Business Overview

11. BUSINESS 11. BUSINESS 11.1 INTRODUCTION With the completion of the Pre-Listing Restructuring and Acquisition, our Group will be a regional mobile telecommunications provider, with operations principally in Malaysia, Indonesia, Sri Lanka, Bangladesh and Cambodia. In addition, we have strategic mobile and non-mobile telecommunications operations and investments in India, Singapore, Iran, Pakistan and Thailand. On a proforma basis, as of December 31, 2007, our Group (including our jointly-controlled entities and associates) had a total of 39.8 million mobile subscribers in various markets in Asia. Our CAGR of mobile subscribers on a proforma basis (including our jointly-controlled entities and associates) was 34.1% between 2005 and 2007. Our mobile telecommunications business is currently centred in our key operating subsidiaries as set out in the table below: Percentage of contribution to our Post Acquisition Proforma Market in which Equity interest operating revenues as of Operating company it operates held by our Group December 31, 2007 %% Celcom . Malaysia 100.0 50.8(1) XL. . Indonesia 83.8 29.8 Dialog .. Sri Lanka 84.8 10.6 TMIB .. Bangladesh 70.0 7.2 TMIC . Cambodia 100.0 1.4 Others . 0.2 Note: (1) This represents the percentage of contribution by the Celcom Group as a whole. We intend to continue to focus on growing our existing market share and expanding into targeted new markets in the South and Southeast Asian mobile telecommunications sector in regions generally characterised by high economic growth and/or low mobile penetration rates. Celcom Group Celcom is a public company incorporated in Malaysia and commenced business on August 21, 1989. Celcom was acquired by TM (our parent company prior to the Pre-Listing Restructuring) in 2003. As of December 31, 2007, the Celcom Group was the second largest mobile telecommunications service provider in Malaysia by number of subscribers with 7.2 million subscribers, according to Frost & Sullivan. As Malaysia had a fairly high level of mobile penetration of 85.9% as of December 31, 2007, up from 74.7% as of December 31, 2005, according to Frost & Sullivan, and relatively low growth rate of the total number of mobile subscribers, the Celcom Group’s CAGR of mobile subscribers was 2.5% between 2005 and 2007. As of December 31,2007, the Celcom Group had a 30.9% market share, representing 7.2 million subscribers, according to Frost & Sullivan. Celcom was the first privately owned company in Malaysia to offer mobile services when it launched its “ART900” analog mobile system based on extended total access communications system (ETACS) in 1989. In 1995, Celcom was one of the first operators in Malaysia to provide digital services through its GSM 900 network. With the launch of its GSM 900 network, it was the first operator in Malaysia to offer a dual mobile technology platform, namely ART900 and Celcom GSM. 11. BUSINESS (cont’d) As of the Latest Practicable Date, the Celcom Group is licensed to provide a broad range of voice and data communications services and offers its subscribers a choice of postpaid or prepaid services through the nationwide mobile networks it operates -a 2G network utilising both GSM 900 and GSM 1800 technologies and Malaysia’s first 3G network launched in 2005 using Wideband Code Division Multiple Access 2100 (“WCDMA 2100”) technology. We believe that the Celcom Group provides its subscribers with the widest network coverage in Malaysia. In 2006, the 3G network was upgraded and the Celcom Group was the first operator in Malaysia to provide HSDPA services, offering subscribers mobile broadband access with speeds of up to 3.6 Mbps currently. XL XL was incorporated as a limited liability company under the laws of Indonesia. XL commenced business on October 8, 1996 and was the first private company to provide mobile telephony services in Indonesia. It has been a public company listed on the Indonesia Stock Exchange (previously known as the Jakarta Stock Exchange) since 2005 and became our subsidiary through a series of acquisitions in 2005 and 2006. Following the completion of the Acquisition, our shareholding in XL will increase from 670% to 83.8%. As of December 31,2007, XL was the third largest mobile telecommunications service provider in Indonesia measured by total subscribers, having a 16.6% subscriber market share representing 15.5 million subscribers, according to Frost & Sullivan. Of those 15.5 million subscribers, 0.5 million were postpaid subscribers and 15.0 million were prepaid subscribers. XL’s CAGR of mobile subscribers was 48.9% between 2005 and 2007. XL operates a GSM mobile network and provides services in Indonesia in 2 allocated bandwidths of GSM 900 and GSM 1800. XL has also been allocated 3G spectrum and in September 2006, XL introduced its 3G service in Indonesia, the XL 3G, which is currently available in 73 cities throughout Indonesia. As of December 31, 2007, XL’s network covered more than 90% of the populated areas of Indonesia. In 2007, XL made significant investments of USD700 million to expand its network and to enhance its network and coverage for its subscribers. Dialog Dialog is a Sri Lankan company which commenced business on January 31, 1995 and has been a public company listed on the Colombo Stock Exchange since 2005. In 1996, the local promoter divested its stake in Dialog to us, making Dialog our subsidiary. Dialog is the largest mobile telecommunications service provider in Sri Lanka with a market share of 53.4% in the mobile telecommunications market as of December 31, 2007, representing 4.3 million subscribers, according to Frost & Sullivan. Of those 4.3 million mobile subscribers, 3.7 million were prepaid subscribers and 0.6 million were postpaid subscribers. Dialog’s CAGR of mobile subscribers was 41.6% between 2005 and 2007. Dialog’s mobile network has a wide reach in Sri Lanka covering a substantial portion of its inhabited land mass. In 2006, Dialog was awarded the 3G spectrum by the Telecommunications Regulatory Commission of Sri Lanka (“TRC”). Dialog launched its 3G commercial services in August 2006 and became the first operator in South Asia to launch a 3G network. 11. BUSINESS (cont’d) Dialog has also made several strategic corporate acquisitions in order to capitalise on and secure a strong position in a “quadruple play” market (where mobile, fixed, broadband internet and media services are offered as a result of global technology trends moving towards convergence, featuring multi-media services and multiple technologies to deliver such services). In December 2005, Dialog acquired 100% of DBN, which operates the largest transmission and data communication network in Sri Lanka. DBN is a key player in providing backbone transmission, infrastructure facilities and data communication services, and is also engaged in the business of internet service provision. In July 2007, DBN launched its COMA services. Dialog also has a 100% interest in Dialog TV, a media company that is licensed to operate television broadcasting and pay television in Sri Lanka. In December 2006, Dialog, through Dialog TV, acquired CBNP and CBNSP. Since these acqUisitions, Dialog has invested in digital broadcast infrastructure, targeting digital terrestrial broadcast, direct to home (“DTH”) and mobile television service provisioning. The acquisition of these entities has provided Dialog with a portfolio of licenses, technology and service positioning capability, enabling Dialog to offer quadruple play services. TMIB TMIB is a public limited company incorporated in Bangladesh and commenced business on November 15, 1997. It is a 70:30 joint venture formed in 1996 between us and A.K. Khan & Co. Ltd., a Bangladesh corporation with diversified businesses. TMIB is currently the third largest mobile telecommunications service provider in Bangladesh. As of December 31, 2007, TMIB had a 20.4% market share representing 7.2 million subscribers, according to Frost & Sullivan. Of those 7.2 million subscribers, 0.1 million were postpaid subscribers and 7.1 million were prepaid subscribers. TMIB operates under the “AKTEL” brand. TMIB’s CAGR of mobile subscribers was 53.4% between 2005 and 2007, and enjoyed a 24.7% year-on-year growth in subscribers between 2006 and 2007. TMIB was the first operator to link the southernmost and northernmost parts of Bangladesh (Teknaf to Tetulia), the first mobile operator in the country to exploit Next Generation Network (“NGN”) Internet Protocol (“IP”) backbone technology to enable it to implement IP traffic and signalling and the first operator to have successfully implemented Frequency Load Planning (“FLP”) enabling TMIS to offer more capacity in its radio network despite the narrow GSM 900 and GSM 1800 network on which it currently operates. TMIC TMIC is a private limited liability company incorporated in Cambodia and became our wholly­owned subsidiary in 2006, commencing business on October 19, 1992. TMIC offers mobile telecommunications services in all cities and prOVinces, as well as the main national roads, in Cambodia under the brand “hello”. As of December 31, 2007, TMIC was the third largest mobile telecommunications service provider in Cambodia with 0.3 million subscribers, representing a 12.7% market share, according to Frost & Sullivan. Of those 311,000 subscribers, 3,000 were postpaid subscribers and 308,000 were prepaid subscribers. TMIC’s CAGR of mobile subscribers was 40.3% between 2005 and 2007. TMIC’s mobile network in Cambodia currently covers approximately 56% of the populated areas. Foreign strategic operations and investments We also have strategic operations and investments in the South and Southeast Asian region as well as in other countries. In general, although we do not own a majority of all such companies, we have significant influence over their business and operations through directorships, shareholder or partnership agreements. 11. BUSINESS (cont’d) Mobile telecommunications investments Our investments in mobile telecommunications businesses include: • Spice (operating in India) -Spice is a public company which has been listed on the Bombay Stock Exchange Limited since July 19, 2007. Spice currently offers mobile telecommunications services in the Punjab and Karnataka states of India. Spice has also been awarded licenses for the states of Maharashtra, Andhra Pradesh, Delhi and Haryana although allocations for spectrum have not yet been granted. As of December 31, 2007, Spice had 3.8 million subscribers representing a 1.6% market share in India, and was the second and fifth largest mobile telecommunications service provider within the Punjab and Karnataka circles, respectively, according to Frost & Sullivan. As of December 31, 2007, for the Punjab state, Spice had 2.3 million subscribers, comprising 0.4 million postpaid subscribers and 1.9 million prepaid subscribers. As of December 31, 2007, for the Karnataka state, Spice had 1.5 million subscribers, comprising 0.1 million postpaid subscribers and 1.4 million prepaid subscribers. Our shareholding in Spice as of the Latest Practicable Date is 39.2%. We consider it to be a significant strategic investment for our Group given the potential for growth in the Indian economy as well as for Spice within India.
• M1 (operating in Singapore) -M1 is a public company listed on the SGX-ST offering a broad range of mobile voice and data communications services over its 2G/3G/3.5G network. According to Frost & Sullivan, as of December 31, 2007, M1 was the third largest mobile telecommunications service provider in Singapore by number of subscribers with 1.5 million subscribers, representing a 27.3% market share of subscribers. Of those 1.5 million subscribers, 0.8 million were postpaid subscribers and 0.7 million were prepaid subscribers. We believe that our investment in M1 benefits us in our regional expansion as we are able to draw on its expertise in technology, products and services. In 2005, Khazanah, TM and TMI formed a consortium through SunShare to invest in M1. As of the Latest Practicable Date, SunShare held a 29.8% interest in M1. Upon completion of the Pre-Listing Restructuring and the Acquisition, we will have 100.0% of the share capital of SunShare. SunShare has 2 seats on the board of directors of M1.
• MTCE (operating in Iran) -MTCE is a private company incorporated in Iran. MTCE offers mobile telecommunications services in the Esfahan province of Iran. We have a 49.0% interest in MTCE and one seat on its board of directors. The government of Iran through the Telecommunications Company of Esfahan and the Iran Telecommunications Industry also owns 49.0% and 2.0% respectively in MTCE. As of December 31,2007, MTCE had 30,568 subscribers, comprising 63 postpaid subscribers and 30,505 prepaid subscribers.

11. BUSINESS (cont’d)
11.2 COMPETITIVE STRENGTHS We believe we have the following competitive strengths: 11.2.1 Unique portfolio of assets focused on certain fast-growing South and Southeast Asian markets, complemented by mobile operations in Malaysia generating strong cash flows Through a number of acquisitions, our Group controls a unique portfolio of assets focused on the provision of mobile telecommunications services within the fast-growing markets in the South and Southeast Asian region, a number of which are characterised by low mobile telecommunications penetration. We believe that our Group is therefore well positioned to benefit from population growth, economic development and increased demand for mobile telecommunications services in these regions. Economic growth (measured in terms of GDP per capita), population growth and mobile subscriber growth in these regions have outpaced that of developed countries or countries in the Organisation for Economic Cooperation and Development in recent years. We expect this trend to continue over the next few years. In addition, our portfolio is well complemented by the Celcom Group, our anchor operations in Malaysia, which operates in a more developed market and provides steady cash flows that can be deployed to support our operations in the high growth markets as well as serve as a strong base to grow talents and expertise. 11.2.2 Strong competitive position providing growth potential within the South and Southeast Asian region Our Group has strong competitive positions in many of the regional markets that we operate. In terms of market share of mobile subscribers, Dialog is Sri Lanka’s largest mobile telecommunications service provider. The Celcom Group is the second largest mobile telecommunications service provider in Malaysia, while XL, TMIB, TMIC and M1 are the third largest mobile providers in Indonesia, Bangladesh, Cambodia and Singapore, respectively. Many of our companies also have long operating track records and were either the incumbent mobile services provider or the pioneer in delivering certain key services, such as 3G, in their respective markets. 11.2.3 Ability to develop and enhance synergies across operating companies The operational challenges and opportunities faced by each of our operations are similar and therefore we believe that our knowledge and experience can be leveraged across such operations to enhance our Group’s performance and operational efficiencies. We believe that we can create additional revenue streams, improve our purchasing power for the acquisition of network eqUipment and infrastructure to achieve lower capital expenditures per unit on network and infrastructure, lower expenses through the coordination of marketing opportunities and processes and enhance individual operations through the sharing and application of knowledge and telecommunication best practices, particularly through our management rotation and other talent management efforts. Specifically, we have entered into joint purchasing arrangements for our Group to achieve economies of scale as well as cost saVings. We are also able to make improvements to our technology and business processes by leveraging on expertise across our operations. Areas where our Group can enhance synergies across our operating companies include network and IT, sales and marketing and launching new products and businesses. 11. BUSINESS (cont’d)

 

11.2.4 Strong brand equity in our respective markets Our operating companies have strong competitive positions in their respective markets, particularly in Malaysia, Indonesia, Sri Lanka, Bangladesh, Cambodia and Singapore. We have successfully developed strong brand identities in many of our markets. We believe our brand names, such as “Ce/com”, “XL”, “Dia/og”, “AKTEL”, “hello” and “M1” are well-known and recognised in their respective markets and therefore playa critical role in subscriber acquisition and retention across all of our principal product segments. Our brands and their attributes are key in differentiating our Group’s products from those of existing and new competition. Over the years, we have invested heavily in the building of our brand names such as “Ce/com”, “XL” and “Dia/og”. Our brands were built through planned advertising and promotions centred around our commitment to providing high quality and innovative communication services that anticipate and meet our subscribers’ needs. We believe that our strong market position, operating track record and strong brand recognition position us well for us to continue capturing opportunities for growth in our markets.
11.2.5 Extensive network coverage and effective distribution network We believe that our extensive network coverage and numerous distribution outlets in our respective operating markets have enabled us to compete successfully in the mobile telecommunications services market particularly in Malaysia, Indonesia and Sri Lanka. In Malaysia, the Celcom Group operates nationwide mobile networks, including the nation’s first 3G network, providing our subscribers with extensive network coverage in the country. The Celcom Group also has a wide distribution network consisting of over 15,000 outlets for prepaid services as of the Latest Practicable Date. XL also operates a nationwide mobile and 3G network with its own fiber optic network covering most of the populated areas of Java. XL also has high capacity microwave transmission links covering Kalimantan, Sumatra, Sulawesi, Bali and Lombok and a submarine cable linking Java, Sumatra, Sulawesi and Kalimantan. XL’s products in Indonesia are widely distributed through XL Centres and through its network of distributors. Dialog’s mobile network has a wide reach in Sri Lanka covering a substantial portion of its inhabited land mass. Its distribution network in Sri Lanka consists of its own retail outlets and service centres as well as an exclusive business partner network. We believe that a strong distribution network supported by wide mobile network coverage is a key competitive advantage to attract and retain subscribers.
11.2.6 Ability to deliver enhanced technology and innovative products and services We believe that our operating companies have demonstrated their ability to consistently deliver innovative products and services to their markets, allowing us to compete effectively in a rapidly developing mobile telecommunications market. The Celcom Group has maintained its technology leadership in the Malaysian mobile telecommunications industry with its launch of Malaysia’S first HSDPA service, branded “ee/com 3GX’. Since the launch of Celcom 3GX (HSDPA), the Celcom Group has made further capital investments to ensure that its 3G network remains competitive in terms of coverage and quality. The Celcom Group has also consistently delivered innovative products and services. Its strategic alliance with Vodafone has also allowed it to launch exclusive innovative services for business users and international travellers. 11. BUSINESS (cont’d) XL’s 3G network supports HSDPA services and has a wide coverage of 73 Indonesian cities. It offers GPRS-based features such as mobile mail, WAP services as well as various interactive services such as video calls supported by its network. Dialog was the first operator in South Asia to introduce 3G services in August 2006. Its HSDPA­enabled network also supports high speed mobile broadband, allowing it to offer innovative services such as live streaming, video conferencing and surveillance. Dialog’s subsidiaries also offer broadcast television services using leading digital video broadcast technology and broadband services using WiMax technology.
11.2.7 Experienced management team with extensive industry experience We believe that our senior management team (both in Malaysia and internationally) possesses the mix of skills and multinational experience necessary to grow and focus our Group on becoming a leading regional mobile services provider. Our senior executives are highly qualified and experienced with strong exposure to high growth mobile markets in Asia. We believe that the ability of our management team to adapt to various cultures and operating environments is key to our future success.

11.3 FUTURE PLANS AND STRATEGIES Our goal is to become a leading regional mobile telecommunications provider. The key elements of our strategy to achieve this objective are: 11.3.1 Increase emphasis on organic growth in existing country operations • Build on our strong positions in our existing markets through effective branding and disciplined marketing. We intend to continue working to further develop our brand equity, image and awareness, to enable us to strengthen our position within our core segments while attracting new subscribers. We plan to employ a disciplined marketing strategy based on strong and clear marketing propositions in each market that will be focused on increasing market share in our existing markets.
• Continue to expand network coverage, capacity and quality. Since our Group’s operations are focused on a number of fast growing mobile markets in South and Southeast Asia, we believe that we must work continuously to expand our network coverage and enhance our network quality in order to improve our subscriber base and operating margins. For example, in Indonesia, we have been aggressively increasing the number of XL’s BTS. Between 2006 and 2007, XL’s total number of BTS increased by 54%.
• Develop innovative product offerings and services. We intend to continue to develop and package innovative products and services, in both voice and data, in all of our markets, which we believe will help us to continue building our subscriber base and improving margins.
• Further strengthen management teams in operating companies. We intend to continue to develop our human capital and seek additional talent from outside our Group where appropriate.

11. BUSINESS (cont’d) 11.3.2 Pursue selective acquisitions and partnerships in mobile telecommunications markets in South and Southeast Asia • Expand our footprint in our targeted markets. The South and Southeast Asia mobile markets are generally characterised by high economic growth and/or low mobile penetration rates and we intend to continue to focus on expanding our footprint in these markets. Specifically, we intend to enhance and grow our Group’s operations and/or investments in key markets, particularly India, which represents one of Asia’s fastest growing mobile markets. We also intend to pursue growth opportunities in other Asian emerging economies such as Indochina.
• Strategic acquisition opportunities. In several of our target markets, we believe there will be opportunities to participate in strategic business combinations with other mobile telecommunications companies. We believe that some of these opportunities could provide synergies with our capabilities and assist in further strengthening our platform and growth. We will continue to seek to evaluate and pursue, where appropriate, potential business combinations that we believe would be beneficial to our business.
• Partnerships with other telecommunications companies. We will continue to consider partnerships with other telecommunication companies which may have capabilities that are complementary to our business that could enhance our shareholders’ value.

 

11.3.3 Further Improving operational synergies and efficiencies • Drive operational synergies among our operating companies. Our corporate centre will support the execution of our strategies and drive operational synergies on the revenue and cost side among our operating companies. We plan to increase the revenue and cost synergies through increased collaboration and best practice sharing among our operating companies. Specifically, we believe revenue synergies may be derived from roaming synergies and the development of innovative products and services which will facilitate traffic within our network or within our operating companies. With the breadth of our networks across multiple countries, we also believe there are cross-selling opportunities which we can capitalise on. On the cost side, we have already realised procurement synergies and believe there remain significant synergy opportunities that can be extracted through a group-wide procurement initiative. Other areas of cost savings include improved cost structures in sales and marketing costs, human resources costs, IT costs and R&D expenditure. • Leverage operational efficiency in the individual operating companies. We intend to actively manage costs and maximise margins in low ARPU environments. We believe our continued focus on cost improvement initiatives and development of operational excellence, including best practice sharing, throughout our portfolio of operating companies will help us maximise profitability in the developing markets which our Group operates in.
11.3.4 Attracting and retaining a high quality workforce • Develop a talent management programme. In order to strengthen our corporate culture and further develop our human resource capabilities, we intend to undertake initiatives to enhance our staff capabilities, inclUding through the development of a structured talent management programme. We intend to rotate and second key managers and officers to our different operating companies, allowing them to benefit from the breadth and diversity of experiences available within our Group. 11. BUSINESS (cont’d) • Introduce an improved compensation structure. We believe that compensation should commensurate with responsibility, capability and performance to create a high performance culture. We intend to link incentive compensation to the achievement of specific key performance indicators, promote meritocracy and build a high performance culture. We believe that a competitive compensation structure will motivate our talent to perform to the best of their abilities and also help us to recruit and retain the best talent.
• Provide comprehensive training and development programmes. We intend to focus on developing an effective human resources strategy which fosters a work environment that contributes to continuous learning and improvement, provides both accountability and fairness for all employees and will be attractive to skilled personnel we seek to recruit.

 

11.4 HISTORY AND BACKGROUND Our Company was incorporated in Malaysia under the Companies Act on June 12, 1992 as a private limited company under the name of Telekom Malaysia International Sdn Bhd and commenced business in 1994. On October 16, 2001, we changed our name to TM International Sdn Bhd. On December 12, 2007, we were converted into a public company. Since incorporation, our Company has been a wholly-owned subsidiary of TM. The key events in the history of our Group, other than the Pre-Listing Restructuring and the Acquisition, are set out below: MonthlYear  Event  February 1994  A joint venture agreement was entered into between TMI and Sunpower Systems  (Private) Limited to set up Dialog (then known as MTN).  October 1996  TMIB was incorporated in Bangladesh as a joint venture company between A.K.  Khan & Co. Ltd. and TM.  November 1996  Sunpower Systems (Private) Limited divested its stake in MTN to TMI, which  resulted in Dialog becoming wholly-owned by TM!.  May 1998  TMI purchased 51.0% of Cambodia Samart Communication Company Limited  (“Casacom”) (now known as TMIC) from Samart.  January 2005  TMI through TMIL acquired the entire equity interest of Indocel, which has a 23.1 %  equity interest in XL.  February 2005  TMI through TMIL entered into a share sale agreement to acquire a 78% stake in  Multinet from Nasser Khan Ghazi and Adnan Asdar.  June 2005  Indocel acquired an additional 4.2% equity interest in XL from Rogan Partners,  Inc.  July 2005  Dialog was listed on the Colombo Stock Exchange.  August 2005  TMI, Khazanah and SunShare entered into a joint venture and shareholders’  agreement to establish SunShare as a joint venture company for the acquisition of  equity interest in M1.  September 2005  A restated joint venture and shareholders’ agreement was entered into among  SunShare, TMI, Khazanah and TM as a new party to the earlier agreement to  participate in the affairs of SunShare.  September 2005  XL was listed on the Jakarta Stock EXchange (now known as the Indonesia Stock  Exchange).
11. BUSINESS (cont’d) Month/Year Event October 2005 Indocel increased its shareholding in Xl to 56.9% through the exercise of its call and put option, October 2005 TMI through SunShare, acquired 12.1% of the equity shares in M1 from Great Eastem Telecommunications LId. Prior to March 2006, SunShare made on­market purchases, bringing its total equity interest in M1 to 29.8%. December 2005 TMI through TMll acquired a 49.0% ownership interest in MTCE through a transfer from TRI, a wholly-owned subsidiary of Celcom. December 2005 Dialog acquired 100% of DBN (then known as MTT Network (Private) Limited). February 2006 TMI obtained a 24.4% stake in Samar! I-Mobile by purchasing existing shares from Samar! I-Mobile’s parent company, Samar!. In addition, TMI has a 18.9% stake in Samar! and Samar! in turn holds 54.1 % in Samar! I-Mobile. February 2006…………. TMI purchased the remaining 49.0% of Casacom (now known as TMIC) from Samar!, and Casacom became a wholly-owned subsidiary of TM!. March 2006 TMI acquired the entire equity interest of TMI India (then known as DCll), which had a 49.0% equity interest in Spice. June 2006 Indocel increased its shareholding in Xl to 59.6% by a purchase of additional shares from AIF (Indonesia) Ltd. September 2006 , Dialog acquired 90.0% of the total issued and paid-up share capital of Dialog TV (then known as Asset Media (Private) Limited) from Nihal Seneviratne Epa and lasantha Joseph Milroy Pieries. September 2006 TMI through TMll entered into a share sale agreement with Nasser Khan Ghazi to acquire an additional 11.0% equity interest in Multinet. October 2006 Casacom changed its name to TMIC. December 2006 Dialog, through Dialog TV, entered into a share sale and purchase agreement for the acquisition of 100% of the share capital of CBNP and CBNSP from Muhunthan Canagasooryam and Niranjan Canagasooryam. June 2007 Indocel increased its shareholding in Xl to 67.0% by a purchase of additional shares from AIF (Indonesia) Ltd. July 2007 Spice was listed on the Bombay Stock Exchange. September 2007 Dialog acquired the remaining 10.0% of the total issued and paid-up share capital in Dialog TV, which resulted in Dialog TV becoming wholly-owned by Dialog. December 2007 TMI through TMll entered into a shareholders’ agreement with Etisalat Indonesia in relation to the acquisition of 15.97% equity interest in Xl by Etisalat Indonesia from Bella Sapphire Ventures Ltd. 11. BUSINESS (cont’d)
11.5 OUR KEY MOBILE TELECOMMUNICATIONS OPERATIONS Our key mobile telecommunications operations are as follows: 11.5.1 Celcom Group Celcom was incorporated in Malaysia on January 5, 1988 and commenced business on August 21, 1989. The Celcom Group is primarily engaged in the provision of voice and data communications services through mobile networks in Malaysia. The Celcom Group’s business is focused on the domestic mobile services segment and it operates nationwide mobile networks ­a 2G network utilising both GSM 900 and GSM 1800 technologies and Malaysia’s first 3G network using WCDMA 2100 technology. We believe that the Celcom Group currently has the widest 2G and 3G network coverage in Malaysia and was the first operator in the country to launch 3G services in 2005. In 2006, the 3G network was upgraded and the Celcom Group was the first operator in Malaysia to provide HSDPA services, offering subscribers mobile broadband access with speeds of up to 3.6 Mbps currently. The Celcom Group offers postpaid mobile services under the “Celcom Postpaid” banner and prepaid mobile services under the “Xpax” brand. As of December 31, 2007, the Celcom Group had a 30.9% market share representing 7.2 million subscribers, making the Celcom Group the second largest mobile telecommunications service provider in Malaysia by number of subscribers, according to Frost & Sullivan. The 7.2 million subscribers comprised 1.3 million postpaid subscribers and 5.9 million prepaid subscribers. As of the Latest Practicable Date, we believe that the Celcom Group has the widest mobile network in Malaysia. The following table shows certain information relating to the Celcom Group’s revenues, adjusted EBITDA and PATAMI extracted from Celcom Group’s audited financial statements for the periods indicated: Year ended December 31, _____2::..:0:..,:0.::..5 .::..20:..:0c.::..6 2007 Revenue (RM millions) . 4,496 4,526 5,127 Adjusted EBITDA (RM millions)!’) .. 1,133(2) 1,957 2,275 PATAMI (RM millions) .. (194) 816 1,052 Notes: (1) Adjusted EBITDA is not a uniformly or legally defined financial measure. We define adjusted EBITDA as net profiV(loss) before taxation, interest expense/(income) and other finance cost, depreciation, impairment and amortisation, other expense/(income), share of results of associates and jointly-controlled entities and foreign exchange gain/(Ioss). Adjusted EBITDA is presented because we believe it is a widely accepted financial indicator on an entity’s ability to incur and service debt. You should not consider the adjusted EBITDA as an alternative to net income or income from operations, or as an indicator of our operating performance or other combined operations or cash flow data prepared in accordance with generally accepted accounting principles, or an alternative to cash flows as a measure of liquidity or any measures of performance derived in accordance with Malaysian GAAP. The computation of adjusted EBITDA herein may differ from similarly titled computations of other companies. Adjusted EBITDA is not a measure of financial performance under Malaysian GAAP and should not be considered as an alternative to net cash provided by operating activities or as a measure of liquidijy or an alternative to net income as indicators of our operating performance or any measures of performance derived in accordance with Malaysian GAAP. 11. BUSINESS (cont’d) The following table reconciles our definition of adjusted EBITDA to our profit after taxation for the financial years indicated: For the year ended December 31, 2005 2006 2007 RMmillion RMmillion RM million (Loss)lprofit after taxation  .  (193.7)  820.3  1,058.7  plus:  Taxation  .  257.6  325.9  351.6  Depreciation, amortisation and impairment  ..  1,046.5  805.0  912.8  less:  Finance income , ,  ..  (60.5)  (55.8)  (47.1)  Share of results of associated companies  ..  4.5  8.5  (5.1)  Other income  .  (13.6)  (16.1)  (29.6)  plus:  Finance cost  .  92.3  67.7  35.0  Foreign exchange loss/(gain)  1.5  (1.5)-‘–‘­ Adjusted EBITDA  1,133.1 1,957.0 2,274.8__.;.:.;.;:.:.;.,:..-_…..:~.;.;.;;.__..::::.::;..;.;.;.,
(2) The lower adjusted EBITDA for the year ended December 31, 2005, was largely attributable to a significant one-off provision for satisfaction of the award to DeTeAsia of RM915.1 million. See “Section 11.17 -Business -Legal proceedings and disputes”. Subscriber base and usage According to Frost & Sullivan, Malaysia had a fairly high level of mobile penetration of 85.9% as of December 31, 2007, up from 73.0% as of December 31,2006 and 74.7% as of December 31, 2005. The level of mobile penetration dropped to 73.0% as of December 31,2006 as a result of the enforcement of a new MCMC requirement of subscriber registration that resulted in all prepaid subscribers in Malaysia who were not registered by December 29, 2006 being automatically terminated. As a result, the fiscal 2006 data may be unrepresentative of trends in the market. As of December 31, 2007, prepaid subscribers comprised 82.2% of the Celcom Group’s subscribers and postpaid subscribers comprised the remaining 17.8% of the Celcom Group’s subscribers. The Celcom Group experienced a decline in subscriber market share from 35.1 % in fiscal 2005 to 31.2% in fiscal 2006, which we believe was primarily attributable to management’s ongoing efforts to focus on revenue market share instead of subscriber market share and the Celcom Group’s redefinition of a “subscriber” to include only active and revenue contributing subscribers. Between fiscal 2006 and fiscal 2007, the Celcom Group’s market share was stable. However, it is anticipated that the Government of Malaysia will introduce mobile number portability in August 2008, which will allow subscribers to change operators while retaining their number and thus make it much easier for subscribers to switch from one telecommunications provider to another. We expect this to result in increased competition in the short term as operators attempt to attract subscribers from their competitors, resulting in pricing pressures, increased marketing expenses and a possible loss of market share if the Celcom Group fails to successfully keep existing subscribers and attract sufficient new subscribers. In addition, we anticipate competition to intensify as a result of one of the Celcom Group’s primary competitors, DiGi, having recently obtained approval from the MCMC for the transfer, subject to certain conditions, of a license to operate a 3G network from TdC to DiGi.

 

 

11. BUSINESS (cont’d) • SMS in Colour and SecretSMS. SMS in Colour is the first service in Malaysia that allows subscribers to add colours and icons to their SMS. SecretSMS allows restricted access when viewing incoming SMS which are protected by a password.
• Channel X, a mobile content platform containing mobile content and services targeted at young and technologically savvy mobile users. Channel X is accessible via the web, WAP and unstructured supplementary service data CUSSO”).
• Caff Me Tones, which enable the caller to hear the subscriber’s preferred songs instead of normal ringback tones. The Celcom Group has a few thousand songs and sound effects in its Call Me Tones list.
• ZMS, an innovative iconic SMS available in English and Malay.
• Airtime Share. Customers can transfer any amount of airtime between RM1.00 to RM25.00 to their friends within the Celcom Group’s network.

Advanced data and mobile broadband Other major services available to Celcom Group prepaid and postpaid subscribers include advanced data services which allow connectivity to the internet via GPRS, 3G or HSOPA networks, charged according to usage. Under the advance data services category, the Celcom Group also offers mobile broadband services (branded “Celcom Broadband”) with daily or monthly unlimited usage packages. The Celcom Group was the first operator in Malaysia to launch a 3G mobile network. Celcom 3GX, the Celcom Group’s HSOPA service offers mobile broadband access with speeds of up to 3.6 Mbps. The Celcom Group believes that it has the widest 3G coverage in Malaysia. Celcom 3GX (HSOPA) provides corporate users with secure mobile accessibility to corporate networks, coupled with high-speed retrieval and downloading of confidential corporate information. In addition, Celcom 3GX (HSOPA) subscribers can access and view video streaming and games and have fast access to rich multimedia websites. In the event of network unavailability due either to coverage or end user device limitations, fallback to the next best network is provided. For example, if a monthly unlimited Celcom 3GX (HSOPA) user happens to be in a location without Celcom 3GX (HSOPA) coverage, the end user can still connect to the internet via the 3G network if available. If not, connectivity will be provided via GPRS. BlackBerry products and services • BlackBerry Enterprise Solution. In September 2006, the Celcom Group launched the BlackBerry Enterprise Solution, a solution for corporate organisations on push-based access to email, calendar, contacts, tasks and notes, instant messaging, web based applications and services, and enterprise applications. It runs on both GPRS and 3G data bearer. This solution enables connectivity to messaging and collaboration software (such as Microsoft Exchange, Lotus Domino and Novell GroupWise) on enterprise networks for email synchronisation and personal information management between desktop and mobile software.
• BlackBerry Internet Solution. Launched in June 2007, this serves professionals and business users with smaller email accounts without an enterprise-wide email platform. It comes with a BlackBerry wireless device which combines the capabilities of, among others, telephone, e­mail, SMS, browser and organiser. This solution also allows an integration of up to 10 supported business or personal email accounts, and enables the user to send and receive instant messages, and browse web content while on the road. Further, no email storage quota is required to manage the email accounts that are integrated with the BlackBerry device.

279 11. BUSINESS (cont’d) Domestic and international interconnection service The Celcom Group currently has interconnection arrangements with other domestic telecommunication operators for domestic call services and international carriers for IDD service and traffic termination to Malaysia, pursuant to which the Celcom Group receives domestic and international interconnection revenue for all calls that connect onto the Celcom Group’s network. For calls from domestic mobile networks and PSTN to its subscribers, the Celcom Group receives domestic interconnection revenue, for which the MCMC has set guidelines on the interconnection rates. For international interconnections, commercial arrangements are based on mutual agreement. For international calls from overseas to its subscribers, the Celcom Group also receives revenue from the traffic terminated through the Celcom Group’s international gateways. The present submarine cable systems that the Celcom Group has access to are the Asia-Pacific Cable Network (APCN), Southeast Asia-Middle East-Western Europe 3 (“SEA-ME­WE 3”), Fiber optic Link Around the Globe (FLAG), Thailand-Vietnam-Hong Kong (TVH) and Trans-Pacific cable-5 (TPC-5), for which the Celcom Group is part of various consortiums. These allow the Celcom Group to have direct interconnections with 30 international carriers across 16 countries worldwide. International roaming services As of the Latest Practicable Date, the Celcom Group had 335 GSM international roaming partners across 127 countries around the world. This includes 171 GPRS international roaming partners operating in 79 countries and 70 3G international roaming partners in 43 countries. With the combination of GSM, GPRS and 3G capabilities, the Celcom Group is able to offer a wide range of services to subscribers of both local and foreign operators. Roaming services range from basic voice calls, SMS and internet access to more sophisticated services such as video calls and HSDPA services which are enabled through the Celcom Group’s 3G international roaming services. In addition, the Celcom Group provides a virtual home environment solution to subscribers of both local and foreign operators which allow short code dialling while roaming in cooperative networks. These services are offered to both the Celcom Group postpaid and prepaid subscribers. For postpaid subscribers who have concerns on charges while roaming, the Celcom Group offers a budget call service called Roam Saver. Customers utilising this service enjoy discounts of up to approximately 80% on the calls made. The Celcom Group receives revenue both from calls made by its own subscribers roaming abroad and when foreign operators’ subscribers roam on Celcom’s network. The international roaming arrangements are made bilaterally with foreign operators in accordance with GSM Association guidelines. For calls made by its own subscribers while roaming abroad, the Celcom Group receives outbound roaming revenue from its subscribers. The Celcom Group will pay the international roaming charges by foreign operators while retaining a portion of such revenues. For calls made by subscribers of foreign operators while roaming on the Celcom Group’s network, the Celcom Group receives inbound roaming revenue from foreign operators. Inbound roaming revenue that the Celcom Group receives from foreign operators as a result of calls made by their subscribers while roaming on Celcom’s network have traditionally been higher than the Celcom Group’s outbound roaming revenue because of the high proportion of incoming roamers from foreign networks.
11. BUSINESS (cont’d) Business solutions (Ce/com POWERTOOLS) Celcom POWERTOOLS was introduced in 2006 as an umbrella brand for its suite of business solutions and service packages targeted at enterprise subscribers in a wide array of industries. The main solutions offered are Mobile Office, Workforce Mobility, Machine-to-Machine (M2M), and other value-added business services. • Mobile Office. Business Voice -Competitive voice service packages incorporating free voice, video calls and messaging within a defined closed user group, together with targeted handset subsidies. Business BlackBerry -Market leading push e-mail service from Research in Motion (RIM) of both Canada and the United Kingdom, incorporating specific BlackBerry devices and software installed behind corporate firewalls, or provisioned as a hosted service for small and medium enterprises. E-mail and Beyond -A device-agnostic platform utilising Microsoft and other compatible e-mail servers to provide instant and effective push and pull e-mail to any device utilising a Microsoft Windows Mobile operating system. Business Broadband -3G and 3.5G data access to LANs, Wide Area Networks (WANs), Internet Protocol Virtual Private Networks (IP-VPNs) and the worldwide web, with differentiated monthly service packages based on access speeds and bundled hardware. • Workforce Mobility. Sales Force Automation -Customised solutions that extend sales monitoring and reporting functions, subscriber relationship and order management to mobile devices, used by sales personnel while out of the office. Field Service Automation -Enables instant access to an enterprise’s corporate databases by field personnel, for usage at warehouses, assembly plants, technical support centres and mobile enforcement. Mobile Satellite -Celcom-branded postpaid satellite service utilising the Asia Cellular Satellite (ACeS) network and dual-mode handsets. • Machine-to-Machine (M2M). Fleet Management -Remote tracking of vehicles nationwide, for enhanced security, driver monitoring, more efficient vehicle routing, and more cost effective operations overall. Asset Management -Supervisory Control and Data Acquisition (SCADA) services enabling companies to monitor and manage fixed assets effectively through data collection, remote control, alarms/warnings and ground surveillance. Remote Meter Reading (RMR) -Enables regular wireless updates and frequent polling of electricity and other utility meters for real-time tracking, control and reduction in human resource requirements. Mobile EFTPOS -Point-of-sales (POS) terminals with end-to-end security that relies entirely on mobile packet transmission to execute and authorise credit card transactions in real-lime, and at any location. 281
11. BUSINESS (cont’d) The Celcom Group’s partnerships also extend to MVNO and domestic roaming partnerships. The Celcom Group was the first to launch a MVNO in Malaysia with Merchantrade in the middle of 2007 to target foreign workers. In addition, the Celcom Group has recently signed a memorandum of understanding with Redtone to develop a MVNO to target the small and medium enterprise segments and has also entered into Malaysia’s first nationwide domestic roaming arrangement with U Mobile, offering connectivity when U Mobile subscribers are outside of their network coverage areas. The Celcom Group is also a member of AMI, a platform for collaboration among leading mobile operators in the region, which include M1, IDEA Cellular (India), XL and DTAC (Thailand). This has resulted in easier access and enhanced experience for its subscribers. The Celcom Group has also launched a co-branded credit card with Citibank. The credit card is designed to provide financial savings to subscribers who accumulate a large amount of mobile phone bills monthly, where the subscriber is offered a 5% cash rebate on the Celcom Group’s postpaid plans and another 5% for the Celcom Group’s bills that are paid via Citibank’s one bill service. Marketing, sales and distribution Marketing The Celcom Group spent RM471.5 million, RM475.3 million and RM515.4 million in fiscal 2005, fiscal 2006 and fiscal 2007 respectively, on marketing, advertising and promotional activities. The Celcom Group marketing strategy is anchored by the following key strategic principles: • Customer segmentation to clearly identify key subscriber segments for marketing and sales targeting with support at all levels such as subscriber service and network.
• Aggressively enhance the overall brand appeal among subscribers by offering good coverage, speed, rates and service. The Celcom Group believes that it has the widest domestic coverage and the fastest speeds for data and SMS connectivity via its HSDPA network. The Celcom Group aims to offer its subscribers attractive rates and good subscriber service.
• Aggressive acquisition initiatives to grow its subscriber base as well as revenue stimulation programmes such as reloading campaigns on a quarterly basis.
• Targeted up-selling initiatives via aggressive database marketing programmes to existing subscribers.
• Mass implementation of loyalty programmes to increase subscriber tenure.
• Strong product brand portfolio management to bring products beyond tactical packages and tariffs to differentiate from generic product offerings of competitors and simplify the subscriber offers.
• Sponsorships and affinity programmes to create affinity and grow brand appeal via co­branding initiatives with selected properties and personalities specific to identified target segments. Anchor sponsorship of the English premier league from 2004 to 2007 associated the Celcom Group with international football.

 

11. BUSINESS (cont’d) As an acknowledgment to the strength of the Celcom Group’s marketing programmes and the quality of subscriber service, the Celcom Group has received several awards. See “Section 11.9 -Awards”. The Celcom Group also works closely with its subscriber services outsourcing partner which won awards such as Best Outsourced Service Contact Centre Gold Award 2007 -Under 50 seats (Customer Premier Service) from the Customer Relationship Management and Contact Centre Association of Malaysia (“CCAM”), Best Contact Centre Professional Outsourced Gold and Bronze Award 2007 -Above 50 seats from the CCAM and Best Contact Centre Manager Gold Award 2007 -Above 50 seats from the CCAM. Sales and distribution The Celcom Group sells its prepaid and postpaid services through Blue Cube retail outlets as well as a wide network of dealers, amongst which it considers approximately 350 of such dealers to be exclusive key dealers for its prepaid services and 150 of such dealers to be exclusive key dealers for its postpaid services. The Celcom Group also sells additional services such as enterprise and business solutions through Blue Cube retail outlets. As of the Latest Practicable Date, the Celcom Group had more than 40 Blue Cube retail outlets, located principally in shopping malls and high traffic areas in key cities in Malaysia, and through its dealers, more than 15,000 outlets where prepaid cards can be purchased as well as reloaded at more than 300 bill payment centres. These 15,000 outlets include 7-Eleven, petrol stations, Kodak and Fuji stores and other alternative channels which provide a variety of reloading options to the subscribers. The number of Blue Cube retail outlets will be increased in the near future and the Celcom Group will explore other channels of distribution aside from traditional outlets which sell mobile devices and standard telecommunications services. The Celcom Group also provides a virtual reload alternative, allowing a subscriber to reload their prepaid credit without having to purchase physical reload cards. The Celcom Group anticipates that contribution from its virtual reloading platform will increase in the future. Competition Competition in Malaysia has evolved from being based around coverage to SUbscriber service, quality, pricing of basic services, and we expect it to further evolve to one where greater value is placed on providing segment relevant offerings with increased importance of value-added services such as data access, content and non-voice services. There are currently 5 licensed mobile operators in Malaysia, namely, the Celcom Group, Maxis, DiGi, U Mobile and TdC. U Mobile and TdC are new entrants in the 3G network, each having been awarded a 3G license in 2006. The Celcom Group and Maxis operate both 2G and 3G licenses, while DiGi operates a 2G only network currently. U Mobile was launched in the third quarter of 2007 and is in the midst of rolling out its 3G services. TdC has yet to rollout a 3G network. In March 2008, DiGi received approval for the transfer of TdC’s 3G spectrum, SUbject to certain conditions. U Mobile has a domestic roaming arrangement on Celcom 2G network, allowing their subscribers to use their mobile phone outside areas of which U Mobile has no network coverage. Due to the high penetration rates within the market, increasing voice and SMS usage alone may not be sufficient to compensate for the decline of average prices for both services. In order to increase revenue, mobile operators are under pressure to expand alternative revenue streams such as broadband access, mobile content, mobile-commerce and mobile advertising. The Celcom Group believes that it has the widest network coverage for both 2G and 3G in Malaysia, giving it a competitive advantage especially in the 3G network, and as such has a major competitive advantage over new entrants, who would have to spend significant capital expenditure and other resources to match the Celcom Group’s coverage. 284 11. BUSINESS (cont’d) Mobile operators are mandated to provide facilities and services that have been mandated in the access list issued by the MCMC to other licensees. The access list may be reviewed by the MCMC from time to time. The Celcom Group is also mandated to provide domestic roaming on 2G to other 3G operators, with commercial terms to be negotiated between the operators. It is anticipated that the Government will introduce mobile number portability in August 2008, which will allow subscribers to change operators while retaining their number. We expect this to result in increased competition in the short term as operators attempt to attract subscribers from their competitors, resulting in pricing pressures and increased marketing expenses. Network and infrastructure The Celcom Group’s mobile network infrastructure comprises 3 major components -mobile access, core network and the transmission system. As of the Latest Practicable Date, the Celcom Group has constructed 5,838 GSM BTS and 2,310 3G Node B. This makes the Celcom Group one of the widest network coverage providers for both 2G and 3G services in Malaysia. In addition, the Celcom Group is the first operator in Malaysia to provide 3G services. Integrated planning of 2G and 3G networks ensures that the Celcom Group’s subscribers can enjoy coverage by both networks with high quality services. The Celcom Group had also deployed HSDPA technology in the central business district in Kuala Lumpur and sub-urban areas in Malaysia allowing subscribers to access broadband services on its network. Given the rapid deployment of base stations sites and other transmission site required to support its network growth in the past, the Celcom Group has a significant number of base stations and transmission towers which have been installed while pending submission to or approval from the local authorities. As the Celcom Group expects that the number of applications rejected is low, the Celcom Group does not expect the cost of relocating the physical structures (for the applications which are rejected) to have a material impact on the financial position of our Group. The Celcom Group’s core network consists of different elements that make possible the provision of various types of services such as voice call, SMS and internet access. While voice service remains the key service for the Celcom Group, the demand for advanced data services is on the rise. This has resulted in a significant increase in usage since the launch of mobile broadband services. The Celcom Group plans to complete the unification of its 2G and 3G core networks into a single platform by the second quarter of 2008. This will result in a more efficient and optimised network architecture that will significantly reduce network operating cost and capital expenditures. Upon completion, the Celcom Group will have a leaner network with 2 international switching centres (ISC), 7 Gateway Mobile Switching Centres (“GMSC”), 14 mobile switching centre servers (MSS) and 18 Media Gateways (“MGW”). This exercise is also partly meant to prepare the network for the future all-IP network. The Celcom Group has enhanced its IP network features with the deployment of Multi Protocol Label Switching (“MPLS”) components. Initially serving the requirement for 3G services, the network will be gradually enhanced to support all different types of services. In this way, the Celcom Group will leverage on MPLS’ features to ensure efficient transport of various services. MPLS will eventually become a single packet-service backbone network and also form an important part of the future all-IP network. The Celcom Group is also in the process of enhancing its IP/MPLS network with security features. The VPN feature of MPLS is one of the key enablers to provide secure access for subscribers. In addition, the Celcom Group has deployed security components such as firewalls and Intrusion Prevention System (IPS) as part of its efforts to curb any possible loopholes and vulnerability in the network. 285 11. BUSINESS (cont’d) The increase in capacity demands also entails the requirement for an increase in the capacity of transmission network. Connections from STS to the regional mobile switching centres are realised via microwave, fiber optic and very small aperture terminal (“VSAT”) transmission systems. The Celcom Group has been able to meet increased capacity demands with the deployment of its own transmission network. Being independent and without relying too much on other operators’ infrastructure ensures that the Celcom Group is able to quickly deploy capacity requirements. Together with its affiliates, the Celcom Group has constructed a fiber optic transmission backbone network. The current capacity of the backbone network is at the Synchronous Transport Module (“STM”) 64 levels and will be upgraded to dense wavelength division multiplexing (DWDM) in 2008. The backbone network will deploy state-of-the-art protection mechanism of Automatically Switched Optical Network (“ASON”) technology to protect against multiple fiber optic cuts, thus resulting in less down time on critical services. Fiber optic transmission system also makes up some part of the Celcom Group’s metro network. The high capacity requirement from mobile broadband has required the Celcom Group to undertake an ongoing process to upgrade the metro network to STM-16. The high capacity fiber optic network is also supplemented by high capacity microwave links as alternative routes and diversity. The network is also in the process of upgrading and modernisation with the installation of new next generation, flexible capacity for last mile links of super Plesiochronous Digital Hierarchy (“PDW) and compact Synchronous Digital Hierarchy (“SDH”) technology. The Celcom Group measures the technical performance of its service against internal and external benchmarks. A series of tests conducted at least annually by the MCMC since 2002 showed that the Celcom Group, which has a round-the-clock network operation centre, achieved excellent results in terms of “drop call” rate and service availability. The Celcom Group also conducts monthly internal benchmarking activities in order to ensure the performance of its network is ahead of industry standards and continuously invests in new tools to test and simulate subscriber experience on its services. Spectrum Celcom has been allocated the GSM 900 and GSM 1800 spectrum bands identified below exclusively for the duration of its licenses. In addition, TM has been assigned the spectrum bands for 3G mentioned below for 15 years until April 1, 2018. The frequency bands allocated for the Celcom Group for the operation of GSM are at the 900 MHz and 1800 MHz spectrums with 2×17 MHz and 2×25 MHz bandwidths, respectively. Specifically, the allocated range at the 900 MHz frequency is from 888 MHz to 905 MHz for uplink communication from mobile terminals to STS and from 933 MHz to 950 MHz for downlink communication from STS to mobile terminals. The bandwidths at 1800 MHz are from 1735 MHz to 1760 MHz for uplink communication and from 1830 MHz to 1855 MHz for downlink communication. The set frequency granted by the Government under the 3G spectrum assigned to TM for the Celcom Group’s operation of 3G mobile telecommunications services are for frequency division duplex (“FDD”) frequency of the 1950 MHz to 1965 MHz bandwidth and 2140 MHz to 2155 MHz bandwidth. In addition, TM was also granted time division duplex (“TDD”) frequency of 2020 MHz to 2025 MHz bandwidth for Celcom Group’s 3G operations. The MCMC has, via its letter dated February 21, 2008 given its approval for the transfer of TM’s 3G Spectrum Assignment to Celcom as part of the Pre-Listing Restructuring. See “Section 5 -Pre-Listing Restructuring and Acquisition”. 11. BUSINESS (coni’d)
11.5.2 XL XL was established under the Deed of Establishment No. 55, dated October 6, 1989, as amended by Deed No. 79, dated January 17, 1991 and commenced business on October 8, 1996. XL was previously established under the name PT Grahametropolitan Lestari and has its legal domicile in Jakarta, Indonesia. In 1995, XL changed its name to its present name. XL’s business primarily consists of providing voice, data and other value-added mobile telecommunications services. XL operates its network under a GSM 900 and GSM 1800 license from the Minister of Communications and Information in Indonesia and has been allocated 2 bands of spectrum pursuant to which it operates its GSM 900 and GSM 1800 networks. XL has also been allocated 3G spectrum and in September 2006, XL introduced its 3G service in Indonesia, the XL 3G, which is currently available in 73 cities throughout Indonesia. As of December 31, 2007, XL’s network covered more than 90% of the populated areas of Indonesia. In 2007, XL made significant investments of USD700 million to expand its network and to enhance its network and coverage for its subscribers. XL also provides leased line and corporate services which include internet service provider (“ISP”) and VolP services. The following table shows certain information relating to XL’s net revenues, adjusted EBITDA and PATAMI extracted from XL’s audited financial statements for the periods indicated: Year ended December 31, 2005 2006 2007 —-=–:=::——:-::::-::­Net revenue (lOR billions)………………………………………….. 3,059 4,682 6,460
Adjusted EBITDA (lOR billions)(1)………………………………… 1,735 2,554 3,509
PATAMI (lOR billions)……………………………………………….. (224) 652 251
Note: (1) Adjusted EBITDA is not a uniformly or legally defined financial measure. We define adjusted EBITDA as net profit/(loss) before taxation, interest expense/(income) and other finance cost, depreciation, impairment and amortisation, other expense/(income), share of results of associates and jointly-controlled entities and foreign exchange gain/(loss). Adjusted EBITDA is presented because we believe it is a widely accepted financial indicator on an entity’s ability to incur and service debt. You should not consider the adjusted EBITDA as an alternative to net income or income from operations, or as an indicator of our operating performance or other combined operations or cash flow data prepared in accordance with generally accepted accounting principles, or an alternative to cash flows as a measure of liquidity or any measures of performance derived in accordance with Indonesian GAAP. The computation of adjusted EBITDA herein may differ from similarly titled computations of other companies. Adjusted EBITDA is not a measure of financial performance under Indonesian GAAP and should not be considered as an alternative to net cash provided by operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any measures of performance derived in accordance with Indonesian GAAP. The following table reconciles our definition of adjusted EBITDA to our profit after taxation for the financial years indicated: For the year ended December 31, 2005 2006 2007 –;;ID”””‘R~bi”‘II'”””io-n lOR billion lOR billion (Loss)/profit after taxation………………………………………….. (224) 652 251
plus: Tax expense (89) 351 267 Depreciation, impairment and amortisation………………….. 1,165 1,526 1,749
less: Interest income……………………………………………………….. (22) (52) (51)
plus: Interest expense and other finance costs 401 416 694 Other expense/(income) 142 6 395 (345) 204Foreign exchange loss/(gain) ,-,3e.,6,.:2 -:-=::-::’-‘—;:-=:,:-:­1..;..7_3_5 …;.2,554 3,509Adjusted EBITDA …;._ 11. BUSINESS (cont’d) Subscriber base and usage With 15.5 million subscribers as of December 31,2007, XL is estimated to have a 16.6% share of the Indonesian mobile market, which is estimated at 92.9 million subscribers, making XL the third largest mobile telecommunications service provider in Indonesia, measured by total subscribers according to Frost & Sullivan. XL’s prepaid subscribers have grown to 15.0 million subscribers as of December 31, 2007, from 9.1 million prepaid subscribers as of December 31, 2006, which represents a growth rate of 64.0%. As of December 31, 2007, XL had 0.5 million postpaid subscribers, an increase of 24.3% from the 2006 figure of 0.4 million postpaid subscribers. The following table shows certain information relating to XL’s mobile telecommunications subscriber base for the periods indicated: As of/Year ended December 31, 2005 2006 2007 Number of subscribers (‘000):  Postpaid  ..  176  387  481  Prepaid  .  6,802  9,141  14,988  Total number of subscribers Number of mobile subscribers in Indonesia (‘000)11 1, (2)  .. ..  6,978 46,260  9,528 63,660  15,469 92,864  Indonesian mobile penetration(1). (2) Market sharel21 ,{31  .. .  19.1% 15.1%  25.9% 15.0%  37.3% 16.6%  ARPU (IDR ‘000 per month)  Postpaid  .  251  172  155  Prepaid  ..  50  42  43  Blended  ..  54  46  47  Average monthly churn rate (%):  Postpaid  ,  ..  0.3%  2.9%  4.8%  Prepaid  ..  5.6%  12.2%  13.5%  Blended  .  5.5%  11.9%  13.2%  Average monthly MOU per subscriber:  Postpaid .. ,  ,  ,  ,  ,  .  327  223  202  Prepaid  ,.,.,  ,  ,  .  54  56  97  Average monthly SMS per user  .  75  86  92
Notes: (1) Figures are extracted from the report prepared by Frost & Sullivan.
(2) The number of mobile subscribers in Indonesia does not include fixed wireless subscribers of PT Telkom’s “TelkomFlexi”, Indosal’s “StarOne” and PT Bakrie Telekom’s “Esia”.
(3) Computed as XL’s estimate of its total number of subscribers divided by the number of mobile subscribers in Indonesia as extracted from the report prepared by Frost & Sullivan.

XL’s average monthly churn rate has significantly increased from 5.6% in fiscal 2005 to 12.2% in fiscal 2006 and 13.5% in fiscal 2007 for prepaid subscribers and from 0.3% in fiscal 2005 to 2.9% in fiscal 2006 and 4.8% in fiscal 2007 for postpaid subscribers. We believe the increase in, as well as the very high level of, the churn rate for prepaid subscribers is due to very aggressive competition with respect to the pricing of starter packs (generally comprises a SIM card and a reload voucher), and we expect this competition and the churn rate for prepaid subscribers to continue to increase in the future. We believe that the increase in the churn rate for postpaid subscribers is in part due to XL’s focus on higher quality subscribers that has caused lower quality subscribers to churn, and in part due to the considerable competition. XL’s ARPU differs significantly between its postpaid and prepaid subscribers. Postpaid subscribers tend to be heavier users of mobile services, in part reflected by the higher ARPU of postpaid subscribers, and are loyal to a specific operator, as indicated by the lower churn rate. In contrast, prepaid subscribers are lighter users of mobile services to the extent that the ARPU for prepaid subscribers is lower. This result is due to the increase in penetration rate of the prepaid market in tandem with the lower tariffs and discounts offered through marketing and loyalty programmes to prepaid subscribers. The increased penetration rate in the prepaid market has resulted in a higher proportion of new low-usage subscribers, such that there is lower usage of voice services and higher usage of SMS from prepaid subscribers on the whole. 288 11. BUSINESS (cont’d) XL’s ARPU for prepaid subscribers decreased from IDR50,000 per month in fiscal 2005 to IDR42,000 per month in fiscal 2006, and then was almost flat at IDR43,000 per month in fiscal 2007. We believe the stable ARPU for prepaid subscribers between fiscal 2006 and fiscal 2007 was in part due to the success of XL’s “Rupiah 1″ promotion to stimulate usage, which began in July 2007. The promotion provides subscribers with a nearly zero per-minute rate on a call after the initial several minutes of the call are charged at the standard tariff. XL’s ARPU for postpaid subscribers decreased from IDR251 ,000 per month in fiscal 2005 to IDR172,000 per month in fiscal 2006 and IDR155,000 per month in fiscal 2007. We expect ARPU for both prepaid and postpaid subscribers to continue to deteriorate in the future notwithstanding the short-term stabilisation in ARPU for prepaid subscribers in fiscal 2007. Services and products The following table shows the breakdown of XL’s total revenues as a percentage of its total gross operating revenue for the periods indicated: Year ended December 31, 2005——;;7’%  2006 0/0  2007  GSM telecommunications services  75.9  77.1  77.7  GSM interconnection services  21.4  18.6  16.5  Other telecommunications services Total gross operating revenue  –=.;.2.”‘7 —-,,:-:4″‘.3:-__—::=5.78 1.:.;0:.::0.:.:.0:..-__……:.1.;;00:.:..0~ 1:.::0;.:.0.:.:.0
The following tables show XL’s revenues from GSM telecommunications services and interconnection services for the following periods: Year ended December 31, 2005 2006 2007 —–lOR billion Revenues from GSM telecommunications services: Voice calls 1,922.4 2,747.2 3,866.3 Non-voice. 1,340.4 2,239.4 2,632.5 Monthly service charge.. .. ‘–._—-::-=-:,-::0.:..;.7:–__-:-::-=0°:;:..;0-9__—-=-c==1″‘=-.9 Total revenue from GSM telecommunications services ;…_—:3:.:;,2:.:6:.::3.:.:.5:..-__.:.4,~9.::.87:.:..::.5__..:6:.:;,5:.:0:.::0.:.:…7 Year ended December 31, __–=20:.::0~5 2006 2007 lOR billion Revenues from GSM interconnection services: Domestic interconnection…………………………………………………………………. 671.6 866.3 887.0 International roaming 242.3 306.9 465.3 SMS interconnection……………………………………………………………………….. 7.7 23.7 25.9 Others ‘–‘__~~0″”.9;-__.,.–;;-;c4~.9;;-_—:;-;;;~5c:.;;-.4 Total revenues from GSM interconnection services ;… 9;”;2;;;2.:.:.5;.-__.:.1,:,;;2,;,,01,;,,;.8~__1;,,:;.3;,,;8;,,;;3,;,;,,,.6 XL implemented a product repositioning programme, with the introduction of the ‘jempof’ and “bebas” prepaid services in August 2004 and the “Xplor” postpaid service in October 2004, which is intended to provide a range of service packages targeting different income segments of the market. XL offers a wide array of voice and non-voice mobile telecommunications services to its subscribers on either a postpaid or prepaid basis. XL’s GSM telecommunications services include basic mobile voice services, SMS, value-added services and roaming services. 11. BUSINESS (cont’d) Prepaid voice Prepaid subscribers purchase vouchers that contain fixed amounts of service value rather than receiving monthly bills, and do not pay subscription or other monthly charges. XL has 2 main products for its GSM prepaid card, namely, “lempo/” and “bebas” , which are targeted at different market segments. A party becomes a prepaid subscriber by purchasing a starter pack which includes a SIM card and a reload voucher. A starter pack costs between IDRS,OOO and IDR10,OOO and includes a reload voucher with a credit amount of IDRS,OOO and IDR10,000 respectively. XL does not charge its subscribers an activation fee to activate their SIM cards. Prepaid subscribers can increase the value of their SIM cards by purchasing physical reload vouchers or electronic reload vouchers. XL prepaid subscribers may purchase physical reload vouchers at XL Centres, XL Kita outlets and at many independent retailers throughout Indonesia. Prepaid subscribers may also purchase electronic reload vouchers at XL Centres and XL Kita outlets, or through an ATM. • “lempo/” prepaid service The ”lempo/” prepaid service, which XL launched in August 2004, is targeted at the price­sensitive income segment of the prepaid market which requires basic voice and SMS services at competitive prices without any value-added services. XL’s “lempo/” prepaid subscribers can purchase vouchers or e-reload in denominations of between IDRS,OOO and IDR200,OOO with an active period of 30 days to 180 days for electronic reload and 15 days to 30 days for physical reload voucher. • “bebas” prepaid service The “bebas” prepaid service was launched in August 2004 and is targeted at prepaid subscribers who require value-added services in addition to basic voice and SMS services. The “bebas” prepaid card offers affordable tariffs with different thresholds for different regions. XL’s “bebas” prepaid subscribers also enjoy number portability within the XL network. XL allows its “bebas” prepaid subscribers to switch to the “Xplor” postpaid service, and vice versa, without changing their phone number, paying additional charges or purchasing a new SIM card. Xplor postpaid services In October 2004, XL’s postpaid service was re-branded as “Xplor” to distinguish it from the postpaid services offered by other mobile operators in Indonesia. XL’s postpaid subscribers, other than corporate users, are subject to certain credit checks and a monthly minimum payment requirement of IDR2S,000. “Xplor” postpaid subscribers enjoy additional benefits such as zero subscription charges, voice billing per second (in contrast to certain of XL’s competitors such as Telkomsel and Indosat, which apply airtime charges on 6­second intervals) and one tariff for telephone calls to up to 50 countries. Postpaid services are typically used by individuals with heavier usage needs such as corporate subscribers. “Xplor” postpaid subscribers also enjoy number portability within the XL network. XL allows its “Xplor” postpaid subscribers to switch to the “bebas” prepaid service without changing their phone number, paying additional charges or purchasing a new SIM card.

 

11. BUSINESS (cont’d) SMS In addition to its voice services, XL offers its subscribers a number of data and other value-added services, including SMS. XL’s subscribers may send SMS to any mobile subscriber in Indonesia and to mobile subscribers of foreign mobile service providers with whom XL has roaming arrangements. Other value-added features and services XL provides a number of value-added features and services to all of its prepaid and postpaid subscribers without additional charges including caller identification, call holding, call waiting, call forwarding and multi-party calling. XL 3G services On September 21, 2006, XL launched XL 3G simultaneously in 11 cities in Indonesia namely, Jakarta, Bogor, Depok, Tangerang, Bekasi (collectively, “Jabodetabek”, a metropolitan area covering Jakarta and its surrounding areas), Medan, Batam, Sintan, Bandung, Surabaya and Bali. SUbsequently, XL 3G was introduced in Yogyakarta in October 2006, and from then, XL’s 3G coverage has since expanded into Mataram and throughout Pulau Lombok and Nusa Tenggara Barat. At present, XL 3G covers 73 cities throughout Indonesia. XL also provides high speed data services with speeds of up to 2.6 Mbps utilising HSDPA technology for its 3G subscribers. To support this, XL has also launched the MEGAIGIGA data packet, which enables subscribers to access the internet at a high speed with monthly subscription fees depending on data size. XL’s subscribers can enjoy the XL 3G service when travelling in 22 countries with 37 operators, such as Australia, Malaysia, Taiwan, Hong Kong, Singapore and the United States. GSM interconnection services XL receives domestic interconnection revenue for calls which connect to XL’s network and pays domestic interconnection charges for calls which connect to other operators’ networks. XL also provides out-bound international roaming service for its postpaid subscribers. Postpaid subscribers are able to receive and make calls while travelling abroad in countries where XL has cooperative roaming arrangements with mobile service providers in those countries. As of the Latest Practicable Date, XL had cooperative international roaming agreements with 349 mobile service providers operating in 140 countries. XL has entered into interconnection agreements with other telecommunications operators which may allow interconnections between XL’s mobile network and the PSTN, the international gateways operated by Indosat, as well as other networks operated by other mobile and fixed-line operators. These interconnection agreements enable XL’s subscribers to call, and to receive calls, from subscribers of other telecommunications operators. The Indonesian Ministry of Communication and Information has set guidelines on interconnection rates between XL and other telecommunications operators. See “Section 11.19.2 -Regulations and licenses -Indonesia” for more details. 11. BUSINESS (cont’d) Domestic and international interconnection XL currently has interconnection arrangements with other telecommunications operators and IDD service providers in Indonesia, pursuant to which XL receives domestic and international interconnection revenues for all calls that connect onto XL’s network. These interconnection arrangements are subject to guidelines on interconnection rates set by the Indonesian Ministry of Communication and Information. For calls from the PSTN to XL’s subscribers, and calls from subscribers of other mobile operators to XL’s subscribers, XL receives domestic interconnection revenues. For international calls from overseas to XL’s subscribers, the IDD service providers collect the applicable IDD tariff and remit a portion to XL. The interconnection revenues that XL receives from incoming calls to XL’s subscribers are higher than the interconnection payments XL makes to other operators because of the high proportion of incoming calls to XL’s subscribers from subscribers of other operators. In-bound roaming XL receives revenue from in-bound roaming carried out by subscribers of overseas mobile operators which are in Indonesia and are using the XL network for mobile coverage. XL has roaming agreements with other mobile operators in respect of international in-bound roaming charges for calls and SMS made by, and received by, their subscribers while roaming on XL network. XL’s roaming agreements with these operators establish the charges for these services. The charges for international in-bound roaming are denominated principally in USD, and XL receives payments from operators outside Indonesia for these services in USD. Corporate services XL’s Business Solutions offer convergent communication solutions and services (FMC -fixed and mobile communications convergence), targeted at corporate subscribers. As a full telecommunications service provider, Business Solutions provides focused telecommunications solutions and can be adapted to subscribers’ need through a consultative approach. The services provided by Business Solutions are supported by a fiber optic cable backbone network which extends through the islands of Java, Bali, Lombok, Sumatra, Batam and a large part of Kalimantan and Sulawesi, as well as supported by XL’s operator partners in other countries which guarantee the availability of international scale networks. Strategic alliances XL has forged partnerships with partners such as Vodafone, AMI and Yahoo. With Vodafone, XL provides its subscribers with access to a wide range of international voice and data roaming services such as GPRS roaming and 3G roaming, as well as business products and solutions. XL is also a member of AMI, a platform for collaboration among leading mobile operators in the region which include Celcom, M1, IDEA Cellular (India) and DTAC (Thailand). This has resulted in easier access and enhanced experience for its subscribers. XL also has a strategic partnership with Yahoo! Indonesia to distribute Yahoo! oneSearch, Yahoo!’s popUlar mobile search service, across XL’s mobile internet portal. 11. BUSINESS (cont’d) Marketing, sales and distribution Marketing XL spent IDR218.6 billion, IDR332.3 billion and IDR433.0 billion in fiscal 2005, fiscal 2006 and fiscal 2007 respectively, on advertising and promotional activities. XL’s marketing strategy is targeted at emphasising XL’s image as a “good quality, great value” mobile operator which fully understands the mobile needs of Indonesians. XL’s marketing strategy focus on the following: • Maintain high-impact national programmes designed to aggressively grow MOU and revenues. XL intends to sustain its subscriber and revenue growth momentum achieved by tariff simplification, emphasis on affordability of voice and SMS tariffs and call duration stimulation.
• Targeted retention and loyalty programmes to increase subscriber productivity and longevity. XL has launched a loyalty programme called “XL Poin Hadiah” that rewards subscribers for using XL’s services by giving them points for usage or reload. These points can be redeemed for XL services such as free voice minutes, free SMS, and shopping vouchers.
• Aggressive marketing in brand portfolio management. XL has adopted an aggressive marketing approach in its brand management of the XL brand portfolio (“XL”, “bebas”, ‘jempo/” and “Xplor’) to further strengthen its positioning as the “best GSM value provider” in prOViding subscribers with a total product offering and mobile services.
• Focused sales and marketing culture. XL has fostered an aggressive sales and marketing culture to attract new subscribers, particularly after expanding into new areas. XL’s wide range of distribution channels include direct sales, XL-owned and XL-managed stores, franchised stores, independent retailers and reloading through ATMs and XL’s M-Wallet feature. XL aims to increase its interaction with its subscribers by focusing on more direct and customised marketing methods.
• Enhanced subscriber service. Using its integrated billing system and subscriber relationship management system, XL monitors its subscribers’ preferences and realigns its market strategies to reflect subscriber insight. XL’s subscriber relationship management system also allows XL to attract subscribers with its diverse, customised range of services and account management. XL’s contact management self service automation system also provides a channel for its subscribers to get information regarding our products, services and programmes easily.

In 2007, XL capitalised on the coverage and pricing levers to drive subscriber growth and increase revenue share. The major programmes were: “Wide Coverage Campaign”, “Flat Per Second Tariff Scheme”, followed by regional tariffs based on a national campaign of “Rupiah 1 per Second On-Net Voice Tariff'” and an off-peak SMS campaign. In January 2008, XL launched a new tariff of IDRO.1 per second for “bebas” users for all operators in Indonesia and a special SMS tariff of IDR35 for usage among XL’s subscribers. Sales and distribution In 2007, XL changed its distribution system from the direct method to a hybrid direct and indirect (dealer management system) method. As of the Latest Practicable Date, XL had entered into cooperative arrangements with 3 national distributors, more than 15 regional distributors and more than 200 other distributors. These distributors will distribute XL’s products through their distribution network on a non-exclusive basis. 11. BUSINESS (cont’d) Many independent retailers also sell XL starter packs and physical vouchers. XL’s prepaid subscribers can reload vouchers electronically at all XL Centres and XL Kita outlets, at ATMs, through phone banking, or through its XL Kita outlets. Currently, approximately 90% of all reloads occur electronically and XL expects that proportion to increase in the future. As of the Latest Practicable Date, XL had 112 XL Centres and 137 XL Centre outlets. XL Centres are an important component of XL’s subscriber service functions as they provide a direct interface with XL’s subscribers. XL Centre outlets are owned by third parties who typically sell XL starter packs and vouchers. Competition According to Frost & Sullivan, Telkomsel, a subsidiary of PT Telekomunikasi Indonesia Tbk, is the largest mobile operator in Indonesia, accounting for 51.6% of total mobile subscribers as of December 31, 2007, followed by Indosat (26.4%) and XL (16.6%). The remaining 5.4% market share came from PT Sampoerna Telekomunikasi Indonesia, PT Mobile-8 Telecom Tbk and new operator Hutchison Telecom Indonesia (launched in March 2007). Operators of mobile telecommunications services in Indonesia have historically competed on the basis of service quality, pricing, availability of data services, network coverage and value-added features such as voice mail and text messaging. As the market for mobile services in Indonesia develops, subscribers will place increasing value on subscriber service. The geographic scope of XL’s network coverage and its significant network capacity provides XL with an advantage over new market entrants, who cannot duplicate XL’s network coverage or capacity without significant capital expenditure. XL’s subscriber-focused approach and its ability to offer various service packages and regional pricing using its integrated billing system distinguish XL from its competitors in both prepaid services and postpaid services. XL’s most prominent competitors are Telkomsel and Indosat. Network and infrastructure XL utilises many types of telecommunications network infrastructure to support its services to subscribers, amongst which are microwave transmission, fiber optic, VSAT, submarine cable and MPLS. In mid-1997, XL placed a microcell network in Jakarta’s central business area, which utilises fiber optic cables and microcells and is designed to offer high quality transmission of voice and data services. Over the last 3 years, XL intensified its coverage in buildings in order to achieve improved radio network quality. XL utilises a combined fiber optic and microcell network designed to avoid blank spots and distorted connection disturbances and provide subscribers a good connection even during peak hours. XL’s fiber optic network consists of a backbone network and ring network along both sides of the northern railroad from Western Java to Surabaya in Eastern Java, covering all the major cities in Java. To reduce network redundancy and to support the telecommunications traffic from the cities in the middle and southern part of Java, XL has constructed 4 fiber optic rings connected to its backbone network. The Java fiber optic backbone consists of 3 types of fiber cores (comprising 72, 144 and 216 fiber cores respectively), using SDH to connect each node along the backbone and the ring.
11. BUSINESS (cont’d) XL has constructed a number of submarine fiber optic cables with a capacity of 2.5 and 10 gigabytes per second from Puger (East Java) to Denpasar, Bali to Senggigi, Lombok to Kawindanae, Sumbawa and ending at Makassar, South Sulawesi. XL also has a similar submarine cable from Palu, Central Sulawesi to Sangatta, Kalimantan. XL has a submarine fiber optic network from Ancol, North Jakarta to Mentigi, Bangka Island to Sungai Liat, Riau Islands and through Kuala Tungkal, Jambi. From Kuala Tungkal, the fiber optic network infrastructure will be extended to Batam. On the Sumatra Island, XL constructed fiber optic cables to connect the cities of Medan, Padang, Pekanbaru, Jambi, Palembang and Bandar Lampung. The backbone is intended to be eventually linked to Java Island by submarine cable between Anyer and Kalianda. The construction of a fiber optic backbone for the Kalimantan Island is currently in progress. XL has also constructed a high capacity microwave link to Singapore and Penggarang (Malaysia) from Batam and Bintan. The submarine fiber “Batam Rengit Cable System” connects the XL network to the network in Malaysia which is operated by TM Group to capture a significant population of Indonesians working in Malaysia. XL is exploring options to unlock the value of its passive infrastructure with the objective to improve its return profile and create shareholder value. Recently, a business unit was established to manage and execute the tower sharing initiative. To date, it has signed a Memorandum of Understanding with 4 operators, namely, Hutchison Telecom Indonesia, Natrindo Telepon Seluler, Bakrie Telecom and Sampoerna Telekomunikasi. Geographical capacity and coverage XL’s network is primarily based on the GSM 900 standard. XL uses its GSM 1800 spectrum to improve the capacity of radio in heavily populated areas such as Jakarta, Bandung, Bali and Surabaya, using the GSM 1800 standard as an overlay on the existing GSM 900 standard. The GSM 1800 standard allows XL in particular to provide voice and data services in densely populated areas. Based on current technology, XL believes its GSM 900 and GSM 1800 spectrums are adequate to support its subscriber growth for the next few years. From 2006, XL made 3G technology available with the adoption of WCDMA in the cities of Jabodetabek, Bandung, Surabaya, Yogyakarta, Denpasar, Mataram, Medan and its surroundings, Batam as well as Bintan. In 2007, the expansion of 3G continued to the main cities in Sumatra, Kalimantan and Sulawesi and the other cities of Java. XL’s mobile service covers the following areas: Java Island (covering Jabodetabek, a large part of East and Middle Java, Yogyakarta, East Java), Bali Island, Lombok and Sumbawa (covering a large part of Bali, Lombok and Sumbawa), Sumatra Island, Kalimantan Island and Sulawesi Island. In 2007, XL expanded its network to the eastern part of Indonesia including Nusa Tenggara Timur, Maluku and Papua. As of the Latest Practicable Date, XL had 11,597 BTS (inclUding 1,375 Node B), 300 HSDPA hotspots, 109 SSC and 45 MSC. In 2006, XL began to switch to the NGN which represents a synthesis between the MSC server and the MGW. XL has 2 network operation centres in Jakarta and Sintaro which monitor its network 24 hours a day, 7 days a week. XL is currently implementing an integrated network management system (“INMS”) which will enable XL to monitor its entire network infrastructure through a single platform. XL purchases most of its infrastructure from Ericsson and Huawei Tech Investment Co. Ltd (“Huawei”). XL’s network is an integrated system which incorporates its switching system, cell site equipment and microwave transmission network. Most of its STS are situated within or on top of buildings or on vacant land owned or leased by XL for periods ranging from 5 to 20 years. 11. BUSINESS (cont’d) Spectrum The term ‘frequency allocation’ is used when the government of Indonesia uses certain bandwidth frequency for specific interests, such as, the frequency allocation for mobile telecommunications services or the frequency allocation for broadcasting. The term ‘set frequency’ is used when the government of Indonesia gives permission to specific businesses to use the said frequency for the provision of services as decided in the frequency allocation. XL’s GSM 900 frequency allocations are at the 890 MHz to 915 MHz frequency bandwidth and the 935 MHz to 960 MHz frequency bandwidth. The set frequencies granted or assigned by the government of Indonesia in XL’s licenses to provide GSM 900 mobile telecommunications services are 2×7.5 MHz at 907.5 MHz to 915 MHz and at 952.5 MHz to 960 MHz frequency. The frequency allocation by the government of Indonesia for the GSM 1800 mobile telecommunications services in Indonesia is at 1710 MHz to 1785 MHz frequency bandwidth and at the 1805 MHz to 1880 MHz frequency bandwidth. The set frequencies granted by the government of Indonesia in XL’s licenses to provide GSM 1800 mobile telecommunications services are 2×7.5 MHz at 1710 MHz to 1717.5 MHz and 1805 MHz to 1812.5 MHz frequency. The set frequencies granted by the government of Indonesia in XL’s license to provide IMT-2000 services are 2×5 MHz at 1945 MHz to 1950 MHz coupled with 2135 MHz to 2140 MHz.
11.5.3 Dialog Dialog commenced business on January 31, 1995. Dialog’s business is predominantly focused on the provision of mobile telecommunications services in Sri Lanka. According to Frost & Sullivan, Dialog is the largest mobile telecommunications service provider in Sri Lanka by number of subscribers as of December 31, 2007. In 2006, Dialog was awarded the 3G spectrum assignment by the TRC. Dialog launched its 3G commercial services in August 2006 and became the first operator in South Asia to launch a 3G network. As of the Latest Practicable Date, Dialog operated 1,024 2.5G BTS across Sri Lanka on dual band GSM 900 and GSM 1800 networks. Dialog also operated more than 440 3G BTS as of the Latest Practicable Date. Dialog has also made several strategic corporate acquisitions in order to capitalise on and secure a strong position in a quadruple play market (where mobile, fixed, broadband internet and media services are offered). In December 2005, Dialog acquired 100% of DBN, which operates the largest transmission and data communication network in Sri Lanka. DBN is a key player in providing backbone transmission, infrastructure facilities and data communication services, and is also engaged in the business of internet service provision. In July 2007, DBN launched its CDMA services. In 2006, in order to have a stake in the television media industry, Dialog acquired a 90% interest in Dialog TV (then known as Asset Media (Private) Limited), a media company that is licensed to operate television broadcasting and pay television in Sri Lanka and acquired the remaining 10% in September 2007. In December 2006, Dialog, through Dialog TV, acquired CBNP and CBNSP. Since these acquisitions, Dialog has invested in digital broadcast infrastructure, targeting digital terrestrial broadcast, DTH and mobile television service provisioning. The acquisition of these entities has provided Dialog with a portfolio of licenses, technology and service positioning capability, enabling Dialog to offer quadruple play services. The following table shows certain information relating to Dialog’s revenues, adjusted EBITDA and PATAMI extracted from Dialog’s audited financial statements for the periods indicated: Year ended December 31, 2005 2006 2007 Revenue (SLR millions) —….,.1::'”6,::-:03″””4 —::-:25:-:,6::=7:;:-9 32,517 Adjusted EBITDA (SLR millions)(t) 9,416 13,744 13,740 PATAMI (SLR millions) 7,012 10,119 6,967 11. BUSINESS (cant’d) Note: (1) Adjusted EBITDA is not a uniformly or legally defined financial measure. We define adjusted EBITDA as net profit! (loss) before taxation. interest expense (income) and other finance cost, depreciation, impairment and amortisation, other expense/(income), share of results of associates and jointly-controlled entities and foreign exchange gain/(loss). Adjusted EBITDA is presented because we believe it is a widely accepted financial indicator on an entity’s ability to incur and service debt. You should not consider the adjusted EBITDA as an alternative to net income or income from operations, or as an indicator of our operating performance or other combined operations or cash flow data prepared in accordance with generally accepted accounting principles, or an alternative to cash flows as a measure of Iiquid~y or any measures of performance derived in accordance with Sri Lankan GAAP. The computation of adjusted EBITDA herein may differ from similarly t~led computations of other companies. Adjusted EBITDA is not a measure of financial performance under Sri Lankan GAAP and should not be considered as an alternative to net cash provided by operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any measures of performance derived in accordance with Sri Lankan GAAP. The following table reconciles our definition of adjusted EBITDA to our profit after taxation for the financial years indicated: For the year ended December 31, 2005 2006 2007 SLR million SLRmillion SLRmillion Profit after taxation  ..  7,012  10,119  8,967  plus:  Tax expense  ..  42  75  45  Depreciation, impairment and amortisation  .  2,152  3,017  4,477  less:  Interest income  ..  (172)  (250)  (153)  plus:  Interest expense and other finance costs  ..  367  741  797  Other expense/(income)  .  (53)  (123)  (379)  Foreign exchange loss/(gain)  68-.:=-=­ 165…..::.-=–­ (14).,…,…:’::-“­ Adjusted EBITDA  .  9,416  13,744  13,740
—~—…….;—-…;..­Subscriber base and usage Dialog is the largest mobile telecommunications service provider by subscriber base in Sri Lanka with a market share of 53.4% in the mobile telecommunications market as of December 31, 2007, representing 4.3 million subscribers, according to Frost & Sullivan. In 2007, while Dialog’s postpaid active subscriber base increased by 17.6% over 2006, Dialog’s prepaid active subscriber base increased by 40.8% over 2006 to 3.7 million subscribers in 2007. 11. BUSINESS (cant’d) The following table shows certain information relating to Dialog’s mobile telecommunications subscriber base for the periods indicated: As ofNear ended December 31, ____2::.;0;.:0.=.5 2006 2007 Number of subscribers (‘000): Postpaid . 441 484 569 Prepaid . 1,682 2,621 3,690 Total number of subscribers . 2,123 3,105 4,259 Number of mobile subscribers in Sri Lanka (‘000)(‘) .. 3,362 5,413 7,983 Sri Lankan mobile penetration(l) . 16.4% 26.1% 38.1% Dialog’s share of net market increase . 66.0% 48.0% 45.0% Market share(2) . 63.1% 57.4% 53.4% ARPU (SLR per month): Postpaid . 1,635 1,682 1,688 Prepaid .. 426 432 412 Blended . 697 658 590 Average monthly churn rate (%): Postpaid . 3.3% 3.4% 3.1% Prepaid . 0.1% 0.2% 0.1% Average monthly MOU per subscriber”): Blended .. .. 269 221 212 Average monthly SMS per user .. 2023 22 Notes: (1) Figures are extracted from the report prepared by Frost & Sullivan.
(2) Computed as Dialog’s estimate of its total number of subscribers divided by the number of mobile subscribers in Sri Lanka as extracted from the report prepared by Frost & Sullivan.
(3) Dialog’s blended monthly MOU per subscriber comprises chargeable and non-ehargeable MOU.

Dialog’s average monthly churn rate has remained steady from fiscal 2005 through fiscal 2007, with fiscal 2007 churn rate of 0.1 % for prepaid subscribers and 3.1 % for postpaid subscribers. There have been discussions in Sri Lanka as to the possible adoption of mobile number portability regulations. If such regulations were approved, we would anticipate that the churn rate would increase. Services and products The following table shows the breakdown of Dialog’s total revenues as a percentage of its total gross operating revenue for the periods indicated: Year ended December 31, ____2::.;0:.:;0,;-.5 2006 2007 %% % GSM telecommunications services 79.0 79.0 78.0 Inbound roaming……………………………………………………………………. 6.0 4.0 3.0 International termination 8.0 9.0 10.0 Others 7.0 6.0 5.0 Broadband and other telecommunications services 2.0 2.0 Media , ‘–__-=-=-==—-,–;;-;;-;c–=~27.0 Total gross operating revenue ;,.. 1:.::0;.::0.;.:.0:.:%.::…. .;;10;.:0:.;..0.::…. 1.;.;0;.::0~.0 Dialog offers voice and non-voice mobile services on either a postpaid or prepaid basis. 11. BUSINESS (cont’d) Prepaid and postpaid services Dialog operates a 2.5G and a parallel 3G GSM network, supporting the latest in multimedia and . mobile internet services, and also provides automatic international roaming (AIR) facilities in over 200 countries and destinations. Dialog’s postpaid mobile service commenced in March 1995 under the “Dialog” brand name and Dialog introduced prepaid services in 1999 under the brand name “Kit”. Prepaid subscribers purchase vouchers that contain fixed amounts of service value and do not pay subscription or other monthly charges. These service value vouchers are available in the form of physical recharge vouchers or electronic reloads. While Dialog has achieved widespread distribution for traditional recharge via paper-based vouchers, its subscribers also utilise SMS­based electronic reload. Dialog offers innovative services such as 3G portal, 3G video conferencing and video call centres. Dialog’s 3G network supports high speed mobile broadband at data speeds in excess of 7.2 Mbps. Other value-added features and services A continued focus on innovation and local adaptation of cutting edge technologies has enabled Dialog to maintain and grow a comprehensive portfolio of value-added services. A broad outline of the services offered by Dialog to its subscribers is set out below: • SMS based value-added services. SMS provides an underlying bearer for a range of 100 services spanning a wide spectrum of information categories ranging from financial information, through entertainment to sports and news. SMS is also used as a primary access medium for the request and delivery of reusable content services. Dialog offers a “Star Call” voice messaging service which allows its subscribers the unique benefit of extending the SMS experience to the voice dimension.
• International roaming services. Dialog has an international roaming network, which has been extended to encompass GPRS roaming, enabling subscribers to use GPRS mobile data facilities while roaming overseas. Additional roaming options such as SMS Home and Call Home are also available as more economical roaming services.
• GPRS portal services. Diaiog’s GPRS portal provides a mobile internet interface to a range of information services from reusable content services to information retrieval and search engine facilities.
• Reusable content (download) services. Downloads of ring tones, games, wallpapers and multimedia clips are rapidly growing in popularity. Dialog maintains a comprehensive and regularly updated content store, which provides subscribers with access to a wide variety of content.
• Location based services. Dialog provides a suite of location based services ranging from location sensitive 100 services to corporate solutions for vehicle and fleet tracking and sales force management.
• Local language services. Dialog has pioneered the support of Sinhalese and Tamil SMS and mobile portal services in the Sri Lankan mobile telecommunications market.
• MMS. Dialog offers MMS, which facilitates the transmittal of pictures and short moving clips between mobile phones and/or e-mail terminals.

299 11. BUSINESS (cont’d) • Video streaming services. Dialog uses GPRS and Enhanced Data rates for GSM EDGE technologies to provide a range of video streaming applications. The principal application for EDGE technology is the mobile television service supporting live television streaming to compatible mobile devices.
• MyOialog.lk. Dialog’s mobile blog, “MyDialog.lk”, has been launched on web and WAP, with features such as blogging via SMS/MMS, group messaging and the ability to upload photos via MMS. A free bundle content offer was coupled at launch.
• Dialog directory assistance. Dialog has also pioneered Sri Lanka’s first SMS/e-mail support directory information services, which links its subscribers to the “Rainbow” classifieds database of Sri Lanka Telecom Limited.
• Mobile surveillance. This is an internet-based surveillance system branded as the “Phone Eye” and launched by Dialog under the 3G umbrella. This is Dialog’s latest product in mobile security, offering its subscribers the ability to view live images or videos captured from the installed camera or closed circuit television (CCTV) system. The surveillance camera images can be accessed on a mobile phone or computer through the internet.
• Breaking news alerts. Introduced for the first time in Sri Lanka, this service allows Dialog’s subscribers to receive the latest local and international breaking news via SMS or view international news live through CNN on MyTV or get CNN news updates through video on demand. The breaking news alerts, one of Dialog’s most important and valuable services, is a quick and easy way for subscribers to keep up-to-date on the latest developments both locally (through Ada Derana local news service in Sri Lanka) and internationally (through CNN International news service).
• MyTV. Through this service, Dialog offers on demand television viewing. Built on video streaming technology, MyTV offers local and foreign channels. To enhance its user friendliness, MyTV has a channel selector for greater ease for the user to surf channels. MyTV is also 3G-, GPRS-and EDGE-enabled, granting this feature added accessibility.
• Twin S/M. Dialog’s TWIN SIM facility, also known as the Master/Slave connection is another first in Sri Lanka. According to the TWIN SIM concept, the subscriber will get 2 parallel SIM connections with the principal connection being tagged as the Master and the secondary connection tagged as the Slave. Both the SIM will have the same mobile number and the main feature of this service is added fleXibility for the user to forward calls between the Master and the Slave connections.
• Background Music. Background Music is another new value added service for Dialog’s postpaid and prepaid subscribers, allowing them to enjoy background music, background effects and sound effects during call conversations.
• Songcatcher. Provides the convenience of storing Dialog’s subscribers’ favourite songs on their mobile phones by dialling ‘389’ and placing the mobile phone near a radio or any other music source for 15 seconds to record a song. The song details, along with a download link, will then be sent to the subscriber’s phone via SMS.
• Video Star Call. Dialog launched video star call following the launch of ‘Star Call’. With the launch of Video Star Call, subscribers can now send short video messages by pressing the

• key and recording a short video message. This service adds a video dimension to the previously audio-and text-based mobile messaging. 300 11. BUSINESS (cont’d) Other value-added services offered by Dialog include caller identification, 100, call waiting, call hold, call forward, voice mail and 6-way call conferencing. Dialog also introduced sub-products such as video calls, 100 video calls, 3G outbound roaming, video sharing and blogging. Dialog also launched in 2007 the BlackBerry platform in Sri Lanka, enabling Dialog’s subscribers to gain instant and online access to e-mail and browsing services. Supplementary businesses Dialog has ventured into 5 main supplementary telecommunications related businesses based on licenses acquired from the Government of Sri Lanka and its acquisitions. • International business Following industry liberalisation and the cessation of the monopoly by Sri Lanka Telecom Limited on international services, Dialog entered the international services arena, prOViding international private leased circuits (“IPLC”) and voice traffic origination/termination. Dialog’s international services business unit, Dialog Global, has established a comprehensive network of international linkages facilitating the flow of traffic to and from Sri Lanka to most international destinations. In order to aggregate originating international voice minutes from non-Dialog subscribers, Dialog launched its international calling card branded as Dialog Global. These cards are distributed via its retail network and the mobile prepaid top-up charge card may be used to refill these calling card accounts. As an extension to this calling card, Dialog launched an international calling card to aggregate terminating traffic to Sri Lanka under the brand name of Qlink. This was launched by Mobicom Communications Pty. Limited in Australia on a pilot basis in partnership with Dialog Global and Dialog plans to extend it to other markets which have large Sri Lankan migrant popUlations. In February 2008, Dialog Global launched a co-brand calling card in Bahrain with Harmony Telecoms Bahrain Ltd. Dialog envisions future demand for international bandwidth to escalate due to the entry of Sri Lanka into the business process outsourcing (BPO) space. Dialog’s reach extends well beyond the locally connected SEA-ME-WE 3 and SEA-ME-WE 4 cables to all major submarine cables through bridging arrangements supported by TM at its multipoint global nodes situated in all major global markets. • Broadband and internet business Dialog’s internet business was launched in 2001 with the primary intention of developing the IP infrastructure required for Dialog to become the leader in a convergent environment. Dialog has also established a retail ISP service, Dialog Internet, which provides dial-up internet services to more than 3,000 subscribers as of December 31, 2007. Dialog Internet’s broadband services are offered through WiMax technology and at speeds of up to 4Mbps. Broadband services are further complemented by HSDPA and WiFi offerings. • Fixed telephony and data business Dialog launched its COMA operations commercially in July 2007. In addition to the lower end voice services provided through COMA, higher end corporate voice services such as hosted private automated branch exchange (“PABX”) services are also provided. Dialog is a leading provider of data links and solutions to business establishments in Sri Lanka. Currently, there are more than 1,800 data links from a subscriber base of more than 250. 301 11. BUSINESS (cont’d) • Tefe-infrastructure business Dialog’s tele-infrastructure (“DT!”) is a newly formed supplementary business unit responsible for the management and retail of Dialog’s tele-infrastructure. DTI provides a state-of-the-art transmission and infrastructure services to all other supplementary business units of Dia[og and to external licensed operators. DTI is responsible for Sri Lanka’s national transmission network, which is supported by an extensive communications infrastructure. DTI clients include all fixed and mobile operators, paging networks, most private television and frequency modulation (FM) radio networks, data communication networks and ISPs in Sri Lanka. • Media business Dialog TV operates Dialog Satellite TV, a DTH satellite television service. With the aim of offering the best satellite television to all Sri Lankans, Dialog TV supports a broad array of international content including CNN, BBC, HBO, Cinemax, AXN, ESPN, Ten Sports, Discovery Channel, MTV (Music Television) and Cartoon Network, in addition to a wide portfolio of Sri Lankan television channels. Dialog TV services are based on cutting-edge digital video broadcasting by satellite (DVB-S) digital broadcast infrastructure and as of December 31, 2007, this service reached over 73,000 Sri Lankan subscribers. In line with its commitment to deliver broadcasting services of the highest quality and sophistication, Dialog TV has invested in state-of-the-art technology in all areas of its operations. The use of digital technology ensures superior broadcast quality and enables a wide range of services and features to be provided to the end consumer. Strategic alliances In January 2006, TM entered into a strategic partnership alliance with Vodafone, a leading telecommunications company. Under this alliance, Dialog, together with Vodafone, launched a range of exclusive services for business users and international travellers, which included Vodafone wireless office solutions as well as 3G datacards and 3G routers. The partnership also allowed Dialog’s subscribers access to Vodafone’s international services while travelling within the participating Vodafone partners in addition to supply chain management benefits. The partnership enables Dialog to leverage on Vodafone’s experience and portfolio of services to offer a comprehensive business product portfolio. The partnership covers a range of areas, including preferential roaming arrangements, multinational corporations, sales collaboration, best-practice sharing and ongoing access to new products such as BlackBerry devices. In addition, Dialog partnered the National Development Bank PLC of Sri Lanka (“NOB Bank”) to introduce eZ Pay, South Asia’s first mobile payment and banking network, which was launched in the third quarter of 2007. Themed “mPowering a New Economy”, eZ Pay added a revolutionary and consumer centric dimension to banking in Sri Lanka. The Dialog-NOB Bank mobile commerce network allows consumers to carry out a variety of electronic transactions using their mobile phone from anywhere within Dialog GSM’s network coverage, including the purchase of goods, payment of bills, transfer of money and performance of banking transactions. Dialog also collaborated with mChek India Payment Systems Pvt. Ltd. (“mChek”), who provided the technological partnership for eZ Pay. mChek provides the mCommerce software on the SIM card to transform a standard mobile phone to an electronic wallet and/or a point of sale device capable of capturing and validating electronic (mobile commerce) transactions and banking transactions for use by retailers and merchants. 11. BUSINESS (cont’d) Marketing, sales and distribution Marketing Dialog spent SLR2.3 billion, SLR3.0 billion and SLR3.5 billion in fiscal 2005, fiscal 2006 and fiscal 2007 respectively, on marketing, advertising and promotional activities. • Brand bUilding, advertising and promotion Dialog’s advertising and promotion strategy is divided between brand building, new product announcements and promotion. The wide portfolio of products and services supported by Dialog, alongside the correspondingly wide range of market segments it addresses, necessitates consistent and sustained advertising and promotional activities characteristic of leading mobile operators in the region. Dialog actively advertises in the press, on television, radio, outdoor events and through its channel distribution network. Dialog’s core advertising strategy is to consolidate and extend its brand value as the leader in the telecommunications industry in Sri Lanka. As such, Dialog focus on the quality of advertising and ensuring consistency with the Dialog brand promise of “The Future.Today”. The brand portfolio of Dialog consists of the main brand Dialog GSM, prepaid brand Dialog Kit, value-added services, Dialog 3G, new segment entry products and international business. In addition to the branding of mobile services, Dialog actively promotes its subsidiaries’ products and services, namely Dialog TV, Dialog Fixed Telephony and Dialog Broadband. • Reward programmes Dialog supports a comprehensive portfolio of subscriber reward programmes focused on rewarding subscribers for loyalty and continued usage of Dialog’s services. Based on the wide spectrum of consumer segments addressed by Dialog, several rewards and loyalty programmes have been designed. The Club Vision and Priority Circle programmes are targeted at top tier postpaid subscribers. The eligibility criteria focus on factors such as the length of time for which a person has been Dialog’s subscriber, revenue generated per user and the timely settlement of bills. Such subscriber groups enjoy special benefits of enhanced credit limits, special call tariffs and preferential services which include exclusive offers, such as additional rewards points, SKYWARD air miles and benefits through other Dialog partner establishments. Star Points is a loyalty programme where all Dialog’s subscribers can earn points on transactions made on any of Dialog’s product, service or other purchases at partner merchants located in Sri Lanka. Subscribers can redeem their accumulated points equivalent to SLR at any of the partner merchants or for any Dialog transaction. Sales and distribution Dialog has established a wide dealer network operated primarily by 10 exclusive business partners of Dialog. Dialog’s dealer network has over the years established points of presence for Dialog’s products and services in all major towns and cities across the country including the northern and eastern provinces. Dialog’s business partners also playa lead role in the country’s mobile phone trading sector having established themselves as large-scale importers of all major brands of mobile phones and accessories. 303 11. BUSINESS (cont’d) The collaborative strength of Dialog and its business partners is manifested in the “Arcade” concept, a unique model store featuring the co-location of all business partners within a Dialog sponsored showroom. The “Arcade” model store has been replicated in several major cities in Sri Lanka and provides consumers with a wide variety of mobile phones and accessories. Dialog’s distribution network as of the Latest Practicable Date, comprised 2,802 retail outlets constituting 6 Dialog Arcades, 62 subscriber service points and 11 service centres that are owned and managed by Dialog. A majority of Dialog’s subscriptions are sold by its exclusive business partner network. Business partners accounted for approximately 73.0% of prepaid connections and 72.0% of postpaid new connections for fiscal 2007. Since the launch of the “Kif’ brand in 1999, Dialog has established 33,500 distribution outlets as of the Latest Practicable Date. Dialog’s distribution mechanism included 33 exclusive distributors supported by approximately 280 field sales representatives as of the Latest Practicable Date. Competition The size and composition of Dialog’s subscriber base and usage patterns have changed over the past few years. Rapidly increasing affordability and enhanced availability in terms of network reach have acted as a catalyst for wide scale adoption by less affluent segments of society. The advent of prepaid services has provided a strong impetus for mobile telecommunications penetration growth. The low commitment attached to ownership, characteristic of prepaid services, has increased the number of mobile telecommunications users in Sri Lanka. Mobile telecommunications continues to be used widely in the high spending and corporate segments, which are markets that accounted for a large majority of mobile phone ownership during the early years of sector development in Sri Lanka. Diaiog continues to face intense competition from Mobitei (Pvt) Ltd., Celltel LankalTigo and Hutch Sri Lanka. In 2007, Bharti Airtel was awarded a license to commence mobile telecommunication operations in Sri Lanka and is expected to commence its operations in 2008. Competition has been aggressive in terms of coverage, service portfolios and price. However, Dialog has been benefiting from market growth opportunities notwithstanding declining ARPU and MOU. In preparation for emerging growth opportunities within a mass market environment, Dialog has focused on “profit per minute” and “profit per user” as lead indicators of ongoing performance as opposed to ARPU. The former measures have driven changes in Dialog’s cost structure and value chain formulation which has helped Dialog to deliver approximately 20.0% CAGR measured in profitability between 2005 to 2007 notWithstanding the transformation evidenced with respect to the spending profile of the Dialog’s subscriber base. The main competitors in the fixed telephony and broadband sectors are Sri Lankan Telecom, Lanka com Services, Suntel and Lanka Bell. The growth in the fixed line sector is led by COMA technology which enables phone sales that caters to a largely untapped need of low cost fixed line telephony in the market. The introduction and aggressive promotion of fixed broadband internet solutions by DBN and its competitors have resulted in a rapid growth in that sector. Aggressive adoption and marketing of wireless broadband within the Sri Lankan market can be said to be one of the key highlights of the industry with deployment of HSDPA and high speed uplink packet access (HSUPA) applications in addition to 3G. In the pay television market, the main competitors to Dialog TV are Commel Cables and Lanka Broadband Networks. The current low level of penetration with only 100,000 pay television subscribers and 4 million households indicate the growth potential in the pay television for Dialog TV. 304 11. BUSINESS (cont’d) Network and infrastructure Dialog’s network infrastructure spans mobile, international and internet services. Dialog is the single largest infrastructure investor in Northern and Eastern provinces of Sri Lanka, and its investments in rural communication infrastructure development exceed USD200 million to date. The provision of telecommunications services to the Northern province shortly after the ceasefire was made possible through the introduction of satellite based transmission technology. Dialog has a leading position in Sri Lanka’s GSM market by investing in the widest coverage as well as the latest multimedia technologies and providing innovative mobile solutions to its subscriber base. Dialog intends to extend its mobile network to achieve island-wide coverage of Sri Lanka over the next 3 years. The Dialog network includes GSM equipment from GSM equipment suppliers, namely Alcatel, Ericsson and Huawei. The operations and maintenance of the Dialog network is carried out by a highly trained network operations team functioning on a 24 x 7 basis. Operations and maintenance is centred on a Network Operations Centre (“NOC”) located in Colombo, a 24 x 7 centralised monitoring system, which monitors the entire GSM/GPRS/3G/HSPAIIDD/ISPIINNAS/internationai voice and data networks in real time. The NOC regularly records, analyses and responds to a large number of network performance benchmarks relating to the quality of service provided to subscribers across all components and geographic regions of the network. Network performance benchmarks and key performance indicators are standardised against international best practices and incorporated within Dialog’s service quality management indices. Dialog’s IP infrastructure is connected to a reliable backbone via SEA-ME-WE 3 and SEA-ME­WE 4 backed up by satellite via Intelsat, Ltd. Dialog Internet also offers variety of Internet access solutions ranging from local shared internet access to customised fiber ethernet solutions to dedicated leased circuits with acceptable level of quality service via SEA-ME-WE 3, SEA-ME-WE 4 and satellite connectivity. The infrastructure of DBN, a wholly-owned subsidiary of Dialog, includes an island wide digital microwave transmission backbone and a broadband last-mile infrastructure. The MPLS data backbone offers the most comprehensive data coverage in Sri Lanka with 85 points of presence distributed across every province. DBN operates one of the largest transmission and communication network in Sri Lanka. Dialog has established an extensive digital transmission network and communication infrastructure facilities across central, southern, eastern and western Sri Lanka covering over 80% of the island. DBN has deployed its IP broadband wireless last-mile access network using WiMax 802.16d together with its islandwide IP MPLS backbone for high-speed voice, data and video communication and internet. DBN also has deployed a CDMA network based on 450 MHz to cater to the voice and low speed data requirements of the residential market. The satellite-based DTH operation of Dialog TV is one of the largest in Sri Lanka offering 54 international and local channels to its subscribers. Dialog TV is operating on MPEG-2 encoding and is in the process of introducing MPEG-4 encoding and high definition content to the market. Dialog TV has also set up its pioneer digital video broadcast terrestrial (DVB-T) transmission centre in Colombo, although this service is still not commercially available for consumers. 11. BUSINESS (cont’d) Geographical capacity and coverage Dialog commenced operations in 1995, and has expanded rapidly, to cover all key urban centres in Sri Lanka, including Colombo and its suburbs, Galle, Kandy, Anuradhapura and Kurunegala. Having pioneered GSM technology and digital mobile in Sri Lanka, the network has been at the forefront of technology introduction, and now offers mobile communication services on par with networks in the developed world. Dialog continues to expand its network across Sri Lanka and as of the Latest Practicable Date operated over 1,000 base stations distributed across all 9 provinces of the country, on a dual band GSM 900 and 1800 spectrum configuration and 14 MSC with 2 tandem MSC. As of the Latest Practicable Date, Dialog has a 3G/HSDPA network with more than 475 Node B. As of the Latest Practicable Date, Dialog provides IDD coverage and international roaming in over 200 countries and destinations, GPRS international roaming in over 100 destinations and 3G international roaming in over 20 destinations. Spectrum Dialog’s GSM 900 frequency allocations are 2×7.5 MHz at the 907.5 MHz to 915 MHz and 952.5 MHz to 960 MHz frequency bandwidth. For GSM 1800, Dialog has been allocated 2×15 MHz, with the first allocation of 2×6.5 MHz at the 1717.5 MHz to 1724 MHz frequency bandwidth for uplink communication and at the 1812.5 MHz to 1819 MHz frequency bandwidth for downlink communication while the second allocation of 2×8.5 MHz at the 1755 MHz t01762.5 MHz paired with 1850 MHz to 1857.5 MHz and 1724 MHz to 1725 MHz paired with 1819 MHz to 1820 MHz for uplink communication bandwidth and downlink communication respectively. Dialog has been allocated IMT-2000/3G spectrum at the 1910 MHz to 1915 MHz, 1970 MHz to 1980 MHz and 2160 MHz to 2170 MHz frequency bandwidths. DBN has been allocated the CDMA frequency in 450 MHz band at the 455.35 MHz to 456.6 MHz and 465.35 MHz to 466.6 MHz frequency bandwidths. DBN also operates on 3.5 GHz for WiMax and 10.5 GHz for ultra broadband wireless access (UBWA) which it uses for the provision of data access services. 11.5.4 TMIB TMIB commenced business on November 15, 1997. TMIB provides mobile telecommunications services in Bangladesh. It was the first operator to link the southernmost and northernmost parts of Bangladesh (Teknaf to Tetulia) and the first mobile operator in Bangladesh to exploit NGN IP backbone technology to enable it to implement IP traffic and signalling. It was also the first operator to have successfully implemented FLP, enabling TMIB to offer more capacity in its radio network despite the narrow GSM 900 and GSM 1800 network on which it currently operates. TMIB operates GSM mobile services on the 900 and 1800 MHz bands under the brand name ”AKTEL”. With the addition of 1,135 BTS in 2007, TMIB has expanded its network coverage to 82.5% in population terms and 71.0% in geographic terms as of the Latest Practicable Date. The following table shows certain information relating to TMIS’s revenues, adjusted EBITDA and PATAMI extracted from TMIB’s audited financial statements for the periods indicated: Year ended December 31, 2005 2006 2007 Revenue (B OT millions) —–;:9:-:,2:::76=—–.,..,13″”‘,1″”4″”0 14,390 Adjusted EBITOA (BOT millions)(l) 4,431 5,974 4,235 PATAMI (BOT millions) “……………………… 3,967 4,333 105
11. BUSINESS (cont’d) Note: (1) Adjusted EBITDA is not a uniformly or legally defined financial measure. We define adjusted EBITDA as net profit (loss) before taxation, interest expense (income) and other finance cost, depreciation, impairment and amortisation, other expense/(income), share of results of associates and jointly-controlled entities and foreign exchange gain/(Ioss). Adjusted EBITDA is presented because we believe it is a widely accepted financial indicator on an entity’s ability to incur and service debt. You should not consider the adjusted EBITDA as an alternative to net income or income from operations, or as an indicator of our operating performance or other combined operations or cash flow data prepared in accordance with generally accepted accounting principles, or an alternative to cash flows as a measure of liquidity or any measures of performance derived in accordance with Bangladeshi GAAP. The computation of adjusted EBITDA herein may differ from similariy titled computations of other companies. Adjusted EBITDA is not a measure of financial performance under Bangladeshi GAAP and should not be considered as an alternative to net cash provided by operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any measures of performance derived in accordance with Bangladeshi GAAP. The following table reconciles our definition of adjusted EBITDA to our profit after taxation for the financial years indicated: For the year ended December 31, 2005 2006 2007 BDTmiliion BOT million BOT million Profit after taxation .. 3,967 4,333 105 plus: Tax expense .. 125 69 165 Depreciation, impairment and amortisation .. 644 1,745 2,899 less: Interest income , .. (309) (300) (62) plus: Interest expense and other finance costs . 4 131 1,253 Other expense/(income) . (6) (4) (119)Foreign exchange loss/(gain) ‘—–,—~ -‘-:–::’-‘:­4,431 5,974 .:…_Adjusted EBITDA _. .:… .;….. 4,235 Subscriber base and usage TMIB is currently the third largest mobile telecommunications service provider in Bangladesh. As of December 31, 2007, TMIB had a 20.4% market share representing 7.2 million subscribers, according to Frost & Sullivan. TMIB enjoyed a 24.7% year-on-year growth in subscribers between 2006 and 2007. The following table shows certain information relating to TMIB’s mobile telecommunications subscriber base for the periods indicated: As oflYear ended December 31, ___-=c20:..:O-‘-5 2006 2007 Number of subscribers (‘000): Postpaid .. 87 152 121 Prepaid .. 2,965 5,610 7,062 Total number of subscribers . 3,052 5,762 7,183 Number of mobile subscribers in Bangladesh (‘000)(1J. 9,672 21,279 35,153 Bangladesh mobile penetration(1) .. 6.7% 14.4% 23.4% TMIB’s share of net market increase . 29.4% 26.7% 8.0% Market share(2) .. 31.6% 27.1% 20.4% ARPU (BDT per month) Postpaid . 1,755 1,485 1094 Prepaid . 408 299 234 Blended . 498 342 261 Average monthly MOU per subscriber(3L Postpaid .. 481 648 456 Prepaid .. 69 119 118 11. BUSINESS (cont’d) Notes: (1) Figures are extracted from the report prepared by Frost & Sullivan.
(2) Computed as TMIB’s estimate of its total number of subscribers divided by the number of mobile subscribers in Bangladesh as extracted from the report prepared by Frost & Sullivan. TMIB’s internal estimate of number of subscribers in Bangladesh is 10.5 million for fiscal 2005, resulting in ~s market share of 29.1%.
(3) TMIB does not have comprehensive incoming MOU data (calls originating from other operators) in fiscal 2005 and 2006.

TMIB’s subscriber base consists mainly of prepaid users, which account for 98.3% of the total number of subscribers as of December 31, 2007. Approximately 56% and 29% of this key subscriber base are located in Dhaka and Chittagong respectively. TMIB’s market share has declined from 31.6% as of December 31, 2005 to 20.4% as of December 31, 2007 due mainly to an increase in competition, with competitors such as Banglalink engaging in price competition. TMIB intends to improve its ability to bring new products and services to Bangladesh at quicker speeds and to offer enhanced services. Instead of focusing on mass subscriber acquisition, TMIB will concentrate its efforts on retention and loyalty which is essential in securing revenue and profitability. TMIB intends to also strengthen its brand equity and to have a focused master brand portfolio. Services and products SUbstantially all of TMIB’s revenues are derived from voice mobile services. In addition to basic voice services, TMIB also offers enhanced services such as Optimal Routing, Welcome SMS, Missed Call Alert, USSD Call Back, USSD Menu Browser (“AKTEL Opener”), and Ring Back Tone. Several initiatives were carried out in 2006 including Cellular on Wheel, Clock Synchronisation and New Numbering Plan. TMIB offers various packages such as Bangia SMS, 5FnF in prepaid and postpaid packages, AKTEL Kathar Chithi (voice SMS), AKTEL Gopshop (SMS chat), AKTEL GoonGoon (caller ring back tone service), Sangladesh Telegraph and Telephone Board (“SnS”) incoming and outgoing for 3 prepaid packages (Power, Joy and Exceed), Economy ISDN facility, Spice (access to GPRS service to prepaid connections), Signature Joy, Uddokta package for the public call office segment, AKTEL P.A. (missed call alert) and LDD service for AIRS (AKTEL international roaming service). • AKTEL PA (One Page) is a missed call alert service where AKTEL users will be notified about all the missed calls when the user was not reachable (for example, when the user’s mobile phone is switched off or is out of coverage or when the line is busy).
• AKTEL GoonGoon is a ring back tone service that allows the user to set a song, tone, music, funny message or sound as a ring back tone for his callers.
• Voice SMS (Kothar Chithi) allows the user to send an SMS with his/her voice instead of using text.
• GPRS, MMS, internet features enable the user to download contents such as ring tones and wallpapers, send and receive photographs through MMS, check and send electronic mails from the user’s mobile phone and use the internet.
• AKTEL Opener is a service under which by dialling only a single number, the user can browse and enjoy different value-added services such as AKTEL GoonGoon, AKTEL P.A., Cricket Update (8CRI), Post-Paid bill information (8PST) and other infotainment services.

308 11. BUSINESS (cont’d) New products in 2007 included: • Accident insurance coverage for all postpaid subscribers.
• Call centre solutions -Hunting line with PABX/mobile connectivity capabilities. TMIB was the first mobile operator in Bangladesh to provide this solution for client call centres and helplines. Clients of TMIB include BRAC Bank, Standard Chartered Bank and Nokia in Bangladesh.
• Corporate messaging platform -Group SMS or e-mail based messaging for corporate clients.
• Balance transfer service -Allows all subscribers to transfer balance of funds from their own accounts to any prepaid account.
• Easy load -Pinless electronic refill or top up for prepaid accounts.
• International roaming data/SMS -Data/SMS only for international roaming.
• Internet for prepaid -GPRS/EDGE internet services for prepaid subscribers.
• International voice SMS -Voice SMS with international connectivity.
• MMS -Picture and other MMS for all subscribers.
• Voice mail service -Allows callers to leave a voice message, which the recipient can retrieve at a later time.

Other products included: • AKTEL Phurti -a prepaid package built from consumer insight to address competition and supplement TMIB’s other offerings.
• AKTEL Power -for high-end prepaid subscribers to enable them to use GPRS/EDGE.
• AKTEL Joy -a family oriented prepaid package.
• AKTEL Signature· a consumer postpaid package similar to AKTEL Power and AKTEL Joy.
• AKTEL Infinity -a consumer postpaid package with upfront minimum monthly fees and extra services including having doctor on call, rewards and loyalty points.
• AKTEL Corporate -corporate postpaid package for comprehensive voice and data communications.
• AIRS -AKTEL International Roaming Service.

11. BUSINESS (cont’d) Marketing, sales and distribution Marketing TMIB spent BDT535.1 million, BDT672.3 million and BDT745.7 million in fiscal 2005, fiscal 2006 and fiscal 2007 respectively, on marketing, advertising and promotional activities. The key initiatives to improve TMIB’s marketing operations will include decentralising its business operations, beginning from North Bengal. TMIB believes that this will improve operational efficiencies and enhance its ability to bring new products and services to the nation at quicker speed as well as to strengthen AKTEL’s presence in Dhaka, which TMIB believes is a highly profitable region. Due to urban migration, AKTEL will benefit from ensuring effective quality of services overall, both in Dhaka and all other regions. AKTEL Phurti will be marketed as an entry level package with basic features to attract new subscribers. AKTEL Power and AKTEL Joy will be targeted at advanced level prepaid users in need of the latest features and services. TMIB will also concentrate efforts on relatively new revenue streams such as call centre solutions and leased line business. The call centre business has proven to be a profitable venture for TMIB, which has already provided hunting numbers for help lines for Standard Chartered Bank, BRAC Bank and Nokia in Bangladesh. As TMIB will no longer focus on mass subscriber acquisition, retention and loyalty will playa pivotal role to secure revenue and profitability. In view of this, TMIB plans to introduce unique usage plans and promotions. TMI B intends to also strengthen its brand equity and to have a focused master brand portfolio. This will be initiated through marketing directed at brand positioning. Examples of promotional offers launched by TMIB include the following: • Different types of usage driving -Specific usage bonus/usage drive campaign which was for a limited period.
• Validity extending & tariff benefit offers throughout the year was run -This is entirely based on the periods offered by competitors.
• Showcase Malaysia -A usage drive campaign which was for limited period.
• Kothay Kothay Mobile -A usage drive campaign which was for limited period.

TMIB also participated in a number of activities and sponsorship including sports sponsorship of cricket and golf, as well as television programmes and talk shows. Sales and distribution TMIB sells its products through its distribution network consisting of 67,983 trade outlets. Prepaid subscribers can reload vouchers electronically at all trade outlets, subscriber care centres, ATMs, AKTEL Touch Points (ATP) and through its employees and other AKTEL subscribers (Share-A­Fill). As of the Latest Practicable Date, TMIB had 65,840 trade outlets, 448 ATP, 86 exclusive dealers and 19 subscriber care centres. Corporate subscribers are managed by TMIB’s own corporate solutions team. 310 11. BUSINESS (cont’d) Competition As of December 31, 2007, it is estimated that TMIB had a market share of 20.4%, according to Frost & Sullivan. Besides TMIB, there are 5 other mobile operators in Bangladesh: Grameenphone (the largest mobile services provider with a market share of 46.9%), Banglalink (with a market share of 20.1 %), Citycell (with a market share of 4.0%), Teletalk (With a market share of 2.4%) and Warid Telecom (with a market share of 6.2%), which won its mobile phone license in December 2005. Intense competition among the operators has led to frequent reduction in average prices for mobile services. Network and infrastructure The principal components of TMIB’s network consist of: • Core network, which comprises MSC (Transit (T) MSC, Gateway (G) MSC and Visiting (V) MSC), core routers (Mobile Packet Backbone Network), SG (Signalling Transfer Point), Home Location Register (“HLR”), Serving GPRS Support Node (SGSN) and Gateway GPRS Support Node (GGSN) (for Packet Core).
• Intelligent Network (“IN”), which comprises the service control point (“SCP”) and the service data point (SDP).
• Radio, which comprises BSC and BTS.
• Transmission, which comprises PDH, SDH and optical fibers.
• Network monitoring system for core, radio, IN and transmission (“TX”). The monitoring and operations and maintenance system for each element is separate and based on the server and client architecture. However, the INMS platform in the central monitoring centre in Dhaka is capable of monitoring any node of any vendor from a single point.

TMIB depends on Alcatel, Ericsson and Huawei for its network elements and also relies on suppliers such as Huawei and CISCO for IT equipment. In terms of transmission infrastructure, TMIB has 5 high capacity microwave backbone, comprising 2 parallel backbones between Dhaka and Chittagong and one each for all other divisions (between Dhaka and Sylhet, between Dhaka and Khulna/Barisal and between Dhaka and Rajshahi). TMIB also has its own optical fiber (259 kilometres) between Dhaka and Chittagong. There are also metro fiber rings (dual) within Dhaka (20 kilometres) and Chittagong (10 kilometres). The suppliers of transmission equipment and accessories are Alcatel, Ericsson, Huawei (for fiber core) and Stratex. In addition, TMIB has 174 green field towers providing vast coverage in rural areas and supporting transmission spur link (add-drop from high capacity microwave backbone). TMIB’s network operation centre comprises head offices in 6 divisional headquarters and its network monitoring centre is in Dhaka. The platform is based on an INMS capable of integrating and monitoring multi-vendors. Geographical capacity and coverage With the addition of 1,135 BTS in 2007, TMIB expanded its network coverage to 82.5% in population terms and 71.0% in geographic terms as of the Latest Practicable Date. 311 11. BUSINESS (cont’d) TMIB’s network is based on the GSM 900 and GSM 1800 standard (2G). Further, TMIB has deployed GPRS (2.5G) and EDGE (2.75G) for data services such as internetIWAP browsing, MMS and content downloads. TMIB has 100% GPRS coverage throughout Bangladesh. In addition, the core network of TMIB is ready for the 3G network. spectrum TMIB’s GSM 900 frequency allocations are 2×7.4 MHz at the 900.2 MHz to 907.6 MHz frequency bandwidth and at the 945.2 MHz to 952.6 MHz frequency bandwidth. TMIB’s frequency allocations for GSM 1800 are 2×5.4 MHz at the 1727.2 MHz to 1732.6 MHz frequency bandwidth and at the 1822.2 MHz to 1827.6 MHz frequency bandwidth. 11.5.5 TMIC TMIC commenced business on October 19, 1992. TMIC is a private limited liability company incorporated in Cambodia and became our wholly-owned subsidiary in 2006. TMIC offers mobile telecommunications services in all cities and provinces, as well as the main national roads, in Cambodia under the brand “hello”. As of December 31, 2007, TMIC was the third largest mobile telecommunications service provider in Cambodia with 0.3 million subscribers, representing a 12.7% market share, according to Frost & Sullivan. As of December 31,2007, TMIC’s blended ARPU is currently the highest among TMI’s international subsidiaries at USD13 per month while the average blended ARPU in Cambodia is USD1 0 to USD11 per month. The following table shows certain information relating to TMIC’s revenues, adjusted EBITDA and PATAMI extracted from TMIC’s audited financial statements for the periods indicated: Year ended December 31, ___~20~0.;;.5 “’20~0′””‘6 2007 Revenue (USD millions) . 22.2 30.9 41.3 Adjusted EBITDA (USD millions)(11 8.5 14.4 18.3 PATAMI (USD millions). 1.9 ~7 ~8 Note: (1) Adjusted EBITDA is not a uniformly or legally defined financial measure. We define adjusted EBITDA as net profiU (loss) before taxation, interest expense/(income) and other finance cost, depreciation, impairment and amortisation other expense/(income). share of results of associates and jointly-controlled entities and foreign exchange gain/(Ioss). Adjusted EBITDA is presented because we believe it is a widely accepted financial indicator on an entity’s ability to incur and service debt. You should not consider the adjusted EBITDA as an aiternative to net income or income from operations, or as an indicator of our operating performance or other combined operations or cash flow data prepared in accordance with generally accepted accounting principles, or an alternative to cash flows as a measure of liquidity or any measures of performance derived in accordance with Cambodian GAAP, The computation of adjusted EBITDA herein may differ from similarly titled computations of other companies. Adjusted EBITDA is not a measure of financial performance under Cambodian GAAP and should not be considered as an alternative to net cash provided by operating activities or as a measure of liquidity or an alternative to net income as indicators of our operating performance or any measures of performance derived in accordance with Cambodian GAAP. 11. BUSINESS (cont’d) The following table reconciles our definition of adjusted EBITDA to our profit after taxation for the financial years indicated: For the year ended December 31, 2005 2006 2007 -“”U”‘S;”;:D:-m—‘;-i1I””io-n USD million USD million Profit after taxation .. 1.9 6.7 9.8 plus: Tax expense .. 1.5 1.6 2.7 Depreciation and amortisation . 4.6 5.7 5.9 less: Interest income .. (0.2) plus: Interest expense and other finance costs . 0.5 0.4 0.1 Non-cash expense/(income) .. Foreign exchange loss/(gain) .. Adjusted EBITDA . 8.5 14.4 18.3 Customer base and usage The table below shows certain information relating to TMIC’s mobile telecommunications subscriber base for the periods indicated: As ofNear ended December 31, ____2_0-‘-0_5  2_0-‘-0_6 2007  Number of subscribers (‘000):  Postpaid  .  ..  2  2  3  Prepaid  ..  156  227  308  Total number of subscribers  ..  158  229  311  Number of mobile subscribers In Cambodia (‘000)(1)  ..  1,138  1,578  2,456  Cambodia mobile penetration(1)  ..  8.4%  11.4%  17.3%  TMIC’s share of net market increase  ..  (0.6%)  0.4%  (0.5%)  Market share(2)  ..  13.9%  14.5%  12.7%  ARPU (USD per month):  Postpaid  .  44.6  43.5  39.9  Prepaid  .  14.0  13.5  12.6  Blended  ..  14.2  13.9  12.8  Average postpaid monthiy churn rate (%)  ..  1.1%  0.8%  0.2%  Average monthly MOU per subscriber:  Postpaid  ..  188  237  354  Prepaid  .  98  124  195  Average monthly SMS per user  .  13.4  19.5  28.2  Notes:
(1) Figures are extracted from the report prepared by Frost & Sullivan.
(2) Computed as TMIC’s estimate of its total number of subscribers divided by the number of mobile subscribers in Cambodia as extracted from the report prepared by Frost & Sullivan.

Services and products SUbstantially all of TMIC’s revenues are derived from voice mobile services. TMIC provides mobile services on the GSM frequency operating under a 35-year mobile concession which commenced in 1996 and was granted by the MPTC. Recently, TMIC obtained a license to set up its own VolP service, which was launched in August 2007 under the prefix “166”. TMIC has obtained an ISP license and with about 1.0% internet penetration, there is potential for internet growth in Cambodia. TMIC also has an allocation for 3G frequency spectrum held in reserve and plans to offer trial 3G services by mid-2008. TMIC intends to tap the low penetration rate for internet services by offering broadband services and is considering WiMax services to complement its 3G services. 11. BUSINESS (cont’d) TMIC intends to increase its current product range for voice services and SMS to cater for growing market segments. It will also continue to offer its current products and services which are being offered under the “hello” brand. Such services include: • “hello” prepaid.
• “hello” postpaid.
• “hello” biz, for corporate clients.
• “hello” happy visa -a roaming service for both postpaid and prepaid subscribers. Customers can make and receive calls, receive SMS and access the internet via GPRS/EDGE while they are overseas.
• SMS roaming for prepaid subscribers -the integration of SMS service with “hello” happy visa. This integration allows “hello” happy visa subscribers to send SMS when they are overseas.
• Call party alert -an SMS alert service to inform the caller that the subscriber is reachable.
• Call line identification restrict and call iine identification restrict open.
• GPRS/EDGE services -a mobile internet service via the GPRS/EDGE platform.
• VoIP. TMIC also offers value-added services such as:

• SMS voting campaigns -an on-demand partnership service for voting via SMS.
• Content download -Content download including games, MPEG-1 audio layer 3 (MP3), wallpapers, logos, picture messages.
• Goal! & Goal!+ -The on-demand soccer result service through SMS. Customers have to request through SMS with prefiX of the soccer games offered.
• True love finder -The compatible iove horoscope for “hello” subscribers via SMS.
• Voice SMS.

Marketing, sales and distribution Marketing TMIC spent USDO.9 million, USD1.1 million and USD1.6 million in fiscal 2005, fiscal 2006 and fiscal 2007 respectively, on marketing, advertising and promotional activities. TMIC was the first to launch GPRS and EDGE in Phnom Penh and Siem Reap. In November 2007, TMIC started a rebranding campaign to launch its new brand identity “hello”, which will spearhead TMIC’s aggressive move to increase capacity through the establishment of up to 500 additional BTS throughout Cambodia. This branding campaign will focus on other areas such as distribution network, subscriber service and staffing and involves a major facelift for TMIC’s 10 service centres (including 2 new ones) named “hello point”. 11. BUSINESS (cont’d) Key marketing initiatives are as follows: • Value propositioning and building brand equity. TMIC intends to target the 14-40 age group and the corporate and small and medium enterprises segments with specific products to expand its market share. The launch of the new “hello” identity is intended to bring the brand to another level of excellence.
• Product. TMIC offers different products for different target segments. For example, for the youth segments, there are creative call plans and lifestyle services; for the mass market, TMIC focus on quality coverage, affordable call rates and reliable services and for the corporate segment, business packages such as GPRS, push mail services and talk time sharing are available. In October 2007, TMIC partnered with Nokia to provide the first Khmer text user interface handsets in Cambodia. This new product was aimed at increasing the usage of SMS in Khmer and encourages the making of Khmer content. This exclusive deal saw 5,000 handsets sold within the first 2 weeks of its launch. Nokia will commence its main promotion event in the first quarter of 2008 and as of the Latest Practicable Date, TMIC has committed 50,000 Khmer handsets.
• Pricing. TMIC has affordable call rates with a simplified call rate plan and intends to introduce new plans to cater to different market segments based on call usage and services required. The new product “My First Hello” which is aimed at a growing market of young adults with packages ranging from basic entry-level services to more sophisticated users, will be launched in April 2008.
• Promotions. TMIC promotes brand visibility through public relations events and advertising, and launched a rebranding exercise in November 2007. The rebranding campaign unveiled a new logo for the “hello” brand simultaneously throughout Cambodia via television commercials, billboards and nationwide media coverage during the launch. TMIC participated in a number of activities and sponsorship events including the 2007 Water Festival in Cambodia. In the first quarter of 2008, TMIC will launch a series of thematic television commercials, roadshows and a concert in Phnom Penh to promote its new brand and new products for 2008.

Sales and distribution As of the Latest Practicable Date, TMIC has 408 dealers and 6 “hello point” service centres. It intends to increase the number of dealers to 500. TMIC has 3 “hello point” service centres in Phnom Penh and it plans to add 2 more service centres in Phnom Penh, and convert existing offices into “hello point” service centres in the provinces of Siem Reap, Kg Cham, Sihanoukville, Baltambang and Koh Kong by the first quarter of 2008. As of the Latest Practicable Date, recharge cards are sold at 17 Caltex Starmart retail outlets and other petrol kiosks and convenience stores. TMIC is in final negotiations with the Cambodian airports to place promotional booths at entry points at the Phnom Penh and Siem Reap airports as well as other entry points near Thailand and Vietnam. Competition According to Frost & Sullivan, TMIC’s key competitors in Cambodia are Mobitel, the country’s largest mobile telecommunications service provider with a market share of 67.3% as of December 31, 2007, and Camshin, a joint venture owned by Thailand’s Shin Satellite Pic of Shinawatra Corporation and the MPTC, with a market share of 19.1% as of December 31,2007. Further, a new entrant, Starcel, recently launched its mobile services and another new entrant, Applifone, is expected to launch its mobile services in the second quarter of 2008. 315 11. BUSINESS (cont’d) Network and infrastructure The main components of TMIC’s network consist of: • Network switching sUbsystem (“NSS”), which comprises MSC HLRISCP/Authentication Centre (AuC), combined GPRS support node (CGSN) (for Packet Core), SMS centre (“SMSC”), multimedia messaging centre (“MMSC”), WAP gateway;
• IN -Prepaid service platform;
• The net subscriber capacity of the current core network is 400,000. TMIC has plans to increase the hardware capacity to 1,000,000 subscribers in 2008;
• Base station subsystem (“BSS”), which comprises 4 BSC and 274 BTS sites;
• Transmission, which comprises PDH, SDH backbone and high capacity intra-city optical fiber links; and
• Operation support system for core, radio, IN and TX. The monitoring and operations and maintenance system for each element is separate and based on the server and client architecture.

TMIC’s current network is a single-vendor network from Ericsson for all major network elements ­NSS, BSS and transmission. A new supply contract has been put in place with a second supplier -Zhong Xing Telecommunication Equipment Company Limited of China (“ZTE”), for network expansion on BSS and SMSC which are under implementation. TMIC has high capacity microwave SDH (STM1+1) backbone along Routes 5 and 6 providing ‘ring protection’ for key transmission hubs at Siem Reap and Battambang. There are also 5 intra­city fiber optic links within Phnom Penh to link major installations. TMIC also has satellite links to provide coverage to remote areas. The current microwave transmission equipment supplier is Ericsson. However, a new contract has been signed with a second supplier, ZTE, for transmission equipment to link new BTS sites which are under installation. TMIC’s network operation centre is located in Phnom Penh, with an operations support system (OSS) supplied by Ericsson. Geographical capacity and coverage In 2007, TMIC focused on network expansion to provide subscribers with broader coverage and a high quality network in Cambodia. It undertook an expansion programme to increase its switch capacity from 180,000 subscribers to 400,000 subscribers, install 100 new BTS, intensify coverage and improve network quality. By the end of 2007, TMIC’s network coverage was extended to all cities and provinces in Cambodia as well as the main national roads. Spectrum TMIC is operating on GSM 900 frequency of 2×9.3 MHz on the bandwidths 905.7 MHz to 915 MHz I 950.7 MHz to 960 MHz. On December 8,2003, TMIC was allocated spectrum in the 2.4 GHz band for Wireless Broadband Access (“WBA”) (2439.5 MHz to 2454.5 MHz) and on October 19, 2007, TMIC was assigned spectrum in the 5.3 GHz frequency band (Tx/Rx 5.230 GHz to 5.250 GHz) for the operation of its data links. Further, TMIC has been allocated 10 MHz 3G frequency spectrum held in reserve and plans to offer trial 3G services by mid-2008 at the bandwidths of 1920 MHz to 1930 MHz for uplink communication and 2110 MHz to 2120 MHz for downlink communication. In addition, TMIC is applying for the GSM 1800 band frequency which has 10 MHz remaining available for use. 11. BUSINESS (cont’d) 11.6 OUR OPERATING AND STRATEGIC INVESTMENTS 11.6.1 Spice Spice currently offers mobile telecommunications services in the Punjab and Karnataka states of India. As of December 31,2007, Spice had 3.8 million subscribers representing a 1.6% market share in India, and was the second and fifth largest mobile telecommunications service provider within the Punjab and Karnataka circles, respectively, according to Frost & Sullivan. Our shareholding in Spice as of the Latest Practicable Date is 39.2%. Since acquiring a stake in Spice, our Company has worked closely with Spice in sharing technological experience and in the creation of new products and services. Spice is also seeking to expand its footprint in India by applying for licenses in other circles throughout India. The table below shows certain information relating to Spice’s mobile telecommunications subscriber base for Punjab for the periods indicated: As ofNear ended As ofNear ended June 30, December 31,1′) 2005 2006 2007 Number of subscribers in Punjab (‘000): Prepaid . 783 1,105 1,885 Postpaid . 378 463 441 Total number of subscribers in Punjab .. 1,161 1,568 2,326 Number of mobile subscribers in India (‘000)11) .. 75,947 149,620 233,625 India mobile penetration(1 ) . 7.0% 13.7% 21.0% Spice’s share of net market increase . 20.0% 20.0% 18.0% Market share for Punjab circle . 31.0% 27.0% 22.0% Number of billable subscribers (‘000): Prepaid .. 456 768 1,454 Postpaid . 347 396 408 Total number of billable subscribers . 803 1,164 1,862 Blended ARPU (INR per month) .. .. 521 402 302 Average postpaid monthly churn rate (%) .. 5.0% 6.0% 5.0% Average monthly MOU per subscriber: Prepaid .. 576 665 693 Postpaid . 315 369 373 Average monthly SMS per user .. 67 110 54
Notes: (1) Figures are based on the report by Frost & Sullivan and are as at December 31 for the years presented.
(2) Spice’s year end was June 30 of each year until June 30, 2006. Spice changed its year end to December 31 of each year, to be consistent with TMI, starting from December 2006. In 2006, audits were carried out for June 30, 2006 and December 31, 2006. As such, the table above does not contain information from July 1, 2006 to December 31,2006.

11. BUSINESS (cant’d) The table below shows certain information relating to Spice’s mobile telecommunications subscriber base for Karnataka for the periods indicated: As ofNear ended As ofNear ended June 30, December 31,<‘) 2005 2006 2007 Number of subscribers in Karnataka (‘000): Prepaid . 256 417 1,403 Postpaid .. 57 70 71 Total number of subscribers in Karnataka . 313 487 1,474 Number of mobile subscribers in India (‘000){1) .. 75,947 149,620 233,625 India mobile penetration(1) . 7.0% 13.7% 21.0% Spice’s share of net market increase . (2.0%) 5.0% 14.0% Market share for Karnataka circle .. 8.0% 7.0% 10.0% Number of billable subscribers (‘000): Prepaid . 130 270 1,223 ~~~~….. ………………..•.•……….••__ . 5162 60
Total number of billable subscribers . 181 332 1,283 Blended ARPU (INR per month) .. 622 515 316 Average postpaid monthly churn rate (%) .. 7.0% 4.0% 5.0% Average monthly MOU per subscriber: Postpaid . 654 651 738 Prepaid .. 396 458 447 Average monthly SMS per user .. 105 157 226 Notes: (1) Figures are based on the report by Frost & Sullivan and are as at December 31 for the years presented.
(2) Spice’s year end was June 30 of each year until June 30, 2006. Spice changed its year end to December 31 of each year, to be consistent with our Company, starting from December 2006. In 2006, audits were carried out for June 30, 2006 and December 31, 2006. As such, the table above does not contain information from July 1, 2006 to December 31, 2006.

Spice is a mobile operator in the states of Punjab and Karnataka with an allocation in the 900 MHz spectrum in both these states. As of the Latest Practicable Date, it had installed 2,240 sites throughout Punjab and 1,821 sites throughout Karnataka. Spice owns or leases fiber optic backbone and micro transmission links with back-up and redundancy support in the markets in which it operates. As of the Latest Practicable Date, Spice distributed its services through 495 exclusive distributors, which has a network of 99 corporate dealers and various retailers and 43,247 independent retailers. Spice has been awarded a license for national long distance services and a license for international long distance services on August 8, 2007, which will expire on August 7, 2027. Spice has received 4 Unified Access Services (“UAS”) licenses for the Maharashtra Service Area, Andhra Pradesh Service Area and Haryana Service Area on February 29, 2008 and the Delhi Service Area on March 3, 2008 pursuant to the respective license agreements with the Department of Telecommunications (DOT), India. Spice will now be entitled to 4.4 MHz of GSM spectrum per circle, subject to availability. Spectrum has yet to be allocated to Spice for these 4 licenses. In 2005, Spice began to implement a twin strategy of outsourcing and sharing of passive infrastructure such as towers and shelters through independent infrastructure providers with the objective of achieving faster rollout, reducing capital expenditure and operating expenses. Spice entered into an agreement with an independent passive infrastructure provider to build, own, and lease (“BOL”) infrastructure based on an agreed service lease agreement (“SLA”). The agreement is for 10 years, which can be extended, with periodic revisions in lease charges every year or every alternate year. 11. BUSINESS (cont’d) In order to achieve faster rollout of its network and infrastructure, Spice has engaged multiple BOL operators. These infrastructure providers are capable of rolling out 150 to 200 sites per month. Spice is entitled to a discount on the lease charges on a tower after a second tenant leases such tower. The scope of agreement with these infrastructure providers includes the following: • Building the site within agreed time lines.
• Owning, insuring, managing, maintaining and operating the sites as agreed in the SLAs.
• Providing round the clock security on all greenfield sites.
• Obtaining all necessary approvals from local agencies.
• Ensuring the availability of power connection along with standby diesel generator (DG) sets.

On December 31, 2007, Spice executed an agreement for the sale and leaseback of its 875 telecommunication towers to a tower operating company in India for a total consideration of INR6 billion. The proceeds from the sale were used to partially support Spice’s financial obligations arising from the 4 UAS licenses which Spice had recently obtained. We believe that Spice is a strong and vibrant brand in its circles, which it currently promotes in a targeted manner in each of its markets, using local languages and cultural norms. As it expands its business outside of Punjab and Karnataka following the award of 4 licenses to Spice, Spice expects to supplement this local brand strategy with a national brand strategy which focus on India’s relatively youthful consumer population by providing marketing, subscriber retention and loyalty programmes and lifestyle features, including value-added services that appeal to younger subscribers. Currently, Spice also offers various value-added services and international roaming services. Spice was the first operator in India to introduce a flexible tariff with per second billing in the Punjab circle and also the token payment system for postpaid subscribers, which is aimed at prOViding convenience to the subscribers to pay their bills through over-the-air recharge facility for postpaid services. One of the challenges faced by the Indian mobile telecommunications services industry is high churn rate. Spice has implemented a comprehensive churn prediction module which helps it to estimate potential loss of subscribers on the basis of certain parameters such as usage, calls to competitor help lines, the payment pattern and history of subscribers’ network. Spice was listed on the Bombay Stock Exchange Limited on July 19, 2007. 11.6.2 M1 M1 offers a broad range of mobile voice and data communications services over its 2G/3G/3.5G network. According to Frost & Sullivan as of December 31, 2007, M1 was the third largest mobile telecommunications service provider in Singapore by number of subscribers with 1.5 million subscribers, comprising 0.8 million postpaid subscribers and 0.7 million prepaid subscribers. 11. BUSINESS (cont’d) The table below shows certain information relating to M1’s mobile telecommunications subscriber base for the periods indicated: As ofNear ended December 31, 2005 2006 2007 Number of subscribers (‘000): Prepaid . 436 528 679 Postpaid . 810 809 856 Total number of subscribers .. 1,246 1,337 1,535 Number of mobiie subscribers in Singapore (‘000)(1) .. 4,256 4,639 5,619 Singapore mobiie penetration(1) . 97.8% 105.2% 122.5% Market share(‘) .. 29.3% 28.8% 27.3% ARPU (SGD per month) Postpaid . 61.1 60.2 61.9 Prepaid .. 21.0 19.1 17.6 Average postpaid monthly churn rate (%) . 1.5% 1.5% 1.2% Average monthly MOU per subscriber: Postpaid .. 337 347 362 Prepaid . 137 145 190 Note: (1) Figures are extracted from the report prepared by Frost & Sullivan. M1 is an established brand in Singapore that provides mobile telecommunications services over its seamless dual band GSM 900/1800 MHz WCDMNHSDPA network. M1’s GSM network also incorporates GPRS which was launched in November 2000. It also provides international call services to mobile and fixed-line users, and wireless broadband Internet services to home, office and mobile users. M1 offers a wide range of mobile voice, non-voice and value-added services on its nationwide mobile network. Subscribers subscribe to M1’s services on either a postpaid or prepaid basis from a variety of price plans. For international call services, M1 offers mobile and fixed-line subscribers with IDD services, using prefixes 002 and 021, and an international calling card (ICC) service using the prefix 1818. M1 also sells international wholesale minutes to other international service providers. M1 commenced commercial operations in April 1997 with the launch of its GSM network. It subsequently rolled out a WCDMA network and began offering 3G services in February 2005. In December 2006, the 3G network was further upgraded with HSDPA to support broadband services at downlink speeds of up to 3.6 Mbps. M1 was also the first operator to offer location­based SMS advertising. M1 has an island-wide network of operator-owned retail shops (“M1 Shop”) and operator­appointed distributor outlets that serve the consumer segment and an enterprise sales team that serves the business segment. As of the Latest Practicable Date, M1 had a total of 12 M1 Shop outlets. In addition, M1 runs an e-shop, which provides online sale of mobile phones and accessories. M1 holds a facilities-based operator (“FBO”) license and a telecommunication dealer’s class license issued by the IDA, and a Media Development Authority class license. In April 2001, M1 also obtained an FBO license for the provision of 3G mobile communication systems and services and in July 2005, M1 was granted the WBA Spectrum Right. M1 is also bidding for the Next Generation National Broadband initiative in Singapore. M1 was listed on the SGX-ST in December 2002. 11. BUSINESS (cont’d) 11.6.3 MTCE MTCE offers mobile telecommunications services in the Esfahan province of Iran. As of December 31,2007, MTCE was the third largest mobile telecommunications service provider in the Esfahan province of Iran with 30,568 subscribers. The largest and second largest mobile telecommunications service providers are national operators. According to Frost & SUllivan, as of December 31, 2007, the largest operator, Mobile Communication Company of Iran, controls 87.4% of the subscriber base and the second largest provider, MTN Irancell Telecommunications Services Company, controls 6.8% of the subscriber base. MTCE commenced operations in June 2002 as the first provider of mobile prepaid SIM cards in Iran. MTCE has a license to operate a GSM 900 MHz mobile telecommunications service with a capacity of 35,000 subscribers in the Esfahan province of Iran for a 15-year period commencing May 2001 In October 2006, MTCE expanded its network by installing 29 new BTS and extending its coverage to 4 additional towns. This expansion enabled MTCE to increase its operating capacity from 20,000 subscribers to 35,000 subscribers. As of the Latest Practicable Date, MTCE controlled a total of 64 BTS with 368 transceivers covering 9 cities and towns in the Esfahan province and as of December 31, 2007, MTCE had a total of 30,568 registered subscribers. MTCE’s objective is to further enhance subscriber experience by providing additional applications for prepaid SIM cards and postpaid mobile services. This includes providing value-added services such as domestic roaming, VolP and international roaming, in addition to developing and improving its radio network. 11.7 OUR NON·MOBILE TELECOMMUNICATIONS INVESTMENTS 11.7.1 Multinet Multinet’s licenses allow it to offer a wide range of non-mobile telecommunications services, including long distance, international voice and broadband, in Pakistan and it is carrying out a project to link 107 cities in Pakistan with a fiber optic backbone. Multinet’s portfolio of licenses enables it to provide broadband, value-added, long distance and international voice, domestic and international access, and satellite transmission services in Pakistan, and local access services in Karachi. Multinet’s fiber optic backbone, Project Ittehad, is enabled principally through its long distancelinternational (“LDI”) license. Multinet’s products and services include, amongst others, a digital subscriber line (“DSL”), MetroNET and DialUp. For fiscal 2007, IPLC was the most significant contributor to Multinet’s revenue, accounting for 40.4% of total revenues, followed by DSL and MetroNET accounting for 35.4% and 20.0% of total revenues respectively. In November 2006, Multinet secured a major subscriber for its fiber optic backbone through a 20­year capacity contract with Telenor Pakistan in addition to a service contract entailing maintenance and associated services for the duration of the contract. The aggregate amount of both the capacity and service contract is estimated to be USD40.0 million. 11. BUSINESS (cont’d) 11.7.2 Samart Samart has interests in various subsidiaries but as a group, its business activities are divided into 4 major business units: ICT Solutions, Mobile Multimedia, Domestics, and International, operated through its subsidiaries and affiliates. Samart and 2 of its subsidiaries, Samart I-Mobile and Samart Telcoms Public Company Limited, are listed on the Stock Exchange of Thailand. The Samart group’s revenue is driven by the sales of mobile phones, locally in Thailand and internationally, infotainment and multimedia business, turnkey projects from the government sector and private enterprises, a call centre business as well as air traffic control business in Cambodia. 11.7.3 Samart I-Mobile Samart I-Mobile sells mobile phones, both locally and internationally, and provides infotainment and multimedia services primarily in Thailand. For mobile phones, Samart I-Mobile sells mainly its house brand, I-mobile phones in Thailand, Malaysia, Indonesia, Vietnam, Bangladesh and India. As of December 31, 2007, the market share for I-mobile handsets in Thailand is approximately 31.0% and Samart I-Mobile sold more than 3.0 million handsets for the year ended December 31, 2007. In Thailand, Samart I-Mobile’s business operations include 77 branches located in Bangkok and other provinces and are divided into 3 core segments: mobile business, multimedia business and international business. Samart I-Mobile’s mobile business includes the distribution of mobile phones, mobile phones bundled with content called the I-mobile package, accessories and SIM cards. The multimedia business provides voice services under the brand names of BUG1900, BUG1113 and BUG1110, non-voice or multimedia services under the brand name of BUG2Mobile and the provision of infotainment services. Samart I-Mobile’s international business involves the distribution of mobile phones and mobile phones bundled with content providing multimedia services abroad, mainly in Malaysia, Indonesia, Vietnam, Bangladesh and India. The sale of mobile phones is Samart I-Mobile’s single largest revenue contributor accounting for 96.0% and 94.0% of total revenues in fiscal 2006 and fiscal 2007 respectively. Samart I-Mobile offers instant wireless information services and mobile content, along with the distribution of mobile telephones and accessories. Samart I-Mobile relies on wholesale channels such as hypermarkets (Tesco, Lotus and BIG-C) to push sales while at the same time initiating co­promotion with operators in respective countries. 11.8 CUSTOMERS AND SUPPLIERS There are no major subscribers that individually contributed 10.0% or more of our Post Acquisition Proforma revenue for each of the last 3 financial years ended December 31,2007. There are no major suppliers that individually contributed 10.0% or more of our Post Acquisition Proforma operating expenses for each of the last 3 financial years ended December 31, 2007. On a Post Acquisition Proforma basis, the major suppliers that individually contributed 10.0% or more of our purchases of network equipment and services for our Group for each of the last 3 financial years ended December 31, 2007 are Ericsson, Alcatel and Huawei. 11. BUSINESS (cont’d) 11.9 AWARDS We have received a number of awards and certifications from international and local industry organisations, including: Celcom Group • Brand Visibility Award 2006 -NO.1 most visible brand in 2006 by Brand Equity magazine
• Brand Equity Award 2007 -Fourth place under the Brand Visibility Award category
• Malaysia’s Fifth Most Valuable Brand in the inaugural listing of Malaysia’s Top 30 Most Valuable Brands 2007 by the Association of Accredited Advertising Agents Malaysia (AAM)
• “The Best Innovation in Marketing” at the Marketing Award 2007 as well as 2006
• “Indonesia’s Most Admired Knowledge Enterprises” award based on the study conducted in 2007 by Dunamis Organisation Services and Teleos
• Cellular Award 2007 for “The Best Prepaid GSM” (for the “bebas” prepaid card) and “The Best Customer Care Operator” by Selular magazine
• National Brand Award 2006
• Best Marketing Campaign 2006
• Call Centre Award 2006 for Exceptional Outstanding Performance awarded by the Centre for Customer Loyalty and Satisfaction Indonesia and Marketing magazine
• Best Managed Companies in Asia award from the Finance Asia magazine
• Indonesia Cellular Award 2006 as the Best GSM Operator given by The Association of Indonesian Cellular Association Company

XL Dialog • Most Valuable Brand in Sri Lanka, in an evaluation done by Brand Finance in 2007
• Ranked No. 2 in the 2007 Edition of the ‘Most Respected’ entities in Sri Lanka by LMD magazine
• Selected as one of the Top 10 Organisations in Sri Lanka by the Business Today magazine
• Together with its Technology Partners Microimage and the Dialog -University of Moratuwa Mobile Comunications Research Laboratary, Dialog received a commendation in the category of “Best Use of Mobile for Social & Economic Development” for its GSM based Disaster and Emergency Warning Network (DEWN)
• Outstanding Achievement Award in Customer Relationship Excellence at the Customer Service Awards 2007
• Innovative Technology of the Year -E-Channelling at the Customer Relationship Excellence Awards 2007

11. BUSINESS (cont’d) • Dialog Contact Centres was accredited with Customer Service Quality Standard (“CSQS”) ­Level 3 in 2007
• Dialog was awarded membership of the UN Global Compact (UNGC) in 2006 and in 2007 was appointed to the UNGC Local Network Steering Committee as the representative of Telecommunication Sector in Sri Lanka
• Overall Gold Award recognising excellence in computing at National Best Quality Software Awards (NBQSA) 2006
• Award for Excellence in Multidisciplinary team efforts in R&D (Awarded by the Ministry of Science and Technology), National Awards for Science and Technology 2006
• ISO 9001 :2000 Quality Management System -Recertification (2006)
• Customer Service Quality Standard Certification accreditation by the Asia Pacific Customer Service Consortium (APCSC) with CSQS certification -Level 3 in 2006

TMIB • Telelink Telecommunication Certificate of Appreciation 2005 and 2006 for excellence in services, discipline and dealership satisfaction
• Standard Chartered -Financial Express Corporate Social Responsibility (CSR) Award 2006 for contribution in education, primary health, poverty alleviation and ecological impact
• Financial Mirror & Robintex Business Award 2006 for providing outstanding telecommunication services in Bangladesh
• Desher Kagoj Business Award 2006 for excellence in services and social commitment in Bangladesh
• Arthakantha Business Award 2005 for excellence in services in telecom sector of Bangladesh
• Deshbandhu C. R. Das Gold Medal 2005 for excellent contribution to the telecommunications sector in Bangladesh

M1 • M1’s “1 life. live it” commercial won the GSM Association’s award for “Best Broadcast Commercial” in 2005 11. BUSINESS (cont’d) 11.10 LICENSES AND PERMITS AND INTELLECTUAL PROPERTY Licenses and permits For the purposes of our business, we hold licenses and permits, of which the key licenses and permits are disclosed in “Annex B -Key licenses and permits”. Intellectual property We rely on a combination of trademarks, servicemarks and domain name registrations, copyright protection and contractual restrictions to protect our brand names and logos, marketing designs and internet domain names. The Celcom Group is the registered owner in Malaysia of, amongst others, the trademarks “Celcom”, “X.pax” and “Xpax”, and in Sri Lanka, Dialog is the registered owner of the trademarks “Dialog”, “Kit”, “E-volution” and “W@P”. TMIC is the registered owner in Cambodia of the trademark “hello”. We have also applied for the registration of other trademarks and approvals for such trademarks are pending. 11.11 RESEARCH AND DEVELOPMENT We do not undertake any proprietary R&D at the group level. Going forward, we envisage R&D to be carried out at our operating companies’ level and intend to coordinate R&D activities and develop centres of excellence within the respective operating subsidiaries, to leverage such learnings across the other operating companies. Currently, there are certain R&D activities undertaken by Dialog. As part of Dialog’s social investment toward facilitating R&D and higher learning in Sri Lanka, Dialog, together with the University of Moratuwa, established the Dialog-University of Moratuwa Mobile Communications Research Laboratory. This is the first fully industry-sponsored research laboratory to be established in a university in Sri Lanka and is also Sri Lanka’s first laboratory for R&D in mobile communications. The 2 creations of the laboratory, namely, a remote activated GSM alarm device and a learning management system, are currently used in 2 Dialog-supported national initiatives, which are the Disaster and Emergency Warning Network and the Digital Bridge. The laboratory’s R&D work has received accolades, including the Overall Gold and R&D Category Gold in the National Best Quality Software Awards 2006, which was in collaboration with Dialog and Microimage. Examples of the other areas of R&D which have been undertaken by Dialog and the results of such R&D are as follows: LBS (“Location Based Based on the research done by Dialog, Dialog deployed the SIM Services”), streaming Application Toolkit (“STK”) LBS applet for corporate LBS solutions technologies, mobile and LBS 10D services. commerce solutions ATI (“Any Time ATI-based location platform is now integrated with Dialog’s HLR. Interrogation”) Streaming This is a GPRS-based live television solution. Dialog has fine-tuned its real server to stream live television on its 2.5G network. This has been in operation since 2003. 11. BUSINESS (cont’d) Payment solution The STK wallet-based payment solution researched and deployed mChek payment system. mChek acts as a software solution provider which enables Dialog to offer mobile commercial services to Dialog’s subscribers. Through a partnership with mChek and the NOB Bank, Dialog was able to convert a standard mobile phone into an electronic wallet, capable of capturing and validating electronic transactions and banking transactions by retailers and merchants. WAP gateway WAP gateway was internally developed as a low-cost and efficient solution to extending licenses on the vendors’ platforms. As of the Latest Practicable Date, there are 17 persons employed by Dialog to carry out R&D at various divisions in Dialog. The amounts spent by Dialog on R&D for the fiscal 2005, 2006 and 2007 are RM34,847, RM479,937 and RM666,384 (based on respective average exchange rate for the respective years) respectively. None of the other subsidiaries carry out their own R&D activities. However, in the past, all R&D for the TM Group (including Celcom) was managed by Telekom Research & Development Sdn Bhd (“TM R&D”), a wholly-owned subsidiary of TM, and covered the R&D of various new technologies for application in fixed and mobile telecommunications services. All such R&D works have been funded by TM. TM R&D had undertaken and continued various R&D projects including several mobile technologies and applications (“Projects”). Pursuant to the Framework Agreement (details of which are set out in “Section 5.1 -Pre-Listing Restructuring”), TM, TM R&D and Celcom executed a Research and Development Agreement on March 5, 2008 to formalise and regulate their relationship, duties, responsibilities and rights, among others, with respect to the Projects, the continuing R&D of the Projects, and the custody of the Projects upon their completion. Pursuant to the Research and Development Agreement, Celcom has the option of fully acquiring the intellectual property rights to the research results, technology and technical information from TM provided that Celcom reimburses TM the amount of the funds disbursed by TM for the undertaking of the Projects by TM R&D. Our subsidiaries in the mobile telecommunications provision business generally maintain close working relationships with their key network equipment suppliers and participate in their technology trials so as to improve equipment performance. 11.12 IT SYSTEMS, BILLING AND CREDIT MANAGEMENT Celcom Group Billing The Celcom Group bills its postpaid subscribers through a variety of channels and payments that are supported by extensive collection points throughout its sales channels. This is made possible via integrated web portal services, which allow the Celcom Group to leverage on its sales channels for subscriber relationship management. An extensive online self-service capability is also prOVided to its prepaid subscribers for their personal account management. In the near future, Celcom Group intends to extend full capabilities of subscriber management to its authorised channels to improve subscriber experience. This initiative is in line with the launch of mobile number portability in creating a seamless integration between its postpaid and prepaid services. 11. BUSINESS (cont’d) The Celcom Group’s integrated postpaid billing system allows it to create a consolidated postpaid subscriber profile which enhances its subscriber relationship management system and supports its business decision making processes. Credit management and deactivation The Celcom Group practices credit profiling, whereby each category of subscribers is broadly distinguished between retail and corporate subscribers. The profiling is based on the assessment of payment history, spending behaviour, plan, loyalty and creditworthiness. Credit profiling determines the level of credit limits granted and discretion in exercising call barring or termination action. A vetting process is conducted to examine and evaluate its subscriber’s credibility of remitting payment by performing a background check prior to the registration of such subscriber via an internal and external blacklist database before offering them with services. In addition, the Celcom Group will call all newly registered subscribers to validate their identities to prevent fraudulent usage. In the event of default in payment or if a subscriber is about to exceed the allocated credit limit, the Celcom Group will contact the subscriber via a phone call, SMS or Automated Outbound Oialler (AOO) to remind the subscriber of the payment status before any credit control action such as call barring and termination of phone line is taken against their account. In most cases, call barring action will be taken should the subscriber fail to remit payment before the due date or 35 days from the date of the statement and the account will be terminated 95 days from the date on which call barring action was taken. The type of action taken may vary depending on the credit profile of the subscriber determined under the initial credit assessment. The Celcom Group with its internal credit management system retains the flexibility to modify its credit control action policies to adapt to market and subscriber behaviour in order to minimise credit exposure, churn as well as to ensure subscriber satisfaction. The various payment channels apart from the Celcom Group’s own branches includes appointed collection agents, selected authorised dealers, financial institutions, banks and Pos Malaysia offices in Malaysia. In addition, there are numerous payment facilities being offered for the subscriber’s convenience including internet payment facilities, direct debits facilities, mail, telephone, check and credit card payments. In addition, the Celcom Group has also various automated payment teller via its branches and TM Points nationwide which accepts payments through cash, credit cards and checks. These numerous payment channels and variety of payment facilities provide convenience to the subscriber and facilitate bill payments, indirectly mitigating credit exposure. XL Billing XL’s subscriber relationship management and billing system (“CRM & Billing system”), launched in early 2003, enables XL to integrate its prepaid and postpaid billing, network, and subscriber service capabilities in one platform. XL’s CRM & Billing system provides the ability to integrate voice, video, data and content charging, giving greater fleXibility in charging and offering various combined voice and data service packages to its subscribers. XL’s CRM & Billing system improves the time to market of new pricing plans provides XL with the ability to offer regional pricing and assists XL in management of its average monthly churn. XL’s CRM & Billing system enables XL to obtain a detailed segmentation of its subscriber base and to track subscriber usage so that XL can offer services that are better suited to the needs of its subscribers. XL can then provide specific services knowing each subscriber’s requirements and tailor its services to encourage subscribers to remain with XL. 327 11. BUSINESS (cont’d) Credit management and deactivation Depending on XL’s evaluation of the credit worthiness of its postpaid subscribers, XL either allocates a credit limit of IDR2.0 million and permits the subscriber to utilise its international roaming service if the subscriber registers his number and SUbmits supporting documents to an XL Centre or allocates a credit limit of IDR550,OOO without access to international roaming service. Postpaid subscribers have 26 days from the billing date to pay their bill before it is overdue. Postpaid subscribers typically receive the bill 13 days before a biil is overdue for subscribers in the Jabodetabek area, and 15 days before a bill is overdue for subscribers outside the Jabodetabek area. XL takes various actions against a subscriber who is late paying their bill including sending SMS reminders, blocking outgoing call service, sending written reminders, blocking incoming and outgoing calls and after 60 days, deactivating the account. Dialog Billing Dialog’s billing system is integrated with its subscriber relationship management system, which has support for multi-channel seif-care requests. These include walk-in, a complaints management unit (billing eMU), facsimile, web, SMS, USSD and IVR based on required services. It also has multiple interfaces to facilitate payments and/or payment collections from Dialog branches and arcades, Dialog BUZZ (which is a mobile collections facility in the form of a vehicle), banks, supermarkets, franchise outlets, partner payment centres and fuel stations throughout Sri Lanka. Apart from these payment points, Dialog has further extended its payment collection modes to internet payments, standing orders, The Hongkong and Shanghai Banking Corporation “pay here” modes, payment through redemption of Star points or gift vouchers, IVR, direct debit, and the recently introduced eZ Pay system through NDB Bank. Credit management and deactivation Credit management division focus on providing an enhanced service to subscribers while adhering to credit policies which lead to a control of bad debts. The credit management division aims to work towards achieving the main goal of minimisation of bad debts and improving organisational cash flow by reducing financial losses. The role of the credit management division would be to monitor, administer, and control the trade debtors and control the credit function effectively. Further, it would also handle the subscribers according to the policies of Dialog. In accomplishing such task, the credit management division has segmented the subscriber base whereby the credit actions would be differentiated. 11. BUSINESS (cont’d) 11.13 INSURANCE Our Group maintains insurance policies with registered insurance companies in Malaysia and overseas, which cover material damage to property, business interruption, public liability, employer’s liability, direCtors’ and officers’ liability, motor liability, construction and erection liability, money-in-transit and premises, surgical hospitalisation expenses, credit risk, fidelity guarantees, marine-related liabilities, goods-in-transit, group accident, term life and business travel accident. Our Group also maintains insurance coverage on risks from expropriation, forced divestiture, abandonment, license cancellation, riots, strikes, civil commotion and malicious damage, war and currency inconvertibility for its investments outside Malaysia. Some of the insurance policies such as those relating to comprehensive general liability, fidelity guarantees and money-in-transit, are maintained by the TM Group. Following the Pre-Listing Restructuring, we will have to obtain insurance policies for our Group for areas previously covered by such TM Group’s insurance policies. Notwithstanding our Group’s insurance coverage, damage to facilities, equipment, machinery, buildings or other properties as a result of occurrences such as fire, explosion, power loss, telecommunications failure, intentional unlawful act, human error or natural disaster could nevertheless have a material adverse effect on our Group’s financial condition and results of operations to the extent such occurrences disrupt the normal operation of Group’s business. 11.14 BUSINESS CONTINUITY AND DISASTER RECOVERY There have been no interruptions in the business which had a significant effect on the operations of our Group during the 12 months preceding the Latest Practicable Date. Celcom Group The Celcom Group has taken several key measures to ensure continuity of business process during major failure incidents or disasters, including the implementation of various protection mechanisms and redundancy in order to ensure resiliency of the networks. Such key measures include: (a) Having BSS network equipment and/or systems designed with high availability where critical modules such as power supply, processors and inter-faCing hardware are redundant, robust and less affected by humidity and temperature.
(b) Having reliable and extended back-up power supply of at least 8 hours for critical BTS/Node Band BSC/radio network controller (RNC) sites..
(c) Ensuring transmission path diversity for resilient node connectivity.
(d) Ensuring the availability of standby mobile base stations for immediate deployment for coverage recovery.

To further protect against the impact of a disaster or a total failure at critical sites, the Celcom Group had deployed a business continuity plan. A prudent approach has been taken in the execution of the plan in order to allow progressive continuous improvement, while ensuring efficient initial cost of implementation. The initial phase of implementation is expected to be completed in the middle of 2008, focusing on the high revenue generating sites. Further expansion, including the implementation of ASON and MSC in a loop subsequently will further improve the protection mechanism to ensure business continuity. 11. BUSINESS (cont’d) XL XL has a disaster recovery (“DR”) plan which covers both technical and operation-related business interruption. XL backs up all critical data daily. XL has set up network redundancy to help ensure that in the event of a failure of a network device, there are backup systems to keep the network running. Traffic can be rerouted through XL’s backbone to other switches and other SSC in the event of a failure at one of the SSC or MSC. XL has set up backup power supplies which it believes are able to produce sufficient electricity for the computer systems at XL’s head office for between 4 to 8 hours. Most of XL’s STS are equipped with power generator sets. Dialog One of the key objectives of Dialog’s DR plan is to minimise the effects on the network due to the loss of network nodes in the event of a disaster at the switching location having the highest concentration of switching capacity. The underlying design of the DR plan/business continuity plan features the following key concepts: (i) Development of a DR site centred on a DR MSC and an optimum number of DR SSC.
(ii) Minimisation (through relocation) of co-location of MSC and SSC -thereby decoupling risk of disruption applicable to these critical network nodes.

(iii) Redesign and increasing robustness (through the introduction of diversity paths, hubs and nodes) of the microwave transmission network. (iv) Installation of key VAS DR nodes -SMSC, MMSC, IN platform at the DR site. Currently a majority of the SSC are co-located with the MSC. These SSC are being relocated based on the geographical area they cover. The concept will ensure a more controlled risk management programme through well-planned risk distribution. The DR plan includes a dedicated DR MSC and SSC. Although the MSC will act as the DR centre it will be loaded with low revenue generating SSC during normal operations. In the event of a major interruption at any location the SSC currently connected to the damaged exchange will be rerouted to the DR MSC. This will ensure Dialog has sufficient redundancy to limit any adverse impact. The DR site would be also used to capture and exploit excess traffic at exceptional peak usage (for example, festive occasions and times of natural disasters) thereby exploiting exceptional revenue opportunities which would otherwise be lost. 11. BUSINESS (cant’d) 11.15 EMPLOYEES As of the Latest Practicable Date, we had 12,436 employees, of which 155 were temporary employees. This is inclusive of 3 employees who were seconded to our associated companies (which are not included in the tables below). The following tables set out the number of employees of our Company and our key subsidiaries for the relevant periods: TMI Number of employees as of March 17, 2008(1) Average number of years of Category of employees Permanent Contractual Temporary …:s…:e..;.rv..;.i…:c..;.e_ Managerial and professional. . 2 16 2.1 Executive and managers .. 29 15 2.0 Clerical and related occupation .. 15 3.3 General workers ‘———–.,c=——=-:,——-­Total ;.., 4~6 …:3;.1~ _
Note: (1) The number of employees includes 5 secondees from TM but does not include 3 employees seconded to our associated companies. Celcom Group Number of employees as of March 17, 2008(1) Average number of years of Category of employees Permanent Contractual Temporary service Managerial and professional. 51 7 7.0 Executive and managers 2,295 36 10.0 Clerical and related occupation……….. 1,254 19 127 7.7 General workers ;…. -,:-,=’9;-~__—-;-=_ 7.3 Total _, 3,:.,6_0_9 62 12_7_ Note: (1) The number of employees includes 1 secondee to Fibrecomm from TNB. XL Number of employees as of March 17, 2008(1) Average number of years of Category of employees Permanent Contractual Temporary service Managerial and professional………. 718 4 7.0 Executive and managers 1,991 15 4.9 Clerical and related occupation 58 6.6 General workers ;…. -::-:-::1″‘7,—-,;—-;;;-10.1 Total …:.__…..;:2;:.;,1~3,:.7 9;:..-..;;9_ Note: (1) The number of employees includes 2 secondees from TM. 11. BUSINESS (cont’d) Dialog Number of employees as of March 17, 2008(1) Average number of years of Category of employees Permanent Contractual Temporary s_e_rv_ic_e_ Managerial and professionaL………….. 14 4 7.7 Executive and managers 1,522 74 3.5 Clerical and related occupation 386 1,502 1.8 General workers ‘–__—-=~6″‘9’—–____:~2~2=_——6.3 Total ;… 1~•.;;.99;..1~__-.;.o1.:.;;;6.;;.02;;…. _ Note: (1) The number of employees includes 3 secondees from TM. TMIB Number of employees as of March 17. 2008(1) Average number of years of Category of employees Permanent Contractual Temporary ..:.s..:.e:….rv..:.ic..:.e..:. Managerial and professiona!………….. 5 6 2.3 Executive and managers 1,212 18 3.0 Clerical and related occupation………. 68 177 1.8 General workers ‘–__—-=-==-=’12~3:——_ 3.5 Total ;…__–.;1~.2;;.;;8~5 …..;;3;.;;;24.;… _ Note: (1) The number of employees includes 3 secondees from TM. 1 secondee from Celcom and 2 secondees from TMI. TMIC Number of employees as of March 17, 2008(1)  Average number  of years of  Category of employees  Permanent  Contractual  Temporary  service——­ Managerial and professional.  11  3.0  Executive and managers  91  7  5.0  Clerical and related occupation..  237  411  4.0  General workers  “‘c..’  .=-=:,35:;­ -:-:-::­ _  8.0  Total  ;..,  ….;.37:..4:….  …:4.:..18:;…,..  _
Note: (1) The number of employees includes 1 secondee from TM and 10 secondees from TMI. Multinet Number of employees as of March 17. 2008(1) Average number of years of Category of employees Permanent Contractual Temporary ..:.s..:.e:….rv:….ic..:.e_ Managerial and professionaL………….. 18 11 2.6 Executive and managers…….. 165 5 2.2 Clerical and related occupation 130 1.6 General workers ‘c..’ =c6~1.;—–…..,..::——1;_;9;_ 1.6 Total ;… …;3;;.;7…;4 ….;.;16;…. .;;.19;… Note: (1) The number of employees includes 1 secondee from TM and 7 secondees from TMI. 11. BUSINESS (cant’d) We offer and provide various training and development programmes to our employees with the objective of equipping them with requisite knowledge and skills geared toward facing the growing challenges of the business. There are plans to undertake initiatives to enhance our staff capabilities including through the development of a structured talent management programme. See “Section 11.3.4 -Attracting and retaining a high quality workforce”. None of our Group’s employees are unionised and labour relations within our Group are generally positive and harmonious. There have not been any industrial disputes in the past. 11.16 PROPERTIES Details of the land and buildings owned or leased by our Group as of December 31,2007 are set out below: Freehold Leasehold Net book Net book value No. of  Area  No. of  Area  value of land  of buildings  lots  (‘000 sq tt)  lots  (‘000 sq tt)  (RM mllllon)I’)  (RM million)I’1  Sri Lanka  .  15  509  11.8  43.4  Bangladesh  204  1,254  5.0  23.5  Cambodia  .  1.3  Indonesia  ..  9,052  25,045  297.0  12.0  Malaysia  .  21  602  50  2,105  33.1  43.4  Total  .  240  2,365  9,102  27,150  346.9  123.6  Note:
(1) Based on net book values as of December 31, 2007. No revaluation has been made on any of the land and buildings. Usage of properties Satellite! Transmission Office Stores! submarine cable Location Exchanges stations buildings warehouses stations Sri Lanka . 12 6 Bangladesh .. 203 Cambodia . Indonesia .. 11 Malaysia . 20335 6 As at December 31, 2007, the net book value of our Group’s network equipment is RM9,472.9 million. 11. BUSINESS (cont’d) 11.17 LEGAL PROCEEDINGS AND DISPUTES Save as disclosed below, none of our Company or any of our subsidiaries have been or are engaged in any litigation, claims or arbitration, either as plaintiff or defendant, as of the Latest Practicable Date, which may have a material adverse effect on the financial position or business of our Group and we are not aware of any proceedings, pending or threatened, or of any facts likely to give rise to any proceedings which may have a material adverse effect on the financial position or business of our Group. Celcom v. DeTeAsia Holding GmbH (Kuala Lumpur High Court (Special and Appellate Division) Originating Summons No. R1-24-85-2005) In 2003, DeTeAsia Holding GmbH (“DeTeAsia”) initiated arbitration proceedings against Celcom for monetary damages caused by Celcom’s alleged breach of the Amended and Restated Supplemental Agreement between Celcom, DeTeAsia, TRI and TRIL dated April 4, 2002 (“ARSA”). In August 2005, the arbitral tribunal found in DeTeAsia’s favour and ordered Celcom to pay the full amount of its principal claim of USD177.2 million together with interest at 8% from October 16, 2002 until full settlement and costs (“Award”). On January 27, 2006, Celcom satisfied the Award in full (which amounted to USD232.0 million (RM871.7 million based on the then prevailing exchange rate» without prejudice to proceedings that Celcom was contemplating to commence in Malaysia. On November 17, 2005, Celcom commenced proceedings in Malaysia seeking, amongst others, a declaration that the Award was contrary to the public policy of Malaysia and hence unenforceable in Malaysia. DeTeAsia has responded with an application to set aside this proceeding. The hearing for DeTeAsia’s application has been fixed for mention on April 28, 2008. Celcom’s action will be heard by the Malaysian courts only after DeTeAsia’s response has been disposed of. Celcom & Another v. Tan Sri Dato’ Tajudln Ramli (“TSDTR”) & 8 Others (Kuala Lumpur High Court (Commercial Division) Suit No. D5-22-610-2006) In connection with the Award in DeTeAsia’s favour mentioned above, Celcom instituted proceedings against 8 of its former directors alleging that they had breached their fiduciary duties in entering into a subscription agreement on its behalf on June 25, 1996 with Deutsche Telekom AG, and an amended and restated supplemental agreement dated April 4, 2002 with DeTeAsia whilst they were directors of Celcom. In addition, Celcom has also made a claim against TSDTR for alleged unauthorised profits made by him in connection with the execution of the abovementioned agreements. Celcom is seeking an indemnity from the directors for the sums paid by Celcom to DeTeAsia in satisfaction of the Award against it, return of the alleged unauthorised profits by TSDTR amounting to RM446 million, all monies received by the directors arising out of such breaches, losses and damages. Proceedings have been served on all the defendants. Mr Axel Hass, one of the former directors, was served by way of substituted service. Celcom’s and TRI’s application to restrain Dato’ Lim Kheng Yew’s (one of the directors) solicitors from representing him on the ground that the solicitors had advised on the abovementioned agreements in connection with the acquisition of Celcom by the TM Group was allowed with costs on February 26, 2008. Dato’ Lim Kheng Yew has appointed new solicitors to act on his behalf on March 26, 2008. The remaining directors except for Mr Axel Hass have respectively applied to set aside these proceedings on the basis that the issues had been litigated and decided on their merits based on the Award. On March 7, 2008, the solicitors for the remaining directors informed Celcom’s solicitors and the Court that they have entered conditional appearance on behalf of Mr Axel Hass and will be filing similar application to set aside these proceedings. TSDTR and Bistamam Ramli’s (one of the directors) application is fixed for hearing on June 13, 2008. The applications for the other directors, including Mr Axel Hass’ application, are scheduled for hearing on June 12, 2008. 11. BUSINESS (cont’d) Rego Multi-Trades Sdn Bhd v. Aras Capital Sdn Bhd & TSOTR (Kuala Lumpur High Court (Commercial Division) Civil Suit No. 02-22-1411-2005) In 2005, Rego Multi-Trades Sdn Bhd (“Rego”), a wholly-owned subsidiary of Celcom, commenced proceedings in the High Court against Aras Capital Sdn Bhd (“Aras Capital”) and TSDTR for amounts due to Rego pursuant to an investment agreement with Aras Capital and an indemnity letter given by TSDTR. The sum claimed in the proceedings is RM261.8 million as of November 30, 2004 together with interests and costs. On May 13, 2005, TSDTR filed its defence and instituted a counterclaim against Rego, TRI and its directors to void and rescind the indemnity letter and also claim damages. Subsequently, Rego, TRI and its directors filed their respective applications to strike out TSDTR’s counterclaim on July 19, 2005 but their respective applications were dismissed by the Registrar on May 18, 2006. Rego, TRI and its directors then filed their respective appeals and the same are fixed for mention on April 14, 2008. MCAT GEN Sdn Bhd v. Celcom MCAT Gen Sdn Bhd (“MCAT”) has commenced 2 related proceedings against Celcom. Details of these proceedings are as follows: (i) Contractual claim (Kuala Lumpur High Court Civil Suit D4-22-1682-2005) In November 2005, MCAT filed a claim against Celcom for alleged breach of an agreement between Celcom and MCAT for MCAT to resell Celcom’s application and network services on a prepaid basis (“Reseller Agreement”). MCAT sought, amongst other remedies, specific performance of the Reseller Agreement, 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 the parties. In 2006, MCAT unsuccessfUlly applied for an injunction to restrain Celcom from entering into a similar agreement with any other party that would be detrimental to MCAT’s alleged rights under the Reseller Agreement and 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 the basis 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 RM250,000 into the Court. Celcom’s striking out application was however dismissed by the Court. The matter commenced to trial in June 2007 and hearings are scheduled to continue in May 2008. (ii) Libel claim (Kuala Lumpur High Court Civil Suit 56-23-74-2005) In connection with the abovementioned suit, in November 2005, MCAT filed a claim against Celcom, alleging that Celcom’s denial, through a press statement, of any contractual relationship with MCAT in respect of the Reseller Agreement constituted libel. MCAT sought, amongst other remedies, damages for libel in the sum of RM1.01 billion, aggravated and exemplary damages, an injunction restraining Celcom from further publishing any similar allegedly defamatory words, a public apology, interests and costs. Celcom then filed a defence on the grounds that there was no concluded contract 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 as those of Celcom’s, implying a trade association with Celcom when no such association exists and for misrepresenting itself as a reseller of its products and services, and filed an application to strike out MCAT’s claim. 335 11. BUSINESS (cant’d) In December 2006, at the Court’s direction, Celcom successfully applied to consolidate this action with the suit mentioned below under the heading -Tan Sri Abdul Rashid Bin Abdul Manaf, Danny Ng Siew L’Leong, Datuk Yaacob Bin Md Amin, Ungku Safian Bin Ungku Abdullah & Mohd Razi Bin Adam v. Celcom -which MCAT appealed against. MCAT has since withdrawn the appeal with no order as to costs. On March 22, 2007, Celcom’s striking out application was dismissed with costs and Celcom subsequently filed an appeal against this dismissal. On January 29, 2008, the Court dismissed Celcom’s appeal. Celcom has filed a notice of appeal to the Court of Appeal on February 25, 2008. Tan Sri Abdul Rashid Bin Abdul Manaf, Danny Ng Siew L’Leong, Datuk Yaacob Bin Md Amin, Ungku Safian Bin Ungku Abdullah & Mohd Razi Bin Adam v. Celcom (Kuala Lumpur High Court Civil Suit No. S4-23-77-2005) In 2005, the directors of MCAT, namely, Tan Sri Abdul Rashid Bin Abdul Manaf, Danny Ng Siew L’Leong, Datuk Yaacob Bin Md Amin, Ungku Safian Bin Ungku Abdullah and Mohd Razi Bin Adam commenced a libel action against Celcom in their personal capacities on the same basis as the libel action commenced by MCAT mentioned above (“MCAT Libel Suit”). The plaintiffs sought, amongst other remedies, an aggregate amount of RM1.0 billion in damages, aggravated and exemplary damages, a retraction of the allegedly defamatory statements and an injunction restraining Celcom from further publishing any similar allegedly defamatory words. Celcom filed its defence and striking out application on the same grounds as its defence in the MCAT Libel Suit. It also filed a counterclaim against Mohd Razi Bin Adam for a breach of his employment contract with Celcom and his fiduciary duties as an employee of Celcom prior to his joining MCAT as its chief executive officer. Celcom also applied for an injunction 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 November 12, 2007. The plaintiffs have filed an appeal and the hearing of the same is fixed for hearing on June 9, 2008. On March 9, 2007, Celcom successfully applied to consolidate this suit with the MCAT Libel Suit. Consequently, this proceeding shall only be heard after the MCAT Libel Suit has been disposed of. Pengurusan Danaharta Nasional Berhad & 2 Others v. TSDTR (By Original Claim), TSOTR v. Oanaharta & 23 Others (By Counterclaim) (Kuala Lumpur High Court Civil Suit No. 02· 22-673-2006) In June 2006, TM, TESB, Celcom and TRI (collectively referred to in this section as the ‘TM Group”) were served with a defence and counterclaim by TSDTR in connection with proceedings initiated against him by Pengurusan Danaharta Nasional Berhad (“Danaharta”) and 2 others for a breach of the Facility Agreement dated July 13, 1994 (“Facility Agreement”) and the related Settlement Agreement dated October 8, 2001 between TSDTR and Danaharta (“Settlement Agreement”) in relation to a loan granted to TSDTR by Danaharta. The TM Group and the 20 defendants were joined in these proceedings via the counterclaim. TSDTR seeks from 11 defendants, including the TM Group, jointly and severally, amongst others the following relief: (i) the sum of RM6,246.5 million;
(ii) an account of all sums paid:
(a) under the Facility Agreement;
(b) to Danaharta and its subsidiaries by TSDTR and received by Danaharta from the sale of TRI shares and Naluri Corporation Berhad shares;

 

(iii) an order for repayment of all sums overpaid by TSDTR to Danaharta; and 336 11. BUSINESS (cont’d) (iv) an account of all dividends and payments received by TM and TESB in relation to TRI (now Celcom) shares and an order for payment of these sums. In addition, TSDTR seeks from all the defendants, amongst others, the following relief: (i) the sum of RM7,214.9 million;
(ii) a declaration that the vesting certificates are illegal and ultra vires the Pengurusan Danaharta Nasional Act, 1998 (“Danaharta Act”), unconstitutional and against public policy;

(iii) a declaration that the Settlement Agreement is illegal and ultra vires the Danaharta Act, unconstitutional and against pUblic policy; and (iv) a declaration that all acts and deeds and agreements executed by Danaharta pursuant to the vesting certificates and/or the Settlement Agreement are illegal and unenforceable. In July 2006, TM Group’s solicitors filed applications on behalf of TMITESB, and CelcomlTRI respectively to strike out the counterclaim. Both applications were dismissed on August 28, 2007 with costs. TMITESB’s appeal against the dismissal is fixed for hearing on July 16, 2008 and CelcomlTRI’s appeal is fixed for hearing on September 26, 2008. TSDTR has also applied to re-amend the counterclaim to include 14 additional defendants, 11 of whom are present or former directors/officers of the TM Group. This application is fixed for hearing on July 21, 2008. TM Group is opposing it on the grounds it is, amongst others, frivolous and an abuse of the process of court. Mohd Shuaib Ishak v. TM Group & 11 others (Kuala Lumpur High Court (Commercial Division) Civil Suit No. 06-22-1568-2007) On November 26,2007, TM, Celcom and TESS (collectively referred to in this section as the “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”) alleging that the offer price under the general mandatory offer undertaken by TM through TESB in respect of Celcom should have been at the price set out in the ARSA. MSI is seeking from the TM Group and 11 others (including the former and existing directors of TM Group) jointly and/or severally, amongst others, the following: (i) a Declaration that the Sale and Purchase Agreement dated October 28, 2002 between Celcom and TM (or TESB) for the acquisition by Celcom of the shares in TM Cellular Sdn Bhd, and all matters undertaken thereunder 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 TM and/or parties acting in concert with them with effect from and including the date of the Notice of the mandatory offer dated April 3, 2002 issued by Commerce International Merchant Bankers Berhad (now known as CIMB) are illegal and void and of no effect;

(iii) all necessary and fit orders and directions as may be required to give effect to the aforesaid Declarations as the Court deemed fit including but not limited to directions for the rescission of all transfers of shares of Celcom made after the notice of mandatory offer for shares in Celcom dated April 3, 2003; (iv) that TM by itself, its servants and agents be restrained from giving effect to or executing any of the proposals relating to the proposed demerger of the mobile and fixed-line businesses of the TM Group; and
(v) various damages to be assessed.

337 11. BUSINESS (cont’d) The TM Group has, as of November 30, 2007, obtained leave to enter conditional appearance and subsequently on December 17, 2007, TM Group filed the relevant applications to strike out the suit. The applications are fixed for hearing on May 15, 2008. The amount of damages payable, if the MSI is successful, cannot be ascertained as of the Latest Practicable Date. Mohd Shuaib Ishak v. Celcom (Kuala Lumpur High Court (Commercial Division) Originating Summons No. 05-24-20-2008) On February 4, 2008, Celcom was served with a sealed Originating Summons (“Summons”) by MSI seeking leave to bring a derivative action in Celcom’s name under Section 181A(1) of the Companies Act (“Proposed Action”). The Proposed Action is against, amongst others, the former and existing directors of Celcom and TM for failing to obtain the consent of DeTeAsia pursuant to the ARSA with DeTeAsia prior to entering into the sale and purchase agreement dated October 28, 2002 with TM for the acquisition by Celcom of the shares in Celcom Mobile. MSI alleged that the directors are liable for damages which were calculated by reference to the difference between the buyout offer price of RM7.00 per Celcom share under the ARSA and the price of RM2.75 per Celcom share under the mandatory general offer undertaken by TM through TESS in respect of Celcom. The Summons has been fixed for hearing on April 22, 2008. The amount of damages payable, if MSI is successful, include (i) a fixed sum of USD232,999,745.80 claimed as due to Celcom from TM, TESS and, inter alia, various present and past directors of TM and Celcom and (ii) damages to be assessed which cannot be ascertained as of the Latest Practicable Date. Johanes Irwanto Putro v. XL On January 11, 2007, XL received a notification letter from the Yogyakarta District Court regarding the execution of a North Jakarta District Court decision relating to a claim by Johanes Irwanto Putro for the ownership of XL’s land located in Yogyakarta which was purchased in 2002. On January 15, 2007, XL lodged an objection with the Yogyakarta District Court for the execution of the North Jakarta District Court decision. For the purpose of such objection, XL appointed a law consultant in relation to the retention of XL’s ownership of the land located at JI. Pangeran Mangkubumi 20-22 Yogyakarta. XL lodged an objection on the basis that XL is the legal owner based on land title certificates. On June 22, 2007, Yogyakarta District Court’s verdict stated that XL was the legal owner of the land, and that the North Jakarta District Court’s decision was not valid and did not have any legal effect with respect to XL. On June 27, 2007, the North Jakarta District Court produced a new resolution which cancelled the execution of its previous decision. Johanes Irwanto Putro appealed against the Yogyakarta District Court decision. On September 28, 2007, XL submitted a Contra Appeal Memorandum to the Yogyakarta District Court. On January 16, 2008, the Yogyakarta High Court issued a decision affirming Yogyakarta District Court’s verdict. Until the Latest Practicable Date, XL has not received any notice from the Yogyakarta District Court that Johanes Irwanto Putro intendsto appeal the Yogyakarta High Court’s decision to the Supreme Court. 338 11. BUSINESS (cont’d) This land was acquired in 2002 with acquisition cost of IDR8.48 billion. In accordance with Indonesian GAAP, XL does not make provision for amortisation of its land. The size of the land is 1,729m2 . KPPU v. XL& 7 Others On November 1, 2007, the KPPU issued a decision addressed to XL and 7 other telecommunications companies, Telkomsel, Indosat, PT Telkom, Hutchison Telecom Indonesia, PT Bakrie Telekom, PT Mobile 8 Telecom and PT Smart Telecom, regarding a preliminary investigation on suspicions of price-fixing of SMS and therefore breaching article 5 of Antimonopoly Law (Law No. 5/1999). On November 15, 2007, following the preliminary investigation conducted by the KPPU, the KPPU sent a summons letter to the President Director of XL as well as the 7 other telecommunications companies for a hearing session scheduled on November 16, 2007. However, due to the tight schedule of the President Director, this investigation was postponed until December 12, 2007. On December 14, 2007, the KPPU decided to proceed with the second stage of investigation against all operators and if the KPPU believes that it requires further information from XL, XL may be summoned to appear before the KPPU or requested to provide such information. Under Indonesian law, the KPPU is required to complete the second stage of the investigation within 60 business days, to be followed by a 30-business day decision-making period. We expect a decision to be rendered in May 2008. If XL and the other operators are found liable for price-fixing, they may be ordered to terminate or abandon the perceived minimum price arrangement and to pay fines of up to IDR25.0 billion. 11.18 PROSPECTS We expect our Group to benefit from the positive outlook of the South and Southeast Asian mobile telecommunications markets, which are generally characterised by high economic growth and/or low mobile penetration rates. We intend to capitalise on the growth potential of the markets we are in. 11.19 REGULATIONS AND LICENSES 11.19.1 MALAYSIA Legislation The communications and multimedia industry is governed by 2 main legislation: • the Malaysian Communications and Multimedia Commission Act 1998 (“MCMCA”), which came into force on November 1, 1998; and
• the CMA, which came into force on April 1, 1999 (except for certain sections which came into force at a later stage).

The CMA and its subsidiary legislation is the primary legislation regulating the converging communications and multimedia industries. The CMA applies to communications over electronic media but not print media. It also sets out the licensing and regUlatory framework in relation to the communications and multimedia industry, establishes the powers and functions for the MEWC and the MCMC and the powers and procedures for the administration of the CMA. The MCMCA establishes the MCMC and stipulates the general powers and functions of the MCMC. The MCMC is responsible for the regulation of the communications and multimedia industry. 11. BUSINESS (cont’d) The MEWC is responsible for policy making in respect of the communications and multimedia industry, whilst the MCMC is responsible for policy implementation. Licensing regime The CMA provides that, unless exempted by the MEWC, no person may:
(i)  own or provide any network facilities;  (ii)  provide any network services;  (iii)  provide any applications services; or  (iv)  provide any content applications services,
except under an individual license granted or a class license registered under the CMA. The CMA provides for 4 categories of provider licenses: (i) network facilities provider: for the ownership and provision of physical infrastructure used to provide communications services (for example, fixed links and radio communications transmitters and links);
(ii) network services provider: for the provision of communications services over network facilities (for example, cellular mobile services and broadcasting distribution services);

(iii) applications service provider (“ASP’): for the provision of application services by means of network services (for example, PSTN telephony, public cellular services and IP telephony); and (iv) content applications service provider: for the provision of content applications services (for example, satellite broadcasting and terrestrial free to air television). Within each of the above 4 categories, the CMA provides for the issuance of individual and class licenses. However, ASP licenses have all been migrated to class licenses. Individual licenses are generally granted to providers of services or owners of facilities which have national or social significance or where there is a need to control market entry, establish conditions of operation or limit the scope of licensed activities which necessitate a higher degree of regulation. The MEWC shall consider the MCMC’s recommendation before making a decision to issue an individual license. The term of an individual license is generally 10 years unless cancelled by the MEWC before its expiry. However, where a license granted pursuant to predecessor legislation (the repealed Telecommunications Act 1950 and the repealed Broadcasting Act 1988) for a similar activity or service and such licenses have a residual term exceeding 10 years from the date of the grant of the individual license under the CMA, the validity period of the individual license under the CMA (granted in substitution of a license granted under the predecessor legislation) shall be equivalent to the residual term of the license granted under the predecessor legislation. A person who intends to operate under a class license is required to register with the MCMC. The registration is vaiid for 1 year and is renewable annually. 11. BUSINESS (cont’d) Spectrum allocation Generally, under the CMA, the use of frequency spectrum in Malaysia requires a spectrum assignment, an apparatus assignment or a class assignment, all of which are issued by the MCMC, unless otherwise exempted by the MEWC. The MCMC issued a spectrum plan in November 2006 which sets out, amongst other things, how the spectrum is currently used in Malaysia and the MCMC’s plan to develop it in the near future. Access regime An access regime is established under the CMA to ensure that all network facilities providers, network service providers, ASP and content applications service providers can gain access to the necessary facilities on reasonable terms and conditions in order to prevent the inhibition of downstream services. The Access List (as defined below) and the mandatory standard on access and access pricing forms part of this regime. Access list The access list is a specific list of facilities and/or services determined by the MCMC to be essential to the provision of network services and application services. An “Access Provider” shall, upon written request by an “Access Seeker”, provide the “Access Seeker” with access to its facilities and/or services included in the access list (i) on at least the same technical standard and quality provided on the Access Provider’s facilities or services, and (ii) on an equitable and a non­discriminatory basis. The MCMC had on June 12, 2005 issued a revised access list (“Access List”) which came into force on July 1, 2005 with the exception of a few paragraphs (which will come into force at a later date to be decided by the MCMC). The facilities and services included in the Access List are fixed network origination service, equal access (PSTN) service, fixed network termination service, mobile network origination service, mobile network termination service, interconnect link service, private circuit completion service, domestic network transmission service, internet access call origination service, 3G-2G domestic inter-operator roaming service, inter-operator mobile number portability support services, infrastructure sharing, domestic connectivity to international services, network co-location service, network signalling service, bitstream services, digital subscriber line resale service, internet interconnection service, broadcasting transmission service and digital terrestrial broadcasting multiplexing service. Full access line sharing service and sub-loop service are also included in the Access List. However, these services will only come into force at a later date to be decided by the MCMC. Mandatory standard on access and access pricing The MCMC has also determined a mandatory standard on access which came into force on July 1, 2005. It sets out principles and model terms and conditions for the provision of access to facilities and/or services in the Access List by an “Access Provider” to an “Access Seeker”. The mandatory standard on access pricing, as amended, prescribes maximum prices for some of the facilities and services included in the Access List, namely, fixed network origination and termination services for PSTN and IP network, equal access (PSTN) service, mobile network origination and termination service, domestic network transmission service, private circuit completion service, interconnect link service, domestic connectivity to international service, broadcasting transmission service and bitstream services. Where the mandatory standard on access pricing does not prescribe prices for facilities or services included in the Access List, operators are free to set their own prices. The prices prescribed in the mandatory standard on access pricing are valid until December 31, 2008. 341 11. BUSINESS (cont’d) Compliance with both the mandatory standard on access and access pricing is mandatory. Mobile number portability Inter-operator mobile number portability support services (“mobile number portability”) is a service which enables a mobile subscriber of 1 mobile service provider to switch to another mobile service provider without having to change their mobile phone numbers. Mobile number portability is currently listed in the Access List. The MEWC had on February 28, 2007 issued a direction to the MCMC on the implementation of mobile number portability. Pursuant to that Ministerial direction, the MCMC has appointed Talian Gerak Alih Sdn Bhd to build, operate and manage the number portability clearinghouse for the implementation of number portability for mobile services in Malaysia. The industry along with MCMC has been working on the implementation of mobile number portability since the issuance of the direction by the MEWC. Mobile number portability is expected to be deployed on a countrywide rollout in August 2008. As the implementation of mobile number portability is a Government policy, the MCMC is expected to issue rules and/or regulations in the near future to give effect to this policy. Rate setting As of August 1, 2000, mobile operators are not subject to any rate settings and are free to set prices for the mobile services provided. Generally, a facilities or service provider may set prices in accordance with market rates on the basis of the principles set out below: (i) rates must be fair and, for similarly situated persons, not unreasonably discriminatory; (il) rates should be oriented towards costs and, in general, cross-subsidies should be eliminated; (iii) rates should not contain discounts that unreasonably prejudice the competitive opportunities of other providers; (Iv) rates should be structured and levels set to attract investment into the communications and multimedia industry; and (v) rates should take account of the regulations pertaining to rate setting and recommendations of the international organisations of which Malaysia is a member. However, the MEWC may, on the MCMC’s recommendation, intervene in determining and setting the rates for any competitive facilities or services for a good cause, or as the public interest may require. Competition General competition practices are also addressed by the CMA. In particular, a licensee may not engage in conduct which has the purpose of substantially lessening competition in the Malaysian communications market. Furthermore, if the MCMC determines that a licensee is in a dominant position, it may direct that licensee to cease conduct in that Malaysian communications market which has or may have the effect of substantially lessening competition in any Malaysian communications market and to implement appropriate remedies. The MCMC has issued 2 guidelines on “Substantial Lessening of Competition in a Communications Market” and “Dominant Position in a Communications Market”. 11. BUSINESS (cont’d) The CMA also prohibits a licensee from entering into any understanding, agreement or arrangement which provides for rate fixing, market sharing, boycott of a supplier of apparatus or boycott of a competitor. Furthermore, the CMA prohibits mandatory tying or linking arrangements regarding the provision or supply of products and services in the Malaysian communications market. USO usa is governed by the Communications and Multimedia (Universal Service Provision) Regulations 2002, as amended, which came into operation on October 17, 2002 (“USP Regulations”). The USP Regulations governs, amongst other things, the objectives of universal service provision, the designation of universal service targets, the submission of universal service plan, the designation of universal service provider, implementation of the universal service plan, costing of universal services, universal service funds and contribution to the fund. 11.19.2 INDONESIA Telecommunications law The recent regulatory reforms of the Indonesian telecommunications sector have their foundation in Telecommunications Law No. 36 of 1999, which came into effect on September 8, 2000 (“Telecommunications Law”). The Telecommunications Law provides key guidelines for industry reforms, including industry liberalisation, facilitation of new entrants and enhanced transparency and competition. Under the Indonesian regulatory framework, the Telecommunications Law only outlines the substantive principles of the subject matter. Detailed provisions implementing the Telecommunications Law will be provided in the implementation regulations consisting of government regulations, ministerial decrees, in particular decrees and regulations issued by Minister of Communication and Information (“MoGl”, formerly known as Minister of Communication or “MoC”) and decrees of the Director General of Post and Telecommunications (“DGPT”). Indonesian Telecommunications Regulatory Body Under the Telecommunications Law, the role of the government of Indonesia is to become that of an impartial policy maker and supervisor of the telecommunications sector. In order to ensure transparency in the regulatory process, the Telecommunications Law mandates the establishment of an independent regulatory body. The ITRB was established on July 11, 2003 to regulate, monitor and control the telecommunications industry. The DGPT serves ex-officio as the chairman of ITRB. Members of ITRB comprise officials from the DGPT and representatives from the telecommunications industry. In 2003, the MoC also announced the establishment of Telecommunications Traffic Clearing System (“SKTT”), which will assist ITRB in the performance of its duties and authorities, in particular with respect to interconnection matters. It is expected that through SKTT, ITRB will obtain accurate data about the profile of interconnection traffic among operators so as to ensure transparency in the charging of interconnection fees. The actual operation of SKTT will be run by PT Pratama Jaringan Nusantara, a private entity selected by MoC on February 18, 2004, which will act under the supervision and control of the ITRS. 11. BUSINESS (cont’d) Service classifications The Telecommunications Law classifies telecommunications providers into 3 categories: (A) telecommunications network providers; (B) telecommunications services providers; and (C) special telecommunications providers. Telecommunications network providers are further divided into (a) fixed telecommunications network providers and (b) mobile telecommunications network providers. Fixed telecommunications network providers consist of (i) fixed network providers for domestic calls; (ii) fixed network providers for long distance direct dialling; (iii) fixed network providers for 100; and (iv) closed fixed network providers. Mobile telecommunications network providers comprise (i) terrestrial-based mobile telecommunications network providers; (ii) cellular mobile telecommunications network providers; and (iii) satellite-based mobile telecommunications network providers. Telecommunications service providers are divided into basic telephony service providers, value-added telephony service providers and multimedia service providers. Under the Telecommunications Law, licenses are required for each category of telecommunications businesses. A telecommunications network provider is licensed to own and/or operate a telecommunications network. However, if such telecommunications network provider is to provide telecommunications services, it needs to obtain a separate license to provide such services. A telecommunications service provider is licensed to provide telecommunications services to subscribers either through its network or by leasing network capacity from telecommunications network providers. Special telecommunications licenses are required for providers of private telecommunications services for purposes relating to broadcasting and national security interests. Modern license Under the Telecommunications Law, licenses which used to be issued separately are to be combined into a single integrated license commonly referred to as the “Modern License”. The Modern License will specify in details the recipient’s rights and obligations, including the areas of telecommunications business it is allowed to operate in. Under the Modern License, the recipient’s obligations include, among others, construction obligations, service obligations, network performance obligations and contributing 0.75% of their gross revenues for usa. A proposal in May 2007 to revise the usa contribution to 1.25% has not yet been made effective. The recipient of a Modern License is required to fulfil the mandatory obligations set out in its Modern License and the failure to comply with such obligations may result in the revocation of its Modern License. Competition The Telecommunications Law does not prohibit or discourage operators from attaining a dominant position with regard to telecommunications services. However, it specifically prohibits monopolistic practices and unfair competition among telecommunications operators. On March 11, 2004, the MoC issued Decree No. 33/2004, which sets out measures to prohibit the abuse of dominant position by network and service prOViders. Dominant providers are determined based on factors such as their scope of business, coverage area of services and whether they control a particular market. Specifically, the Decree prohibits a dominant provider from engaging in practices such as dumping, predatory pricing, cross-subsidies, compelling consumers to use such provider’s services (to the exclusion of competitors) and hampering mandatory interconnection (including discriminating against specific prOViders). Pursuant to the express prohibitions on activities that may create monopolistic practices and unfair business competition, the Telecommunications Law provides for fair interconnection of networks to allow “any to any connectivity”. Interconnection fees are to be agreed by each network provider and calculated in a transparent manner. 344 11. BUSINESS (cont’d) Government fees All telecommunications operators in Indonesia are required to pay the Telecommunications Operating Fee (Biaya Hak Penyelenggaraan Telekomunikasi or “Operation Fee”) to the government of Indonesia. In addition, if their operation involves the use of certain radio frequency, the telecommunications operators are also required to pay certain Radio Frequency Usage Fee (Biaya Hak Penyelenggaraan Spektrum Frekuensi Radio or “Frequency Fee”). The Operation Fee payable by the telecommunications operators is set out in MoCl’s Regulation No. 22/2005. Based on Article 3.1 of MoCl’s Regulation No. 22/2005, telecommunications operators are required to pay Operation Fee annually in the amount of 1% of its gross revenue. The Frequency Fee payable by the telecommunications operators depend on the bandwidth frequency spectrum used by such operators. The Frequency Fee payable for frequency spectrum used in 2G GSM network is set out in the government of Indonesia’s Regulation No. 28 of 2005. For the 2G network, telecommunications operators are required to pay Frequency Fee which is calculated based on the number of BTS owned by such operators. As to the Frequency Fee payable for 3G GSM’s frequency spectrum, it would depend on the proposal submitted by such operators when they bid for the relevant 3G license. USC Under the Telecommunications Law, all telecommunications network operators and service prOViders are bound by a USO, which requires such network operators and telecommunications service providers to make contribution towards prOViding universal telecommunications facilities and infrastructure or other forms of compensation. On September 3, 2003, the DGPT issued a letter stating that telecommunications operators in Indonesia will be required to contribute 0.75% of gross revenues (with due consideration for bad debt and interconnection charges) for USO development. A proposal in May 2007 to revise the USO contribution to 1.25% has not yet been made effective. Tariffs for the provision of mobile cellular telecommunications services The prices that mobile cellular telecommunications operators can charge for basic telephony services (I.e. activation fee, monthly subscription fee, usage charges and charges for additional features) are determined on the basis of a tariff formula prescribed in MoCI RegUlation No. 12/2006. In principle, the formula uses a floor price as the basis to calculate the tariff that the mobile cellular telecommunication operator can charge to its subscribers. The mobile cellular telecommunication operators are required to submit any plan to change its tariffs to ITRB at the latest 20 days before the new tariffs are published. The new tariffs must be published to the public at the latest 30 days prior to their implementation. As long as the prices are determined within the formula set out in MoCI RegUlation No. 12/2006, mobile cellular telecommunications operators may set the amount of tariff charged to its subscribers. The MoCI is currently finalising a draft regUlation to replace MoCI Regulation No. 12/2006. The new regulation is expected to remove the requirement to use the floor price as the basis to calculate the tariffs. The objective of the new regUlation is to give the operators the flexibility to determine the tariffs based on the prevailing market conditions, SUbject to certain monitoring by ITRB. Tariffs for interconnection and access On February 8, 2006, the MoCI issued Decree No. 8/PER/M.KOMINFO/02/2006, which regulates the new cost-based interconnection tariff scheme by setting up the formula which must be applied by all telecommunications network and services operators in calculating their interconnection tariffs for all telecommunications network and services operators. This scheme became effective on January 1, 2007. 11. BUSINESS (cont’d) Under the new scheme, the operator of the network on which calls terminate would determine the interconnection charge to be received by it based on a cost-based formula. Pursuant to Decree No. 8/PER/M.KOMINFOI02/2006, each telecommunications network operator is required to prepare and submit to the ITRB a Reference Interconnection Offer (“RIO”), which must prescribe the type of interconnection services offered by the network operators and the tariffs charged for each of the offered services. Such calculated interconnection charges must be presented in a RIO and reported to the ITRB. Existing interconnection agreements remain valid as long as the parties to the agreements mutually agree and to the extent that the existing agreements do not conflict with Decree No. 8/PER/M.KOMINFOI02/2006. Consumer protection Under the Telecommunications Law, each operator must provide guarantees for consumer protection in relation to quality of services, usage or service fees, compensation and other matters. The law also allows subscribers injured or damaged by negligent operations to file claims against negligent providers. 11.19.3 SRI LANKA The regulatory framework in the telecommunications sector The telecommunications industry is governed by the Sri Lanka Telecommunications Act No. 25 of 1991 as amended by the Sri Lanka Telecommunications (Amendment) Act No. 27 of 1996 (“SLTAU). Prior to the enactment of the SLTA, the Department of Telecommunications was the sole operator providing both local and international voice services and there was no independent regUlator for the local telecommunications sector. Pursuant to the SLTA, all the property, rights and liabilities to which the Department of Telecommunications was entitled, was vested in a corporation established under the name of Sri Lanka Telecom, which was SUbsequently converted to a public limited liability company, SLT. The SLTA also provided for the creation of a telecommunications authority entrusted with the duty of regUlating the industry. The SLTA made provision for the conversion of the said authority into the TRC. Current telecommunications legislation The principal legislation governing the telecommunications sector in Sri Lanka is the SLTA and the rules made pursuant to the SLTA. The SLTA provides for the establishment of the TRC, sets out its composition and demarcates its duties and powers. The TRC was also constituted as the sole entity in Sri Lanka to manage and control the radio frequency spectrum. The SLTA enables the licensing of operators of telecommunications systems in Sri Lanka. It also contains the procedures for licensing of telecommunications services and operation of networks and delineates the eminent domain for operators. The SLTA also sets down offences related to telecommunications services and operation and provides corrective measures to be imposed when such an offence or breach is committed. The SLTA gives the TRC authority to make rules which govern areas including interconnection and quality of service. 11. BUSINESS (cont’d) The regulator The TRC consists of the following parties: (i) the secretary to the Minister in charge of the relevant sUbject, who will be the chairman of the TRC;
(ii) the director general of the TRC; and

(iii) 3 members appointed by the Minister, having recognised qualifications and having distinguished themselves in the respective fields of law, finance and management. The Director General of the TRC is appointed by the Minister as its chief executive officer. The stated objective of the regulatory body is to facilitate sustained development in the telecommunications industry by shaping the regulatory process, protect public interest and be responsive to imperfections in a competitive market. Within this broad context, the following issues remain the focal points of any policymaking by the TRC: (i) availability of affordable and effective.choices of communications for the citizens of Sri Lanka;
(ii) establishment and promotion of a modern and efficient information infrastructure for Sri Lanka, with focus on convergence on information technology, media and communications;

(iii) enhance independence and enforcement authority of the TRC in terms of its regulation, as well as transparency and public participation in its procedures; (iv) transformation of telecommunications market structure and regulation towards a more liberalised, technology neutral model;
(v) establishment of provisions for promoting and enforcing fair competition;
(vi) establishment of an explicit universal access policy;

(vii) regulating tariffs, quality of service, and consumer protection and progressive deregulation of tariffs for competitive services; (Viii) enabling of Sri Lankan communications service providers to become global players; and (ix) establishment of efficient and transparent spectrum management. Liberalisation of the telecommunications sector In keeping with the Government of Sri Lanka’s intention to progressively Iiberalise the telecommunications sector through a phased transition from monopolistic beginnings to open and competitive ownership of telecommunications infrastructure and service provisioning facilities, several reforms have been introduced by the TRC. Set out below are some significant steps in the liberalisation process: (i) External Gateway Liberalisation International gateway operations were opened up in March 2003 to competition terminating the monopoly of SLT in international telecommunications. As of the end of 2003, approximately 30 new gateway operating licenses were issued to various local as well as foreign parties, resulting in an overall reduction in 100 call tariffs. (ii) Completion ofthe tariffre-balanclng ofSLT The final step of the tariff re-balancing of SLT as stipulated in the shareholders’ agreement signed between the Government of Sri Lanka and Nippon Telegraph and Telephone Corporation in August 2003 removed the cross subsidy from international to local call tariffs to a large extent. 347 11. BUSINESS (cont’d) (iii) Introduction of a 10 digit numbering system An international standard compliant 10 digit numbering system was introduced in June 2003 to accommodate the increased demand for telecommunications services and to bring about uniformity in numbering. (Iv) Fiscal incentives An ICT development fund, “Telecommunications Development Charges Fund” was set up in April 2005 for the furtherance of rural network rollout and facilitation of ICT-led socio-economic development in under-served areas. The fund is designed to be endowed with stipulated contributions from external gateway operators and from donor sources. Developments in the telecommunications sector Further to the Iiberalisation of the telecommunications sector, the TRC proposed the formulation of a policy on the Calling Party Pays (“CPP”) scheme. A new interconnection policy based on the application of cost based interconnection rates was contemplated by way of a move towards a CPP regime from the current Mobile Party Pays (“MPP”) scheme. The move from MPP to CPP was expected to act as a catalyst for the expansion of mobile telecommunications to rural markets. Enhanced completion rates with respect to mobile terminated calls and the enhanced fixed termination interconnection compensation incorporated within the proposed scheme was expected to provide significant dividends to fixed line operators. In terms of developments, the TRC conducted a public inquiry to assess the implementation of CPP in August 2005. However, in its final decision in November 2005, TRC has decided to retain the MPP regime model. Principal Governance Aspects The key aspects of Sri Lanka’s regulatory framework for the telecommunications sector are: (i) Licensing In order to operate a telecommunications system, a license must be obtained from the Minister in charge of telecommunications. The license is granted under the recommendation of the TRC. However, the Minister is empowered to reject any such recommendations and to use discretion in granting operating licenses. Every application made in respect of licenses must be in writing. The TRC will provide public notice of its intention to grant a recommendation for a license if it is deemed necessary or if considered to be in the interest of the public. A licensed operator is not permitted to share the telecommunications system for which a license has been granted with any person for business purposes without prior approval from the TRC. All activities including the trade, manufacture, importation, sale, offer for sale, dealings, transfer, hire, lease, maintenance and repair of telecommunications apparatus may only be carried out under the authority of the TRC. The TRC may recommend modifications of the license granted, to the Minister and also has powers of revocation for breach of conditions and restrictions, non-payment of fees and failure to comply with regulations set out under the SLTA. Such decisions would be SUbject to judicial review, if reasonable grounds therefore exist. 348 11. BUSINESS (cont’d) (ii) Interconnection Companies licensed to operate and provide a pUblic telecommunications network are obliged to provide interconnection for the purposes of transmitting traffic between different operators. The TRC aims to provide a non-discriminatory and transparent interconnection regime which will provide fair competition for all operators, in accordance with WTa principles. Interconnection is governed by the Interconnection Rules of 2003. The full and complete implementation of the rules has not been achieved to date. During the prevailing transition period leading up to the implementation of the Interconnection Rules, PSTN service providers operate within an environment wherein no net­interconnection/traffic settlement payments are levied between operators. (iii) usa A universal access policy delineates the right of all citizens of Sri Lanka to have access to all sources of information and means of communication which should be reasonably affordable to all classes. The SLTA does not impose an usa on service providers. However, the TRC is focused on establishing an explicit usa policy. The regulatory framework in the broadcast sector Whilst the Sri Lankan constitution generally protects the right to freedom of speech and expression, subject to specified limitations specific provisions relating to the licensing of radio and television broadcasting in Sri Lanka is found in the Sri Lanka Broadcasting Corporation Act No. 37 of 1966 (“SLBC Act”), Sri Lanka Rupavahini Corporation Act NO.6 of 1982 (“SLRC Act”) in addition to those provisions discussed above under the Sri Lanka Telecommunications Act No. 25 of 1991 (as amended). The SLBC Act predominantly stipulates the rules and regulations by which the Sri Lanka Broadcasting Corporation (“SLBC”) must comply. The provisions pertaining to the licensing of a private radio broadcasting station are set out in Section 44 of the SLBC Act. The Minister is empowered, if he considers it necessary to do so and after consultation with the SLBC issue to any person a license for the establishment and maintenance of any private broadcasting station in any area in Sri Lanka. The SLBC Act further provides that no license shall be issued to any person except after inquiry into his application. The SLBC Act further empowers the Minister to make regulations as to the procedure in respect of an application for a broadcasting license, the control and supervision of programmes broadcast from private broadcasting stations, the furnishing and disclosure of information by a person applying for such a license, prohibition, regulation or control of the ownership of private broadcasting stations by prescribed classes of persons, the regUlation or control of the transfer of shares in companies which hold licenses for private broadcasting stations and the transfer of interests in such stations. The SLRC Act while predominantly stipulating the rules and regulatiQns,by which the Sri Lanka Rupavahini Corporation (“SLRC”) must comply, provides in Section 28 for the licensing of the establishment and maintenance of private television broadcasting stations. Section 28 of the SLRC Act provides that no person other than the SLRC shall maintain a television broadcasting station unless such person has obtained a license from the Minister. The Minister is empowered to issue a license for the establishment and maintenance of a private television broadcasting station, in consultation with the SLRC. Section 28 also provides that the Minister shall only issue a license if the person applying for a license has such technical, financial and professional qualifications as may reasonably be required for the purpose of establishing and maintaining a private broadcasting station. The SLRC Act also empowers the Minister to make regUlations in respect of matters for which such regUlations are required. 349 11. BUSINESS (cont’d) The allocation and licensing of frequencies for the use of such private broadcasting stations (both radio and television) is carried out by the TRC under Section 22 of the Sri Lanka Telecommunications Act NO.25 of 1991 (as amended). 11.19.4 BANGLADESH Legislation and institutional framework The telecommunications sector of Bangladesh is governed by the BTA. While previous legislations on the sector, namely the Telegraph Act 1885 and the Wireless Telegraphy Act 1933, are still applicable, they are subject to the provisions of the BTA. After the BTA came into force, an independent regUlatory commission, the BTRC, was established on January 31,2002. Under the BTA, the BTRC has vast powers and is responsible for, among others, the issuance of licenses, allocation of radio frequency, renewal, suspension and cancellation of licenses, settlement of disputes. The BTRC also performs other various functions. Pursuant to the power conferred under the BTA, the BTRC had issued various regUlations from time to time, including: (i) BTRC Licensing Procedure Regulations 2004, Regulation NO.1 of 2004
(ii) BTRC (Interconnection) Regulations 2004, RegUlations NO.2 of 2004

(iii) BTRC Licensing Procedure Regulations 2004, Amendment NO.1 of 2005 (iv) BTRC Licensing Procedure Regulations 2004, Amendment NO.1 of 2007 Licensing regime As mandated under the telecommunications law of Bangladesh, no person shall without a license: (i) establish or operate a telecommunications system in Bangladesh or undertake any construction work of such system;
(ii) provide in Bangladesh or to any place outside Bangladesh any telecommunication service; or

(iii) undertake any construction work for prOViding internet service or install or operate any apparatus for such service. The BTRC Licensing Procedure RegUlations 2004, Amendment NO.1 of 2007, which was issued following the introduction of the International Long Distance Telecommunications Systems (“I LOTS”) Policy 2007, includes a set of procedures relating to the issuance of licenses to potential operators possessing the requisite competency and also the issuance of licenses on non-exclusive basis in order to rationalise private participation and encourage the creation of a competitive environment. It specifically provides for new procedures in applying for new licenses through a competitive bidding procedure and an open licensing procedure. 11. BUSINESS (cont’d) Services for which competitive bidding license procedure is applicable include: (i) Cellular mobile phone
(ii) Satellite mobile phone (GMPCS)

(iii) Overseas telecom (iv) Paging (for commercial purpose)
(v) Radio trunking (for commercial purpose)
(vi) National long distance (NLD)

(vii) International gateway (IGW) (viii) Interconnection exchange (ix) Internet exchange
(x) 3G
(xi) WiMax

Services for which an open licensing procedure is applicable include: (i) PSTN
(ii) ISP

(iii) VSAT (iv) Data communication
(v) IP telephony
(vi) Call centre

(vii) Telecommunications value-added services (viii) Any other services authorised by STRC In terms of fee structure, the current fees payable by cellular mobile operators in Bangladesh are: (i) an entry fee and/or annual fee as provided in the operators’ licenses;
(ii) payment of revenue sharing of 5.5% of all the collected rent and call charges. This payment is to be made on a quarterly basis by the 10th day of the month following the completion of every quarter; and

(iii) spectrum charge is to be paid quarterly as fixed by STRC from time to time. Spectrum allocation The authority for the allocation of spectrum is vested with BTRC and charges are fixed by BTRC to be paid on a quarterly basis. Although a national frequency allocation plan (NFAP) has been published in July 2005, the spectrum allocation process is still evolving and improving. Access regime The access regime is currently defined under the Interconnection Regulations 2004 as well as in the ILDTS Policy adopted in 2007. The Interconnection Regulations 2004 ensure uniform and neutral interconnection arrangements between telecommunications networks and operators. Under the Interconnection Regulations 2004, it is mandatory for all operators to ensure any-to-any connectivity for the subscribers of 1 operator to communicate with the subscribers of other operators as and when required. 11. BUSINESS (cont’d) As such, the previous arrangement on interconnection which was based on mutual agreements between the operators, will be significantly altered following the introduction of the ILDTS Policy 2007. The ILDTS Policy 2007 introduced a new license category for interconnection exchange operators (“ICX”) which is limited to local operators only. Further, a new interconnection arrangement will be put in place where domestic and international calls will be interconnected through ICXs or switches, which will create a complex and multi-layered interconnection regime, increase interconnection cost and make prior investment in interconnection arrangements redundant. The BTRC has recently issued licenses for ICX and it is expected that the new licensees will commence operation in the near future. At present, the rate of cellular mobile termination rate has been fixed by the BTRC at BDT0.40 per minute. Rate setting/tariff fixing Under the BTA, there is an express provision that before an operator commences the provision of its service, it shall submit to the BTRC a tariff containing the maximum and minimum charges that may be realised for such service, and until the tariff is approved by the BTRC, the operator shall not start providing the service or realising charges for the service. Further, on July 26, 2007, BTRC issued an Interim Directive on Tariff and Marketing Promotion which stipulated a tariff circuit, consisting of a ceiling and floor rate. Under the said directive, call charges will be bound by a circuit between the ceiling rate of BDT2 per minute and the floor rate of BDTO.25 per minute. Competition There is no competition law in Bangladesh and the Bangladesh telecommunications law does not specifically prohibit monopolistic practices among telecommunications operators. However, the telecommunications law does define the objectives for the BTRC, which include the prevention of discrimination in providing telecommunications services, and to protect telecommunications operators from activities that are damaging to competition. There are provisions in other legislation such as the Penal Code, copyright law, information and communication technology law, on the restriction of monopolistic business. USO There is no usa fund in Bangladesh. The BTA states that for the purpose of ensuring access to the service specified in the license to rural and sparsely populated areas, the licensee is obliged to provide such service but not exceeding 10.0% of its capacity. It is unclear if a policy decision on a usa fund will be implemented, especially given the wide cellular mobile coverage in Bangladesh. 11.19.5 CAMBODIA Overview Currently, all telecommunication activities in Cambodia are licensed and regulated by the MPTC, acting pursuant to Sub-Decree No. 66 ANKr. BK, dated October 22, 1997 (“SUb-Decree No. 66”). Specific duties and authority allocated to MPTC under Sub-Decree No. 66 include: (i) operating telecommunication services; (ii) being a partner of business alliances in telecommunications work; (iii) establishing license and inspection regulations and the management of radio waves of all kinds; (iv) establishing a telecommunications development plan; and (v) managing and leading telecommunications work in Cambodia. These duties and authority are further specified to include: (i) coordinating the use of long radio spectrum; (ii) developing price lists; (iii) coordinating bilateral agreements; and (iv) dealing with regulations in competition. 11. BUSINESS (cont’d) Under Sub-Decree No. 66, the MPTC has issued mobile telecommunication licenses to both private operators and a public company, Telecom Cambodia. In keeping with the MPTC’s mandate under Sub-Decree No. 66, mobile telecommunication licenses to private operators have customarily been issued in 2 parts: 1 part dealing with a joint venture relationship between the MPTC and the operator; and the other part dealing with the license itself. The MPTC has issued detailed tariff schedules for both the use of telecommunications equipment and telecommunications services. Telecom Cambodia Telecom Cambodia, a public company with characteristics of a state-owned company, was authorised by Sub-Decree No. 01 ANKr. BK, dated January 12, 2005. Telecom Cambodia has a broad set of objectives and duties including: (a) operate telecommunication networks and service providers by radio, satellite, optical fiber, sub-marine cable for the purpose of telephone, facsimile, data transmission, internet, and private leased circuit; and (b) television transmission services. Telecom Cambodia is under the technical administration of the MPTC and the financial administration of the Ministry of Economy and Finance. WTO Cambodia became a member of the WTO in October 2004, and has since been in the process of preparing and submitting to its National Assembly laws covering a wide range of areas, including laws dealing with the telecommunications industry. Draft Cambodia Telecommunications Law There is a draft Cambodia Telecommunications Law, which is designed to provide the framework applicable to all areas of telecommunications. It is unclear when the Cambodia Telecommunications Law may be promUlgated. Its specific objectives include: (a) to promote national policy objectives; (b) to establish a regulatory framework; (c) to establish the powers, functions, and responsibilities of the independent regulatory authority to be set up; and (d) to establish the powers and procedures for the administration of the Cambodia Telecommunications Law. The concept being that the regulatory authority, once established, will become an independent regulatory authority in the telecommunications sector, setting out rules and regulations in accordance with the policies set out by the MPTC. The regulatory authority will issue regulations, effect the establishment of a telecommunications network for use during emergency and national disaster, issue licenses, take necessary measures to ensure the compliance of network and service providers to the telecommunications regUlations, and furnish reports to the government of Cambodia. Licenses under draft Cambodia Telecommunications Law The draft Cambodia Telecommunications Law explicitly states that no person shall own a network or prOVide telecommunications services without a license. Licenses will be issued by the regUlatory authority. Licenses will be divided into 2 categories: an individual license, and a class license; and there shall be a register of all individual and class licenses, and such register shall be available to the pUblic. Concessions Law In late 2007, to promote and facilitate the implementation of privately financed infrastructure projects in Cambodia, Cambodia promUlgated a Concessions Law, which among other matters, specifically authorises the use of a concession contract (SUCh as build-operate-transfer (BOT), bUild-transfer-operate (BTO), build-lease-transfer (BLT), modernise-own-operate (MOO)) in relation to infrastructure facilities for the telecommunications sector. 353

 

 

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