RESPONSES TO QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) 29 th Annual General Meeting 08 May 2014

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1 RESPONSES TO QUESTIONS FROM MINORITY SHAREHOLDER WATCHDOG GROUP (MSWG) 29 th Annual General Meeting 08 May 2014

2 Background As stated in the Group CEO s Statement, TM s customer base grew by 7.2% from 2.07 million as at end of 2012 to 2.21 million customers in 2013, with continued growth seen in both UniFi and Streamyx. Question 1 What would be the Board s expectation on the growth rate of its customer base for both UniFi and Streamyx for FY2014? Answer : We expect the growth for both UniFi and Streamyx to be in line with the telecommunications industry growth. IDC forecast the retail market for voice, data* and broadband** services will continue to grow with a 3.6% compound annual growth rate (CAGR) for (2012 to 2016) vs 3.1% for (2011 to 2015). The market is expected to increase to RM28.9 billion in 2014 from RM27.9 billion in The retail telco market growth will be led by the fixed-market segment, contributed mainly by data and Internet. Note: *Data comprises IPVPN, Leased Line, ISDN, Metro-Ethernet, Frame Relay and ATM services **Broadband comprises fixed and mobile broadband services 2

3 Background On 27 March 2014, it was reported that TM entered into an Investment Agreement with Green Packet Berhad and SK Telecom Co., Ltd. to collaborate on developing a nextgeneration LTE infrastructure to offer customers a full-suite of converged communications services. As part of the Investment Agreement, TM will initially invest RM350.0 million into Packet One Networks (Malaysia) Sdn. Bhd. ( P1 ) which would see TM emerging as a 57% shareholder in P1. TM would also invest up to RM210.0 million into Green Packet via exchangeable bonds, which may be exchangeable into Green Packet s stake in P1 in the future. TM, Green Packet and SK Telecom, would then invest up to RM1.565 billion convertible bonds to be issued by P1 for the future plans of P1. Question 2 How would this collaboration bring value to TM and complement its broadband business? Please elaborate. Answer : The proposed collaboration provides TM with opportunity to provide a full suite of converged communications services in both time and costefficient manner by building on P1 s existing platform and assets (~500,000 subscribers, valuable spectrum assets, almost 2,000 WiMax sites nationwide which are upgradeable to LTE). 3

4 Answer (cont) : The transaction:- - helps TM realise significant synergies from the upgrading of P1 s existing sites - leverages TM s extensive fibre infrastructure and distribution channels - reduces TM s investment risk exposure by sharing the LTE roll-out funding costs TM has been looking at providing a full-suite of converged communications services, as a natural evolution towards true convergence, from not only a technology/device perspective but from a customer experience point of view. Enables TM to enhance its overall value proposition, in line with our overall strategy to become a complete Information and Innovation Exchange and Malaysia's broadband champion. 4

5 Background It was stated in the Annual Report that TM supports the Government s decision to expand the High Speed Broadband (HSBB) Project into its second phase ( HSBB2 ). Question 3(a) Is there any indicative timeline for this project? Answer: TM is currently in discussion with the Government on the project, whereby no firm decisions have been made. TM expects that an agreement can be reached within the next few months, but this would still depend on the outcome of the discussions. 5

6 Question 3(b) What would be TM s expected capital expenditure for this project and how would this project be funded? Answer: While discussions are still ongoing, it is premature to arrive at any particular capital expenditure figures. For HSBB2, if the agreement reached is within TM s current planning, TM will rely on internally generated funds with Government co-investment. Question 3(c) What would be the increase in TM s coverage upon completion of this project? Answer : Based on current discussions with the Government, HSBB2 is expected to include State Capitals and selected major towns. Actual coverage would depend on the outcome of said discussions. 6

7 Background The capital expenditure/revenue ratio was 17.5% for FY2013 compared to 25.5% for FY2012. Question 4 What would be the main capital expenditure that would be incurred for FY2014 and what is the expected ratio for FY2014? Answer : We expect capex spend to be related to our ongoing Business As Usual (BAU) and HSBB capex. Additional capex is also expected for growth projects, particularly for Global & Wholesale and ICT-BPO, as well as for enhancement of customer experience. We expect our Capex/Revenue ratio to be at approximately 22% Capex/Revenue (excluding major projects e.g. HSBB2 and P1). 7

8 END OF DECK Investor Relations Level 11 (South Wing) Menara TM Jln Pantai Bharu Kuala Lumpur, Malaysia Tel (603) / 7366 / 7388

31 st Annual General Meeting 28 th April Attachment 1

31 st Annual General Meeting 28 th April 2016 Attachment 1 Responses to Questions from MSWG Company Updates Financial Highlights Latest Developments: Convergence, HSBB2, SUBB, Unifi RESPONSES TO QUESTIONS