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' Malaysian Communications and Multimedia Commission 2007

The information or material in this publication is protected under copyright and, save where otherwise stated, may be reproduced for non-commercial use provided it is reproduced accurately and not used in a misleading context. Where any material is reproduced, MCMC as the source of the material must be identified and the copyright status acknowledged.

The permission to reproduce does not extend to any information or material the copyright of which belongs to any other person, organisation or third party. Authorisation or permission to reproduce such information or material must be obtained from the copyright holders concerned.

Malaysian Communications and Multimedia Commission Off Persiaran Multimedia, 63000 Cyberjaya,

Selangor Darul Ehsan, Malaysia.

Tel: (603) 8688 8000 Fax: (603) 8688 1000

Cover Rationale

The cover symbolises the uniqueness of the magnificent Rafflesia, the world’s largest flower that can be found in Malaysia’s tropical forests. With a diameter reaching 100cm and weighing 10kg, this cross-pollinated flora draws many forms of lives together – the insects, human and flowers themselves.

Likewise, this publication draws together the many developments toward the convergence of communications, multimedia and content, and assists to bring Malaysian communications stakeholders to cross pollinate ideas and work together.

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FOREWORD

On behalf of the Malaysian Communications and Multimedia Commission (MCMC), it is my pleasure to present the Communications and Multimedia Malaysia Market and Financial Review for the first quarter of 2007. This Bulletin provides an insight into various aspects of the performance of the communications and multimedia (C&M) industry and related country economic developments, including other market segments under the scope of MCMC.

In this Bulletin there are several highlights and analysis, which include a discussion on television broadcast over a mobile platform; the trend of Short Messaging Service (SMS); an update of the C&M MESDAQ companies, and a discussion on broadband wireless access with a focus on WiMax.

This and previous issues of this publication can be obtained from MCMC’s website at:

http://www.mcmc.gov.my/what_we_do/Research/financial_review.asp

The MCMC envisages for the publication to be useful to all our stakeholders including the government, industry players, educators, and the consumers.

We therefore welcome any comments, enquiries, suggestions and feedback to improve further on the information presented in this Bulletin. Please send them to webmaster@cmc.gov.my.

Thank you.

YBhg. Datuk Dr. Halim Shafie Chairman

Malaysian Communications and Multimedia Commission

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SUMMARY HIGHLIGHTS

Local Market Traded Volatile in 1Q-07 (pg 4)

Bursa Malaysia experienced volatile trade, albeit gains were on positive factors such as upbeat buying as retailers herald in the new year. Losses were due to volatile overseas market trade, such as, sharp declines in China exchanges. The KLCI gained 16% on the uptrend, lost 14% on downswing, but towards end March 2007, recovered to close the quarter at 1,246.9 points – up an encouraging 13.7%.

C&M Sector 9.5% of Bursa Malaysia (pg 5)

Local market capitalisation was RM985 billion as at 1Q-07. C&M sector market capitalisation gained 8%

to RM94 billion (2006: RM87 billion).

DiGi still Best Share Price Performer (pg 6)

DiGi once again topped gainers list with share price up 23% to RM18.70 in 1Q-07. Talks of capital repayment may have supported gains.

Operationally, DiGi has introduced “Fu-Yoh!”

package with one low flat rate voice tariff directed at youths and standardized SMS and MMS rates.

MESDAQ 1Q-07: One C&M Related (pg 9)

Out of three MESDAQ companies listed in 1Q-07, only MY EG Services Bhd is C&M related. MCMC licensee, Green Packet gained most by market capitalisation – up 19% and is top amongst Top 10 MESDAQ companies in trade performance while N2N Connect Bhd features as number four.

C&M Sector Revenue at RM8.5 Billion (pg 10)

Overall, the C&M sector revenue grew 13.8% from RM7.5 billion in 1Q-06. Telcos command bulk at 87% (RM7.4 billion); broadcasting at 8% (RM2.7 billion); and postal at 3% (RM0.8 billion).

SMS Trends (pg 15)

SMS service is expected to continue to post substantive growth in the next few years. MMS is another non-voice service that is slower to take-off but will overtake SMS in terms of revenue eventually. SMS substitutes include mobile e-mail and instant messaging.

Steady 5.3% GDP Growth in 1Q-07 (pg 11)

Malaysian economy outlook remains positive on back of resilient domestic demand. Stronger ringgit has lowered import costs. Inflation is to average between 2% and 2.5% in 2007.

BNM Prospects for 2007: C&M Perspective (pg 13)

Prospects for 2007 are positive. BNM anticipates economic growth drivers as the resilient domestic demand, private sector investment, and public sector development expenditure especially Ninth Malaysia Plan. C&M sector is a direct beneficiary of a growing economy, positive business and consumer sentiments.

1Q-07 Adex at RM1.108 Billion (pg 18)

Adex grew 8.1% in 1Q-07 to RM1.026 billion, registering the highest adex for period of 2003- 2006. Main contribution was possibly due to the Visit Malaysia Year promotions held this year.

Print and TV Captures 65% and 27% of Adex (pg 19)

Print and FTA TV witnessed highest growth within 2003-2006. 1Q-07 growth is 8.1% and 5.2%

respectively, translating to RM719.9 million and RM291.8 million adex respectively.

Two New Channels Boost Radio Adex (pg 21)

Nielsen Media inclusion of Media Prima’s Hot FM and Fly FM into its database increased overall radio ad revenue to RM51.4 million (1Q-06: RM44.4 million). Top radio is Era FM with RM3.6 million;

second is My FM with adex at RM2.3 million.

Broadband Wireless Access (pg 24)

Globally, Internet users number more than one billion and mobile users more than two billion. This is one incentive driving operators to provide broadband wireless service, which have various delivery platforms from mobile side as well as fixed wireless and mobile broadband side. These are at best complements and at worst rivals depending on market. Mobile broadband access is promising in many ways, but there is a need to plan carefully for cost effectiveness and excellent service provision to tap the masses.

TV As We Know It (pg 30)

Some say true mobile TV is the broadcast type.

Others view it as three variants – broadcast;

streamed mobile TV; and download mobile TV.

Last two years witnessed many trials but few commercial launches. Many standards are available to support delivery. Mobile TV offers avenue for celcos to provide TV services to their subscribers, and for broadcasters to tap on mobile subscribers. The equation to this potential is close co-operation between celcos and broadcasters.

Also marketing hype needs to be moderated, with perfect planning and excellent delivery.

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C & M MARKET

KLCI 2006 KLCI 1Q-07

Index Index

Index Last Price 1,096.24 High 11/12/06 1,101.70 Average 956.28 Low 15/06/06 886.48

Index Last Price 1,246.87 High 23/02/07 1,283.47 Average 1,192.28 Low 11/01/07 1,106.06

800 850 900 950 1,000 1,050 1,100

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 1,050 1,100 1,150 1,200 1,250 1,300

Jan Feb Mar

C & M MARKET

10 8

22

5

1 3

0 5 10 15 20 25

2006 1Q-07

No. of Companies

Main Board Second Board MESDAQ Market

New Listings 2006 to 1Q-07

Source: MCMC, Bloomberg

% Change Bursa Malaysia

Market Indicators Dec-06 1Q-07

KL Composite 1,096.2 1,246.9 13.7

Second Board 92.0 99.3 7.9

MESDAQ 119.9 138.5 15.5

Average Daily Turnover

Volume (million units) 801.1 1,983.0 147.5 Value (RM million) 1,017.4 2,610.1 156.5 Market Capitalisation

(RM billion) 848.7 985.1 16.1

Market Trade Volatile in 1Q-07

The local market experienced volatile trade in 1Q-07 with the Kuala Lumpur Composite Index (KLCI) hitting a high at 1,283.5 on 23 February 2007 from a low of 1,106.1 on 11 January 2007 – up 16%.

The better sentiment early in the year was in part due to upbeat buying by investors, especially retailers after the Chinese New Year holidays. This catapulted the market to reach levels not seen in 14 years in terms of trading volume. Some proposed acquisitions also boosted market sentiment, for example, Bank of Tokyo-Mitsubishi buying a stake in Bumiputra-Commerce Holdings for more than a billion ringgit.

Nevertheless, the market declined 14% from its 1Q-07 high to 1,109.56 on 3 March 2007. This was due to turbulence from overseas market trading, e.g., sharp decline on China’s exchanges. On an encouraging note, rapid recovery saw the local market close 1Q-07 at 1,246.9 points – up 13.7% from end 2006.

Source: MCMC, Bursa Malaysia, Bloomberg Source: MCMC, Bursa Malaysia, Bloomberg

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C&M Sector Contribution to Bursa Malaysia

The contribution of the communications and multimedia companies to Bursa Malaysia market capitalisation at end of March 2007 was 9.5% or RM94 billion. This is about 8% gain from the C&M sector market capitalisation of RM87 billion at the end of 2006. Total Bursa Malaysia market capitalisation was RM985 billion at end of first quarter 2007.

Individual C&M Companies Contribution to Bursa Malaysia

In terms of C&M individual companies contribution to Bursa Malaysia, both Maxis and DiGi posted increased market capitalisation by 0.1% to 3.1% (RM30.1 billion) and 1.4% (RM14 billion) respectively in first quarter 2007.

On the other hand, contribution by TM and ASTRO decreased further by 0.5% and 0.4% respectively to 3.4% (RM34.1 billion) and 0.9% (RM9.1 billion) compared to 2006. The rest of the companies, Pos Malaysia, Time and Media Prima traded with no change to the market capitalisation as compared to 2006.

0 100 200 300 400 500 600 700 800 900 1,000

Mar-06 Jun-06 Sep-06 Dec-06 Mar-07

C&M Companies Market Capitalisation versus Bursa Malaysia Market Capitalisation

RM (billion)

733

74 659

74 722

648

78 746

668

87 848

761

94 985

891

Individual C&M Companies Contribution to Bursa Malaysia Mar 2007

Bursa Malaysia= RM985 billion

Others 90.5%

9.5%

Maxis 3.1%

DiGi

1.4% ASTRO 0.9%

Pos Malaysia 0.3%

Time 0.2%

Media Prima 0.2%

TM 3.4%

Communications &

Multimedia Sector RM94 billion

Source: MCMC, Bursa Malaysia , Bloomberg Source: MCMC, Bursa Malaysia, Bloomberg

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C & M MARKET

Companies

Share Price

Low (RM)

DiGi 15.30

Maxis 10.00

Time 0.62

TM 9.65

Media Prima 2.28

Pos Malaysia 4.08

ASTRO

29/12/2006 (RM) 15.20 10.20 0.74 9.75 2.50 5.00 5.55

30/03/2007 (RM) 18.70 11.90 0.82 10.00 2.48 4.74 4.70

% Change (3 months)

23.0 16.7 10.8 2.6 -0.8 -5.2 -15.3

High (RM) 18.80 12.30 0.96 10.90 2.55 5.05

5.70 4.68

Average Volume Traded

(‘000) 1,244 3,873 16,257 6,802 1,510 1,193 2,352

-3.8 -2.2

% Change (1Q-06) % Change (1Q-07)

Market Capitalisation % Change (1Q-06 versus 1Q-07)

-20 -10 0 10 20

-8.9 -15.0

9.5 10.0

3.0

41.7

10.5 3.8

17.1 6.8 30 22.8

40 50

ASTRO Pos

Malaysia

Media Prima

TM Time Maxis DiGi

Percentage Change (%)

Source: MCMC, Bursa Malaysia, Bloomberg

C&M Companies Share Price Movements

Following on from last year, DiGi was still the best performer in terms of share price performance as at first quarter 2007. DiGi topped the list with a share price gain of 23% from RM15.20 per share at end 2006 to RM18.70 at first quarter 2007. This is likely due to news reports on its capital repayment. In this period, DiGi has newly introduced its “Fu-Yoh!” package with one low flat rate voice tariff directed at youths, and standardized SMS and MMS rates.

Maxis overtook Time in terms of the second best performer based on percentage gain, compared to 2006.

Maxis share price gained 16.7% from RM10.20 per share at end 2006 to RM11.90 at end first quarter 2007.

Volume-wise, Time traded most actively with 16.2 million units.

Ringgit-wise, Time posted a gain of RM0.08 (11%) to RM0.82 per share while TM gained RM0.25 or 3% to RM10.00 per share. Meanwhile, Media Prima, Pos Malaysia and ASTRO posted losses of 0.8%, 5.2% and 15.3% respectively.

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80 85 90 95 100 105 110 115 120 125 130

% Change: Base 29 Dec 06

Pos Malaysia Maxis ASTRO Media Prima TM DiGi Time

Jan Feb Mar

DiGi

TM Maxis Time

ASTRO Media Prima Pos Malaysia

Communications and Multimedia Companies Performance Jan-Mar 2007

C&M Amongst Other Heavyweights

TM and Maxis shares feature amongst the large market capitalisation stocks on Bursa Malaysia. TM stands as number three largest in terms of market capitalisation while Maxis stands at number seven amongst the Top 10 heavyweights on Bursa Malaysia.

C&M Among Top 10 Heavyweights Jan-Mar 2007

Market Capitalisation (RM billion)

49.7 49.2 34.1

34.0 32.2 30.9 30.1 29.4 27.7 20.3

0 10 20 30 40 50

Maybank Tenaga TM MISC BCHB Public Bank Maxis Genting IOI Sime Darby

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C & M MARKET

Local C&M versus Overseas by Market Capitalisation in US Dollar

Companies Country Main Business

Market Capitalisation (USD billion) Dec-06 Mar-07

172.2 181.8

73.9 85.1

48.9 49.5

40.6 47.0

44.3 39.8

30.0 35.9

34.0 34.4

22.5 21.8

18.0 18.7

18.5 18.3

19.4 16.5

12.7 15.5

14.0 12.5

9.8 9.9

9.4 9.9

7.3 8.7

6.8 6.8

6.4 5.5

5.1 5.4

4.4 4.4

4.1 4.1

3.2 4.1

4.1 3.7

3.3 3.4

2.9 3.2

3.0 2.6

2.7 2.6

2.0 2.1

1.71 1.93

1.82 1.69

0.04 1.57

1.40 1.43

0.73 0.71

0.60 0.67

0.64 0.64

0.53 0.60

0.54 0.55

0.13 0.10

0.09 0.10

0.05 0.08

0.06 0.07

0.041 0.048

0.040 0.035

0.020 0.020

China Mobile NTT DoCoMo BT

Telstra

China Telecom KDDI

Sing Tel Telekom TBK Chunghwa China Unicom SK Telecom China United KT Corp PLDT Telekom Maxis Telecom Corp KT Freetel Taiwan Mobile Far Eastone PCCW DiGi Indosat Globe LG Telecom ASTRO VSNL MTNL Dacom Excelcomindo New World MobileOne Pos Malaysia Smartone True Corp Time Media Prima Hutchison TT&T GD Express CSA REDtone NasionCom Nationwide AKNM Tech

Hong Kong Japan Britain Australia China Japan Singapore Indonesia Taiwan Hong Kong Korea China Korea Philippines Malaysia Malaysia New Zealand Korea Taiwan Taiwan Hong Kong Malaysia Indonesia Philippines Korea Malaysia India India Korea Indonesia Hong Kong Singapore Malaysia Hong Kong Thailand Malaysia Malaysia Australia Thailand Malaysia Malaysia Malaysia Malaysia Malaysia Malaysia

Wireless Wireless

Wireline

Wireless Wireline Wireline Wireless Wireless Wireless Wireless Wireless Wireless Wireless Satelite Pay-TV Wireline Wireline Wireless Wireless Wireless Postal Services Wireless Wireless

Commercial FTA TV Wireless

Courier

Discounted Call Services Web Portals / ISP Courier

Internet Content/

Entertainment 0.011 0.012

% Change (3 months)

5.6 15.2 1.2 15.8 -10.2 19.7 1.2 -3.1 3.9 -1.1 -14.9 22.0 -10.7 1.0 5.3 19.2 No change

-14.1 5.9 No change No change

28.1 -9.8 3.0 10.3 -13.3 -3.7 5.0 12.9 -7.1 3,825.0 2.1 -2.7 11.7 No change

13.2 1.9 -23.1 11.1 60.0 16.7 17.1 -12.5 No change

9.1

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MESDAQ New Listing (1Q-07) Business Activities RM (million) Raised

MY EG Services Bhd E-commerce 0.55 14.0

H-Displays MSC Bhd Electronic Components 0.40 22.3

Tejari Technologies Bhd Machinery 0.28 11.2

Total Proceeds Raised 1Q-07 47.5

Source: MCMC, Bloomberg, Bursa Malaysia

MESDAQ Composite Index Component Stock

Market Capitalisation

RM (million) % Change (3 months) Dec-06 Mar-07

Green Packet Bhd 1,826.0 2,177.4 19.2

YTL E-Solutions Bhd 222.8 911.3 309.0

Rexit Bhd 338.9 488.5 44.1

N2N Connect Bhd 277.1 470.3 69.7

MEMS Technology Bhd 336.3 470.2 39.8

Dreamgate Corp Bhd 361.2 463.8 28.4

Iris Corp Bhd 329.1 446.0 35.5

Stemlife Bhd 120.5 435.6 261.5

Jobstreet Corp Bhd 355.8 371.6 4.4

Rank Mar-07

1 2 3 4 5 6 7 8 9

10 OSK Ventures International 420.0 367.5 -12.5

100 110 120 130 140 150 160

Jan Feb Mar

Last Price 138.49 High 23/02/07 154.20 Average 131.30 Low 08/01/07 119.49

Index Index

80 90 100 110 120 130 140

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

MESDAQ 2006 MESDAQ 1Q-07

Index Last Price 119.92 High 12/07/06 127.84 Average 110.61 Low 03/01/06 85.94

Index

Source: MCMC, Bloomberg Source: MCMC, Bloomberg

MESDAQ 1Q-07

In the first quarter of 2007, there were a total of three new listings on the MESDAQ market. Out of these only one, MY EG Services Bhd, is in the C&M or related business category.

Top 10 Ranking by Market Capitalisation

Amongst the top 10 ranking by market capitalisation on MESDAQ, only two MCMC licensees are featured in this list. The licensee MESDAQ company is N2N Connect Bhd and Green Packet Berhad through its subsidiary Packet One Networks (M) Sdn Bhd (formerly known as MIB Comm Sdn Bhd). Green Packet gained most by market capitalisation – up 19% and is the top amongst the Top 10 MESDAQ companies in trade performance while N2N Connect Bhd was number four. There are so far 14 MCMC licensees listed on MESDAQ which has 131 companies listed at end March 2007.

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C & M ECONOMICS

C&M Companies Revenue

The C&M sector chalked up RM8.5 billion in revenue for the first quarter of 2007, a growth of 13.8% from RM7.5 billion for the same period in 2006. There was positive growth across all sectors with majority of companies achieving double digit growth in revenue. The telecommunications companies captured largest revenue market share of 87%, followed by broadcasting at 9%, postal services with 3% and others at 2%.

1Q-06 1Q-07 1Q-06 vs 1Q-07 RM (billion) RM (billion) % Growth

TM 3.788 4.181 10.4%

Maxis 1.727 2.157 24.9%

DiGi 0.861 1.015 17.9%

Time 0.087 0.080 -8.0%

Major Telcos 6.463 7.433 15.0%

ASTRO* 0.532 0.578 8.6%

Media Prima 0.100 0.113 13.0%

Broadcasting 0.632 0.691 9.3%

Pos Malaysia 0.212 0.218 2.8%

Others 0.179 0.179 –

C&M Total 7.486 8.521 13.8%

Revenue Market Share 1Q-07

Broadcasting 8%

Post 3%

Others 2%

Major Telcos 87%

Overseas Revenue Market Share 1Q-07 = RM1.455 billion Overseas Revenue Market Share

1Q-06 = RM0.924 billion

Maxis 22.0%

Maxis

3.4% Media Prima

0.4%

Media Prima 0.4%

TM 77.6%

TM 96.2%

*FYE 31 January

Source: MCMC, Industry Source: MCMC, Industry

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The industry recorded 58% growth in revenue from overseas operations compared to the contribution in 1Q-06. Overseas revenue stands at RM1.5 billion and constitutes 17% of the aggregate industry revenue for 1Q-07. This proportion has increased from 13% in 1Q-06. TM’s overseas revenue portion of RM1.13 billion contributes to 14% of overall C&M industry revenue while Maxis and Media Prima are at 4%

and 0.1% respectively.

TM continues to lead domestic operators in overseas revenue growth. Domestically, the group continues to focus on growing its broadband segment and mobile revenue share.

Maxis has Indian operations seeing revenue growth in the markets where it has gained a strong foothold.

This constitutes 15% of total Maxis group revenue (1Q-06: 2%). Its domestic revenue was spurred by gain of post-paid subscribers and strong growth of 21% in data revenue.

Media Prima has a presence in Ghana via Free-To-Air television network TV3 Network Limited. Meanwhile, ASTRO reported it has yet to complete the documentation for its investment in Indonesian start-up which has been incurring losses to date.

Malaysian Economic Snapshot

The Malaysian economy achieved a steady economic expansion of 5.3% in first quarter of 2007.

This follows from 5.7% GDP in the fourth quarter of 2006 (2006: 5.9%). Fears of higher global inflation from hikes in oil prices has subsided and the anticipated slowdown in foreign markets were milder than expected.

The Malaysian Institute of Economic Research (MIER) envisages a better than expected expansion for Malaysia in 2007 (previous forecast of 5.2%).

The country’s export diversity has also provided some resilience to the impact of deceleration of external demand, particularly from its major export markets. The combination of a bullish local stock market, better job market and easing inflation worries contributed to the wave of consumer optimism and willingness to spend on big ticket items as reported in MIER’s Consumer Sentiment Index. The Business Conditions Index revealed an easing back of manufacturing operations and declining orders. However, the Index was still higher than the same period last year and above the 100-point threshold. Given the more positive outlook, MIER forecasts a GDP of 5.8% for 2008.

A stronger ringgit has brought import costs down. In the period from 1 March to 25 April 2007, the ringgit appreciated 2.5% against the greenback following weak US economic data. However, the ringgit depreciated against the euro which strengthened on positive economic data.

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C & M ECONOMICS

Performance of Ringgit against Major Currencies (7-day moving average)

5.0 4.5 4.0 3.5 3.0 2.5

7.5 7.0 6.5 6.0 5.5 5.0

A 06 M 06 J 06 J 06 A 06 S 06 O 06 N 06 D 06 J 07 F 07 M 07 A 07

Performance of Ringgit against Regional Currencies (7-day moving average)

5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5

10.5 10.0 9.5 9.0 8.5 8.0 7.5 7.0 6.5

A 06 M 06 J 06 J 06 A 06 S 06 O 06 N 06 D 06 J 07 F 07 M 07 A 07

RM/Rupiah, S$

Won, Renminbi RM/USD, Euro, Yen

10 Renminbi Euro

STG (RHS)

USD 100 Yen

1,000 Won

10,000 Rupiah

S$

100 Peso (RHS) RM/Baht, Peso

100 Baht (RHS)

Source: Bank Negara Malaysia, Monthly Statistical Bulletin March 2007 Source: Bank Negara Malaysia, Monthly Statistical Bulletin March 2007

Consumer Price Index Overnight Policy Rate

Consumer Price Index & Overnight Policy Rate

Percentage

3.2 3.2 4.8

3.9 4.1

1.5 3.3 3.3 3.1 3.0 3.1 3.2 3.1 4.6

3.9

3.0 3.25 3.25 3.5

3.5 3.5 3.5 3.5 3.5 3.5 3.5 3.5

3.5 3.5

3.25

0 1 2 3 4 5 6

Jan- 06

Feb- 06

Mar- 06

Apr- 06

May- 06

Jun- 06

Jul- 06

Aug- 06

Sep- 06

Oct- 06

Nov- 06

Dec- 06

Jan- 07

Feb- 07

Mar- 07

Inflation declined significantly to 1.5% in March 2007 due mainly to lower inflation of items in the transport and housing,water,electricity,gasand other fuelscategories, following the lapse of the March 2006 increase in the prices of retail petroleum products. Inflation is expected to average between 2% to 2.5% in 2007.

Source: Bank Negara Malaysia

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p- preliminary

Source: Bank Negara Malaysia

BNM Prospects for 2007 – A C&M Perspective

The communications and multimedia (C&M) industry is a direct beneficiary of a growing Malaysian economy, backed by positive business and consumer sentiments. Prospects for the current year are buoyed by a positive outlook. The central bank, Bank Negara Malaysia (BNM) anticipates economic growth drivers in 2007 to be in the form of the resilient domestic demand, underpinned by the private sector providing impetus through investment and the public sector development expenditure implementation under the Ninth Malaysia Plan. An increase in capacity utilisation and expansion given the strong domestic and external demand is also expected.

Services 58.5

Agriculture 8.3

Manufacturing 31.9

Construction 2.6 Mining &

Quarrying 6.3

GDP by Sector 2006 (% Share)

GDP by Sector 2007 (% Share)

p f

Services 58.7

Agriculture 8.1

Manufacturing 32.1

Construction 2.5

Mining &

Quarrying 6.1

f- forecast Note: Not adjusted for imputed bank service charges &

import duties.

Indicators 2005 (%) 2006 Preliminary (%) 2007 ^Forecast (%)

Real GDP (annual change) 5.2 5.9 6.0

Real GDP (RM billion) 262.2 277.7 294.4

Sectors (annual change)

– Agriculture 2.5 6.4 3.2

– Mining & Quarrying 0.8 -0.2 2.8

– Manufacturing 5.1 7.0 6.6

– Construction -1.6 -0.5 3.0

– Services 6.5 6.5 6.3

CPI 3.0 3.6 2.0 - 2.5

PPI 6.8 6.7 –

Unemployment Rate (% of labour force) 3.5 3.5 3.5

-3.8 -3.5 -3.4

Per Capita Income (current prices) (RM) 18,040 19,764 20,900

Per Capita Income (current prices) (USD) 4,763 5,388 5,806

Selected Economic Indicators

* Budget 2006/2007

Source: Bank Negara Malaysia Annual Report 2006

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C & M ECONOMICS

The services sector expanded a faster 6.5% in 2006 than the overall economy. The transport, storage and communications sub-sector has experienced rapid expansion since 2000. This sub-sector together with finance, insurance, real estate and business services constitute nearly 25% of overall GDP. Alongside the agriculture and manufacturing sectors, the services sector is set to remain a key driver of growth for the economy and envisaged to contribute 3.7% to the overall GDP growth in 2007.

In addition, activities of business services and outsourcing services companies are expected to take off this year after attaining Multimedia Super Corridor status last year. Part of the MyICMS 886 strategy is to spur the development and production of high value-added products in the local information and communications technology industry. Some other high growth focus areas are biotechnology, modern agriculture, halal food industry, tourism and Islamic finance.

As intended under Budget 2007, the private sector leads in generating investments, economic advancements and new sources of growth in technology and knowledge-intensive sectors. Corporate tax for year of assessment 2007 is reduced to 27% (2008:26%). In terms of investment activity, capital expenditure particularly in upgrading and expanding of networks by telecommunications service providers will augment public sector investment activity.

Inflation is expected to trend downwards this year in the range of 2 – 2.5%. According to the central bank, monetary policy stance will remain accommodative this year while being vigilant of interest rates levels and inflationary pressures with the objective of promoting price stability and sustainable economic growth.

Despite some moderation in exports, growth in the Asian region is expected to remain favourable, supported by encouraging growth in India and China. Global economy is expected to expand by more than 4% in 2007, marking a fifth consecutive year of positive growth. Given the resilience of the domestic demand, backed by favourable outlook for regional and global growth, BNM is confident of a 6%

GDP growth for 2007.

On the consumer front, spending received a boost encouraged by optimistic perceptions of the employment market, easing inflation and annual bonus payouts. This was also on the back of a bullish stock market, all of which according to the MIER Consumer Sentiments Index for the first quarter of the year, has consumers more upbeat about spending so much so that big ticket items such as houses and cars are now on the cards.

The capital market received a boost from further easing of foreign exchange administration policies from April 1, 2007. Among the new measures are that foreign firms will be able to utilise the proceeds of their initial public offering (IPO) on the Main Board of Bursa Malaysia. Local firms will also be able to use the proceeds of their IPO for offshore investments. The move promotes a more sophisticated financial and capital market, which in turn would spur greater economic growth. The move to ease further foreign exchange administration policies facilitates funding needs for all companies including C&M market players who have set their sights on investments further afield.

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SMS Trends

The best non-voice achievement in the industry so far has substantially increased revenue for many operators around the globe. In terms of Value Added Services (VAS), both Short Messaging Services (SMS) and Multimedia Messaging Services (MMS) are in the category of non-voice. SMS especially has increased revenue generation drastically in the past years. VAS is used to enable a wide range of applications such as marketing campaigns, enterprise applications; surveys and voting; transactions; entertainment and information services.

Despite continuous competition arising from liberalisation and the stabilisation of penetration rates which is making it difficult for players to gain further market share, messaging is deemed a low risk service, which increases revenue base and enables the introduction of new areas for services differentiation and branding.

In terms of global traffic growth, Portio Research estimates that both the SMS and MMS trends would be on the uptrend with substantive growth rate over the next few years but slower towards 2010.

The moderation of growth towards 2010 is likely due to alternatives and more versatile messaging services such as mobile instant messaging, mobile e-mail and web-based messaging services.

43

22 16 11

24 24 25 27

68 68 73

81

0 10 20 30 40 50 60 70 80 90

2005e 2006e 2007e 2008e 2009e 2010e

SMS MMS

Growth in Global SMS / MMS Traffic Volume

Growth (%)

SMS MMS

e-estimates

Source: Portio Research Ltd

SMS prevails in the mobile messaging market for Person-to-Person (P2P) messaging compared to MMS.

Reasons for this would be its ease of use, simplicity, reliability, global reach, low cost and accessibility.

Though the price per SMS and revenue from SMS messaging might be under pressure in time, the decreasing price of SMS is essentially propelling greater use, thereby creating an overall net increase in revenue.

As the growth of SMS usage will be realized from reduced pricing, SMS revenue growth will not be as aggressive as the growth in its volume.

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C & M ECONOMICS

MMS is not as popular so far compared to SMS but MMS is expected to take off with the introduction of Application-to-Person traffic (A2P) and wider coverage under 3G networks. Nevertheless, consumers must be aware of the advantages that MMS provides under A2P such as message management, delivery, redirection and storage and notification instead of just sending photos with colour-screens and integrated cameras. The growth in mobile messaging is mainly expected to be driven initially by advanced markets such as Japan and South Korea.

SMS MMS

48.2 49.1 50.3

30.1

35.2 39.9 44.7

1.9 2.4 7.8 12.0 13.4 16.9

0 10 20 30 40 50 60

2004 2005e 2006e 2007e 2008e 2009e 2010e 2004 2005e 2006e 2007e 2008e 2009e 2010e 0

2 4 6 8 10 12 14 16 18

Revenue (USD billion) Growth (%)

10.3 18.0

28.5 33.8

39.1

43.8 47.6 74.8

58.3

12.0 8.7 15.7 18.6

0 5 10 15 20 25 30 35 40 45 50

0 10 20 30 40 50 60 70 80

Revenue (USD billion) Growth (%)

Global SMS / MMS Traffic Volumes (2004-2010)

2,379 2,149

1,860 1,505

1,209 951

761 112.5

92.1 64.5

22.9 38.5 7.3 13.2

0 500 1,000 1,500 2,000 2,500

2004 2005e 2006e 2007e 2008e 2009e 2010e

SMS Volume (billion) MMS Volume (billion)

5 55 105 155 205 255 305

Global - SMS Revenue versus Growth(%) Global- MMS Revenue versus Growth(%)

Revenue (USD billion) Growth (%) SMS

MMS

e-estimates

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80.0

12.3 3.0

301.0 226.4

20.6 7.6 86.1

0 50 100 150 200 250 300 350

China Philippines India Malaysia

SMS Volume of Key Asian Markets

2004 2005

SMS Volume (billion)

Source: Portio Research Ltd, MCMC

SMS volume in the Asian market is driven by select countries such as the Philippines which has an immensely successful SMS market, generating 86.1 billion messages in 2005. Emerging markets such as India and China are expected to be the fastest growing SMS volume countries due to its lower cost and anticipated fastest growing take-up rates in the next few years.

Alternatives to SMS

The most popular mobile e-mail device today is the BlackBerry offered by Research In Motion (RIM). RIM is reported to have had three million subscribers in 2005 and is deemed the most successful amongst other e-mail capable smart phones. The BlackBerry drawback is said to be its PDA size that is deemed bulky.

Handsets these days are stylish, light, small and thin. RIM is rectifying this, for example, its BlackBerry Curve has such features – introduced in the US on 30 May 2007, with innovative features, enhanced multimedia capabilities while maintaining exceptional battery life.

The introduction of Mobile Instant Messaging (MIM) could be a substitute for SMS and MMS subscribers in the future. This is said based upon the uptake in the existing fixed Internet environment with a multitude of new applications introduced, e.g. instant messaging or better known as wireline Instant Messaging (IM).

These are deemed the potential future subscribers of mobile IM. Although mobile IM is constrained in terms of User Interface and bandwidth currently, there is the advantage of mobility. Furthermore, MIM users now will have the added choice to messaging between other MIM users as well as wireline IM users.

Conclusion

Overall, both SMS and MMS are expected to undergo revamp inclusive of handsets, network interoperability, middleware and applications. The vendors, application providers, middleware providers and network operators need to continuously keep up with the technology changes and advancements as such services are mainly in demand amongst the upbeat “tech-savvy” youths in the near future.

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C & M ADEX TRENDS

782.3

1,019.2 1,025.8 1,108.1

965.2

5.9

23.4

5.6 0.6

8.0

0 200 400 600 800 1,000 1,200

2003 2004 2005 2006 2007

RM (million)

0 5 10 15 20 25

(%)

Adex Q1 Comparison 2003-2007

Source: Nielsen Media Research Service

For the first quarter of 2007, adex stood at RM1.108 billion, a growth of 8% from the same period last year and is the highest among the first quarter figures in years from 2003-2007. Possible attribution to the growth is the result of extensive promotions of Visit Malaysia Year 2007, which was widely advertised to all major cities throughout the world. From the period of 2003 until 2006, adex grew moderately but was significantly high in 2004. Industry experts are forecasting that the global ad growth in 2007 is 5.4%, with much expected ad spend contribution coming from the Asia Pacific region due to the run-up to the Beijing Olympic Games in 2008.

Adex Q1 2007 – A Positive Beginning

3.7

4.6 4.7

1.1 4.4

4.5 2.2 18.9

5.7

0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

2003 2004 2005 2006 2007

North America Western Europe Central & Eastern Europe Latin America Africa/M.East/ Rest of World World

RM (million)

0 2 4 6 8 10 12 14 16 18 20 (%)

5.2 7.2

22.8

3.8 6.1 5.9 6.3

16.6

3.5 4.2

10.7 4.2 5.4

15.6

0 5 10 15 20 25

%

2006 2007f

Adex 2003-Q1 2007 Ad Spend Growth per Region

Asia-Pacific

Source: Nielsen Media Research Service f - forecast

Source: Zenith Optimedia

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Adex Comparison by Medium

Q1 Adex via Medium Comparison

687.3 636.0 645.0 615.8 511.9

277.3 290.3 269.5 195.0

32.6 32.0 35.0 31.7 31.951.4 44.4 35.2 37.3 33.06.0 4.4 4.3 3.3 2.125.1 20.513.9 11.2 9.40 0 07.6 8.4

291.8

0 100 200 300 400 500 600 700 800

2007 2006 2005 2004 2003

Newspapers Television Magazines Radio Cinema Outdoor Point of Sale

RM (million)

Ad spends in this quarter come mostly from the Chinese New Year festivities and the New Year celebrations. Print remains the most important medium followed by TV and radio. Print generated a strong quarter-on-quarter growth of 8.1% while TV adex reached new heights in the said period. Although not detailed in this report, it is worthwhile to note that in some developed regions, Internet advertising has overtaken the two long-established media of cinema and outdoor.

The adex pie has witnessed again the print medium slicing more than half of the pie, at 65% for first quarter of 2006 and 2007 while TV dropped a notch to 26%. Radio was up a notch to 5%, thanks to the two new entrants (covered now in Nielsen Media’s research data) from the Media Prima Group which is Hot FM and Fly FM.

Others 4%

RM 1.026 billion Radio

4%

Television 27%

Print 65%

Adex by Medium 1Q-06 Adex by Medium 1Q-07

Others 4%

RM 1.108 billion Radio

5%

Television 26%

Print 65%

Source: Nielsen Media Research Service Source: Nielsen Media Research Service

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C & M ADEX TRENDS

8.0 26.3 129.5 48.8 27.1 52.1 10.7 36.4 135.2 47.3 47.7 8.7 25.3 127.1 87.7 1.8 39.7 5.9 33.6 117.5 78.5 16.0 18.0 9.8 25.9 95.5 63.8

0 20 40 60 80 100 120 140

RM (million)

2007 2006 2005 2004 2003

TV 1 TV 2 TV 3 NTV7 Channel 9/TV9* 8TV

Malaysia TV Adex (Q1 Comparison)

Free-To-Air Television Advertising

*Channel 9 ceased operations on February 2005; TV9 (under Media Prima) started broadcast on 22 April 2006

Adex 1Q TV Adex 2006 Adex Q1 TV Adex 2007

TV 1

3% TV 2

9%

TV 3 NTV7 44%

17%

Channel 9 9%

8TV 18%

TV 1

4% TV 2

13%

TV 3 49%

NTV7 17%

8TV 17%

RM291.8 million

RM277.3 million

FTA TV advertising expenditure recorded a growth of 5.2% from the same period last year, arriving at RM291.8 million. As expected, TV3 tops again and garnered RM129.5 million of advertising revenue, albeit a 4.2% drop from 1Q-06. Sister channel 8TV garnered advertising revenue of RM52.1 million as opposed to RM47.7 million last year.

In terms of market share, TV3 dropped 5% of the TV adex slice to 44% from 1Q-06 while NTV7 remained unchanged at 17%. 8TV posted a notch higher at 18%. Government-owned channels, TV1 and TV2 dropped 1% and 4% of their slice respectively from the same period last year.

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Radio Adex

Radio Adex 1Q-07

3.6

2.3

1.9 1.9

1.7 1.4 1.1

0.7 0.5 0.4 0.4

0.2 0.2 0.2 0.07 0.07 0.05 0.03 0.03 0.03 0

1 2 3 4

ERA FM MY FM

HITZ FM REDI 988 MIX FM

HOT FM

LIGHT & EASY

FM FLY FM

SINAR FM

THR .FM

Other Regional (RT

M) Red 104.9

AI FM (RM S 5)

MINNA L FM (RMS

6)

KL FM (RMS K

L)

MUZ IK FM (RMS

MUZIK)

KLASIK NASIO

NAL FM

TRA XX

FM (RMS 4)

SELANG OR FM

(RMS S'GOR)XFR ESH FM

RM (million)

This year, radio adex included Hot FM and Fly FM. Already at sixth place in terms of radio advertising revenue, Hot FM recorded RM1.4 million, surpassing a few of the more popular channels from AMP. Era FM and My FM again collected the two highest revenue, at RM3.6 million and RM2.3 million but each experienced a drop of 66% and 69% respectively from the same quarter last year.

Radio Adex 1Q-06

RM (million)

10.5

7.4 6.8 6.2

5.2

2.3 1.5

0.9 0.8 0.8 0.4 0.4 0.4 0.4 0.2 0.1 0.09 0

2 4 6 8 10 12

ERA FM

MY FM

REDI 988

MIX FM HITZ FM

LIGHT & EASY

FM THR

.FM SINAR FM

AI F M (RMS

5)

MINNAL

FM (RMS 6) Red 104.9

KLASIK NASIONA L F

M

MUZIK FM (RMS MUZI

K)

XFRESH FM

TRAXX FM (RMS 4)

KL FM (RMS KL)

SEL ANG

OR FM (RMS S'GOR ) Source: Nielsen Media Research Service

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C & M ADEX TRENDS

Top Adex Sectors

Sector

Top 10 Advertisers in Malaysia 1Q-07

TV Print Radio Others

Miscellaneous 0.4 160.2 0.4 0.3

Communications 41.1 67.2 10.7 6.4

Retail 18.1 87.5 8.4 1.3

Toiletries 68.1 19.1 2.1 3.7

Finance 6.2 55.2 2.7 4.2

Automotive 15.2 39.7 4.8 4.4

32.9 8.5 3.1 4.6

Beverage-Non Alcoholic 25.0 15.8 2.2 4.7

Government, Social &

Political Organisations 18.2 19.9 2.8 1.1

Service 2.4 36.0 1.8 0.6

Entertainment 8.8 28.3 1.8 0.8

Total

Total RM (million)

161.3 125.4 115.3 93.0 68.3 64.1 49.1 47.7 42.0 40.8 39.7 846.7

% From Total Adex Cake

15 11 10 8 6 6 4 4 4 4 4

76 236.4 537.4 40.8 32.1

The communications sector has the second highest advertising expenditure after the miscellaneous sector category at RM125.4 million, with majority ads being spent on the print medium at RM67.2 million and TV at RM41.1 million. Print medium is also the top choice in the Retail sector at RM87.5 million.

TV ad sales saw significant contribution from the toiletries, foodstuff and non-alcoholic beverages sectors.

In particular fast moving consumer goods sector recognised TV as their preferred choice of medium for ads.

Radio ads have also been receiving ad attention from the communications sector at RM10.7 million - the sector with the highest ad spend on radio. This is followed by the retail sector at RM8.4 million.

Cinema, outdoor and point-of-sale are also important avenues for advertising, its main customers being the communications sector spending the most at RM6.4 million. Also, sectors such as finance, automotive, foodstuff and non-alcoholic beverages spent more than RM4 million each in this category of advertising medium.

Cellular mobile service providers are the highest advertising spenders under the communications sector, spending RM75.7 million for the first quarter of 2007. DiGi spent RM26.7 million, being the highest cellular mobile service provider spending on advertisement in this service. Mobile interactive services companies spent RM23.8 million followed by corporate advertisements from communications companies at RM9.4 million.

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Communications Sector Advertisements

Types of Advertisements RM (million) Discounted Call Services – Others (NasionCom) 0.1

Sub-total

0.1 Fixed Line Services – TM 0.01 Others 0.3 0.31 Internet Service Provider – Outdoor-Advertiser 0.2 TMNet 0.7 TM 0.5 Others 1.4 2.8 Corporate Advertisements – DiGi 3.4 TM 3.0 Maxis 2.0 Others 1.0 9.4 Others – (Pager & key phone system, phone &

accessories, phone cards) 13.3 Mobile Interactive Services – Maxis 5.5 DiGi 2.9 Others 15.4 37.1 Mobile Line Services –Celcom 19.4 DiGi 26.7 Maxis 17.1 TM 10.3 Others 2.2 75.7

TOTAL 125.4

Mobile Line Services

61%

Internet Service Provider

2%

Corporate

Advertisements 7%

Mobile Interactive

Services 19%

Others 11%

Adex: Communications Sector 2004-1Q-07

700 600 500 400 300 200 100 0

2004 2005 2006 Q1 2007

615.2 639.1

617.9

125.4

RM (million)

Communications Sector:

Type of Advertisements

Source: Nielsen Media Research Service Source: Nielsen Media Research Service

SUMMARY HIGHLIGHTS

CONTENTS

FOREWORD

SUMMARY HIGHLIGHTS

C & M MARKET

C & M MARKET

Market Trade Volatile in 1Q-07

C&M Sector Contribution to Bursa Malaysia

Individual C&M Companies Contribution to Bursa Malaysia

C & M MARKET

C&M Companies Share Price Movements

C&M Amongst Other Heavyweights

C & M MARKET

Local C&M versus Overseas by Market Capitalisation in US Dollar

MESDAQ 1Q-07

Top 10 Ranking by Market Capitalisation

C & M ECONOMICS

C&M Companies Revenue

Malaysian Economic Snapshot

C & M ECONOMICS

BNM Prospects for 2007 – A C&M Perspective

C & M ECONOMICS

SMS Trends

C & M ECONOMICS

C & M ADEX TRENDS

Adex Q1 2007 – A Positive Beginning

Adex Comparison by Medium

C & M ADEX TRENDS

Free-To-Air Television Advertising

Radio Adex

C & M ADEX TRENDS

Top Adex Sectors