chapter 2 ECONOMIC PERFORMANCE OF THE INDUSTRY

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chapter 1 EXECUTIVE SUMMARY

4

chapter 2 ECONOMIC PERFORMANCE OF THE INDUSTRY

7

Malaysian Economy in 2004 7

2005 Economic Growth at 5 – 6% 9

Contribution of C&M Companies to Bursa Malaysia 9

C&M Industry Revenue Overview 12

Telecommunications Sector 13

Telecommunications Companies Revenue 13 MESDAQ Market as a Source of Financing for ASP 18

Introduction 18

Broadcasting Sector 20

Postal and Courier Services Revenue 22

Malaysia: Adex Monitor 25

Malaysia Adex versus GDP Growth 25

Adex Growth (in Ringgit Malaysia) 26

Adex: Market Share 27

TV & Radio Advertising Revenue 28

Free-To-Air Television Adex 29

Radio Advertising Revenue 31

Radio Adex Market Share: 2002 – 2004 Comparison 32

chapter 3 C&M INDUSTRY OVERVIEW

34 Communications & Multimedia Industry – 9.7% of GDP 34 C&M Revenue by Services Market Segment 35

Fixed Line Services 37

Cellular Mobile Phone Services 38

Broadcasting – Subscription TV 39

Communications & Multimedia Services Connections 40

Fixed Line Services 40

Cellular Mobile Phone Services 41

Internet Connections 44

Broadband Penetration 46

Satellite TV Subscribers 48

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Targets for Industry on Service Quality 60

Sampling and Methodology 61

Summary Survey Findings 61

Detailed Survey Findings 63

Quality of Service 70

Mandatory Standard for Quality of Service 70 Mandatory Standard QOS 2003 – 2004 71

Consumer Complaints Handling 82

Rate Monitoring 84

Cellular Coverage for Time One and Time Two 88

MCMC Access Initiatives 91

MCMC – State Coordination 95

chapter 5 C&M STUDIES

98

Introduction 98

MCMC Impact Survey 2004 98

CATI Centre and Hand Phone Users Survey 2004 106 Liberalisation and Trend for Capex in Malaysia 110

chapter 6 C&M INDUSTRY – A LOOK INTO THE FUTURE

115

Introduction 115

World Trade Organisation (WTO) Activities 115

ICANN Activities 116

World Summit on Information Society (WSIS) 116

Broadband – National Broadband Plan 117

Brief Overview 117

Raison D’etre of the NBP 117

IPv6 – Internet Protocol Version 6 122

WiMAX – Worldwide Interoperability for Microwave Access 128

Digital Sound Broadcasting 131

Radio Frequency Identification (RFID) 133 Digital Terrestrial Television Broadcasting (DTTB) 137

chapter 7 MOVING AHEAD

141

APPENDICES

143

LIST OF FIGURES

155

CONTACT US AND SECRETARIAT INFORMATION

160

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It gives me great pleasure to release this Industry Performance Report 2004, which is an annual publication by the Malaysian Communications and Multimedia Commission (MCMC) as required under Chapter 15, Part V of the Communications and Multimedia Act 1998 (CMA).

The main objective of the Industry Performance Report or IPR is to report and highlight the progress and development of the communications and multimedia industry. However, the MCMC has widened the IPR to report not only on the economic health and performance of the telecommunications, broadcasting and multimedia industry but also with respect to digital certification as well as on the postal industry; all of which falls under the ambit of MCMC’s jurisdiction as a regulator.

IPR 2004 has deviated slightly from the past reports in terms of delineation into fixed, mobile and Internet sections for the sake of simplicity. Moreover, IPR 2004 also discloses the development of MCMC licensees, the quality and availability of services, operational performance and the level of compliance of each licensee. Various studies undertaken by MCMC in 2004 such as the Impact Survey Study, Hand Phone Users Survey, and Liberalisation and Capex Study were included for the first time as MCMC now has developed new capabilities of its own to conduct such studies in a regular manner.

As a glimpse into the future, IPR 2004 also details MCMC’s initiatives and implementation work including studies on related new technologies such the National Broadband Plan, IPv6, Worldwide Interoperability for Microwave Access (WiMAX), Radio Frequency Identification (RFID), Digital Terrestrial Television Broadcasting (DTTB) and Digital Sound Broadcasting (DSB) with local as well as international bodies for the enhancement and development of a robust communications and multimedia industry.

The MCMC welcomes any comments, enquiries, suggestions and feedback on the information presented in the IPR. MCMC contact information is available on page 160.

...

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The year 2004 started on a very positive note with original GDP expectations of between 6.0 and 6.5% for the nation. True to expectations, Malaysian economy continued to grow in 2004, with GDP growth of 7.1%, and the communications and multimedia industry followed suit. The industry continued its positive trend over the past three years increasing its contribution of 9.7%

towards the GDP with overall C&M revenue reaching RM24.5 billion from the RM21.3 billion recorded in 2003. This is a significant 15% growth underpinned by robust domestic activities and a favourable external environment, at a time when the industry worldwide was expected to develop greater resilience and financial stability in the face of globalisation.

Looking at the key performance indicators (KPIs) of the industry as propounded under the Framework for Industry Development (FID) 2002-2006, there was a picture of mixed results with certain sectors fairing better than others. Top of the KPI list in terms of best performances was the cellular mobile penetration rates which grew significantly from a 43.9% penetration rate in 2003 to 55.9% at the close of 2004, a significant increase of 12% over the previous year. At this rate of growth, actual mobile penetration rate should exceed the 60% benchmark by 2007 as indicated under our Framework for Industry Development (FID) 2002-2006. With increasing shifts towards a modern lifestyle, the mobility factor increases in importance whereby the mobile phone is no longer seen as a luxury but a necessity, even for young adults. This can be seen by the phenomenal rise in prepaid card growth. An independent survey performed by MCMC revealed that the there was a preponderance of prepaid users over postpaid users in the ratio of 81.4 to 18.6.

As expected the fixed line DEL penetration rate continued its gradual decline ending up at 17.2% for 2004. A new mindset seems to be entrenched whereby the conveniences of the mobile phone seem to offset the costs savings in using fixed line telephony. Worldwide, the more developed countries seem to indicate the same levels of decline whereas in the less affluent developing countries, there is actually gradual DEL growth, especially in jurisdictions where the industry has not yet been liberalised.

In respect of the Internet, the FID targets of 30% by 2007 would now seem quite difficult to achieve as the dial-up penetration rate was recorded at 12.7% in 2004. Furthermore, despite the as yet small numbers for broadband subscribers, broadband is a substitute service for Internet (dial-up). Another reason for the slow growth in dial-up Internet services was the PC penetration rate which remains relatively low in the region of 16 persons owning PC per 100 inhabitants. However, in terms of the quality of Internet services, the results from MCMC Consumer Satisfaction Survey indicated improving trends of services provision. Starting from Wave I figures of 6.77 in February-April 2001, the overall individual Consumer Satisfaction

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Index (CSI) has improved to reach 7.59 in Wave VI for September-November 2003, thereby passing the FID target of 7.5. In 2004, however, the thrust into Internet services have shifted from dial-up to broadband services whereby in the last quarter of 2004, the industry finally obtained the approval of the National Broadband Plan by the Malaysian Cabinet.

Although broadband penetration rates for 2004 remains at just under 1%, nevertheless, with the approval and speedy implementation of the plan, it is envisaged that household broadband penetration growth rates will more than double for the next consecutive three years until the year 2007 whereby the targeted household broadband penetration rate is expected to be 50%. The year 2004, thus can be seen as the year whereby Malaysia shall be launching a government sponsored cohesive plan for laying down broadband infrastructure to reach the masses, the impact of which will flow over into many other sectors, including education, health, e-Commerce, banking and even tourism.

Meantime, broadcasting services have picked up considerably in 2004 with the number of Free- To-Air broadcasting advertisement seconds reaching an all time high of 20,724,658 seconds in 2004, an increase of about 36% over 2003. As a result, Malaysia saw impressive increases in adex revenue in the broadcasting sector from RM4.4 billion in 2004, an increase of 18.9% growth from RM3.7 billion in 2003. The number of advertisements also increased significantly to 758,062 for 2004, a phenomenal increase of 50% over the previous year. All in all, convergence between the broadcasting and telecommunications sectors has prompted the need in 2004 for the major network facilities provider (NFP) and network service provider (NSP) licensees to start preparing for better and wider choice of content whilst at the same time there is an increasing need to resolve the common infrastructure requirements of both sectors in view of new and converging technologies.

MCMC remains the regulator for the postal and courier services industry which maintained total revenue of RM1.7 billion for 2004. Pos Malaysia‘s revenue was recorded at RM694.4 million for 2004, a 7.2% increase from the 2003 figures of RM648 million. Digital Certificates issued under the purview of Digital Services Act grew 72.1% over 2003. Nevertheless, the bulk of the increase was seen arising from the government sector and the total number of certificates remained small at 114,911.

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licensees or operators. This will spill over not only into better coverage for the consumers but also has major repercussions for the industry as companies strategise to think longer term for the sake of the country as a whole.

2004 can be seen as the starting point whereby a new wave of Malaysian operators will be venturing abroad to invest and operate abroad. Even smaller operators such as Redtone have ventured into foreign shores with its investment in Pakistan and in terms of macro-economic development for the Malaysian communications and multimedia industry, it can be seen as a natural progression. Many others will be following suit as a clear sign of maturity becoming visible on the domestic scene.

On the whole, 2004 can be summarised as a year of impressive organic growth marked with a new Minister who has contributed further vigour and dynamism to the industry. The results will be significant in terms of corporate strategies amongst the licensees for the immediate future.

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MALAYSIAN ECONOMY IN 2004

The Malaysian economy continued growth in 2004, building on the positive trend set in the second half of 2003. Following a 5.3% GDP growth for 2003, the real GDP growth for the year 2004 recorded at 7.1%. This is the country‘s fastest growth rate since 2000. Overall, growth was underpinned by robust domestic economic activities driven by the private sector and a relatively contained external environment. Increased consumer and business confidence also contributed to the positive economic growth.

More specifically, growth in the second half year 2004 was moderated somewhat (3Q: 6.8% and 4Q: 5.6%) due to uncertainties arising from higher oil prices, the likelihood of interest rate increase and the slower electronics sector. The impact of these uncertainties is likely to continue to be monitored and reassessed in 2005, with the Government‘s appropriate accompanying action to maintain consistent economic growth of the country.

*Actual GDP

Source: Ministry of Finance, MIER, World Bank, Bloomberg, Bank Negara Malaysia

Fig. 2.1 GDP Growth Forecasts

GDP Growth Forecasts 2004 2005

Estimate Forecast

Ministry of Finance (MoF) 7% 6%

Bank Negara Malaysia (BNM) *7.1% 5 - 6%

Malaysian Institute of Economic Research (MIER) 7.2% 5.7%

Bloomberg Poll 7% 5.5%

World Bank 7% 6%

2003 2004 2005

Preliminary Forecast

Real GDP growth 5.3 7.1 5.0 - 6.0

(RM billion) 231.7 248.0 260.3

Agriculture 5.7 5.0 3.3

Mining 5.9 4.1 5.0

REAL GDP BY KIND OF ECONOMIC ACTIVITY (% CHANGE)

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Malaysian Economy Snapshot

Percentage (%)

GDP (% Change)

9 8 7 6 5 4 3 2 1 0

5 4.5 4 3.5 3 2.5

2 2000 2001 2002 2003 2004p 2005f

p - preliminary f - forecast

Source: Economic Planning Unit (EPU), Ministry of Finance, Bank Negara Malaysia

Fig 2.3 Malaysian Economy Snapshot

Source: MIER

Fig 2.4 Consumer Sentiment Index and Business Conditions Index 2003 - 2004 140

120

100

80

1Q-03 2Q-03 3Q-03 4Q-03 1Q-04 2Q-04 3Q-04 4Q-04

Consumer Sentiment Index

Business Conditions Index (2003 - 2004)

Index Points

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2005 ECONOMIC GROWTH AT 5 - 6%

Amidst the Government‘s ongoing fiscal consolidation process, the economy in 2005 is expected to continue to be broad-based, private sector driven and led by expansion in domestic demand. Growth in 2005 is expected to moderate in line with moderation in world growth amidst anticipated gradual rise in global interest rates. Malaysia‘s continued economic resilience and strong macroeconomic fundamentals will serve to accord flexibility for the central bank in undertaking a supportive monetary stance.

Agencies such as Bank Negara Malaysia, Ministry of Finance and MIER have placed the growth rate of the country‘s GDP for the year 2005 at 5 - 6%, 6% and 5.7% respectively. Growth forecasts remained cautiously optimistic in view of the anticipated effects of continued high oil prices, inflationary pressures, modest downturn in the global electronics cycle, relatively favourable prices for palm oil and crude oil, and improved intra-regional trade amidst reasonably high growth rates in the East Asian region of between 6.3 – 6.5%. The East Asian region (excluding Japan) now accounts for 45.4% of Malaysia‘s total trade.

CONTRIBUTION OF C&M COMPANIES TO BURSA MALAYSIA

The communications and multimedia (C&M) sector contributed RM81.1 billion (11.2%) to the market capitalisation of Bursa Malaysia of RM722 billion in 2004.

The main telecommunications operators contributed 9.5% or RM68.5 billion to Bursa Malaysia capitalisation. Meanwhile, the public-listed broadcasting companies such as ASTRO All Asia Networks plc or ASTRO (satellite TV) and Media Prima Bhd (Free-To-Air TV) contributed 1.44%

(RM10.4 billion) and 0.12% (RM0.9 billion) respectively. Also, the postal sector as represented by Pos Malaysia Services and Holdings Bhd (PosM) contributed 0.18% (RM1.3 billion).

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Communication and Multimedia Market Capitalisation 2004

Bursa Malaysia Market Capitalisation (RM722 billion)

Communications and Multimedia Companies Contribution to Bursa Malaysia Market Capitalisation

6.0 5.0 4.0 3.0 2.0 1.0 0.0

Media Prima

Astro Telekom DiGi Time Maxis PosM 2002 2003 2004

Percentage (%)

Source: MCMC, Bloomberg

Fig 2.5 C&M Companies Market Capitalisation 2004

Source: MCMC, Bloomberg

Fig 2.6 C&M Companies Contribution to Bursa Malaysia Market Capitalisation

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Market Capitalisation

Communications & Multimedia versus Bursa Malaysia

RM (billion)

800 700 600 500 400 300 200 100 0

2001 2002 2003 2004 C&M Others on BM

Market Capitalisation

C&M Sector Contribution to Bursa Malaysia

RM (billion) Percentage (%)

800 700 600 500 400 300 200 100 0

2001 2002 2003 2004

40 35 30 25 20 15 10 5 0

BM Market Cap C&M Market Cap

Source: MCMC, Bursa Malaysia (BM)

Fig 2.7 Market Capitalisation – C&M Sector versus Bursa Malaysia

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C&M INDUSTRY REVENUE OVERVIEW

Overall revenue of RM24.5 billion was recorded for the communications and multimedia industry for the year 2004. This comprised the aggregated revenue of the public-listed communications and multimedia companies in telecommunications, broadcasting, and postal sectors. Overall industry revenue grew 15% from RM21.4 billion in 2003. This growth is lower compared to the 20% growth in revenue in 2003.

The telecommunications sector dominates the C&M industry capturing 89% of total revenue.

Meanwhile, the broadcasting sector has 8% market share, with postal at 3% of industry revenue.

C&M Revenue Market Share 2004

Time Digi Telekom Maxis ASTRO Media Prima PosM

C&M Industry Revenue 2002 - 2004

RM (billion)

16 14 12 10 8 6 4 2 0

2002 2003 2004

Source: MCMC, Industry

Fig.2.9 C&M Revenue Market Share 2004

*Estimated TV3 Revenue Source: MCMC, Industry

Fig.2.10 C&M Industry Revenue 2002 - 2004

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Telecommunications Sector

The telecommunications sector revenue in the year 2004 was robust, driven by a vibrant operating environment backed by strongeconomic growth.

Four main service providers represent the telecommunications sector in Malaysia, namely Telekom Malaysia Berhad (Telekom), Maxis Communications Berhad (Maxis), DiGi.Com Berhad (DiGi) and Time dotcom Berhad (Time). The combined revenue of these companies was RM21.752 billion in 2004. This compares favourably to RM18.9 billion in 2003, reflecting a growth in aggregated revenue of 15% for the sector.

Amongst these service providers, the incumbent Telekom, maintained its lead with the largest share of 61% of total market revenue amounting to RM13.251 billion.

Market share in terms of revenue remains generally unchanged from the previous year as industry players compete intensively to maintain, if not gain, market share respectively.

Telecommunications Companies Revenue

Telecommunication Sector Revenue 2003

Telecommunication Sector Revenue 2004

Maxis 25%

Time 4% DiGi

9%

Telekom 62%

Maxis 26%

Time 3% DiGi

10%

Telekom 61%

Fig 2.11 Telecommunications Sector Revenue 2003

Fig 2.12 Telecommunications Sector Revenue 2004

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Thus, the group is better positioned to optimize resources and focus on further improving margins.

Meanwhile, Celcom has increased marketing efforts, promoting new products and services to gain new mobile subscribers. Also in 2004, lower SMS tariffs and cheaper starter packs were introduced while other efforts included consolidation of its prepaid packages and re-launched as Xpax . In other business segments, Telekom expects to expand its data, value-added services and broadband business by accelerating rollout of broadband via fixed and wireless access. In 2004, wholesale and retail business units were streamlined for optimization of asset (network) utilization and to improve future revenue stream from fixed line business segments.

Telekom Revenue by Segment 2004: RM13.251 billion

Fig 2.13 Telekom Revenue versus Operating Profit Margin

Fig. 2.14 Telekom Revenue by Segment

Telekom

RM (million) Operating Profit Margin (%)

Revenue Operating Profit Margin 15000

10000 5000 0

35 30 25 20 15 10 5 0

2001 2002 2003 2004

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The revenue of Maxis in 2004 grew 21.6% to RM5.689 billion from RM4.68 billion in 2003. This was due to higher number of subscriber additions and mobile service usage. Mobile data revenue grew by 41.2% to RM761 million from RM539 million in 2003. This was due mainly to 70.3% growth in volume of SMS from 2.7 billion to 4.6 billion and higher revenue from mobile data services (content-based services) that increased 18% due to new products and services.

Mobile data revenue accounted for 14.1% of total mobile revenue versus 12.2% in 2003.

Operating profit margin was 40.7% compared to 29.7% in 2003. Pretax profit margin was 41%

from 27.2% in 2003 due to higher revenue, moderated finance cost and write-back of RM36 million in integration costs which were lower than expected. Pretax profit was RM2.338 billion, up 83.5% from RM1.274 billion.

Going forward, Maxis has identified focussing on fundamental improvements to ensure competitiveness, and enhancing new growth opportunities, including spending capex of RM1.4 billion to improve coverage, better quality service, commercial rollout of 3G services in Klang Valley and overall cost management.

Maxis

6000 5000 4000 3000 2000 1000 0

2001 2002 2003 2004

100 80 60 40 20 0

Revenue Operating Profit Margin

Maxis Revenue by Segment 2004: RM5.689 billion

Fig. 2.15 Maxis Revenue versus Operating Profit Margin

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The revenue of DiGi in 2004 was RM2.234 billion – up 30.3% from RM1.714 billion in 2003 mainly due to continued growth in its mobile segment. This translated into higher operating profit margin of 22.8% compared to 15.7% in 2003. Meanwhile, pretax profit increased 45% from RM201.5 million to RM446.8 million in 2004 due in part to higher interest income of RM12.9 million compared to RM7.6 million previously, and despite higher sales and marketing costs which were offset with the higher customer base in 2004.

In the coming year, DiGi has indicated that the company is well-positioned for further growth, and would actively pursue plans to optimise and expand its investment program with focus on high service quality and coverage expansion. DiGi would continue its focus to deliver simple, attractive and easy to use high quality mobile products and services, which are relevant to customers.

DiGi

2500 2000 1500 1000 500 0

100 80 60 40 20 0 2001 2002 2003 2004

Revenue Operating Profit Margin

Fig 2.17 DiGi Revenue versus Operating Profit Margin

Fig 2.18 DiGi Revenue by Segment

DiGi Revenue by Segment 2004: RM2.234 billion

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Time recorded revenue of RM578.4 million in 2004, a decline of 27.6% or RM220.2 million from RM798.6 million in 2003. The drop was mainly due to sale of its mobile arm in 2003, as well as lower traffic volumes from domestic and international interconnect businesses. The company posted an operating profit loss of RM830.4 million compared to loss of RM18.8 million in 2003.

The operating profit loss in 2004 was mainly due to higher depreciation from a change in depreciation method (RM715.2 million), and a change in provision for doubtful debts apart from overall lower revenue for the year.

Time provides a range of services catering to domestic and international markets for voice and data communications, broadband solutions, Internet, global managed services, payphones and various multimedia solutions. Time has embarked on initiatives to build its fixed line business including a strategic alliance aimed at corporate customers apart from intensifying efforts to improve competitiveness and performance.

Time Revenue and Operating Profit/Loss 2001 - 2004

Revenue Operating Profit/Loss

RM (million)

900 400 (100)

(600) 2001 2002 2003 2004

Time Revenue and Operating Loss 1Q - 4Q 2004

RM (million)

400 200 0 -200 -400

Fig 2.19 Time Revenue and Operating Profit/Loss 2001 - 2004

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MESDAQ MARKET AS SOURCE OF FINANCING FOR ASP

Introduction

The Malaysian Exchange Securities Dealing and Automated Quotation Berhad (MESDAQ) principally provide an avenue for high-growth companies in technology intensive industries to raise capital.

Companies listed on the MESDAQ market of Bursa Malaysia also include the multimedia and communications companies that meet its listing criteria. However, track record such as profit and operating history is not required for listing on MESDAQ Market. Consequently, second tier rating are often given to the companies in this category; MESDAQ Market companies characteristically do not have high market capitalization.

MESDAQ post-listing disclosure requirements are in place to safeguard the interest of investors and in turn, address issues particularly in regards to disclosure, conduct and corporate responsibility.

As at the end of February 2005, there are four companies, which are holders of applications service providers (ASP) licence, that have obtained listing status on the MESDAQ Market.

These are AKN Messaging Technologies Berhad (AKNM Tech); REDtone International Berhad (REDtone) – ASP licence held by wholly-owned subsidiary REDtone Telecommunications Sdn Bhd;

Unrealmind Interactive Berhad (UIB); and NasionCom Holdings Berhad (NasionCom).

MESDAQ Listing Business

Company Date

AKNM Tech 27/1/2003 Develops both enabling technology as well as content largely for mobile Internet messaging solutions based on short messaging services (SMS) and wireless application protocol (WAP) technology.

REDtone 9/1/2004 Provides discounted call services and develops computer telephony integration products.

UIB 30/6/2004 Develops and provides value added mobile content and services for the wireless device market.

NasionCom 23/2/2005 Provides voice and data services, broadband internet access, local loop connectivity, and provision of managed services such as web hosting, data networking, Internet security and network consulting advisory.

Source: MCMC, Bursa Malaysia

Fig 2.21 ASP Licensees Listed on MESDAQ

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ASP Licensees Listed on MESDAQ Market - Revenue

RM153.6 million

RM126.2 million

RM18.3

million RM15.0 million

NasionCom FY2004@31 Dec

REDtone 9 months

@30 Nov 2004

AKNM Tech 6 months

@31 Dec 2004

Unrealmind FY2004@31 Dec

Fig 2.22 ASP Licensees Listed on MESDAQ Market – Revenue

NasionCom is the most recent ASP licensee to float its shares on the MESDAQ Market. The company undertook a public issue of 20,000,000 new ordinary shares of RM0.10 each at an issue price of RM0.33 per share and a further restricted issue of 40,000,000 new ordinary shares at an issue price of RM0.33 per share to identified investors. The listing exercise raised RM19.8 million in proceeds, which will be utilized in growing its VoIP business as well as its network, broadband and data services.

The revenue of the ASP Licensees on the MESDAQ market as at the respective periods of their financial years are as indicated in the chart below. The aggregated revenue of the ASP licensees is a small fraction of the overall communications and multimedia sector revenue.

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BROADCASTING SECTOR

The broadcasting sector as represented by ASTRO and Media Prima posted revenue of about RM2 billion in 2004. This is encouraging compared to about RM1.65 billion posted in 2003 as represented by ASTRO and the then public-listed Sistem Televisyen Malaysia Berhad (TV3).

ASTRO’s revenue for financial year ended 31 January 2005 was RM1.716 billion, an increase of 20.9% from the previous year. This was spurred by higher subscription and advertising revenues mainly from its satellite TV business which represents 89.2% of total revenue.

Since registering its first post-listing operating profit in 3Q 2003 (i.e., FY2004), ASTRO continued to record profitability for financial year 2005, with an operating profit margin of 17.4% (2003: 10.5%).

ASTRO Revenue and Operating Profit/Loss FY ended January 2002 - 2005

RM (million)

Revenue Operating Profit/Loss 1500

1000 500 0 -500

FY Jan-02 FY Jan-03 FY Jan-04 FY Jan-05

ASTRO Revenue by Segment FY Ended 31 January 2005

Fig.2.23 ASTRO Revenue and Operating Profit/Loss

Fig 2.24 ASTRO Revenue by Segment

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Media Prima

100 80 60 40 20 0

50 45 40 35 30 25 20 15 10 5 0 1Q-04 2Q-04 3Q-04 4Q-04

Fig.2.25 Media Prima Revenue and Operating Margin

Media Prima, which owns Free-To-Air (terrestrial) TV stations TV3 and 8TV, recorded total revenue of RM328.4 million in 2004. There are no comparatives for year 2003 in respect of restructuring where Media Prima was listed in place of TV3 in October 2003. For 2004, Media Prima posted operating profit margin of 19%, with operating profit of RM62.3 million.

While margins remain respectable, there is expected more intense competition for adex market share in 2005. However, the group indicated optimism to maintain lead market position and future earnings growth through continued investment in quality programming, branding and prudent financial management.

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POSTAL AND COURIER SERVICES REVENUE

The postal and courier services sector recorded combined estimated revenue of RM1.7 billion in 2004. This is comparable to the revenue posted in 2003.

Pos Malaysia recorded revenue of RM0.694 billion. On the other hand, the aggregated revenue of courier companies is estimated to be in the region of RM0.989 billion for 2004.

At end year 2004, there were 114 courier licensees in Malaysia. The Top 10 players comprising overseas-linked companies and home-grown Malaysian companies contributed 93% of the courier service revenue. The integrated express carriers, also known as the overseas-linked companies are Federal Express (FedEx), DHL, United Parcel Service (UPS) and TNT Express (TNT). The home-grown companies are Nationwide Express (Nationwide), City Link Express (City Link), GD Express, ABX Express, Udara Express and KTM Distribution (KTM).

The overseas linked players contribute more significant revenue – FedEx (33%), DHL (28%) and UPS (15%). Comparatively, Nationwide that is public-listed, and City Link contributed 7%

each to industry revenue.

Top 10 Courier Service Companies 2004 (Capturing RM989 Million Revenue)

Fig.2.26 Top 10 Courier Service Companies 2004

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In respect of the postal sector, public-listed Pos Malaysia and Services Holdings Berhad (Pos Malaysia) is the country’s postal service provider.

Pos Malaysia revenue was RM694.4 million for 2004. This is 7.2% growth from revenue of RM648 million posted in 2003. Operating profit margin for 2004 improved to 14.6% compared to 10.8% for 2003.

Pos Malaysia

690 680 670 660 650 640 630 620 610 600

50 45 40 35 30 25 20 15 10 5 0 2001 2002 2003 2004

Pos Malaysia: Quarterly Results 2004

RM (million)

190 185 180 175 170 165 160

100 90 80 70 60 50 40 30

Fig.2.27 Pos Malaysia Revenue versus Operating Profit Margin

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Pos Malaysia has its postal services divided into four strategic business units, namely PosMel (mail service), PosLaju (express courier service), PosNiaga (retail business) and PosLogistik (customized logistics solutions).

PosMel is the largest contributor to the revenue of Pos Malaysia, representing about two thirds of total operating revenue, followed by PosLaju and PosNiaga.

Pos Malaysia Revenue by 2004 2003

Segment (RM million)

Postal and its related services 693.459 656.887

Others including property investment

& investment holding 0.910 0.964

Total 694.369 657.851

Fig.2.29 Pos Malaysia Revenue by Segment

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% Growth Comparison: GDP & Adex (2000 - 2004)

GDP Growth (%) Adex Growth (%)

9 8 7 6 5 4 3 2 1 0

30 25 20 15 10 5 0 2000 2001 2002 2003 2004

GDP (% Growth) Adex (% Growth) MALAYSIA ADEX MONITOR

Malaysia Adex versus GDP Growth

Against the backdrop of strong economic growth in the year 2004, the advertising expenditure (adex) also performed well. Total adex in 2004 at RM4.4 billion, recorded a whopping 18.9%

increase in comparison to the previous year total of RM3.7 billion.

Source: MCMC, AC Nielsen, Department of Statistics

Fig 2.30 Percentage Growth Comparison: GDP and Adex 2000 - 2004

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Adex Growth (in Ringgit Malaysia)

Over the last five years, the adex industry has grown positively year-on-year in ringgit terms.

In the year 2004, various international and local events boosted the robust adex industry. These came in the form of intensive advertising campaigns by various government agencies and big Malaysian corporations such as the SOCSO campaign and the Tak Nak! no-smoking campaign.

International events such as the Olympics and Euro 2004 also boosted the adex.

In respect of the adex by sector, out of total RM4.4 billion in 2004, the communications sector recorded the highest advertising spend at RM615.2 million or 14% of the entire adex cake in the country. Communications sector advertising includes advertisements by the telecommunications companies and Internet service providers. The advertisements are for their corporate branding purposes as well as for their mobile and internet services such as discounted call services, postpaid and prepaid mobile, Internet dial-up and mobile interactive services such as ring tone or logo downloads.

The second highest advertising spend is the toiletries sector, with RM391.8 million, followed closely by retail services at RM382.4 million. Each of these sectors constituted 9% market share of total adex in 2004.

Adex: 2000 - 2004

RM (billion)

4.4 4.2 4.0 3.8 3.6 3.4 3.2 3.0

2000 2001 2002 2003 2004

Source: MCMC, AC Nielsen

Fig 2.31 Adex Growth (2000 - 2004)

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Adex: Market Share

As is the industry norm, print advertising takes majority market share. For the year 2004, however, print advertising posted comparatively decreased market share from 68% in 2003 to 65% at RM2.8 billion.

In contrast, advertising via television increased to 30% market share from 27% of the previous year. In ringgit terms, total television advertising in 2004 was worth RM1.3 billion, a very encouraging increase of 30.9% compared to RM993 million in 2003.

Interestingly, radio advertising remained status quo at 4% market share. This is translated to a total radio adex of RM168.8 million for the year 2004. Other mediums of advertising such as point-of-sale and cinema advertising remained status quo at 1% market share or RM46.8 million.

Adex Market Share 2004

Adex Market Share 2003

Fig 2.32 Adex Market Share 2004

Fig 2.33 Adex Market Share 2003

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TV & Radio Advertising Revenue

Television Radio

Advertising Revenue for TV and Radio

RM (million)

TV Adex versus % Growth

RM (million) Growth (%)

1,400 1,200 1,000 800 600 400 200 0

35 30 25 20 15 10 5 0 -5 -10 2001 2002 2003 2004

RM (million) % Growth

Fig 2.34 Advertising Revenue for TV and Radio

Fig 2.35 TV Adex versus % Growth

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Free-to-Air Television Adex

In 2004, the option of Free-To-Air television advertising has become more competitive with the introduction of two more channels, i.e., 8TV and Channel 9. As a general observation, TV3 remained the favourite avenue for television advertising. TV3 recorded RM565.1 million worth of adex revenue for the year 2004. This is 7.8% higher than the adex revenue for TV3 in 2003 at RM524.3 million.

In comparison, NTV7 adex revenue for 2004 was RM385.7 million - an encouraging 36.8%

growth from the previous year. TV1 and TV2 television advertisement revenue were at RM26.6 million and RM141.1 million respectively.

Meanwhile, 8TV as the new kid on the block recorded an impressive RM136.2 million for advertising, possibly due to the popular massive advertising blitz for the Malaysian Idol television programme. Comparatively also a newcomer, Channel 9 television advertising revenue

TV 1 TV 2 TV 3 NTV7 Channel 9 8TV

Free-to-Air Television Adex 2001 - 2004

RM (million)

600

400

200

0

Fig 2.36 Free-To-Air Television Adex

(32)

*Note: As with all data collected for adex in this context, the advertising rates for television were based on the costs provided in the official rate cards.

Fig 2.38 Free-To-Air Television Adex – Ads by Number and Seconds

Fig 2.37 Free-To-Air Television Adex by Stations

Free-to-Air TV RM (million)

Stations* 2001 2002 2003 2004

TV 1 60 67.4 32.5 26.6

TV 2 102.7 89.3 155.2 141.1

TV 3 421 455.6 524.3 565.1

NTV7 297.5 309.7 281.9 385.7

Channel 9 n/a n/a n/a 46.0

8TV n/a n/a n/a 136.2

Ads in

Media RM (million) % No. of Ads % Seconds %

TV 1 26.6 2.0 46,504 6.1 1,555,525 7.6

TV 2 141.1 10.8 100,513 13.3 3,072,144 14.8

TV 3 565.1 43.4 224,639 29.6 5,840,812 28.2

NTV7 385.8 29.7 183,760 24.3 4,476,937 21.6

Channel 9 46.0 3.5 85,665 11.3 2,663,652 12.9

8TV 136.1 10.5 116,981 15.4 3,115,588 15.0

TOTAL 1,300.7 100.0 758,062 100.0 20,724,658 100.0

(33)

Radio Adex (2001 - September 2004)

RM (million) Growth (%)

RM (million) % Growth Radio Advertising Revenue

As per the data available to date, the radio advertising revenue growth up to September 2004 was encouraging with a year-on-year increase of 12.4% to RM122.6 million (RM109.1 million was recorded from January to September 2003).

Fig 2.39 Radio Adex

(34)

Radio Adex Market Share Comparison by Companies January to September 2002 - 2004

RM (million)

100 80 60 40 20 0

AMP Star RFM RTM THR

2002 2003 2004

*Note: At time of printing, there was no available data for adex of Xfresh.fm radio station.

Fig 2.40 Radio Adex Market Share, January to September 2002 - 2004 Radio Adex Market Share: 2002 – 2004 Comparison

Over the last three years, AMP radio stations posted relatively higher adex. AMP radio stations, which encompass radio stations such as ERA, hitz.fm, Light & Easy, MIX FM and My FM, and their newest radio stations – Sinar FM and Xfresh.fm, under the ASTRO flagship remained the major players in the radio advertising industry.

AMP radio stations recorded a collective RM90.2 million advertising revenue for the first nine months of the year alone. This was 18.8% growth from the revenue of the previous year at RM75.9 million. In terms of market share, AMP took 73% of the pie for the three quarters of 2004.

Radio stations under Star RFM Sdn Bhd (formerly known as Radio Rediffusion Sdn Bhd), namely Red104.9 and redi988, posted advertising revenue of RM16.7 million in 2004, or 14%

of total radio market share. This was possibly due to the higher listenership and popularity of their Red104.9 radio station. In respect of corporate developments, Star RFM was bought over by Star Publications Malaysia Berhad in October 2003.

Both Time Highway Radio (THR) and Radio Malaysia stations took up 8% and 5% of radio advertising market share respectively. In ringgit terms, THR radio recorded revenue at RM9.3 million and RTM posted radio advertising revenue of RM6.4 million.

(35)

Looking at specific radio stations, the top four stations for advertising all belong to the AMP flagship. Up to September 2004, ERA again was the favourite avenue for radio advertising, with advertising revenue of RM28.3 million. At a distant second, My FM, the Chinese-speaking radio station, recorded advertising revenue of RM20.1 million, followed closely by MIX FM at RM18.2 million.

Star RFM’s redi988 advertising revenue was RM14.9 million, very close to the RM15 million for hitz.fm. In comparison, the sister station of redi988, namely Red104.9 recorded impressive radio advertising revenue increase from RM0.6 million as of September 2003, to RM1.9 million in 2004 or a whopping percentage growth of 216.7%.

*Note: At time of printing, there was no available data for adex of Xfresh.fm radio station.

Fig 2.41 Radio Adex (Market Share via Radio Stations)

Radio Adex (Market Share via Radio Stations) January to September 2004

RM (million) ERA hitz.fm Light & Easy MIX FM My FM red 104.9 redi 988 RM Kuala Lumpur RM Saluran 1 RM Saluran 4 RM Saluran 5 RM Saluran 6 RM Saluran Muzik RM Selangor Sinar FM THR

30 25 20 15 10 5

(36)

COMMUNICATIONS AND MULTIMEDIA INDUSTRY - 9.7% OF GDP

The main service providers of the communications and multimedia industry comprise public- listed entities representing the sectors of telecommunications (Telekom, Maxis, DiGi and Time), broadcasting (ASTRO and Media Prima) and postal (Pos Malaysia). The combined revenue generated by the industry continues to contribute significantly to the national economy.

The total revenue for the communications and multimedia industry amounted to RM24.5 billion as at end in 2004 contributing about 9.7% to the Malaysian GDP. Out of the above-mentioned, the telecommunications sector alone recorded RM21.752 billion gross revenue in 2004 contributing about 8.8% of GDP.

Communications & Multimedia Industry Revenue versus GDP

RM (billion) Revenue as % of GDP

30 25 20 15 10 5 0

15 14 13 12 11 10 9 8 7 6 5

Revenue % GDP

Source: MCMC, Bank Negara Malaysia Report 2004, Industry

Fig 3.1 Communications & Multimedia Industry – Revenue versus GDP

(37)

C&M REVENUE BY SERVICES MARKET SEGMENT

From the point of view of services market segment, the Malaysian C&M industry revenue sources constitute broadly as the services of fixed line, mobile cellular phone, Internet, broadcasting (subscription TV and Free-To-Air TV), and post.

Out of the RM24.5 billion recorded for the communications and multimedia industry for 2004, the fixed line and mobile cellular services market segment commanded a combined 88.2% in revenue. That is, individually the fixed line and mobile cellular phone services market segments contributed 38% and 50.2% in revenue respectively. It is interesting to note that the contribution of mobile services to revenue has overtaken that from fixed line in 2003. This contrasts with the cellular subscriber crossover in 2000, when the number of cellular subscribers surpassed the fixed line users in the country.

The broadcasting market segment in contrast contributes a relatively smaller 7.4% to industry revenue. On the other hand, the postal services market segment contributes about 2.9%. Data communications services remain small, but mobile data services is an encouraging 4%

contribution to industry revenue in 2005 and is expected to increase significantly on availability of more applications on higher bandwidth.

Services Market % Contribution

Segment to

(public-listed Revenue 2003 Revenue 2004 RM24.5 billion

companies) (RM billion) (RM billion) C&M industry

Fixed Line¹ 8.8 9.3 38.0%

Includes: Includes: Includes:

Internet²= 0.397 Internet²= 0.515 Internet²= 2.1%

Datacom Services Datacom Services Datacom Services Telekom = n.a. Telekom = 0.210 Telekom = 0.9%

Maxis = 0.539 Maxis = 0.761 Maxis = 3.1%

Mobile 9.6 12.3 50.2%

Subscription TV 1.2³ 1.5⁴ 6.1%

Free-To-Air TV 0.242 0.328 1.3%

(TV3 + 8TV)

Post 0.647 0.694 2.9%

(38)

Mobile and Fixed Services Revenue Contribution Crossover in 2003

Contribution to C&M Industry

70%

60%

50%

40%

30%

20%

10%

0%

Fixed Line

Cellular

2001 2002 2003 2004

Cellular versus Fixed Line Subscriber Crossover in 2000

No. of Subscribers (million)

16 14 12 10 8 6 4 2 0

1999 2000 2001 2002 2003 2004 Cellular

Fixed Line

Fig 3.4 Cellular and Fixed Line Subscriber Crossover in 2000

Fig.3.3 Mobile and Fixed Services Revenue Contribution Crossover in 2003

(39)

Fixed Line Services

Overall fixed line segment revenue stood at RM9.3 billion for the year 2004, an increase of 5.7%

from RM8.8 billion recorded for 2003.

Telekom as the incumbent and with fixed line as its traditional core business recorded 88% of the fixed line services revenue. The other market players in the fixed line service market segment are relatively late entrants into this market in the late 1990s and collectively they took up 12% fixed line revenue share for the year 2004.

Fixed Line Revenue Share (RM8.8 billion for 2003)

Fixed Line Revenue Share (RM9.3 billion for 2004)

Fig 3.5 Fixed Line Revenue Share 2003

Fig 3.6 Fixed Line Revenue Share 2004

(40)

Cellular Mobile Phone Services

Overall mobile segment revenue stood at RM12.3 billion for the year 2004, increasing 28% from RM9.6 billion in June 2003. There are three major players in this segment which are Maxis, Celcom and DiGi and their segment market revenue shares were 44%, 40% and 16%

respectively in 2004.

In 2004, mobile data revenue was boosted by the propagation of short message service (SMS) by certain popular interactive TV programmes which went on-air during the year.

With the (merger) integration exercises behind them, operators stepped up competition for a larger share of the mobile data revenue. Overall, steady growth of mobile cellular phone usage is expected to drive higher contribution by mobile data services to total revenue.

Mobile Revenue Share (RM9.6 billion for 2003)

Mobile Revenue Share (RM12.3 billion for 2004)

Fig 3.7 Mobile Revenue Share 2003

Fig 3.8 Mobile Revenue Share 2004

(41)

Broadcasting – Subscription TV

ASTRO, the satellite subscription television service provider, recorded revenue of RM1.716 billion for financial year ending 31 January 2005. ASTRO subscription and advertising revenue for the year are in the proportions of 80.2% and 6.2% respectively. The balance 13.6% represents revenue from other sources.

316.5 334.2 355.2 369.8

21.1 25.8 30.0 29.3

1Q 2005 2Q 2005 3Q 2005 4Q 2005

Subscription revenue Advertising revenue

ASTRO Subscription and Advertising Revenue FY ended January 2005

RM (billion)

400 350 300 250 200 150 100 50 0

Fig 3.9 ASTRO Subscription and Advertising Revenue

(42)

Fixed Line Demand and Penetration Rate

No. of DEL Connections (million) Penetration Rate (%)

4.8 4.7 4.6 4.5 4.4 4.3 4.2

21 20 19 18 17 1999 2000 2001 2002 2003 2004 COMMUNICATIONS & MULTIMEDIA SERVICES CONNECTIONS

Fixed Line Services

In 2004, the number of fixed line users as measured by Direct Exchange Line (DEL) connections totalled 4.409 million. The spread between residential and business connections remained as 66% and 34% respectively. It is observed that as in recent years, the penetration rate for DEL connections continued to decline in 2004. This drop was partly due to users switching to mobile services for various reasons including narrowing price differentials between the two services, and cheaper mobile phone handsets. In 2004, penetration rate for fixed line was at 17.2% compared to 18.1% at end of the year 2003.

In respect of fixed line market share by connections, Telekom has 97.4% while Time has 1.6%.

The shares of the other operators were between 0.1% and 0.8%.

DEL Connections Residential versus Business

Fig 3.10 DEL Connections

Fig 3.11 DEL Connections by Operators

Fig 3.12 Fixed Line Demand and Penetration Rate

DEL

2004 Connections % Share

('000)

Telekom 4,293 97.4

Time 74 1.6

Maxis 33 0.8

Celcom 6 0.1

DiGi 3 0.1

Total 4,409 100.0

(43)

Cellular Mobile Phone Services

Cellular mobile phone demand and accompanying penetration rates have been on a upward trend since 1998 despite the economic downturn in 1997 due to the Asian financial crisis then.

The increase in subscribers in the six-year time period was 12.3 million or average of 2.1 million subscribers per year. There was a massive increase between the years 1998 and 2004. The highest growth was between the years 1999 and 2000 with a 9.8% increase in penetration rate or 2.4 million by subscribers.

Cellular mobile phone subscriber growth in the last three years from 2002 to 2004 has comparatively moderated, with yearly subscriber increments between 1.9 to 2 million. Overall, cellular demand is expected to continue growth at a more sustainable rate amidst introduction of new technologies and wider applications in the market.

Cellular Demand and Penetration Rate

No. of Subscribers (million) Penetration Rate (%)

16 14 12 10 8 6 4 2 0

60 50 40 30 20 10 0 1998 1999 2000 2001 2002 2003 2004

Fig 3.13 Cellular Demand and Penetration Rate

(44)

Cellular Mobile - Prepaid and Postpaid Market

No. of Subscribers (million)

Prepaid Postpaid

Fig 3.14 Cellular Mobile – Prepaid and Postpaid Market

Fig 3.15 Cellular Mobile – Prepaid versus Postpaid Growth

Cellular Mobile - Prepaid versus Postpaid Growth

Growth (%)

100 80 60 40 20 0 -20 -40

Prepaid

Postpaid

(45)

The cellular mobile market is shared amongst three major players since the merger and acquisition deals of 2003, where Telekom merged with Celcom and Maxis bought TimeCel. The three players to date are Maxis, Celcom and DiGi.

In 2004, the total number of subscribers was 15 million. This was an increase by a significant 4 million or 36% as compared to year 2003.

In respect of subscriber market share, Maxis topped the list, with the highest market share of 41.7% followed by Celcom (35.9%) and DiGi (22.5%). The continuous growth in the mobile sector has been due to the contribution of the new and innovative features that have been introduced into the market at a rather rapid pace. Furthermore, relatively cheaper handset price for opting to take-up mobile service, including lower usage charges, has also contributed to increased pervasiveness of the service in the country.

However, competition is expected to remain fierce in this sector as market players compete for subscriber market share to lock-in potential for more valued-added and innovative applications within reach in the near future.

Cellular Phone Subscribers by Service Providers (2003 versus 2004)

No. of Subscribers (million)

Cellular Phone Subscribers Market Share 2004

7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00

Celcom Maxis DiGi 2003

(46)

Internet Connections

Internet usage has been growing rather fast in Malaysia, with penetration rates for Internet (dial- up) subscribers almost doubling since five years ago, that is, from 7% in 2000 to more than 12%

in 2004.

At present, the Internet access market is largely dominated by dial-up subscribers, contributing to 3.293 million connections by subscriber or 12.7% by penetration rate as at 2004. The emergence of e-Commerce and the continued rapid evolution of online business transactions are the core factors contributing towards the increasing rate of Internet connections in the country. Furthermore, efforts by the Government to facilitate take up, creating increased awareness of the Internet especially in the rural areas, and promulgating conditions of availability, and speedy availability of such service to users is expected to see this market segment posting steady growth.

Internet (Dial-Up) and Penetration Rate

No. of Subscribers (million) Percentage (%)

3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0

25 20 15 10 5 0 1999 2000 2001 2002 2003 2004

Fig 3.18 Internet (Dial-Up) and Penetration Rate

(47)

TM Net contribution to the overall Internet dial-up subscriber market share has increased the most from 53.7% in 2003 to 58.1% as at 2004. This translates to 1.9 million subscribers in 2004.

On the other hand, Jaring contributed 23.3% (December 2003: 27.0%). Celcom Net Internet dial-up market share remained the same as previous year 2003 at 1.5% while DiGi Net contributed 0.1% (December 2003: 0.2%).

Internet Dial-Up Subscribers Market Share 2003

Internet Dial-Up Subscribers Market Share 2004

Fig 3.19 Internet Dial-Up Market 2003

Fig 3.20 Internet Dial-Up Market 2004

(48)

Broadband Penetration

National Broadband Plan (NBP) is an initiative by the government to promote a knowledge- based society. The NBP is a strategy to spark acceleration of contents and applications demand and supply through escalating the provision and awareness of the requirement for high speed internet platform over a wider spectrum of business and society.

The government has strategised to accelerate Internet usage through intensifying government usage and applications. Therefore, the selected community of government departments at federal, state and district levels will be linked through the Government Integrated Telecommunications Network (GITN) and e-Government Net. All users identified under this community are expected to be linked to a broadband network by end of 2006.

By the end of 2004, there were 252,501 broadband subscribers in the country. Overall, broadband penetration rate at end 2004 was 0.98% (2003: 0.44%). ADSL connection recorded 98%, followed by SDSL 1.2%, and others at 0.8%. The general public currently have a choice of broadband services via Asymmetrical Digital Subscriber line (ADSL), Wireless Local Area Network (WLAN), Wireless Fidelity (WiFi) and Integrated Service Digital Network (ISDN).

Broadband Services

1Q 2Q 3Q 4Q

ADSL 139,862 170,516 213,589 247,802

SDSL 2,168 2,432 2,616 2,834

Others 302 1,286 1,799 1,865

Total by no. of subscribers 142,332 174,234 218,004 252,501 2004

Fig 3.21 Broadband Services and Number of Subscribers

(49)

Of significant note is that the increase in subscribers take up has been accelerated by the reduction of broadband Internet access charges for both commercial and residential users and the more concerted efforts taken by service providers to facilitate take up and improve quality of service.

Broadband Penetration at 0.44% in 2003

Broadband Penetration at 0.98% in 2004

No. of Subscribers No. of Subscribers

113,000 112,000 111,000 110,000 109,000 108,000 107,000 106,000 105,000 104,000 103,000 102,000

SDSL 1,931 Others 302

ADSL 108,173

2003

253,500 252,000 250,500 249,000 247,500 246,000 244,500 243,000 241,500 240,000

Others 1,865

SDSL 2,834

ADSL 247,802

2004

Fig 3.22 Broadband Penetration in 2003

Fig 3.23 Broadband Penetration in 2004

(50)

Satellite TV Subscribers

ASTRO is currently the only satellite subscription TV service provider in Malaysia. ASTRO was formed in July 2003 as a holding company prior to listing on the local stock exchange on 29 October 2003. In 1996, the company had only 22 channels. Today, ASTRO offers 51 channels serving a wide mix of foreign and local programmes to the multi-ethnic and multi-lingual Malaysian audiences.

In terms of subscriber take up, ASTRO hit the one million subscriber mark in FY2003. This was achieved by ASTRO between the years 1998 and 2003. The first spurt was in 1998 when ASTRO reached the 150,000 mark followed by the 500,000 subscriber mark in year 2000.

As at financial year ended January 2005, ASTRO subscribers totalled 1.6 million from 1.3 million in FY2004, an increase by 0.3 million or 23.1%. In contrast, commercial based subscribers totalled 0.1 million as at end January 2005.

ASTRO Subscribers (Residential)

No. of Subscribers (million)

1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00

Q1 Q2 Q3 Q4 FY 2004 FY 2005

Fig 3.24 ASTRO Subscribers (Residential)

(51)

In respect of ASTRO subscribers, overall churn rates increased over the quarters 2003 to second quarter of 2004. ASTRO reported this being due to unauthorised access to ASTRO transmission signals by cloned smart cards and set-top boxes.

Meanwhile, ASTRO subscriber acquisition cost or SAC increased in parallel. SAC is the average cost incurred in signing up a subscriber to the DTH multi-channel subscription service, including sales and marketing expenses and any subsidy offered on the set-top box and receiving equipment.

ASTRO SAC versus Churn Rates (FY 2004 - 2005)

RM (million) Churn (%)

120 105 90 75 60 45 30 15 0

20 18 16 14 12 10 8 6 4 2 0 1Q-04 2Q-04 3Q-04 4Q-04 1Q-05 2Q-05 3Q-05 4Q-05

SAC Churn (%)

Fig 3.25 ASTRO SAC versus Churn Rates

(52)

POSTAL SERVICES

On 1 November 2001, the Malaysian Communications and Multimedia Commission took over regulation of the Postal Industry and was appointed as the Certifying Agency pursuant to the Digital Signature Act (1997). Henceforth, the Minister of Energy, Water and Communications would issue licences in respect of postal services, including courier and related express services.

COURIER SERVICES

The 114 courier licensees have 427 establishments distributed throughout Malaysia which includes franchisees, affiliates and agents. These establishments totalled 427 distributed by hubs (19), branches (147), gateways (13), and others (248) as of third quarter 2004.

The courier services company employs both full time and part time personnel. The total full time personnel number 5,044, while part time staff totalled 1,607. The courier services business is essentially divided into five key areas (with staff numbers) as follows:

Year Quarter

2001 115

2002 115 62 61 3 117

2003 1 117 50 41 6 114

2 114 0 0 0 114

3 114 0 0 0 114

4 114 64 57 3 110

2004 1 110 14 0 6 102

2 102 22 22 16 118

3 118 0 0 0 118

4 118 4 0 0 114

Number of Licences for Courier Service Newly

As at Expired Renewed Issued

Beginning within within within As at End of

of Period Period Period Period Period

* Since MCMC regulatory oversight of postal industry Source: MCMC

Fig 3.26 Number of Licences for Courier Service

Key Operation Areas Staff Numbers

Administrative 718

Call Centre 831

Despatch 1,385

Sorting 815

Others 1,295

(53)

THE MULTIMEDIA SUPER CORRIDOR

The Multimedia Super Corridor launched in 1996 has the Multimedia Development Corporation (MDC) as the overseeing body. MDC focuses on developing the MSC and coordinating the development of the MSC companies. The successful development of the MSC spurs growth for the communications and multimedia sectors and the ICT industry simultaneously.

From Budget 2005, the MSC was extended to the northern industrial regions of Bayan Lepas, Pulau Pinang, and Kulim High Technology Park, Kedah. The extended platform facilitates existing and potential MSC companies to expand or come onstream respectively, thus allowing wider reach of MSC incentives for incubators and R&D activities. New sources of growth is expected particularly in the shared services and outsourcing industry where Malaysia is ranked as the third best location in the world. The target as indicated by Government is to create an additional 100,000 high value-added jobs to the existing 20,000 in MSC.

In the MSC, there are seven Flagship Applications, which the MDC is entrusted the responsibility of coordinating. Furthermore, various government agencies are fully involved in spearheading the flagship applications as follows:

No. MSC Flagship

Applications Agencies

1. Electronic Government Malaysian Administrative Modernisation and Management Planning Unit (MAMPU)

2. Telehealth Ministry of Health (MOH)

3. Smart Schools Ministry of Education (MOE)

4. Multipurpose Smart Card

– Bankcard Bank Negara Malaysia

– MyKad National Registration Department

5. R&D Clusters Ministry of Science, Technology and Environment 6. e-Business Ministry of International Trade and Industry (MITI)

Multimedia Development Corporation (MDC)

7. Technopreneur Development Ministry of Energy, Water and Communications (MEWC)

(54)

Growth of MSC Companies and Ownership

There are 1,153 MSC status companies as of 6 December 2004, comprising 1,102 MSC technology companies, 39 institutions of higher learning with MSC status and 12 incubator companies. In terms of ownership, the proportions were 71% Malaysian-owned, 26% Foreign- owned, and 2.6% Joint Ventures.

MSC Companies – Shareholdings by Countries

2003

973 MSC Status Companies

As at December 6, 2004 1,153 MSC Status Companies

Source: MCMC, MDC

Fig 3.28 MSC Status Companies 2003

Source: MCMC, MDC

Fig 3.29 MSC Status Companies 2004

Source: MCMC, Multimedia Development Corporation

Fig 3.30 MSC Companies Shareholding by Countries

MSC Companies Shareholding by Countries as at

December 6, 2004

(55)

The highest proportion of MSC companies shareholding is owned by Malaysia (71%) followed by Europe (8%) and others (6%), which includes countries such as Bahamas, British Virgin Islands, and Cayman Islands. Both Singapore and North America holds the same proportion of 4% each.

India takes up 3% followed by Australia 2% and Japan 1%.

Other Asian countries own about 1% of the MSC companies such as Brunei, Indonesia, Thailand and the Philippines.

MSC Companies by Sector

Out of the 1,153 MSC companies, in December 2004, the new MSC companies constituted 184 companies. This is an increase of 18.5% when compared to 2003.

As in previous years, the top three most common applications are Software Development Business Applications, 269 (2003: 198), Software Development Engineering Specification and Applications, 200 (2003: 157) and Internet Based Business e-Commerce Service/Solution Providers, 111 (2003: 105). The number of companies under these applications respectively increased by 36%, 27% and 6% compared to the numbers in the year 2003.

Amongst the MSC applications, the Biotechnology/Life sciences companies totalled only seven so far. Such companies were introduced in Malaysia and are considered at infancy stage.

(56)

MSC Companies by Sector 2003 2004 Difference (%) Software Development – Business Applications 198 269 35.9 Software Development Engineering – Specification & Applications 157 200 27.4 Internet based business – e-Commerce service/solution providers 105 111 5.7

Content Development 98 101 3.1

Hardware/Electronics Design 62 78 25.8

Internet based business-Application service provider 61 68 11.5

Education and Training 56 67 19.6

Systems Integration 48 48 0

Wireless/Mobile Technology 31 43 38.7

Telecommunications/Networking 33 37 12.1

Computer/System security 23 25 8.7

Production/Postproduction/Animation 22 24 9.1

Shared Services 27 20 -25.9

Consultancy 16 16 0

Computer/Engineering Design 15 16 6.7

Incubator 91 2 33.3

Internet Based Business – Web-hosting, web/online publishing 8 11 37.5

Biotechnology/Life sciences 4 7 75.0

Total 969 1153 19.0

Fig 3.31 MSC Companies by Sector

Software Development - Business Applications Software Development Engineering - Specification & Applications Internet based Business-e-Commerce service / solution providers Content Development Hardware / Electronics Design Internet based Business-Application Service Provider Education & Training Systems Integration Wireless / Mobile Technology Telecommunications / Networking Shared Services Computer / System Security Production / Postproduction / Animation Consultancy Computer / Engineering Design Incubator Internet based Business-Web-hosting, web / online publishing Biotechnology / Life Sciences

269 200

111 101 78 68 67 48 43 37 20

25 24 16 16 12 11 7

0 50 100 150 200 250 300 MSC Companies Ranked by Activities as at 6 December 2004

Fig 3.32 MSC Companies Ranked by Activities

(57)

DIGITAL SIGNATURE

Digital signat