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© Malaysian Communications and Multimedia Commission 2006

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

63000 Cyberjaya, Selangor Darul Ehsan, Malaysia. Tel: +603 - 8688 8000 Fax: +603 - 8688 1000 Toll Free Numbers: 1-800-888-030 http://www.mcmc.gov.my

This bulletin is compiled and written by the Industry Research & Analysis Department, Industry Development Division comprising Yee Sye Chung, Sharmila Manoharan, Adzleen Abu Bakar and Mooi Mee Mee.

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Message from the Chairman

3

CHAPTER 1

Executive Summary

4

CHAPTER 2

Economic Performance Of The Industry

7

Malaysian Economy in 2005 7

Contribution of C&M Companies to Bursa Malaysia 10

C&M Industry Revenue Overview 12

Telecommunications Sector 13

Telecommunications Companies Revenue 14

Broadcasting Companies Revenue 18

Postal Services Revenue 19

MESDAQ – MCMC Licensees 21

Malaysian Adex Monitor 22

Adex Comparisons: General Observations 22

Adex by Market Share 23

FTA TV and Radio Advertising Revenue 24

Adex by Sector 28

Advertisements by MCMC Licensees 29

CHAPTER 3

C&M Industry Overview

30

Communications & Multimedia Industry 30 C&M Revenue by Services Market Segment 30

Services Market Segment 31

Fixed Line Services 31

Cellular Mobile Phone Services 32

Broadcasting-Subscription TV 33

Communications & Multimedia Services Connections 34

Fixed Line Services 34

Cellular Mobile Phone Services 35

Malaysian Mobile Players Market Share in 2005 37

Internet Connections 38

Broadband Penetration 39

Satellite Subscription Television Subscribers 41

Postal Services – Postal Traffic 43

The Multimedia Super Corridor 44

Expansion of MSC 44

Bill of Guarantees 45

Growth of MSC Companies 46

Digital Signatures 47

PKI and Digital Signatures 47

Digital Signatures by Type 47

DigiCert and MSC Trustgate 48

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Licences in 2005 50

Rollout of Licences 52

Consumer Protection 54

Mandatory Standards for Quality of Service 54

Rates Monitoring 75

Required Applications Services 80

Resource Management 81

Spectrum Management 81

Number Management 85

Spectrum Monitoring 89

International Coordination in Spectrum & Frequency 92

Content 93

Industry Overview & General Programming Trends 93 Compliance with Content Requirements 96

Content Industry Issues 98

Economic Regulation on Competition and Access 103 Competition and Access to Services 103

Enforcement 111

Investigations & Prosecution 111

CHAPTER 5

C&M Industry – Smaller, Better, Faster

113

Introduction 113

MCMC Surveys 2005 113

Household Use of the Internet Survey 113

Hand Phone Users Survey 115

National Broadband Plan – higher speeds, more applications 116

Broadband Over Power Line 118

CHAPTER 6

C&M Industry Progress Through Partnerships

121

Introduction 121

Standards – Aligning and Alliance 124

Industry Forums 125

The C&M Consumer Forum 126

Consumer Complaints Handling & Dispute Resolution 127

C&M Content Forum 128

Malaysian Access Forum Bhd (MAFB) 129 Malaysian Technical Standards Forum Bhd (MTSFB) 129

Time 1 and Time 2 Implementation 130

World Trade Organisation (WTO) & related developments 135

CHAPTER 7

Staying Ahead – An Outlook

138

Appendices 141

List Of Figures 158

Contact Us 160

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The Commission is very pleased to present the Industry Performance Report 2005. The report is published as stipulated under Chapter 15, Part V of our Communications and Multimedia Act, 1998 (CMA).

This is our fifth publication to date. The Industry Performance Reports have reported changes in the industry since the migration of licensees in 1999/2000 to the current licence structure under CMA.

The Industry Performance Report or IPR for 2005 notes a few first time or rare happenings in the industry, along with the report and highlights of the development of the communications and multimedia industry. The IPR notes more Malaysian operators buying stakes in foreign companies at dramatic pace to expand core business in faster growing markets; accelerated national mobile coverage, moving into Time 2 coverage target; launch of 3G services; major streamlining in the broadcasting sector, with new Free-To-Air TV and radio stations launched including two more pay-TV operators to contribute to existing tussle for adex cake and air time.

The postal industry saw uplift from Voluntary Separation Scheme and modernisation programme.

Broadband take-up doubled to almost 500,000 subscribers in 2005.

On the regulatory front, activities include a review and expansion of the access list and mandatory standard on access pricing; invitation for tender vis-à-vis more 3G spectrum assigments requirement for registration of prepaid users and the list is quite long. Strategically, the MyICMS 886 - a blueprint for the industry 2006-2010 was officiated by the Minister of Energy, Water and Communications in December 2005.

More change is expected and change is here to stay, therefore we need to find ways to mitigate and manage change constructively. Overall, it has been a concerted effort from all parties concerned to start and manage the significant changes in the industry so far. Going forward, more such concerted effort is necessary towards providing first class communications services, which can in turn catalyse business and public sector improvements and growth; sharpening national competitiveness and sustaining economic growth.

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

...

YBhg. Datuk Dr. Halim Shafie Chairman

Malaysian Communications and Multimedia Commission

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The year 2005 is a year of milestone change - change away from the past and change towards taking on the future. This is marked by retiring of the seven-year old ringgit peg to the US dollar to a managed float, heralding economic comeback from the financial crisis of 1997/1998, and by the advent of more robust communications services to come as reflected from a number of “firsts”

in place in Malaysia. That is, the commercial launch of 3G services in 2005, with two more 3G spectrum assigments in 2006, the allocation of frequency range for radio frequency identification in Malaysia, and the issue of guidelines on power line communications that will impact further on.

The resilient Malaysian economy scores full marks in supporting the positive changes in economic activity in 2005 and providing the flexibility for stakeholders to subdue or manage the challenges faced in 2005 as manifest through persistent high crude oil prices and inflationary pressures. The GDP growth for Malaysia in 2005 is 5.3% (2004: 7.1%). Overall, the communications and multimedia industry contributed 10.2% to the country's GDP.

By way of revenue, the communications and multimedia industry garnered RM26.8 billion in 2005 compared to RM24.5 billion in 2004. Overall growth in industry revenue as expected, has moderated (9%) from the 15% growth in 2004. With anticipated revenue moderation, the biggest players Telekom and Maxis have dramatically accelerated their pace of acquisitions into higher growth markets in the region. Revenue posted by the four CMA licensees listed on MESDAQ market of the local stock exchange is more than RM300 million.

Cellular mobile penetration in the country reached 74.1% at end of 2005 from 55.9% in 2004.

Prepaid growth is still strong at 39% from 2004, albeit marginal decline compared to 40% growth in 2004. Post-paid growth has increased a strong 11.5% in 2005 compared to only 4% in 2004.

Competition in the mobile business has been intense both in terms of pricing and product offerings.

Fixed line connection has decreased to 16.6% in 2005 from 17.2% in 2004. Broadband service connections have almost doubled from the year before to 490,630 subscribers or 1.9%

penetration rate (2004:0.98%). Internet Dial-Up service has 3.7 million subscribers or 13.9%

based on penetration rate (2004:3.3 million subscribers; 12.7% penetration rate).

The MSC goes into its eight year of development in 2005. The Budget 2005/06 has expanded the scope of MSC-status tax incentives to qualifying companies outside of the extended-MSC areas in the central and northern parts of the country. Digital Certificates issued under the

Executive Summary

Chapter 1

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purview of Digital Signatures Act grew 46.1% to 167,847 in 2005. The growth is mainly attributed to an 87.7% increase in use from the government sector. In contrast, certificates issued to corporate increase only 13.7% and to individual up 3.7%. The advertising expenditure or adex of the country moderated in line with the economy, grew 4.5% to RM4.6 billion in 2005 (2004:

RM4.4 billion or up 18.9%).

Changing times tests not only the market players, but also the robustness of the regulatory environment. Changing communnications and multimedia landscape requires a re-look into licences issued, and towards this end there was in 2005 a “licence migration” of the ASP (Individual) to ASP (Class) licences. Effectively, this means there is more fluidity in service provision for the ASP licensees, apart from lower licence fees payable. Such a change allows for further growth through a less regulated environment.

In line with the Minister's call for national mobile coverage in 2004, the government welcomes the participation of state-backed companies (SBC) to facilitate and circumvent any delay in the approval process for land acquisition to roll out communication towers. The higher number of NFP (Individual) licences in 2005 was in part due to licensing of state backed companies.

Monitoring and enforcement activities of the MCMC have resulted in offenders charged in court.

Prevention is better than cure, so monitoring or “catching the culprit” should also be a constant vigilance on the part of the service providers, on top of business ethics and governance.

The mandatory standard on QOS is in its second year of implementation in 2005. Results show compliance efforts have been stepped up by licensees with QOS standards being made targets or benchmarks for company compliance goals. Rates monitoring is an on-going task, ensuring proper display of prices for consumer benefit.

Spectrum is a national asset and thus, resource management is crucial to ensure efficient usage.

Therefore, spectrum allocated requires monitoring, and towards this end MCMC has acquired the necessary equipment to assist in surveillance. In respect of allocation of spectrum, two additional spectrum blocks for 3G services were offered in 2005. Number management is another “resource” management job of the regulator. For example, on resolution of shortage of numbers experienced by cellular service providers, MCMC allocated one million numbers on the prefix 014 to be shared by the three mobile operators. Mobile number portability is a case studied following the Minister's call to accelerate this matter in the interest of competitive forces and spurring the market forward. The project is currently in its implementation planning stage.

Broadcasting services in 2005 saw two new entrants for pay-TV (MiTV and Fine TV), two new radio stations (Sinar FM and Fly.fm) and the exit of one Free-To-Air television channel (Channel 9).

New programming trends are in the form of reality TV and interactive programmes in a Malaysian

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setting, which invites viewers to participate by voting using SMS. The prospective issues on content are many. Suffice to say at this juncture, that on top of MCMC content monitoring activities, there is from the complaints perspective, an avenue for recourse in their own operators, the Content Forum and MCMC in their respective complaints handling purviews.

On access regime, the revised access list came into force in July 2005, with a total of 23 services compared to nine previously. Additional services and facilities included means access to them are now greatly enabled, with service providers having recourse to complaints and appeal, namely MCMC as mediator/regulator, if the facilities are not provided as agreed. Greater transparency in the provision of access to key services thereby facilitates a fair and equitable environment and increased choice of services to end-users.

MCMC survey revealed majority of users of Internet in the Malaysian household are young (24 years and below). Also, about 13% of the hand phone subscriber base comprises users less than 20 years old. Therein, rests the potential in the Malaysian communications and multimedia industry. In efforts to maintain growth and national competitiveness in the long run, the government embarked on a National Broadband Plan in 2004 to connect the nation with high speed broadband. In 2005, a Broadband Secretariat was formed at the Ministry of Energy, Water and Communications (MEWC) to assist in bringing the requisite parties together, both government and private sector, in its approach to “broadband” the nation. In a separate but related development, MCMC published a guideline on “broadband over power line”. The government is

“leaving no stones unturned” to accelerate broadband deployment. Thereby, the country not only has access to services, but to faster and better versions of communications services available.

Today's world is not as large as once thought - the distance shortened to almost negligible through enhanced communications services. This necessitates more partnerships and collaborations in many areas as a change in one area or aspect affects more parties than before.

For example, in the development of new standards all relevant parties should be actively involved; greater state coordination is necessary to deploy national coverage for mobile services;

and international collaboration is needed to address domain names, let alone the increased liberalisation of communications services across national boundaries and across continents. The industry forums under the CMA cater for such collaborative platforms, and so does the involvement of Malaysia in ICANN and WTO.

The government's recognition for an accelerated and coordinated plan for getting connected today is exemplified in the MyICMS 886, which is the MEWC strategy to propel ICT in the country.

Nevertheless, the government cannot do it alone, the private sector, the various agencies and secretariats have to put in their efforts as well.

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GDP Growth Forecasts 2006 2007 Forecast Forecast

Ministry of Finance (MoF) 5.5% -

Bank Negara Malaysia (BNM) 6% -

Malaysian Institute of Economic Research (MIER) 5.5% 5.8%

Bloomberg* 5.2% -

Asian Development Bank (ADB) 5.3% -

World Bank 5.25% -

* Bloomberg Median from Survey of 17 economists Source: MoF, BNM, MIER, Bloomberg, ADB, World Bank

Fig. 2.1 GDP Growth Forecasts

% change 2002 2003 2004 2005f 2006f 2007f

World 3.0 3.9 5.1 4.3 4.3 4.2

US 1.9 2.7 4.2 3.5 3.3 3.2

Japan -0.3 1.4 2.6 2.3 1.6 1.3

Euro Area 0.9 0.8 1.8 1.3 1.6 2.0

Asia 6.6 6.7 7.4 6.6 6.6 6.3

China 8.3 9.5 9.5 9.3 8.5 8.0

GDP Growth Forecasts of Major Economies MALAYSIAN ECONOMY IN 2005

The Malaysian economy strengthened further in 2005 withstanding the effects of volatility in the external environment particularly from oil price hikes and inflationary pressures. Stronger than expected expansion in the third quarter of 2005 due to the recovery in the electronics sector, gave renewed momentum for growth in the fourth quarter of 2005. Industrial production gathered momentum in November, the fastest pace in nine months.

Fourth quarter real GDP growth was 5.2% (3Q 2005: 5.3%) led by the manufacturing sector vis- à-vis recovery in the electrical and electronics sector, and strong government expenditure. All in all, the real GDP growth for 2005 was 5.3%.

f - Forecast Source: MIER

Fig 2.2 GDP Growth Forecasts of Major Economies

Economic Performance

of the Industry Chapter 2

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MIER's Business Conditions Index (BCI) and Consumer Sentiments Index (CSI) showed divergent trends for 4Q-05. The BCI slipped 2.2 points to 100.5 in 4Q-05 from a reading of 102.7 in 3Q-05. In contrast, the CSI hiked 13.6 points to settle at 116.1 in 4Q-05, from 102.5 in 3Q-05.

Despite edging downwards, the BCI indicated that business confidence was still holding as the index remained slightly above the 100-point threshold which demarcates expansion and contraction. In contrast, the CSI, which measures consumers' perception of the economy and personal finances, surged upward, in what may have been spurred by year-end spending, buoyed by festivals, holidays and year-end bonuses.

While private spending has been more resilient than expected in the 4Q-05, it could well be dampened by possibility of hikes in energy tariffs in 2006. Petrol prices and diesel are also expected to increase even if the price of crude oil does not as the Government gradually pares down petrol and diesel subsidies.

The Consumer Price Index (CPI) was on the rise during the year, peaking at 3.7% in August, before moderating to 3.5% in November and December. Bank Negara Malaysia (BNM) raised its Overnight Policy Rate (OPR) by 30 basis points from 2.7% to 3.0% in November which led to marginal rises in Base Lending Rates. However, there is a possibility of further rise in interest rates to head off inflationary pressures. Nevertheless, monetary stance remains accommodative to support growth.

Source: MIER, MCMC

Fig 2.3 MIER Consumer Sentiments & Business Conditions Index 2003-2005

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The upturn in the electronics sector could drive improved export growth, going forward. Overall, growth momentum is expected to maintain, given the continued resilient private sector to drive expansion, making for a positive growth outlook for 2006.

Sector % Growth 1997 1998 1999 2000 2001 2002 2003 2004 2005e 2006f 2007f

Agriculture 0.7 -2.8 0.5 6.1 -0.6 2.8 5.6 5.0 4.5 3.1 3.3

Mining 1.9 0.4 6.9 0.3 -1.5 4.3 5.8 3.9 1.4 3.5 3.0

Manufacturing 10.1 -13.4 11.7 18.3 -5.9 4.3 8.4 9.8 4.3 5.5 6.4 Construction 10.6 -24.0 -4.4 0.6 2.1 2.3 2.0 -1.5 -1.3 2.8 1.6

Services 9.9 -0.4 4.5 6.7 6.0 6.5 4.5 6.8 6.4 6.6 6.7

Real GDP 7.3 -7.4 6.1 8.9 0.3 4.3 5.4 7.1 5.3 5.5 5.8 Malaysia: Trend of Real GDP Growth by Sector 1997-2007

e - Estimate, f - Forecast Source: MIER

Fig 2.4 Real GDP Growth by Sector

Source: MIER

Fig 2.5 Sector Contribution to GDP

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CONTRIBUTION OF C&M COMPANIES TO BURSA MALAYSIA

The communications and multimedia (C&M) sector, in terms of companies listed on the KLSE, contributed RM73.7 billion (10.6%) to the market capitalisation of Bursa Malaysia of RM695.3 billion at the end of 2005.

The main telecommunications operators contributed 8.7% or RM60.5 billion to Bursa Malaysia capitalisation. Meanwhile, the public-listed broadcasting companies such as ASTRO All Asia Networks plc or ASTRO (satellite pay-TV) and Media Prima Bhd (Free-To-Air TV) together contributed 1.6% or RM11.1 billion market capitalisation. Also, the postal sector as represented by Pos Malaysia Services and Holdings Bhd (PosM) contributed 0.3% (RM2.1 billion) market capitalisation.

Source: MCMC, Bloomberg

Fig 2.6 C&M Companies Market Capitalisation 2005

Source: MCMC, Bloomberg

Fig 2.7 C&M Companies Contribution to KLSE Market Capitalisation

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Source: MCMC, Bursa Malaysia

Fig 2.8 Market Capitalisation - C&M Sector versus Bursa Malaysia

Source: MCMC, Bursa Malaysia

Fig 2.10 C&M Companies Market Capitalisation

Source: MCMC, Bursa Malaysia

Fig 2.9 C&M Companies Market Capitalisation in RM

C&M Companies Market Capitalisation RM (billion)

2004 2005 % Change

Telekom 39.2 32.4 -17.3

Maxis 23.1 21.0 -9.1

DiGi 4.7 5.9 25.5

Time 1.6 1.2 -25.0

ASTRO 10.4 10.1 -2.9

Media

Prima 0.9 1.0 11.1

PosM 1.3 2.1 61.5

Total 81.2 73.7 -9.2

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C&M INDUSTRY REVENUE OVERVIEW

Supported by overall favourable economic conditions, the overall C&M sector (an aggregate of public listed telecoms, broadcasting and post companies on Bursa Malaysia), recorded a total of RM26.8 billion in revenue for 2005. This is a 9% growth from the previous year industry revenue of RM24.5 billion and a slower pace compared to 14.9% for 2004.

The telecommunications companies commanded the bulk of the overall revenue market share at 88% or RM23.6 billion. Broadcasting and postal services take up 9% and 3% respectively.

Source: MCMC, Industry

Fig 2.11 C&M Revenue Market Share 2005

Source: MCMC, Industry

Fig 2.12 C&M Industry Revenue Breakdown by Sectors 2005

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Telecommunications Sector

The telecommunications sector continued to generate strong revenue growth in 2005, albeit at a slower pace than the previous year. The aggregate revenue for the telecommunications service providers as represented by Telekom Malaysia Bhd (TM), Maxis Communications Bhd (Maxis), DiGi.Com Bhd (DiGi) and TIME dotCom Bhd (Time) amounted to RM23.6 billion reflecting an 8%

increase from RM21.8 billion in 2004.

TM continued to maintain its lead in market share in terms of revenue, at RM13.9 billion or 59%

of total market share, compared to 61% in 2004. The individual market share for Maxis and DiGi gained ground slightly for the period under review. However, Time lost another 1% market share to 2% in 2005.

Source: MCMC, Industry Source: MCMC, Industry

Source: MCMC, Industry

Fig 2.13 C&M Industry Revenue 2003 - 2005

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Telecommunications Companies Revenue

TM group revenue stood at RM13.9 billion for 2005 (2004: RM13.3 billion). The group turned in a more modest 5% revenue year-on-year growth despite subscriber growth due to keen downward pressure on price. In 2005, the group's operating profit margin stands at 13.1% compared to 14.2% in 2004.

TM forged ahead with foreign investments during the year, reported its total mobile customers surpassed the 20 million mark (6.9 million domestic and 13.6 million overseas). TM expanded its global reach further with a partnership with Vodafone in respect of international roaming arrangements.

Source: MCMC, Industry

Fig 2.16 TM Revenue versus Operating Profit Margin

Source: MCMC, Industry

Fig 2.17 TM Revenue by Segment

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Maxis recorded the second highest revenue among telecommunications service providers, posting revenue at RM6.4 billion for 2005, up 12% or RM682 million from RM5.7 billion for 2004.

Operating profit margin, however, slid to 38.5% from 40.7% in 2004. Revenue gained on the back of mobile data revenue which surged in the fourth quarter by 19% from the previous quarter (44%

year-on-year) due to increases in billable SMS services, advanced data service revenue (music and ringtone downloads) as well as overall higher GPRS usage. Consolidated results include for the first time its Indonesian subsidiary, PT Natrindo Telepon Seluler, contributing RM1 million to mobile revenue but recorded startup loss after tax of RM73 million.

Source: MCMC, Industry

Fig 2.18 Maxis Revenue versus Operating Profit Margin

Source: MCMC, Industry

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DiGi continued its strong revenue growth trend, notching 29.1% growth or adding RM651 million to revenue of RM2.88 billion (2003: RM2.23 billion). Operating profit margin was a robust 23.4%

versus 22.8% previously.

Propelled by a surge in subscriber base growth, the company's mobile services revenue jumped by 38% or RM748 million from the previous year.

Source: MCMC, Industry

Fig 2.20 DiGi Revenue versus Operating Profit Margin

Source: MCMC, Industry

Fig 2.21 DiGi Revenue by Segment

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Time revenue edged lower for the year, against a backdrop of declining international interconnect and payphone revenue. The company recorded revenue of RM460 million for 2005, a decrease of 20% from RM578 million in 2004. Time has announced initiatives to maximize asset utilisation, focus on key markets and realign resources to improve network efficiencies and human capital capabilities.

Source: MCMC, Industry

Fig 2.22 Time Revenue and Operating Profit/Loss 2001-2005

Source: MCMC, Industry

Fig 2.23 Time Revenue and Operating Loss 1Q-4Q 2005

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Broadcasting Sector

The broadcasting sector reported here is represented by Free-To-Air television and pay-TV operators, Media Prima Bhd (8TV, TV3 and NTV7) and ASTRO (subscription-based multi- channel satellite TV service) respectively. The two public listed companies' combined revenue for 2005 amounted to about RM2 billion.

Competition in the pay-TV sub-sector intensified in 2005. New privately owned pay-TV entrants, MiTV Corporation Sdn Bhd (MiTV) and Network Guidance Sdn Bhd (Fine TV), debuted in September and December 2005 respectively.

Broadcasting Companies Revenue

ASTRO revenue stood at RM2.01 billion for financial year ended 31 January 2006 gaining 17.3%

from RM1.72 billion previously. The company achieved an operating profit margin of 13.6%.

Source: MCMC, Industry

Fig 2.25 ASTRO Revenue by Segment

Source: MCMC, Industry

Fig 2.24 ASTRO Revenue and Operating Profit

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As at end of 2005, media conglomerate Media Prima had acquired four Free-To-Air TV stations, namely 8TV, TV3, Channel 9 and NTV7 (Channel 9 had ceased operations prior to takeover).

Perintis Layar Sdn, which owns Max-Airplay Sdn, the operator and manager of new radio station called Fly.fm was also brought into its stables.

With an enlarged portfolio, Media Prima announced higher revenue of RM399.7 million, an increase of RM71.3 million from RM328.4 million in 2004. Operating margin for the company stood at 22.8% for 2005, slightly lower than 25.9% in the year before.

Postal and Courier Services Sector

The sole postal service provider is Pos Malaysia. In contrast, there are numerous courier service providers in the country. At the end of 2005, licensed courier companies numbered 112 (2004:

114).

Postal Services Revenue

Pos Malaysia generated revenue of RM787 million for 2005, an increase of 13% or RM93 million from the previous year of RM694 million. The company's operating profit margin saw significant improvement at 13.1% from 8.5% in 2004.

Pos Malaysia streamlined its domestic and international mail products through a reclassification strategy designed to align itself with international standards and best practices, at the same time,

Source: MCMC, Industry

Fig 2.26 Media Prima Revenue versus Operating Profit Margin

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Source: MCMC, Industry

Fig 2.28 Pos Malaysia: Quarterly Results 2005

Source: MCMC, Industry

Fig 2.29 Pos Malaysia Revenue by Segment

Source: MCMC, Industry

Fig 2.27 Pos Malaysia Revenue versus Operating Profit Margin

Pos Malaysia Revenue by Segment

RM (million) 2004 2005

Postal and its related services 693.46 786.26 Others including property investment

and investment holding 0.91 0.77

Total 694.37 787.03

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MESDAQ - MCMC Licensees

There are four of MCMC Individual licensees listed on MESDAQ as at 2005. They are NasionCom Holdings Bhd (NasionCom), REDtone International Bhd (REDtone), AKN Messaging Technologies Bhd (AKNM Tech) and eB Capital Bhd.

Amongst these licensees, eB Capital is the newest listed on MESDAQ, that is, on 2 August 2005.

Their business activities are in the area of providing broadband Internet access and other Internet related services. Unrealmind Interactive Bhd (UMI) former MESDAQ listed company was delisted on 8 June 2005 following buy over by a foreign company. However, UMI remains an ASP(C) licensee.

These companies altogether posts over RM300 million in terms of revenue. Revenue growth- wise, NasionCom posted growth of 26.9% while both REDtone and AKNM revenue declined 2.3% and 20.8% respectively. NasionCom revenue is derived from the provision of Voice over Internet Protocol (VOIP) and wholesale prepaid cards. NasionCom efforts have also been put into looking at Managed Data Services (MDS) for future earnings growth.

* Through subsidiary companies Source: MCMC

Fig 2.30 MCMC Individual Licensees Listed on MESDAQ 2005

NasionCom Holdings Bhd Multiple licences- NFP(I), NSP(I), ASP(C) REDtone International Bhd Multiple licences- ASP(C), NSP(I)

AKN Messaging Technologies Bhd ASP(C) which was previously ASP(I) eB Capital Bhd Multiple licences- NFP(I), ASP(C), NSP(I)

MCMC Invidual Licensees Listed on

MESDAQ 2005 Licence Type

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MALAYSIAN ADEX MONITOR

Adex Comparison: General Observations

In tandem with the moderate growth of the economy, Malaysian adex scenario also recorded a more subdued growth of 4.5%, a marked contrast from the double-digit growth of 18.9%

experienced in 2004. The total adex in 2005 was RM4.534 billion, only marginally higher from RM4.348 billion of the previous year.

However, it must be noted that 2004 was an exceptional year for adex due to various major local and international events such as the Olympics, Euro 2004 football tournaments, general elections and the government's “Tak Nak” anti-smoking campaign which spurred adex growth tremendously. This was in contrast to 2003 where adex growth was dampened by the onslaught of major worldwide disturbance such as the Iraq war and the SARS (Severe Acute Respiratory Syndrome) epidemic.

The adex growth in 2005 is the lowest thus far since 2002.

Source: Nielsen Research

Fig 2.32 Adex, GDP and Adex Growth Comparison

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Adex Month-To-Month Comparison 2004-2005

Television adex market share take up is 29%, marginally lower than 30% for 2004. Other mediums such as cinema, outdoor advertising and point-of-sales are gaining interest amongst advertisers;

growing to 3% market share in 2005 compared from only 1% in 2004.

Source: Nielsen Research

Fig 2.33 Adex Month-To-Month 2004-2005 Comparison

Source: Nielsen Research

Fig 2.34 Adex Market Share 2004 and 2005

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Free-To-Air Television And Radio Advertising Revenue

The advertising revenue for Free-To-Air television totalled RM1.310 billion in 2005; a marginal 0.7%

growth from 2004's Free-To-Air television advertising revenue of RM1.301 billion recorded last year.

In contrast, radio advertising revenue fared better at a higher 5.6% growth or RM178.2 million in 2005.

Television advertising revenue recorded double-digit growth of 30.9% in 2004, the highest since 2001. In respect of radio, its advertising revenue recorded double-digit growths in 2002 and 2004 at 20.4% and 10.9% respectively.

Free-To-Air Television Advertising Revenue

Source: Nielsen Research

Fig 2.36 Free-To-Air Television Advertising Revenue versus % Growth

Source: Nielsen Research

Fig 2.35 Advertising Revenue of Free-To-Air Television and Radio Comparison

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TV3 remained the favoured Free-To-Air television channel for advertising where it recorded RM565.3 million in revenue in 2005. Most Free-To-Air television recorded an upward growth in advertising revenue in 2005. However, NTV7 recorded negative 13.9% growth in comparison to 2004 bumper year revenue of RM385.7 million. Nevertheless, NTV7 remained second favoured spot for advertising amongst other Free-To-Air television channels.

Highest growth recorded was Media Prima's other television station, 8TV at 58.5% with advertising revenue of RM215.9 million. Though trailing behind other television channels, TV1 recorded an impressive growth of 53.8% in 2005.

*Channel 9 ceased operations in February 2005 Source: Nielsen Research

Fig 2.37 Free-To-Air Television Advertising Revenue 2003-2005

Source: Nielsen Research

2003 2004 2005

Free-To-Air TV Stations

TV 1 32.5 -51.8 26.6 -18.2 40.9 53.8

TV 2 155.2 73.8 141.1 -9.1 154.1 9.2

TV 3 524.3 15.1 565.1 7.8 565.3 0.0

NTV7 281.9 -9.0 385.7 36.8 331.9 -13.9

Channel 9 n.a. n.a. 46.0 n.a. 1.8 -96.1

8TV n.a. n.a. 136.2 n.a. 215.9 58.5

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Radio Advertising Revenue

Radio advertising revenue slumped to a growth of 5.6% in 2005 to RM178.2 million after the double-digit growth of 10.7% to RM168.8 million in 2004.

Radio Advertising Revenue Market Share

AMP radio stations continue its top rank, holding as much as 79% of the market share in 2005 to a total of RM141.8 million in ringgit-terms. This is a 13% growth from advertising revenue in 2004 at RM124.8 million and this could be due to the purchase in April of Radio Lebuhraya Sdn Bhd which operates the Tamil-Bahasa Melayu radio station known as THR. THR radio station alone takes up 6% of the market share in 2004. RTM market share is 7% or RM6.9 million advertising revenue in 2005.

Source: Nielsen Research

Fig 2.39 Radio Adex 2001-2005

Source: Nielsen Research

Fig 2.40 Radio Stations Advertising Revenue Market Share 2004 and 2005

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Radio Advertising Revenue By Stations

Era FM, My FM and Mix FM remained the three most favoured radio stations for advertising in 2005 at RM41.7 million, RM28.9 million and RM25.6 million respectively.

Source: Nielsen Research

Fig 2.41 Radio Advertising Revenue by Stations 2005

Source: Nielsen Research

Fig 2.42 Radio Advertising Revenue by Stations 2004

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Adex By Sector

The top five advertising sectors remained status quo where the communications sector remained at the usual top spot at 14% of the entire advertising market share. In ringgit terms, the communications sector Advertising totalled RM639.1 million in 2005. This is a marginal growth of nearly 4% from RM615.2 million of the previous year. Toiletries and retail sectors trailed behind at RM420.2 million and RM408.6 million respectively.

Breakdown of the communications sector advertising expenditure saw 66.4% made via print advertising at RM424.8 million. This is an increase from 2004, both in terms of ringgit and by percentage market share. Television advertising dropped slightly from RM184 million in 2004 to RM170.4 million this year, garnering lower 26.7% market share from 29.9% in 2004.

* Percentage share across all sectors Source: Nielsen Research

Fig 2.43 Top Ten Advertising Sectors Comparison

Source: Nielsen Research

Fig 2.44 Communications Sector Advertising by Medium

Sector RM (million) % Share* Sector RM (million) % Share*

Miscellaneous 622.9 14 Miscellaneous 598.7 14

Communication 639.1 14 Communication 615.2 14

Toiletries 420.2 9 Toiletries 391.8 9

Retail 408.6 9 Retail 382.4 9

Automotive 243.7 5 Finance 236.0 5

Finance 229.1 5 Automotive 218.2 5

Foodstuff 198.3 4 Service 191.6 4

Beverage - Non-Alcoholic 196.2 4 Beverage - Non-Alcoholic 174.4 4

Service 194.2 4 Entertainment 170.8 4

Entertainment 176.6 4 Foodstuff 166.5 4

Government, Social &

Political Organisation 158.0 3 Media 161.1 4

Top Ten Advertising Sectors Comparison

2005 2004

Communications Sector Advertising by Medium

2005 2004

Medium RM (million) % Share Medium RM (million) % Share

Print 424.8 66.4 Print 397.8 64.7

Television 170.4 26.7 Television 184.0 29.9

Radio 24.1 3.8 Radio 17.9 2.9

Cinema 5.5 0.9 Cinema 3.6 0.6

Outdoor 14.2 2.2 Outdoor 11.9 1.9

Point-of-Sales 0.1 0.0 Point-of-Sales 0 -

Total 639.1 100.0 Total 615.2 100.0

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In contrast, radio and outdoor advertising also increased in terms of market share to 3.8% and 2.2% respectively. As a point to note, radio advertising by the communications sector totalled RM24.1 million, that is 34.6% more than the RM17.9 million posted in 2004.

Unlike 2004, communications sector spent much more on advertising their mobile line services instead of mobile interactive services. Mobile line services advertisements in 2005 were recorded at RM270.1 million whereas mobile interactive services were recorded at RM201.5 million. Advertisements for fixed line services dropped drastically from RM23 million in 2004 to only RM9.1 million in 2005.

Advertisement for Internet Service Providers too trimmed from RM39 million to RM26.9 million in 2005.

Advertisements By MCMC Licensees

Telekom Bhd, including Celcom, its mobile subsidiary company, spent RM148.3 million on advertisements of their services in 2005, making the group the top advertiser amongst all MCMC licensees. From that total, RM115.5 million was made by Celcom. Maxis, on the other hand, spent a total of RM91.1 million while DiGi and Time spent RM74.5 million and RM7.5 million respectively. Maxis bought over TimeCel from Time dotcom in 2003. Time now only concentrates

† Includes both smaller MCMC licensees and non-licensees Source: Nielsen Research

Fig 2.46 Advertisements by MCMC Licensees

Advertisements RM (million) Services

Celcom DiGi Maxis Time TM ASTRO Jaring Others Total

Mobile Lines 105.6 65.3 83.5 4.9 1.8 9.0 270.1

Mobile Interactive 9.9 9.2 7.6 2.4 172.4 201.5

ISP 2.6 23.4 0.1 0.8 26.9

Fixed Lines 7.6 1.5 9.1

Total (RM million) 115.5 74.5 91.1 7.5 32.8 2.4 0.1 183.7 507.6 Communications Sector Advertising Breakdown

2005 2004

Medium RM (million) RM (million)

Communications - Corporate Ad 54.6 25.2

Communications - Other 0.4 0.4

Discounted Call Services 0.7 1.9

Fixed Line Services 9.1 23.0

Internet Service Providers 26.9 39.0

Mobile Interactive Services 201.5 234.0

Mobile Line Services 270.1 233.3

Others 75.8 58.4

Total 639.1 615.2

Source: Nielsen Research

Fig 2.45 Communications Sector Advertising Breakdown

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COMMUNICATIONS AND MULTIMEDIA INDUSTRY - 10.2% OF GDP

This section of the report outlines the revenue performance of the communications and multimedia industry service providers comprising telecommunications, broadcasting and postal. The service providers highlighted in the various categories are all listed entities on Bursa Malaysia.

The aggregate revenue of the said companies amount to RM26.8 billion as at end of 2005, representing 10.2% of the GDP of the country.

C&M REVENUE BY SERVICES MARKET SEGMENT

The services market segment constitutes broadly the services of fixed line, cellular mobile phone services, Internet, broadcasting (subscription television and Free-To-Air television) and post.

Of the RM26.8 billion recorded in total revenue for the communications and multimedia service providers, the fixed line and mobile cellular services account for 87% or RM23.4 billion of total revenue. Fixed line services revenue share declined from 38% in 2004 to 33% in 2005.

In contrast, mobile cellular services gained ground at 55% of revenue share from 50% in 2004.

Source: MCMC, Bank Negara Malaysia, Industry

Fig 3.1 Communications and Multimedia Industry- Revenue versus GDP

C&M Industry Overview

Chapter 3

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Services Market Segment - Revenue Comparison 2004-2005

Fixed Line Services

The fixed line services segment revenue amounted to RM8.7 billion for 2005. The amount is a decline of 6.5% from the RM9.3 billion for 2004. Although maintaining its market share at 88%, TM continues to seek out growth opportunities in the domestic broadband Internet market and other emerging markets overseas.

1Includes international gateway 2TM only

3ASTRO Subscription TV Revenue for FY ended 31 January 2005 4ASTRO Subscription TV Revenue annualised for FY 2006 5Media Prima

Source: MCMC, Industry

Fig 3.2 C&M Revenue by Services Market Segment

2004 2005

RM (billion) RM (billion) Services Market

Segment (public listed companies)

% Contribution to C&M Industry

Fixed line 1 9.3 8.7 32.5%

Includes: Includes:

Internet 2= 0.52 Internet 2= 0.70

Mobile 12.3 14.7 54.9%

Includes: Includes:

Datacom Services Datacom Services Maxis = 0.76 Maxis = 1.04 DiGi = 0.28 DiGi = 0.45

Subscription TV 1.53 1.84 6.7%

Free-To-Air TV 0.35 0.45 1.5%

Post (excluding

courier) 0.7 0.8 2.9%

Others 0.4 0.4 1.5%

Total 24.5 26.8 100.0%

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Cellular Mobile Phone Services

Overall mobile revenue segment recorded a total of RM14.7 billion increasing by 19.5% or RM2.4 billion. Data revenue continued to be driven by SMS and ringtones and song downloads as well as increased use of GPRS. Data revenue was also augmented by the introduction of 3G mobile services in 2005.

Source: MCMC, Industry

Fig 3.4 Fixed Line Revenue Share 2005

Source: MCMC, Industry

Fig 3.3 Fixed Line Revenue Share 2004

Source: MCMC, Industry

Fig 3.6 Cellular Mobile Revenue Share 2005

Source: MCMC, Industry

Fig 3.5 Cellular Mobile Revenue Share 2004

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Broadcasting-Subscription TV

ASTRO is a subscription-based multi-channel satellite television service provider. The company recorded total subscription and advertising revenue of RM1.54 billion in 2006 for its multi-channel satellite television services, of which subscription and advertising revenue constitute 93% and 7% respectively.

ASTRO has a total of 55 channels. In contrast, the country's new pay-TV entrants, MiTV and Fine TV is reported to currently offer 41 channels (as at September 2005) and 18 on-demand channels respectively.

Source: MCMC, Industry

Fig 3.7 ASTRO Subscription and Advertising Revenue for FY ended January 2006

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COMMUNICATIONS & MULTIMEDIA SERVICES CONNECTIONS

Fixed Line Services

In 2005, the number of fixed line users as measured by Direct Exchange Line (DEL) connections totalled 4.365 million. The spread between residential and business connections remained as 66% and 34% respectively.

The penetration rate for DEL connections continued to decline in 2005 to 16.6%

(2004:17.2%). Mobile substitution for fixed line as mobile services differentiates is expected to continue having impact to reduce fixed line subscribers, at least in the immediate future.

Source: MCMC, Industry

Fig 3.9 DEL Connections by Operators

Source: MCMC, Industry

Fig 3.10 Fixed Line Demand and Penetration Rate

Source: MCMC, Industry

Fig 3.8 DEL Connections Residential versus Business

DEL Connections ('000)

2004 2005 Share in 2005

(%)

Telekom 4,330 4,263 97.6

Time 74 68 1.6

Maxis 33 31 0.7

Celcom 6 0 0.0

DiGi 3 3 0.1

Total 4,446 4,365 100.0

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Cellular Mobile Phone Services

Cellular mobile phone demand has been on the uptrend since 1998. Penetration rate of mobile phone services in Malaysia in 2005 has reached 74.1%, translated from 19.5 million subscribers out of a population of 26 million.

Despite “slower” growth rate compared to the accelerated growth rates in the early 2000s, the mobile cellular sector is set to see more action in the coming years. The competition for market share amongst the three mobile players in Malaysia is already very stiff. Competition is expected to continue stiff in 2006, albeit not only in user entry prices, but also for types or versatility of mobile services offered.

Source: MCMC, Industry

Fig 3.11 Cellular Demand and Penetration Rate

Source: MCMC, Industry

Fig 3.12 Mobile Subscribers Growth Year-On-Year

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Prepaid growth is still strong at 39% from 2004, albeit marginal decline compared to 40% growth in 2004. Post-paid growth has increased a strong 11.5% in 2005 compared to only 4% in 2004.

Such growth scenario would have probable effect from prepaid registration requirement. For 2006, MCMC requires all new prepaid subscribers to register upon purchase of the service and for existing prepaid subscribers to register with their respective operators by end of this year.

Strong competition for market share amongst the players in 2005 also was keen from pricing point of view. There were lower starter kit prices for prepaid and offers of discount packages on opting from prepaid to post-paid service.

Source: MCMC, Industry

Fig 3.13 Cellular Mobile - Prepaid and Post-paid Market

Source: MCMC, Industry

Fig 3.14 Cellular Mobile - Prepaid versus Post-paid Growth

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Malaysian Mobile Players Market Share in 2005

The telecommunications operators number three companies in 2005, that is Telekom, Maxis and DiGi. Each has 6.9, 7.9 and 4.8 million cellular phone subscribers respectively. Therefore, the total number as at 2005 was 20 million subscribers in 2005. This is an increase of a rather hefty 5 million from 2004 or 35%.

In respect of subscriber market share, Maxis topped the list, with the highest market share of 40.3% followed by Celcom (35.1%) and DiGi (24.5%).

Key driver for future growth would be availability of wireless mobile and Internet broadband facilities. These especially attract the younger generation.

Source: MCMC, Industry

Fig 3.15 Cellular Phone Subscribers by Service Providers

Source: MCMC, Industry

Fig 3.16 Cellular Phone Subscribers Market Share 2005

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Internet Connections

Internet usage, as measured by Internet Dial-Up subscribers, total 3.7 million subscribers in 2005 which translates to a 13.9% penetration rate. In contrast, the penetration rate was 12.7% or 3.3 million Internet Dial-Up subscribers in 2004.

The Internet Dial-Up subscribers are viewed to be amongst the first to take on higher speed broadband service as the latter service catches up on usage in the country. Currently, the major Internet Dial-Up providers are TM Net, Jaring and TimeNet.

Source: MCMC, Industry

Fig 3.19 Internet Dial-Up Market 2005

Source: MCMC, Industry

Fig 3.17 Internet (Dial-Up) and Penetration Rate

Source: MCMC, Industry

Fig 3.18 Internet Dial-Up Market 2004

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Broadband Penetration

By the end of 2005, there were 490,630 broadband subscribers in the country. Overall, broadband penetration rate at end 2005 was 1.9% (2004: 0.98%). While ADSL connection makes up 98%

of such connections, the general public currently have a choice of broadband services including Asymmetrical Digital Subscriber line (ADSL), Wireless Local Area Network (WLAN), Wireless Fidelity (WiFi) and Integrated Service Digital Network (ISDN).

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 further improve quality of service.

Source: MCMC, Industry

Fig 3.21 Broadband Subscription by Services

Source: MCMC, Industry

Fig 3.20 Broadband Services and Number of Subscribers

Number of Subscribers Growth (%) 2004-2005

2003 2004 2005

ADSL 108,173 247,802 477,685 93

SDSL 1,931 2,834 3,712 31

Others 302 1,865 9,233 395

Total no. of

subscribers 110,406 252,501 490,630 94

Broadband Services

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Source: MCMC, Industry

Fig 3.22 Malaysian Broadband Subscribers Quarter-To-Quarter 2004-2005

Source: MCMC, Budde Comm

Fig 3.23 Broadband Penetration 2Q 2005

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Satellite Subscription Television Subscribers

ASTRO was until 2005 the only satellite subscription television service provider in Malaysia.

In terms of subscriber take up, ASTRO subscribers totalled 1.9 million by third quarter FY 2006 (i.e., October 2005) from 1.3 million in FY 2004. Its commercial based subscribers totalled about 0.1 million. In contrast, MiTV projected a subscriber base of 700,000 by 2008. Fine TV, Malaysia's latest pay-TV entrant, currently in 2005 has 1,000 subscriber take up but projects an increase to 10,000 by end 2006.

Overall churn rate has increased over the years, with churn rate at 10.6% as at October 2005 (end of 3Q 2006). The main reason for this as previously reported by ASTRO, was unauthorised access to ASTRO transmission signals by cloned smart cards and set-top boxes.

Meanwhile, ASTRO subscriber acquisition cost (SAC) per set-top box is reported as decreasing, from RM904 in 2004 to RM755 in 2005. 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.

Source: MCMC, Industry

Fig 3.24 ASTRO Subscribers & Churn Rate (FY 2004 to 3Q FY 2006)

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Source: MCMC, Industry

Fig 3.25 ASTRO Subscribers (Residential)

Source: MCMC, Industry

Fig 3.26 SAC per Set-Top Box Sold (FY 2004 to 3Q FY 2006)

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POSTAL SERVICES – POSTAL TRAFFIC Postal traffic is defined as the number of post items posted for both domestic and international destinations.

Most of the postal activities have been in the area of domestic postal traffic rather than international. Domestic postal traffic takes up 96% compared to international at only 4%.

International postal traffic has been decreasing on a gradual basis over the years since year 2000. This could be due to introduction of new or improved technologies in the market such as Internet services, electronic mails and short messaging services.

To be more specific, the provision of Internet services such as electronic commerce may also be a cause of downtrend in the international postal traffic. Although electronic commerce is still at its infancy stage in Malaysia, it is moving from the formative phase into the interactive phase.

This would substitute the old options of mailing and thus have greater impact for business operations in respect of usually lower price and much convenience.

Source: MCMC, Pos Malaysia

Fig 3.27 Postal Trafiic

Source: MCMC, Pos Malaysia

Fig 3.28 Postal Traffic - Domestic versus International

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THE MULTIMEDIA SUPER CORRIDOR (MSC)

Expansion of the MSC

MSC status is an acknowledgement by the Malaysian Government for the new admission companies through the Multimedia Development Corporation (MDC) undertaking ICT activities.

The MSC was established in 1996 and is presently in its second phase of development. The first phase of “successfully create the multimedia super corridor” took the first seven years from 1996 to 2003. During this period, besides the launching of MSC and establishing the overseer body - MDC, developments include fruition of the initial five Cybercities.

Today, there are more than 1,000 MSC-status companies, including universities. The first phase of the MSC also saw the initiatives based on the seven major flagships; created 22,000 high value jobs and the accompanying revenue generation by the MSC-status companies to the tune of RM6 billion.

The second phase of the MSC development extends towards the “growth of MSC to a wider community”. This essentially means the acceleration of growth of MSC through not only extension of the MSC area, but also allowing qualifying companies outside of the extended area to utilise MSC status incentives. This phase of development has been effected through the last two Budgets. The Budget 2004/05 saw the MSC area extended to the northern industrial areas of Bayan Lepas in Penang, and Kulim High Tech Park in Kedah.

In the 2005/06 Budget, the tax incentives enjoyed by MSC-status companies were extended to qualifying companies operating outside of the designated Cybercities. This is to encourage more ICT and multimedia activities including Regional Shared Services Centres throughout the country.

Therefore, for companies as endorsed by MDC, the Government allows a Pioneer Status of 50%

income tax exemption for 5 years or Investment Tax Allowance of 50%.

Source: MCMC, Industry

Fig 3.29 MSC Cybercities

1 Cyberjaya Flagship Zone (CFZ) 2 Technology Park Malaysia (TPM) 3 Kuala Lumpur City Centre (KLCC) 4 UPM-MTDC Technology Incubation

Centre (UPM-MTDC) 5 Kuala Lumpur Tower Bayan Lepas Industrial Park Kulim High Tech Park

Extended beyond these boundaries in 2005

MSC Cybercities

Building of more affordable homes.

Public transport improvement.

Industrial Building Allowance for a period of ten years.

An ICT Development Institute to increase supply of knowledge workers.

Cyberjaya Development Budget 2005/06 Measures

Source: Budget 2005/06

Fig 3.30 Cyberjaya Development

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1 Provide world class physical and information infrastructure.

2 Allow unrestricted employment of local and foreign knowledge workers.

3 Ensure freedom of ownership by exempting companies with MSC status from local ownership requirements.

4 Grant freedom to source capital globally for MSC infrastructure and the right to borrow funds globally.

5 Provide competitive financial incentives, including Pioneer Status (100% tax exemption) for up to 10 years or an investment tax allowance for up to five years and no duties on the importation of multimedia equipment.

6 Become a regional leader in Intellectual Property Protection and Cyberlaws.

7 Ensure no censorship of the Internet.

8 Provide globally competitive telecommunications tariffs.

9 Tender key MSC infrastructure contracts to leading companies willing to use the MSC as their regional hub;

10 Provide a high-powered implementation agency to act as an effective one-stop super shop.

MSC Bill of Guarantees (BOGs)

As a way to propel intensive development of the ICT sector in the country, the Bill of Guarantees (BoGs) was created in respect of securing and incentivising companies to join the MSC development. The MSC BoGs is eight years old and may be considered for review in order to offer better “pull factor” to attract prospective investors to compete with as many other countries who are offering the same or even better incentives. There is also a need to raise the stakes and make sure that incentives and policies remain competitive and serve as much attractive value to would be investors.

Source: Multimedia Development Corporation (MDC)

Fig 3.31 MSC Bill of Guarantees (BoGs)

MSC Cybercity A self-contained intelligent city with world class business and living environment offering the 10-point MSC BoGs MSC Cybercentre A building or complex with basic enabling environment

offering partial BoGs MSC Specifics Definition

Source: MDC

Fig 3.32 MSC Specifics - Definition

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Growth of MSC Companies

The total number of companies granted MSC status and which are in operation number 1,128 in 2005.

The highest proportion of growth in terms of MSC companies by technology for year 2005 is taken up by Software Development companies (53%), which total 601 in number. This is followed by Multimedia Services, Internet-based Business and e-Biz companies each taking 21% and 11% respectively of the total MSC status companies in 2005. Others are within the range of 8%

to 1%. These are still in the development stage.

The industry is seen to have taken off as far as shared services and outsourcing is concerned, given Malaysia's strategic location. The government is also building value add through the consideration of legislating specific bills of guarantee to benchmark the quality of service of Malaysian companies in these areas of business.

Source: MDC

Fig 3.33 MSC Status Companies by Technologies 2005

Source: MDC

Fig 3.34 MSC Global Companies 2005

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DIGITAL SIGNATURES

The government's commitment towards developing the country's information edge through facilitating the growth of multimedia industry saw the instituting of the Digital Signature Act 1997.

This is one of the enactments envisaged to bring about significant change to the current government delivery processes and business operations in Malaysia.

At present, there are three Certification Authorities in Malaysia. They are DigiCert Sdn Bhd, MSC Trustgate DotCom Sdn Bhd and Bank Negara Malaysia (BNM). BNM has limited licence functions, that is, BNM only provides services or addresses issues on digital signature in respect of Employee Provident Fund, Financial Institutions and the Universal Brokers.

MSC Trustgate DotCom Sdn Bhd started its operation in 1999 as MSC Cybersign International Sdn Bhd while DigiCert Sdn Bhd started its operations in 2000. Digital certification therefore has been introduced into the Malaysian environment seven years back, parallel to the first phase development of the MSC.

PKI and Digital Signatures

PKI is an acronym for Public Key Infrastructure. As far as Digital Signature is concerned, PKI is a system of verifying and authenticating the validity of each transaction party. This simply means third party vetting for user identities.

PKI consists of client software, server software such as a certificate authority, hardware (e.g., smart cards) and operational procedures. Within the PKI structure, a user can sign messages using his or her private key, and another user can check the signature using the public key contained in that user's certificate as issued by the certification authority.

As a whole, the PKI is a security architecture that combines software, encryption technologies and services that enables secured transactions.

Digital Signatures by Type Growth (%) 2004-2005 Type

2003 2004 2005

Corporate 36,971 55,620 63,222 13.7

Individual 7,584 7,903 8,194 3.7

Government 22,209 51,388 96,431 87.7

Total 66,764 114,911 167,847 46.1

Source: MCMC, Industry

Fig 3.35 Digital Signatures by Type

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In terms of type of digital certificates issued, each has been increasing steadily throughout the years.

The increase of digital certificates reflects the increasing growth of the number of e-consumers given a more secure environment.

DigiCert and MSC Trustgate

Overall revenue for DigiCert is RM5.1 million while the operating margin is 21.2% as at year 2004. DigiCert is observed to be skewed towards government users.

Source: DigiCert, MCMC

Fig 3.37 DigiCert Revenue versus Operating Profit Margin

Source: DigiCert, MCMC

Fig 3.36 DigiCert Revenue

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As at 2005, MSC Trustgate posted revenue of RM3.1 million. However, MSC Trustgate still post negative operating margin. This is seen mainly due to a high level of depreciation, which constitutes about 40% of overall operating expenses.

Source: MSC Trustgate, MCMC

Fig 3.39 MSC Trustgate Operating Expenses

Source: MSC Trustgate, MCMC

Fig 3.38 MSC Trustgate Revenue

Source: MSC Trustgate, MCMC

Fig 3.40 MSC Trustgate Revenue versus Operating Profit Margin

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Today's communications and multimedia environment is very different from the one player telecommunications market of two decades ago. Major players are more nimble and much has been done to change old ways and embrace new ways of business conduct, brought about sometimes by changing environments which compels players to adapt accordingly or by changing regulations that steers the market environment enough in line with national intent.

In the case of Malaysia, the 10 national policy objectives provide overall guidance, while the CMA, subsidiary regulations, guidelines, Codes and Forum manage the micro-environment backdrop of “law and order”.

LICENCES IN 2005

Yet amidst change, what is closest to heart remains status quo. Licences permit businesses to start-up or operate within the legal and economic environments specified therein. Since the migration of licences to the new licensing regime under the Communications and Multimedia Act, 1998 (CMA), the licensing framework continues to be subject to review so as to be facilitative of the overall development of the industry. In this respect, the review of the licensing framework is therefore an ongoing task for the regulator. In certain cases, the licensing framework can also provide windows of opportunity for smaller or niche players as well as room for further growth in a less regulated environment, in particular, following the re-categorisation of ASP(I) licences to ASP(C) license which took effect on 1 April 2005.

Source: MCMC

Fig 4.1 C&M Licences in Malaysia

- Two types of licences are issued for each category.

- Only activities with significant economic or social impact are individually licensed.

- The long term objective is to move towards less regulation.

C&M Licences in Malaysia

Regulating in Changing Times

Chapter 4

Rujukan

DOKUMEN BERKAITAN

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