Industry Performance Report

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Collaboration Towards Enhancing National Competitiveness

Industry Performance Report

2007

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Industry Performance Report

2007

Collaboration Towards Enhancing National Competitiveness

ABOUT THE COVER

The game of Sepak Takraw as depicted on the cover evolved from an ancient local traditional game of sepak raga. The game is believed played in the countries of South-east Asia. In its original form, the game was played individually by several persons forming a circle and the idea was to keep the raga or a ball that is woven from rattan from touching the ground as long as possible.

For hundreds of years, the way the game was played remained very much the same. However, it underwent significant change in 1935 when the net version of Sepak Takraw was first played, in the state of Negeri Sembilan, during the Silver Jubilee celebration of King George V. From then on the game steadily emerged as a competitive game played internationally and in major sporting events.

The story of Sepak Takraw is one that highlights the importance of team spirit and togetherness. Either in its original or current form, Sepak Takraw depicts players getting together to compete either as a team or individually. Taking the spirit of this national sport to the theme for the cover of this report symbolises the “Collaboration towards Enhancing National Competitiveness.”

© Malaysian Communications and Multimedia Commission 2008

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

Concept, design and layout by: Versa Ads Sdn Bhd (498793-D)

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Content

Message from the Chairman 5

CHAPTER 1 Executive Summary 7

CHAPTER 2 Economic Performance of the Industry 11

Malaysian GDP 6.3% at 2007 11

Contribution of C&M Companies to Bursa Malaysia 12

C&M Industry Revenue Overview 13

Telecommunications Sector 14

Broadcasting Sector 17

Postal Services Sector 19

Digital Signature Revenue 20

MESDAQ Market – An Overview of SKMM Licensees 22

Holding Company of SKMM Licensees on MESDAQ –

Market Listing and Financials 23

SKMM Licensees Listed on MESDAQ 24

SKMM Licensees Business Activities 24

Malaysian Adex 2007 25

Adex: General Observations 25

CHAPTER 3 C&M Industry Overview 29

Regulatory Regime in Malaysia C&M Industry 29

Licensing in 2007 29

Development of the C&M Industry 30

Communications and Multimedia Industry – 6% of GDP 30

C&M Revenue by Services Market Segment 32

Fixed Line Services Segment 33

Cellular Mobile Services Segment 33

Broadcasting-Subscription TV Segment 34

Free-To-Air TV Segment 35

Postal Services Segment 36

Other Segments 36

C&M Capex Trend 37

MyICMS 886 39

MSC Malaysia 47

CHAPTER 4 Fixed Line Services 51

Fixed Line Connections 51

Narrowband - Internet Dial-Up Service 52

Broadband – Wireline and Wireless 55

Broadband Penetration in Malaysia 55

Regional Comparatives 56

Malaysia Broadband Initiatives 57

Wireless Fidelity (Wi-Fi) Hotspots 58

Worldwide Interoperability for Microwave Access (WiMAX) 59

Broadband Packages from Mobile Operators 61

VoIP Service and Packages 61

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CHAPTER 5 Mobile Services 63

Cellular Mobile Phone Connections 63

Trends in Mobile Take-up 63

Prepaid and Post-paid Growth 64

Cellular Phone Connections and Market Share 65

Cellular Mobile Phone Development 66

Malaysia Mobile Going Forward 67

Mobile Number Portability (MNP) 67

Part of the National Policy Objectives 67

Timing for MNP 68

The Process from Regulatory Perspective 68

Industry Engagement 69

MNP Implementation Status 69

Nationwide Mobile Coverage 70

Projects Time 1 and Time 2 – Progress 70

Project Time 2 Expansion 71

Recognition for Time 2 Project 71

Newspaper Advertisements to Seek Feedback 72

Way Forward 73

CHAPTER 6 Broadcast Services 75

Development of Broadcast in Malaysia 75

Free-To-Air Television (FTA TV) 75

Satellite Pay-TV 75

High Definition TV 75

Alternative Platforms for TV 75

FTA TV Revenue 76

Radio Development 77

Radio Revenue 78

Initiatives for Content Development 80

Direct-To-Home (DTH) Satellite Pay-TV 80

DTH Developments 81

CHAPTER 7 Postal Services 83

Postal Services 83

Philately 84

Direct Mail 85

New Products in Postal - Hybrid Mail 87

Logistics Services 88

Modernisation of Pos Malaysia Services 89

CHAPTER 8 Courier Services 91

Courier Business is Highly Competitive 91

Content

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CHAPTER 9 Digital Signature 95

Digital Signature and SKMM 95

Components of Digital Signature 95

SKMM as the Regulator 96

Functions of Certification Authorities (CA) 96

Digital Signatures by Type 97

The Issues Ahead 98

CHAPTER 10 Consumer Protection 101

Quality of Service Mandatory Standard (QoS MS) 101

Review of QoS MS 101

Required Application Service (RAS) 102

Rates Monitoring 103

Communications and Multimedia Act, 1998 103

Communications and Multimedia (Rates) Rules 2002 103

Consumer Complaints Received by SKMM 103

Content Regulation: Overview of Complaints Received 105

Enforcement 106

Industry Self-regulation: Industry Forums 107

Communications and Multimedia Consumer Forum of Malaysia (CfM) 110

Malaysian Access Forum Berhad (MAFB) 110

The Malaysian Technical Standards Forum (MTSFB) 111

CHAPTER 11 Universal Service Provision 113

USP Projects in Bridging Digital Divide 113

Broadband Libraries 113

USP Communications Centre 114

USP Phases 2 and 3 115

Communications Towers along East West Highway 117

Other Activities 118

USP Review 118

Public Awareness Programme 119

Performance Assessment of USP Service Providers 119

Central Monitoring System 120

USP Fund Management System 121

Impact of USP Programme 121

CHAPTER 12 Going Forward – An Outlook 123

Appendices 127

List of Figures 143

Contact Us 146

Content

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PICTURE

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It is my pleasure to present to our readers the Industry Performance Report for the year 2007. The Malaysian Communications and Multimedia Commission (SKMM) publishes the Industry Performance Report on an annual basis as stipulated under Chapter 15, Part V of the Communications and Multimedia Act, 1998 (CMA).

For the last six years, reporting has been skewed more to regulatory developments, including highlights of the changes in the industry since the migration of licensees in 1999/2000 to the current licence structure under the CMA. The report also includes developments under the Postal Services Act, 1991 and the Digital Signature Act, 1997 of which SKMM plays the role of regulator as well.

In the Industry Performance Report 2007, the report is towards industry developments, with the regulatory areas reported as necessary, so that the trends in the communications and multimedia (C&M) industry can be viewed more clearly over the last ten years since the introduction of the CMA.

The theme for this seventh Industry Performance Report is “Collaboration Towards Enhancing National Competitiveness”. Indeed, this theme can be said to be in the minds of operators and all stakeholders in the C&M industry as the traditional boundaries of business are blurring;

heralding the entry of new entrants, products and services, and of course the opportunities that abound for existing players upon advancement of technologies that caters for cross sector competencies to promote successful business ventures.

The C&M industry in our case includes the telecommunications, broadcasting, postal services as well as the relatively new market in digital signatures. The telecommunications sector continues to evolve and grow from strength to strength over the years despite challenges faced such as consolidation and strong competition. Regulatory developments such as the prepaid registration in 2006 and the implementation of mobile number portability together with the rollout of WiMAX services and the services of two other 3G service providers are expected to promote change and challenges in the Malaysian communications environment in 2008.

These are natural developments evolving towards a more converged C&M industry in terms of network, services and applications.

In such a scenario, competition and access issues are common and recurring phenomena that require efforts from all stakeholders and the regulator, including other relevant authorities in sorting the issues arising. This thereby, moves the industry forward to realise the national aspirations of a nation that is internationally competitive, with sustained economic growth and desired socio-economic development towards a developed nation status in the targeted year of 2020.

The SKMM welcomes any comments, enquiries, suggestions and feedback on the information presented in the Industry Performance Report 2007. SKMM contact information is available on the last page of this report.

Datuk Dr. Halim Shafie

Message

From The Chairman

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PICTURE

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The Malaysia economy continues to lend support to the growth of the communications and multimedia (C&M) industry, albeit in steady growth of 6.3% in 2007. This growth rate is in line with the 6% growth anticipated on annual basis to bring the nation from now to developed nation status in the year 2020.

The C&M industry and broadly, the information and communications technology (ICT) development in the country, are acknowledged as enablers to sustaining the growth of the national economy and achieving national and international competitiveness going into the future. In this respect, it underscores the importance of sustaining a healthy growth of the C&M industry in the country, through public and private sector cooperation and other stakeholders concerned.

The C&M industry contribution measured in terms of market capitalisation as captured by the major public-listed C&M companies comprising the integrated telecommunications service providers, the broadcast service providers of Free-To-Air (FTA) TV and pay-TV, and the postal services totalled RM70 billion in 2007 or 6.3% of Bursa Malaysia market capitalisation. This contribution proportion is not comparable to that in 2007 due to the privatisation and delisting of one of the major mobile operators, Maxis Communications Bhd (Maxis). Prior to delisting on 25 June 2007, Maxis posted market capitalisation of RM38.8 billion.

Overall, the C&M industry revenue contributed 6% and 7.6% to the country’s GDP and GNP respectively. The C&M companies garnered in aggregate RM36.7 billion in 2007 (Maxis and RTM revenue is based on annualisation from 3Q-07 results; ASTRO revenue is based on annualisation from 3Q-08 results and adjusted for calendar year) compared to RM32.7 billion in 2006 – a gain of 12.2%. Growth is supported by revenue from overseas operations, which contributed 18% to C&M aggregate revenue in 2007 (2006: 17%). With the overseas investments bearing fruit in terms of profitability for the bigger players such as TM Bhd (TM) and Maxis, having established themselves overseas in the last few years, are seen honing in to the domestic market to reap the benefits of differentiation in light of high mobile penetration and potentially accelerated broadband prospects. Indeed, the domestic telecommunications companies in 2007 propelled both fixed and mobile broadband connections and further differentiated fixed line and mobile services and products. Broadcasters are seen starting to work from this perspective as well as diversification of their base for content delivery.

The broadcasting sector comprising one major Direct-To-Home (DTH) satellite pay-TV operator, ASTRO All Asia Networks Plc (ASTRO), and FTA TV operator, Media Prima Bhd, and government- owned Radio Televisyen Malaysia (RTM) channels garnered combined revenue of RM3.28 billion in 2007. This indicates a growth of 14.7% for this sector from total revenue of RM2.86 billion in 2006. While delivery of pay-TV was upgraded in 2007, traditional FTA TV broadcasts were being pursued and perfected along with development in digital TV implementation and new products such as TV show downloads through the Internet and mobile (so far in pilot and trial modes respectively).

Chapter 1

Executive Summary

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The postal services sector as represented by Pos Malaysia Bhd, contributed RM0.86 billion in 2007, while the courier sector contributed another RM1.35 billion in 2006¹. Revenue posted by the CMA licensees listed on MESDAQ market of the local stock exchange is more than RM491 million in 2007 (2006: RM423 million). The market for digital signature remains small, with a total revenue of RM13.7 million in 2006² (2005: RM8 million). Digital certificates issued under the Digital Signature Act, 1997 grew 206% in 2007 to 1,273,600 (2006: up 148% to 415,641 certificates) due mainly to security requirement from e-filing exercise for tax returns introduced by Inland Revenue Board in 2007.

Adex for the country grew 17% in 2007 to RM5.5 billion (2006: RM4.7 billion). Analysts forecast Malaysian adex growth of 7.1% in 2008 to RM5.58 billion due to the Olympic Games in Beijing and Euro 2008 football championship. Global ad spend growth is forecasted to accelerate in 2008 to 6.4% versus an estimate of 5.8% in 2007, driven by ad spend in US and China.

In terms of the state of “connected-ness” in Malaysia, the cellular mobile penetration in the country reached 85.1% in the year of 2007. Prepaid and post-paid subscribers are in the ratio of about 80:20, with 19.4 million in 2007 (2006: 16.1 million) and post-paid subscribers at 3.9 million (2006: 3.4 million). In year 2007, major market share based on subscribers saw Maxis with 41.6%, Celcom and DiGi at 30.8% and 27.5% respectively.

Fixed line substitution by mobile cellular phone continues - connections by DEL saw penetration rate of 15.8% as at 2007 (2006: 16.1% full year). Broadband connections boast 1.4 million subscribers or 5% penetration rate at end of year 2007 (2006: 3.3% full year), and this is about 15.5% by household penetration. 3G subscribers totalled 1.56 million at end of year 2007. This is a growth of 290% from 0.4 million 3G subscribers at end 2006. Internet dial-up service is estimated at 3.9 million subscribers or 14.3% based on penetration rate for 2007 (2006: 3.8 million subscribers; 14% penetration rate).

The broadcast sector is facing blurring traditional business boundaries, with the beginnings of telco investment in this arena as well through either a fixed line mode or a mobile service delivery through the 3.5G platform. Internet Protocol TV (IPTV) is expected in the next one to two years, with TM holding trials since 2006. Mobile TV underwent trials in 2007 and this continues into 2008, with major players testing various technologies for service delivery. The transition to digital TV transmission is underway with RTM digital TV trials which started in late 2006.

Digital TV transition is expected to accelerate in 2008. RTM is already offering FTA TV shows via online TV service and through 3G mobile networks. Radio broadcast continues on Free- To-Air nationwide, or now in new markets such as in major supermarkets as well the monorail transportation platforms. Background music is now available over the mobile handsets and radio through a broadband connection as well as radio websites.

The Multimedia Super Corridor, aptly renamed MSC Malaysia in April 2006, has gone beyond the initially specified corridor boundaries to encompass cybercities and cyberports including the Johor Cyberport that falls in the Iskandar Development Region. Meanwhile, MSC Malaysia generated intellectual property rights of 1,283 over the 2006 period.

1 & 2 Only 2006 data is available

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The C&M industry in Malaysia is in its almost one decade of existence under the first convergence law of its kind introduced in 1998. The foundation regulatory regime has facilitated developments in the C&M industry in many ways such as to provide a level playing field for old and new entrants alike and also to enable easy licensing access in complicated issues of cross sector service provision and converging service and product offerings such as IPTV, mobile TV and broadband voice calls.

In 2007, the public-private sector initiatives to provide mobile coverage were almost completed with progress of Time 2 at 98% completion. A new programme is underway to enhance further coverage that includes suburban areas, rural communities/indigenous settlements, and additional tourist spots. Amidst all the mainstream provision of voice services and applications in broadband and mobile, the digital divide and the bridging of the gap as more people and places get connected, is constantly being pursued for improvement. This is done through the Universal Service Program undertaken in collaboration with the service providers, the state and local authorities as well as other stakeholders concerned. The initiative to broadband the nation is seen as a prerogative as well to ensure that the national broadband digital divide is also addressed in urban as well as non-urban areas.

These developments are slowly, but surely paving the way for new or alternative ways of doing business in the communications and multimedia industry converging environment as well as allowing the communications services to be increasingly “a basic, reliable and affordable”

service for all.

Monitoring and enforcement activities of the SKMM continue with offenders charged in court or facing compound - more so in 2007, with 352 cases investigated, 54 cases compounded. The mandatory standard on quality of service (QoS) is in its fourth year of implementation in 2007.

Service quality and reliability is expected as a norm in our connected nation, so the compliance requirements have to be adhered and attended to without letup.

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PICTURE

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MALAYSIAN GDP 6.3% AT 2007

The Malaysian economy gained momentum during the year, expanding by 6.3% underpinned by robust domestic consumption and investment activities. Growth was more broad-based with consumption-related sub-sectors expanding rapidly.

Chapter 2

Economic Performance of the Industry

Gross Domestic Product (2000 real prices)

Sectors - Agriculture, livestock, forestry and fishing Mining and quarrying

Manufacturing Construction Services

Consumer Price Index (CPI) Producer Price Index (PPI) Unemployment Rate Budget deficit as % of GDP Corporate Tax Rate (%)

Per capita income (current prices) (RM) Per capita income (current prices) (USD)

Per capita income by Purchasing Power Parity (USD)

Malaysian Institute of Economic Research (MIER) Economic Intelligence Unit (EIU)

Bank Negara Malaysia (BNM) Selected Economic Indicators

GDP Growth Forecasts

2006 (%)

2007 (%)

2007^(e) (%)

2008 (%)

2008^(f) (%)

2009 (%) 5.9

5.2 -0.4

7.1 -0.5

7.2 3.6 6.7 3.3 -3.3

28 20,841

5,681 11,663

6.1 6.0 6.3

6.0 3.1 3.3 3.1 5.2 9.0 1.9 3.5 3.3 -3.2

27 22,345

6,452 13,289

5.4 5.8 -

6.0-6.5 3.5 4.0 3.8 6.3 8.6 - - 3.3 -3.1

26 23,864

6,890 14,206

- 5.9 -

(e) estimate ^(f) forecast

Source: Malaysian Economy Third Quarter 2007 Fig. 2.1 Selected Economic Indicators

Source: MIER, Bloomberg, BNM Fig. 2.2 GDP Growth Forecasts

The services sector supported by stronger tourism activities is expected to sustain growth trend for 2007 offsetting the deceleration in the manufacturing sector. Private consumption held strong as household spending remains resilient despite rising prices. The construction sector is expected to register a positive growth this year spurred by activities under the Ninth Malaysia Plan and the development of regional growth corridors.

Higher oil prices and inflation may impact economic expansion in 2008 according to the Malaysian Institute of Economic Research (MIER). Some moderation from weaker US demand and overall slowing growth of major economies is also expected in 2008.

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Individual C&M Companies Contribution to Bursa Malaysia 2007

Market Capitalisation - Communications and Multimedia versus Bursa Malaysia

Bursa Malaysia = RM1,106 billion

Others on Bursa Malaysia 93.7%

1.7%DiGi

Astro 0.6%

Pos Malaysia 0.6%

0.2%Time

Media Prima TM 0.2%

3.5%

Communications &

Multimedia Sector RM69.5 billion

Source: SKMM, Bloomberg

Fig. 2.3 Individual C&M Companies Contribution to Bursa Malaysia 2007

* No year-end Maxis market capitalisation Source: SKMM, Bloomberg

Fig. 2.4 Market Capitalisation – Communications and Multimedia versus Bursa Malaysia 1,200

1,000 800 600 400 200 0

RM(billion)

2003 579.1

60.9

640.8

81.2

621.6

73.7

761.4

87.3

1,036.7

69.5 640

722 695

849

*1,106

2004 2005 2006 2007

C&M Others on Bursa Malaysia 6.3%

Monetary and interest rate policies remain stable and supportive of growth. Headline inflation as measured by the Consumer Price Index (CPI) edged up 1.9% for October on the back of increased price pressures due to increased food and commodity prices and public service salary revision.

Bank Negara Malaysia has projected the CPI for 2007 to stay in the 2%-2.5% range. The central bank has kept the Overnight Policy Rate unchanged at 3.5%.

CONTRIBUTION OF C&M COMPANIES TO BURSA MALAYSIA

The communications and multimedia (C&M) companies covered in this report comprise the major public-listed telecommunications companies, those in the broadcasting sector and post. Altogether, these companies captured RM70 billion in market capitalisation or 6.3% of the Bursa Malaysia market capitalisation as at 2007. This C&M market capitalisation is not comparable to that posted in 2006 in view of Maxis delisting to become a private company on 25 June 2007. Prior to delisting on 25 June 2007, Maxis posted market capitalisation of RM38.8 billion.

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C&M Companies

Market Capitalisation in Ringgit

C&M Revenue Market Share by

Company 2007 C&M Revenue Market Share by Sector 2007

48.3%TM

Major Telcos**

RM31.6 billion 86%

Broadcasting*

RM3.2 billion 9%

Pos Malaysia RM0.9 billion

2%

Others RM1.0 billion

3%

Maxis**

25.0%

DiGi 11.7%

0.9%Time ASTRO*

Media Prima 6.8%

1.8%

0.2%RTM Pos Malaysia

2.4%

Others 2.8%

40 35 30 25 20 15 10 5 0

RM (billion)

TM Maxis DiGi ASTRO Pos Malaysia Time

2006 2007

Media Prima

TM Maxis DiGi ASTRO Pos Malaysia Time Media Prima Total

33.1 25.7 11.4 10.7 2.6 1.9 1.9 87.3

38.5 n.a.

18.6 6.8 1.3 1.9 2.4 69.5

16.3 n.a.

63.2 -36.4 -50.0 0.0 26.3 -*

* not comparable n.a. - not available Source: SKMM, Bursa Malaysia

Fig. 2.5 C&M Companies Market Capitalisation

Source: SKMM, Bursa Malaysia

Fig. 2.6 C&M Companies Market Capitalisation in Ringgit

* ASTRO third quarter results adjusted and annualised

** Maxis annualised Source: Industry, SKMM

* ASTRO third quarter results adjusted and annualised

** Maxis annualised Source: Industry, SKMM

2006 2007 %

Change C&M Companies Market Capitalisation

RM (billion)

C&M INDUSTRY REVENUE OVERVIEW

Due to the unavailability of Maxis and ASTRO full year revenue at the time of print, the respective companies revenue have been annualised to provide a full year data for reference. ASTRO revenue has been adjusted to calendar year for comparative purpose. The total aggregate revenue of the C&M listed entities comprising telecommunications, broadcasting, post and other companies is estimated at RM36.7 billion for year 2007. This indicates an increase of 12.2% from RM32.7 billion recorded for 2006.

Based on the annualised revenue for 2007, the telecommunications companies captured the lion’s share at 86% or RM31.6 billion, followed by broadcasting and postal services at 9% or RM3.2 billion, and 2% or RM0.9 billion respectively and others comprising mainly MESDAQ listed applications services, network facilities and network service providers with 3% or RM1 billion of total revenue market share.

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Telecommunications Companies Revenue

TM group revenue stood at RM17.84 billion for 2007 (2006: RM16.4 billion) indicating a year-on- year revenue growth of 8.8%. Revenue growth was driven mostly by mobile, data and Internet and multimedia segments with mobile revenue as the major driver.

TM’s cellular mobile services arm, Celcom, contributed group revenue of RM4.97 billion (+12.4%) for FY2007 compared to RM4.42 billion for 2006. TM overseas operations contributed 27.7% (RM4.94 billion) and 25.3% (RM4.2 billion) of total group revenue for the years 2007 and 2006 respectively.

In contrast, despite increasing 2.1% from 2006, fixed line revenue contribution declined to 40.9%

of total group revenue in 2007 from 43.6% for 2006. Overall, group operating profit margin moderated for 2007 to 19.5% (2006: 21.3%).

* Annualised

Source: Industry, SKMM

Fig. 2.9 Telecommunications Sector Revenue Market Share 2006

* Annualised

Fig. 2.10 Telecommunications Sector Revenue Market Share 2007

Telecommunications Sector Revenue Market Share 2006

Telecommunications Sector Revenue Market Share 2007

Maxis*

27%

DiGi

13% Time

1%

TM 59%

Telecommunications Sector

The telecommunications sector revenue grew 12.4% for 2007 compared to the corresponding period in 2006. The aggregate revenue for the telecommunications service providers as represented by main telecommunications players TM, Maxis, DiGi and Time amounted to RM31.6 billion compared to RM28.1 billion for 2006.

For 2007, TM maintained its lead in revenue market share with RM17.8 billion or 56% of telecommunications sector revenue market share of RM31.6 billion, followed by Maxis and DiGi with 29% and 14% of market share respectively. MESDAQ companies providing telecoms services such as messaging, Internet Protocol (IP) and PSTN telephony and Internet access with aggregate revenue of RM0.26 billion do not impact the relative positions of the major companies in terms of telecommunications revenue for this sector.

Maxis*

29%

DiGi 14%

Time 1%

TM 56%

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Fig. 2.11 TM Revenue versus Operating Profit Margin

* Fixed line

Fig. 2.12 TM Revenue by Segment 2007

* No data from Celcom on Operating Profit Source: Industry, SKMM

TM Revenue by Segment 2007:

RM17.843 billion

TMI Group 28%

TM Ventures 4%

Malaysian Business*

40%

Celcom 28%

TM

Celcom

Revenue Operating Profit Margin

18 16 14 12 10 8 6 4 2 0

40 35 30 25 20 15 10 5 0

RM(billion) Operating Profit Margin (%)

2003

11.80 13.25 13.94

16.40 17.84

15.8 14.2 13.1

21.3 19.5

2004 2005 2006 2007

5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0

100 80 60 40 20 0 -20

RM(billion) Operating Profit Margin (%)

2003 2.6

3.2 3.0

4.4 5.0

16.7

-12.3

15.8

25.4

2004 2005 2006 2007*

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* Annualised

Fig. 2.15 Maxis Revenue by Segment 2007

DiGi posted revenue growth of 19.5% from RM3.65 billion garnered for 2006 to RM4.36 billion at end 2007. Data revenue for 2007 surged 25.1% to RM813 million from RM650 million in 2006 on strong data usage. Operating profit margin improved to 32.8%.

Fig. 2.16 DiGi Revenue by Operating Profit Margin

DiGi

5 4 3 2 1 0

100 80 60 40 20 0

2003 1.71

2.23

2.88

3.65

4.36

15.6 22.8 23.4 29.2 32.8

2004 2005 2006 2007

* Annualised

Fig. 2.14 Maxis Revenue by Operating Profit Margin

Maxis

10 9 8 7 6 5 4 3 2 1 0

100 80 60 40 20 0

2003 4.68

5.69 6.37

7.71

9.06

29.7

40.7 38.5 36.8 39.5

2004 2005 2006 2007*

Maxis revenue grew 21.5% from RM5.59 billion at end of third quarter 2006 to RM6.79 billion at end of third quarter 2007. The company’s revenue of RM9.06 billion annualised for year 2007 indicates a growth of 17.5% over last year’s RM7.71 billion. This indicates a reference that operating profit margin for year 2007 improved, edging up to 39.5% from 36.8% in 2006.

Maxis Revenue by Segment 2007*:

RM9.057 billion

Mobile Foreign 17%

Fixed Services 2%

International Gateway Services

2%

Mobile Domestic 78%

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Fig. 2.17 DiGi Revenue by Segment 2007

DiGi Revenue by Segment 2007: RM4.363 billion

Cellular Mobile 97%

Others 3%

Time revenue for year 2007 indicated a decline of 11.8% to RM0.30 billion from RM0.34 billion for FY2006 amidst a backdrop of lower wholesale voice revenue and lagging payphone revenue.

Broadcasting Sector

The broadcasting sector comprises Free-To-Air (FTA) TV operator Media Prima Berhad, the RTM channels and subscription-based multi-channel satellite TV service provider ASTRO All Asia Networks Plc (ASTRO). The combined revenue of the companies amounted to RM3.28 billion as at end of 2007 indicating growth of 14.7% for the sector from total revenue of RM2.86 billion in 2006.

Broadcasting Companies Revenue

Media Prima is the operator of FTA TV networks in the country, namely, 8TV, TV3, NTV7 and TV9.

The group also includes radio networks whose stations are known as Fly.fm and Hot FM.

Media Prima posted revenue of RM0.69 billion for the year under review, a growth of 30.2% from its 2006 revenue of RM0.53 billion. The group achieved an operating profit margin of 23.2% for the period.

Fig. 2.18 Time Revenue and Operating Profit/Loss

Time Revenue and Operating Profit/Loss

1.1

0.6

0.1

-0.4

-0.9

RM(billion)

2003 0.80

0.58 0.46

0.34 0.30

-0.04

-0.8

-0.2 -0.2 -0.2

2004 2005 2006 2007

Revenue Operating Profit/Loss

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* Annualised

Fig. 2.21 ASTRO Revenue and Operating Profit Margin

ASTRO

3.0 2.5 2.0 1.5 1.0 0.5 0

40 35 30 25 20 15 10 5 0

FYE Jan-04 FYE Jan-05 FYE Jan-06 FYE Jan-07 FYE Jan-08*

1.42

1.72

2.01 2.20

2.52

10.5

17.4

13.6

21.5

18.4

ASTRO posted (adjusted) revenue of RM1.86 billion for the nine months ending September 2007, an increase of 12.3% for the same period in 2006. Operating profit margin stood at 18.4%. ASTRO further reinforced its position by offering additional channels following the recent launch of the MEASAT 3 satellite.

* 16 months ending 31 Dec.

Fig. 2.19 Media Prima Revenue and Operating Profit Margin

Media Prima

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

100 90 80 70 60 50 40 30 20 10 0

2003*

62.3

0.33

0.40

0.53

0.69

0.37

18.9 18.5 21.6 23.2

2004 2005 2006 2007

Fig. 2.20 Media Prima Quarterly Revenue and Operating Profit Margin 0.24

0.22 0.20 0.18 0.16 0.14 0.12 0.10 0.08 0.06 0.04 0.02 0

50 45 40 35 30 25 20 15 10 5 0

Revenue Operating Profit Margin Media Prima

1Q-05 2Q-05 3Q-05 4Q-05 1Q-06 2Q-06 3Q-06 4Q-06 1Q-07 2Q-07 3Q-07 4Q-07 12.3 11.6

25.9 22.8

12.3

21.1 23.4 26.6 12.6

20.7

28.0 26.4 0.21 0.20 0.17

0.11 0.16 0.15

0.13 0.12 0.10

0.11 0.08 0.09

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RTM TV garnered total revenue of RM50.5 million as of September 2007, translating to an 81% of the total RTM broadcast revenue. In 2006, RTM registered RM111.2 million worth of total broadcast revenue.

* Annualised

Fig. 2.22 ASTRO Revenue by Segment FYE Jan-08

ASTRO Revenue* by Segment FY Ended 31 January 2008: RM2.523 billion

Others 2%

Radio 6%

Library licensing

& distribution

2% Multi-channel

television 90%

Source: Ministry of Information

Fig. 2.23 RTM TV and Radio Revenue YTD 3Q 2007 Source: Ministry of Information

Fig. 2.24 RTM TV and Radio Revenue 2006

RTM TV and Radio Revenue YTD

3Q 2007 RTM TV and Radio Revenue

2006

Radio RM11.5 million

19%

Radio RM16.8 million

15%

TV RM50.5 million

81%

TV RM94.4 million

85%

Postal Services Sector

Revenue in the postal services services sector comprises the revenue of Pos Malaysia Berhad (Pos Malaysia). Pos Malaysia registered RM0.86 billion revenue for 2007, a growth of 4.9% from RM0.82 billion recorded in 2006. Operating profit margin for the year edged slightly slower to 11.8% (2006:

12%).

(22)

Fig. 2.26 Digital Certificate Revenue Source: Industry, SKMM

Fig. 2.27 Digital Certificate Revenue Growth

Digital Certificate Revenue Digital Certificate Revenue Growth (%)

14 12 10 8 6 4 2 0

80 70 60 50 40 30 20 10 0

RM(million) Growth (%)

DigiCert Revenue MSC Trustgate Revenue

2002 2003

2003 2004

2004 2005

2005 2006

2006 5.3

4.1 1.2

2.6

4.1 2.7

5.1 3.1

4.8 8.2 4.5

26.0

17.3

1.7

71.3

6.7

7.8 8.0

13.7 Source: Industry, SKMM

Fig. 2.25 Pos Malaysia Revenue and Operating Profit Margin

Pos Malaysia

1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0

50 45 40 35 30 25 20 15 10 5 0

2003

0.65 0.69 0.79 0.82 0.86

4.3 8.5

13.1 12.0 11.8

2004 2005 2006 2007

Digital Signature Revenue

Revenues of both the designated Certification Authorities MSC Trustgate.com Sdn Bhd (MSC Trustgate) and DigiCert Sdn Bhd (DigiCert), are basically derived from the issuance of digital certificates. The companies posted combined revenue of RM13.7 million in 2006³ compared to RM8 million in 2005 This translates to an overall gain of RM5.7 million or 71.3%. The significant increase is due to both the consumer awareness factor in terms of security in the e-business environment and the massive online submission of Inland Revenue Board (IRB) tax forms.

Individually, DigiCert recorded higher revenue at RM9.2 million in 2006 (2005: RM4.8 million) compared to MSC Trustgate at RM4.5 million (2005: RM3.1 million). Percentage-wise, the revenue of DigiCert and MSC Trustgate increased by 92% and 45% respectively.

On an overall basis, DigiCert recorded higher revenue compared to MSC Trustgate in the last four years. The significant growth of DigiCert in 2006 indicates that it is more skewed towards government usage. This is from the observation that the total number of certificates issued to government by DigiCert in 2006 is 329,060. As at 2007, there were a total of 1,273,600 digital signature certificates issued.

3 Only 2006 data is available.

(23)

DigiCert started operations in 1999. The effectiveness of their business operations was slowly seen in 2003 with turnaround in operating profit margin of 0.2% (2002: negative 145%). In the following years from 2004 to 2006, its operating profit margin was between 5.1% and 9.2%.

Fig. 2.28 Number of Certificates Issued by Certification Authorities 2006

* Preliminary data Source: Industry, SKMM

Fig. 2.29 Number of Certificates Issued by Certification Authorities 2007

Number of Certificates Issued by Certification Authorities 2006

DigiCert Revenue

Number of Certificates Issued by Certification Authorities 2007*

DigiCert Revenue versus Operating Profit Margin

Individual Corporate Government Individual Corporate Government

1999 2000 2001 2002 2003 2004 2005 2006 10

9 8 7 6 5 4 3 2 1 0

RM(million)

9.2

5.1 4.8 4.1

1.2

0.1 0.9 0.01 350,000 300,000 250,000 200,000 150,000 100,000 50,000 0

No. of Certificates

MSC Trustgate DigiCert BNM

497 7,355 8,396 69,246 329,060 544 9534

1,200,000

1,000,000

800,000

600,000

400,000

200,000

0

No. of Certificates

MSC Trustgate DigiCert BNM

522 17,520 72,3027,923 1,174,101 563 9660

DigiCert

10 9 8 7 6 5 4 3 2 1 0

40 35 30 25 20 15 10 5 0

RM(million) Operating Profit Margin (%)

2006 2005

2004 2003

0.2 4.1

5.1 4.8

9.2 21.2

16.4 35.3

(24)

MESDAQ MARKET - AN OVERVIEW OF SKMM LICENSEES

All eligible companies listed on the Bursa Malaysia MESDAQ market comprise the component companies under the FTSE Bursa Malaysia MESDAQ, which refers to a market capitalisation weighted index. This index has replaced the former MESDAQ (Malaysian Exchange of Securities Dealing and Automated Quotations) Index on 1st November 2007. The objective of the change is to provide more globally relevant trading foundation for both foreign and local investors to base their investment analyses and decisions with market measures that are investable, liquid and transparently managed.

Bursa Malaysia MESDAQ market provides an avenue for high growth companies to raise capital and promote technology intensive industries and assist in developing a science and technology base for Malaysia.

The companies listed on MESDAQ total 123 in number as at end December 2007. Out of these, 18 companies are SKMM licensees. Most of these are in the license category of Applications Service Provider (Class) or ASP(C). The ASP(C) licensees are those that are involved in activities such as voice services, data services, content based services, electronic commerce and other transmission services.

Source: Industry, SKMM Fig. 2.32 MSC Trustgate Revenue

Fig. 2.33 MSC Trustgate Revenue versus Operating Profit Margin

MSC Trustgate Revenue

4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0

RM(million)

2000 2001 2002 2003 2004 2005 2006

0.1

3.4

4.1

2.6 2.7

3.1

4.5

MSC Trustgate Revenue versus Operating Profit Margin

5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0

20 0 -20 -40 -60 -80 -100 -120 -140 -160 -180

RM(million) Operating Profit Margin (%)

2006 2005

2004 2003

2002

-152.4 -127.8

-75.9 4.1

2.6 2.7

3.1

4.5 -26.8

11.6

MSC Trustgate Revenue Operating Profit Margin

MSC Trustgate started business operations in the year 2000 and the company achieved an 11.6%

operating profit margin in 2006. This is a positive reversal of the company’s performance compared to the declining performance of previous years.

(25)

eB Capital Bhd

Airocom Technology Bhd asiaEP Bhd

M3 Technologies Asia Bhd DVM Technology Bhd

Intelligent Edge Technologies Bhd Intelligent Edge Technologies Bhd MNC Wireless Bhd

MNC Wireless Bhd Mobif Bhd

Mobif Bhd N2N Connect Bhd

Nextnation Communication Bhd REDtone International Bhd REDtone International Bhd REDtone International Bhd Palette Multimedia Bhd GD Express Carrier Bhd

REDtone International Bhd Nextnation Communication Bhd

Mobif Bhd

GD Express Carrier Bhd Palette Multimedia Bhd M3 Technologies Asia Bhd N2N Connect Bhd

*DVM Technology Bhd asiaEP Bhd

MNC Wireless Bhd Airocom Technology Bhd +eB Capital Bhd

Intelligent Edge Technologies Bhd

eB Technologies (M) Sdn Bhd Airocom Technology Bhd asiaEP Bhd

M3 Technologies Asia Bhd DVM Intellisource Sdn Bhd Obnet Sdn Bhd

Intelligent Edge Technologies Bhd MNC Consulting Sdn Bhd

MNC Wireless Bhd Mobif Global Sdn Bhd Izzinet Sdn Bhd N2N Connect Bhd

Nextnation Network Sdn Bhd

REDtone Telecommunications Sdn Bhd REDtone Marketing Sdn Bhd

REDtone-CNX Broadband Sdn Bhd Palette Multimedia Bhd

GD Express Carrier Bhd

19/01/2004 26/08/2005

19/05/2004 17/05/2005 2001 27/01/2003 28/11/2005 2/01/2004 16/01/2004 25/10/2005 27/04/2006 2/08/2005 08/2000

29.5 25.0

10.2 10.5 8.8 10.1 8.4 16 18 7.7 15.6 3.3 1.1

0.95 0.78

0.80 0.30 0.40 0.45 0.70 0.40 0.30 0.48 0.60 0.88 1.50

182.8 45.7

64.2 195.5 24.7 27.8 354.7 28.2 57.6 19.8 13.6 27.2 19.7

105.8 100.3

62.9 57.4 17.9 28.3 16.9 16.3 11.1 9.9 4.9 4.8 1.4

31/05/2007 30/04/2007

31/12/2006 30/06/2007 31/12/2006 30/06/2007 31/12/2006 31/12/2006 28/02/2007 31/12/2006 31/12/2006 30/06/2007 31/12/2006 NFP(I) Last Mile, NSP(I)

ASP(C) ASP(C) ASP(C) ASP(C)

NFP(I) Last Mile and NSP(I) ASP(C)

ASP(C) ASP(C) ASP(C)

ASP(C), NSP(I), NFP(I) Last Mile ASP(C)

ASP(C) ASP(C) NSP(I),NFP(I)

ASP(C), NSP(I), NFP(I) Last Mile ASP(C)

Courier Holding Company (FTSE Bursa

Malaysia MESDAQ Listed)

^Holding Company

Types of Licence SKMM Licensee

Date Listed on

MESDAQ IPO Proceeds RM(million)

Offer/Issue Price

RM

Market Capitalisation

31/12/2007 RM(million)

Revenue

RM(million) FY Ending ASP - Applications Service Provider ; NSP – Network Service Provider; NFP – Network Facilities Provider

I – Individual; C - Class Source: Industry, SKMM

Fig. 2.34 SKMM Licensees on FTSE Bursa Malaysia MESDAQ

^ Represents holding company of SKMM licensees or listed company details

* 15 months ending 31/12/2006; change of financial year end from 30 Sep to 31 Dec + 15 months ending 30/06/2007; change of financial year end from 31 Dec to 30 Jun Source: SKMM, Annual Reports, Bursa Malaysia

Holding Company of SKMM Licensees on MESDAQ – Market Listing and

Financials

(26)

eB Technologies (M) Sdn Bhd Airocom Technology Bhd asiaEP Bhd

M3 Technologies Asia Bhd

DVM Intellisource Sdn Bhd Obnet Sdn Bhd

Intelligent Edge Technologies Bhd MNC Consulting Sdn Bhd

MNC Wireless Bhd Mobif Global Sdn Bhd

Provision of broadband Internet access and other Internet related services Provision of total wireless and communication solutions

Providing e-commerce solutions and developing an e-market place for both local and international enterprises

Mobile-Internet messaging solutions using the Short Messaging Services (SMS), General Packet Radio Services (GPRS) and Wireless Application Protocol (WAP) technology

Provision of business and operational support systems and services, software development and business process outsourcing

Internet connectivity services

Provision of consultancy, design and development of business application software solutions

Consultation, sales, marketing, implementation of m-business solution and management of content resources for business to business and business to consumer enterprise.

Mobile value added services

Dealing in telecommunications products and related services SKMM Licensees on MESDAQ Business Activities

SKMM Licensees Business Activities SKMM Licensees Listed on MESDAQ

As far as the 18 SKMM MESDAQ listed licensees are concerned, most of their business operations are in the category of telecoms services and Internet connectivity services, each constituting 27% or five companies. Companies categorised under telecoms services are in research and development, manufacturing, telecommunication products and marketing of telecommunication multimedia solutions. Internet connectivity services consist of services of e-commerce and provision of broadband. This is then followed by mobile content or mobile value added service companies comprising 16% or three companies. This service is observed as potentially high growth in the Malaysian market in view of the high penetration rate of mobile phones in Malaysia.

Source: SKMM, Annual Reports, Company Website

Fig. 2.36 Composition of SKMM MESDAQ Listed Licensees 2007

Composition of SKMM MESDAQ Listed Licensees 2007

Telecom Services 27%

Networking Product

6%

Mobile Content/

Value Added Services

16%

Enterprise Software/Services

6%

Internet Connectivity

Services 27%

Courier Services 6%

Computer Services 6%

Software R&D 6%

(27)

Izzinet Sdn Bhd N2N Connect Bhd

Nextnation Network Sdn Bhd

REDtone Telecommunications Sdn Bhd

REDtone Marketing Sdn Bhd REDtone CNX Broadband Sdn Bhd Palette Multimedia Bhd

GD Express Carrier Bhd

Internet Connectivity Services – Wireless broadband

Carrying on the business as researcher and developer of software packages, provider of design, programming, consultancy services and related activities.

Mobile value added services

Research, development, manufacturing and marketing of computer-telephony integration products, provisioning of communication services and investment holding

Research and development, manufacturing and marketing of telecommunication and multimedia solutions

Provision of broadband and Internet related services

Investment holding and design, development and marketing of information technology related products and services.

Courier services Business Activities

Source: SKMM, Annual Reports, Company Website Fig. 2.37 SKMM Licensees Business Activities

MALAYSIAN ADEX 2007 Adex: General Observations

Source: Nielsen Media Research Service, SKMM Fig. 2.38 Adex and GDP Growth Comparison

Adex and GDP Growth Comparison

6

4

2

0

20

15

10

5

0

RM(billion) Growth (%)

2003 2002

2001 0.3 3.2

9.4

5.7

18.9

4.5

2.2

17.0

4.1

5.3

7.1

5.0 5.9 6.3

3.2 3.5

3.7

4.6 4.7

5.5 4.4

2004 2005 2006 2007

Adex (RM billion) GDP (% Growth) Adex (% Growth)

The growth of the Malaysian economy at 6.3% supports the advertising expenditure growth in the country. Growth in adex was 17% in 2007, translating to a RM5.5 billion worth of advertisements spent in Malaysia. Much of the contribution was advertisements in conjunction with the nation’s 50^th Merdeka Anniversary celebrations and Visit Malaysia Year 2007 tourism promotions.

Analysts are predicting an exciting year ahead in 2008 due to the Olympic Games in Beijing and Euro 2008 football championship. Malaysia is forecasted to have a 7.1% growth in 2008 to RM5.58 billion⁴. Global ads spend growth is forecasted to accelerate in 2008 to 6.4% from an estimate of 5.8% in 2007, driven by ad spend of US and China.

SKMM Licensees on MESDAQ (cont’d)

(28)

Source: Nielsen Media Research Service, Company Reports, SKMM Fig. 2.39 Broadcast Adex 2007

Source: Nielsen Media Research Service, SKMM Fig. 2.40 CAGR Growth of Adex 1988-2007

Broadcast Adex 2007

CAGR Growth of Adex 1988-2007

Media Prima 83%

Radio 11%

TV Adex Revenue (RM1.932 billion)

RTM 10%

ASTRO 7%

The pre-CMA period (1988 to 1998) showed adex achieve a Compound Annual Growth Rate (CAGR⁵) of 15.4%. The highest ad spend achieved in the said period was in year 1997 at RM2.6 billion but a year later to RM2.1 billion due to the 1998-1999 financial crisis.

In the post-CMA period, adex accelerated to positive growth and registered an all-time high adex of RM5.5 billion in the year 2007. Despite many unforeseen negative economic events regionally and globally, Malaysia overall, managed to register adex CAGR of 13.5% from 1988 to 2006.

6 5 4 3 2 1 0

RM(billion)

1988

CAGR:

13.5%

CAGR:

10.4%

CAGR:

15.4%

1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

5 CAGR – Compound Annual Growth Rate. This is a formula to measure the annual growth rate over a period of several years.

0.5 0.6 0.8 1.1 1.2 1.4 1.7 2.0 2.4