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MARKET ANDFINANCIAL REVIEW

3Q 2006

3Q

Malaysian Communications and Multimedia Commission 2006The 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 Commission63000 Cyberjaya, Selangor Darul Ehsan, Malaysia. Tel: 03 - 8688 8000 Fax: 6 03 - 8688 1000Toll Free Numbers: 1-800-888-030 http://www.mcmc.gov.my

�C&M Bulletin Third Quarter 2006

FOREWORD 2

SUMMARY HIGHLIGHTS 3

MALAYSIAN C&M MARKET & FINANCIAL PERFORMANCE 4C&M SECTOR MARKET PERFORMANCE 4 Local Market Hits 6-Year High 4 C&M Sector is 10.5% of Bursa Malaysia 6 C&M Companies Share Price Movements and Trade Details 7-8 Malaysia Top 10 Heavyweights 8

MALAYSIAN VERSUS OVERSEAS 9 Local C&M versus Overseas by Market Capitalisation 9 MyICMS 886 CONNECTIONS STATUS (BRIEF) 10 Services Connection Status 10 C&M FINANCIAL PERFORMANCE 10 C&M Companies Revenue Snapshot First Half 2006 10-11

MALAYSIAN ADEX SCENARIO 12 Malaysian Adex Update: 3Q 2006 & Quarter-to-Quarter Comparison 12 Adex: Month-to-Month Trend and Market Share 13 Adex: Free-To-Air Television and Radio 14-16 Adex by Sector: Communications 17-18

MALAYSIAN ECONOMY 19 Malaysian Economy Status Report – Selected Indicators 19-20

FEATURE ARTICLES 2� THIRD INDUSTRIAL MASTER PLAN – A C&M PERSPECTIVE 2�-22 Key Emphasis in IMP3 21 ICT to be Strategically Harnessed 22 Concerted Efforts of Public and Private Sectors 22

BUDGET 2007: C&M PERSPECTIVE 23-24 Budget 2007 Adopts Five Key Thrusts of National Mission 23 Generating New Sources of Wealth 23

BURGEONING MOBILE MARKET IN CHINA 26-29 Demand Unlimited 26 China & Selected Asian Countries: Fixed Line and Mobile Markets 26 Next Generation Technologies and Financial Snapshots 27-29 IPTV 30-33 An Introduction and IPTV as a New TV Experience 30 Drivers for IPTV Services and IPTV Markets 31 IPTV Plans in Major Platforms – Worldwide Examples 32 Infrastructure, Content and Consumer Awareness 33

A BRIEF ON POSTAL DEVELOPMENTS 34-35 Change in the Postal Industry 34 Competition from New Media 34 Strategies For Future 35

GLOSSARY 36

CONTACT US BackCover

CONTENTS

C&M Bulletin Third Quarter 20062

The quarterly publication of the Malaysian Communications and Multimedia Commission (MCMC) in the form of the “Communications and Multimedia Market and Financial Review” Bulletin provides data and trend analysis, including industry development perspectives of the industry and related market segments under the MCMC purview.

The third quarter 2006 Bulletin cites industry performance in respect of market size and market share, individual company performances both from the financial and stock performance points of view. In this Bulletin, there are highlights of the recently released Budget 2007 and the Third Industrial Master Plan, viewed from the communications and multimedia perspectives. There is also a brief comparison of the China communications market to the ASEAN and selected developed Asian countries counterparts. A discussion on Internet Protocol Television or IPTV and postal services going further into the future are also featured.

The analysis and reports in the publication are based on various information sources such as internal information from the MCMC as well as external data purchased or obtained from licensees’ corporate reports, newswires, Bank Negara Malaysia reports and bulletins, and publications of other local and overseas sources.

Previous issues of this quarterly publication can be obtained from the MCMC’s website at:

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

I trust this document will provide useful information to readers. We welcome feedback that will help us improve this document in the future. Please send your comments to [email protected].

Thank you.

YBhg. Datuk Dr. Halim ShafieChairmanMalaysian Communications and Multimedia Commission

FOREWORD

3C&M Bulletin Third Quarter 2006

LOCALMARKETGAINED6%IN3Q-06The Malaysian stock market hit a six year high on optimism from the corporate tax rate cuts over 2007 and 2008 in Budget 2007. The Malaysian economy remaining resilient provides strong fundamentals for market gains.

C&MSECTORMARKETCAPUP�.2% The C&M sector captured a market capitalization of RM78 billion in 3Q-06, i.e., 10.5% of overall Bursa Malaysia market capitalization of RM745 billion.

MyICMS886CONNECTIONSSTATUS3G service providers have met the 300,000 target at 310,000 subscribers to date. Broadband penetration is 2.8 persons per 100 population or 10% by households.

�H-06C&MREVENUERM�5BILLIONOverall C&M sector revenue grew 16% from 1H-05 (RM13 billion). Telcos command bulk 87% or RM13.2 billion; broadcasting 9% (RM1.3 billion); postal 1% (RM0.2 billion); and others at 3% (RM0.4 billion). Overseas revenue contribution is rising.

ADEX3QGROWTHUP8.4%Backed by positive GDP growth, 3Q-06 adex was RM1.256 billion, a growth of 8.4% versus 3Q-05. Communications sector spent RM476 million on adex.

TVADEXSHAREAT30%,RADIO4%Free-To-Air TV controlled 30% of adex market share translating to RM1.054 billion adex revenue.

ERAFMOFAMPTOPSRADIOADSEra FM – Malay radio station garnered RM34.3 million adex revenue, followed by AMP’s Chinese My FM, with RM22.6 million and Mix FM at RM18 million.

GDPSTRENGTHENED5.9%IN2Q-06Malaysian economy outlook remains positive. GDP growth expected at 5.8% in 2006; 6% in 2007. Inflation is expected to moderate before the year 2006 is out, but concerns on rising costs remain.

BUDGET2007-EXPANSIONARYThe Federal budget in line with five thrusts of National Mission, which includes moving Malaysia up the value chain has initiatives aimed at generating new sources of wealth in technology and knowledge intensive areas. SMEs are encouraged to leverage use of ICT to develop high value added products.

THIRDINDUSTRIALMASTERPLAN Gearing up for global competitiveness through transformation and innovation. Development of ICT as strategic industry to intensify – more than an enabler.

CHINA-BURGEONINGMOBILEMARKETChina features growing affluence and rapidly growing communications needs. The spillover effects have seen Chinese vendors targeting overseas markets and overseas vendors making headway into Chinese market. Poised today in threshold for takeoff is the 3G market in China, pending successful trials accelerated by 2008 Beijing Olympics.

IPTVIPTV developments worldwide accelerated in 2006; poised for further growth in 2007 and beyond. Advances include better compression and set-top box capabilities, standards that bring the potential of IPTV services closer to desired user experience and supplier quest for profit margin and market share, versus pioneer IPTV in 2003-2004.

POSTALDEVELOPMENTSPost industry changing landscape sees new media services such as mobile SMS services, e-mail and Internet retail either boosting or eating into traditional mail services market share. Counter balancing strategies are the age-old (at least in US) direct mail marketing service to tap advertising market pie of the country for new revenue streams. Pos Malaysia has adopted this strategy.

SUMMARY HIGHLIGHTS


Local Market Hits 6-Year High

The local stock exchange, Bursa Malaysia, hit a 6-year high in September 2006, buoyed by a long awaited corporate tax rate cut - first time in nine years when it was cut 1% to 27% in 2007, pro-active expansionary Budget 2007, stable monetary policy, and a still resilient domestic economy.

The local market barometer, the KL Composite Index, hit a high of 968.88 on 28 September 2006. This was a rather steady climb since its low for the year at 886.48 posted on 15 June 2006. In the period of third quarter 2006, the KLCI gained 6% to close at 967.55 on 29 September 2006.

The distinct dip of the KLCI on 17 July may be due to overseas geopolitical tension casting concern over overall global growth and level of oil prices at that time.

Overall, the local market is reflecting positive sentiments from the recent government plans and Budget approach towards raising the Malaysian economic situation ahead in competitiveness and growth to maintain resilience. The negatives which played havoc on anxiety levels earlier in the year such as higher oil prices, higher interest rates worldwide and a slower overall economic growth appear to be a shadow in the background, at least for the current moment.

980

960

940

920

900

880

860

840

Ind

ex

IndexLast 967.55High 28/09/06 968.88Average 931.46Low 15/06/06 886.48

KLCIJan-Sep2006

C&M SECTOR MARKET PERFORMANCE

300

200

100

0

Volu

me

Jan Feb Mar Apr May Jun Jul Aug Sep

Source: MCMC, Bloomberg



Bursa Malaysia Market Indicators

KL Composite

EMAS

Second Board

MESDAQ

Average Daily Turnover

Volume (million units)

Value (RM million)

Market Cap (RM billion)

Dec-05

899.8

203.9

80.4

87.1

423.6

717.8

695.3

3Q-06

967.6

-

83.2

108.1

757.8

931.1

745.5

% Change

8

-

3

24

79

30

7

* The index was discontinued by the Exchange as of 26/06/2006 Source : MCMC, Bursa Malaysia, Bloomberg

*

Main Board

Second Board

MESDAQ

Total No. of Co. Listed:

Dec-05

646

268

107

1,021

3Q-06

650

252

125

1,027

Bursa MalaysiaNo. of Companies Listed

*

* Decline versus Dec-05 on de-listings vis-à-vis PN4 and listing requirements Source : MCMC, Bursa Malaysia, Bloomberg

NewListings2005to3Q2006

807570656055504540353025201510

50

No

. of

Co

mp

anie

s

Main Board Second Board MESDAQ Market

2005 1Q-06 2Q-06 3Q-06

79

9 �0�2

46

17

16 43

2

8

1 1

7

32




C&M Sector is 10.5% of Bursa Malaysia

The public-listed C&M companies comprising the integrated service providers, CASP and Pos Malaysia captured altogether a market capitalisation of RM78 billion in the end of third quarter 2006. This is 5.4% higher than the market capitalisation of RM74 billion recorded at the end of June 2006.

The RM78 billion C&M sector market capitalisation as of September 2006 constituted 10.5% of overall Bursa Malaysia market capitalisation of RM745 billion. Of note, DiGi posted the highest market capitalisation in terms of percentage change by 59.3%, i.e., gaining from RM8.2 billion in June 2006 to RM9.4 billion in September 2006.


Communications & Multimedia Sector RM78 billion

Maxis 3.0%

Media Prima 0.2% DiGi

1.3%

Pos Malaysia 0.3%

ASTRO 1.3%

Time 0.2%

Telekom 4.2%

10.5%

Others 89.5%

Bursa Malaysia = RM745 billion

Individual C&M Companies Contribution to Bursa Malaysia Sep 2006

Companies

Telekom

Maxis

Media Prima

DiGi

Pos Malaysia

ASTRO

Time

Total

Dec-05

32.4

21.0

1.0

5.9

2.1

10.1

1.2

73.7

Mar-06

31.7

21.8

1.1

6.3

2.3

9.2

1.7

74.1

Jun-06

30.7

21.4

1.0

8.2

2.3

8.7

1.7

74.0

Sep-06

31.1

22.4

1.4

9.4

2.5

9.6

1.6

78.0

Communications & Multimedia Companies Market Capitalisation (RM billion)




C&M Companies Share Price Movements

The telecommunications and multimedia companies posted positive gains ranging between 53% and 6% as at third quarter 2006. However, this is with the exception of Telekom and ASTRO, which posted decline by 4.2% and 5.5% respectively.

DiGi topped the gainers list in terms of share price as well. DiGi share price gained 52.7% from RM7.80 to RM11.91 per share with an average volume traded of 1.3 million shares. The significant gains were likely due to perception of its better profit contribution arising from higher subscriber base, cleverly tailored packages, network enhancement drive and recent capital repayment scheme. Time share posted strong gain of over 41% due to takeover target theme. Pos Malaysia also did well with 20% gain to RM4.86 per share.

Market Capitalisation (Dec-05 to Sep-06)

DiGi

Media Prima

Time

Pos Malaysia

Maxis

Telekom

ASTRO

-10 0 10 20 30 40 50 60

Percentage Change (%)

59.3

40.0

33.3

19.0

6.7

-4.0

-5.0


900800700600500400300200100

0

C&M Companies Market Capitalisation versus Bursa Malaysia Market Capitalisation

Dec-05 Mar-06 Jun-06 Sep-06

RM

(bill

ion)

C&M Others

695733 722 745

73.7 74.� 74.0 78.0

79

78

77

76

75

74

73

72

71

C&M Companies Market Capitalisation and Growth

Dec-05 Mar-06 Jun-06 Sep-06

Mar

ket

Cap

ital

isat

ion

RM

(bill

ion)

6.0

4.0

2.0

0.0

-2.0

-4.0

-6.0

-8.0

Gro

wth

(%)

-6.2

0.5 -0.1

5.4

Source: MCMC, Bloomberg Source: MCMC, Bloomberg



DiGiTelekomMaxisASTROPos MalaysiaMedia PrimaTime

30 Dec-05(RM)7.809.558.405.254.041.700.46

29 Sep-06(RM)11.919.158.904.964.861.910.65

% Change(9 months)

52.7-4.26.0

-5.520.312.441.3

High (RM)11.919.209.005.055.001.930.82

Low (RM)10.488.958.504.544.381.600.60

1,3262,1701,6471,6051,1481,0837,878

Share Price

Companies

Average Volume Traded (’000)


C&M Companies Trade Details January – September 2006


200

180

160

140

120

100

80

% C

hang

e: B

ase

30 D

ec 0

5

Maxis

ASTRO

Pos MalaysiaMedia Prima

Telekom

DiGi

Time

Pos Malaysia Maxis ASTRO Media Prima Telekom DiGi Time

Communications and Multimedia Companies Performance(Jan-Sep 2006)


C&M Companies Share Price Movements


Malaysia Top 10 Heavyweights

MaybankTenagaMISCTelekomPublic BankMaxisCAHBIOIPetronas GasGenting

29 Sep-06(RM)

10.709.207.709.056.358.555.95

14.308.60

23.70

% Change (3 months)

11.29.78.69.26.99.06.7

16.28.8

24.1

High (RM)11.4010.108.809.206.859.006.70

17.709.10

25.75

Low (RM)10.409.107.408.956.258.505.70

14.608.60

23.00

3,035 4,657

907 2,170 1,424 1,647 5,018 2,008

338 745

42.740.332.031.123.622.421.020.017.317.0

Share Price

CompaniesMarket

Capitalisation (RM billion)

Average VolumeTraded (’000)


MALAYSIAN VERSUS OVERSEAS

LocalC&MversusOverseasbyMarketCapitalisationinUSDollar

China MobileNTT DoCoMoBTTelstraChina TelecomKDDISingTelTelekom TBKSK TelecomChunghwaChina UnicomKT CorpPLDTTelekomChina UnitedKT FreetelMaxisTelecom CorpTaiwan MobileFar EastonePCCWLG TelecomIndosatGlobeASTRODiGiVSNLMTNLDacomExcelcomindoMobileOneTrue CorpPos MalaysiaSmartoneTimeMedia PrimaSundayTT&THutchisonCSAGD ExpressNew WorldREDtoneNasionComNationwideAKNM Tech

Hong KongJapanUKAustraliaChinaJapanSingaporeIndonesiaKoreaTaiwanHong KongKoreaPhilippinesMalaysiaChinaKoreaMalaysiaNew ZealandTaiwanTaiwanHong KongKoreaIndonesiaPhilippinesMalaysiaMalaysiaIndiaIndiaKoreaIndonesiaSingaporeThailandMalaysiaHong KongMalaysiaMalaysiaHong KongThailandAustraliaMalaysiaMalaysiaHong KongMalaysiaMalaysiaMalaysiaMalaysia

WirelessWirelessDiversified WirelineDiversified WirelineWirelineDiversified WirelineDiversified WirelineDiversified WirelineWirelessDiversified WirelineDiversified WirelineDiversified WirelineWirelineDiversified WirelineWirelineWirelessWirelessDiversified WirelineWirelessWirelessDiversified WirelineWirelessDiversified WirelineWirelessSatelite Pay-TVWirelessWirelineDiversified WirelineWirelineWirelessWirelessDiversified WirelinePostal ServicesWirelessWirelessCommercial Free-To-Air TVWirelessDiversified WirelineWirelessDiversified C&MCourierWirelessDiscounted Call ServicesWeb Portals / ISPCourierInternet Content/Entertainment

93.874.332.235.929.724.426.212.114.816.710.211.5

6.08.67.34.55.68.04.34.44.11.83.01.82.71.52.42.00.91.61.30.8

0.550.700.310.270.220.240.14

0.0460.0520.0280.0870.0380.0240.016

140.672.241.734.529.327.624.418.517.416.012.412.18.58.46.76.26.15.64.84.24.13.23.02.82.62.52.52.12.01.71.31.0

0.680.560.440.380.200.140.12

0.0520.0500.0380.0330.0330.0200.009

49.9-2.829.5-3.9-1.313.1-6.952.917.6-4.221.6

5.241.7-2.3-8.237.8

8.9-30.011.6-4.5

No Change77.8

No Change55.6-3.766.7

4.25.0

122.26.3

No Change25.023.6

-20.041.940.7-9.1

-41.7-14.313.0-3.835.7

-62.1-13.2-16.7-43.8

% Change (9 months)

Sep-06Dec-05

Market Capitalisation(USD billion)

Main BusinessCountryCompanies

Source : MCMC, Bloomberg


MyICMS 886 CONNECTION STATUS (BRIEF)C&M FINANCIAL PERFORMANCE

C&M Companies Revenue Snapshot – 1H 2006

The C&M sector recorded an aggregate revenue of RM15.2 billion for the first half of 2006. This is a growth of 16% from RM13 billion in the first half of 2005. On an annualised basis, the C&M industry revenue is RM30.4 billion, exceeding the RM26.8 billion recorded for listed C&M companies in 2005.

All sectors recorded positive revenue growth except for a few smaller voice and data services providers. The main telecoms companies hold lion’s share of 87% of overall revenue followed by broadcasting (9%), postal (1%) and others (3%).

No. of Subscriber

Maxis 180,000

Celcom 130,000

Total 310,000

ADSL 670,300

SDSL 4,500

Wireless 8,700

Others 74,900

Total 758,400

MiTV 1,000

Fine TV 1,000

Total 2,000

Services

3G

Broadband

Mobile TV

IPTV

Data @

Sep-06

Sep-06

*To date

**Dec-05

Remarks

Surpassed MyICMS 886

target of 300,000 target

by end 2006

*Penetration rate is

2.8 persons per 100

population and 10% by

households

DiGi has 7 channels launched 15 Sep 2006; brandname

D’ Channels. Maxis has 9 channels. Both Maxis and

Celcom use 3G platform.

*News reports, The Edge Asia, MCMC, Industry **Asia Pacific TV (10th Edition), Informa Telecoms and Media

Services Connection Status

C&M Revenue Share 1H-06

Source: MCMC, Industry

Major Telcos 87%

Others 3%

Pos Malaysia

1%Broadcasting

9%

1 Adjusted year-end Source: MCMC, Industry

1H-05vs 1H-06

Growth (%)

15.2

16.3

34.4

-26.2

�7.3

16.9

35.5

�9.8

7.6

-�0.3

16.4

1H-06Revenue

RM (billion)

7.764

3.616

1.760

0.090

�3.230

1.080

0.233

�.3�3

0.2�2

0.426

15.181

1H-05Revenue

RM (billion)

6.737

3.108

1.310

0.122

��.277

0.924

0.172

�.096

0.�97

0.475

13.045

Telekom

Maxis

DiGi

Time

MajorTelcos

ASTRO1

Media Prima

Broadcasting

PosMalaysia

Others

C&M Total

Companies

��C&M Bulletin Third Quarter 2006

C&M FINANCIAL PERFORMANCE

Domestic and Overseas Revenue Contributions

The year 2005 marked Maxis first foray overseas, gaining entry to Indonesian markets through startup mobile services provider PT Natrindo Telepon Seluler. By end of the first half of 2006, Maxis and Telekom overseas revenue account for 6% and 25% respectively of total revenue.


Maxis & Telekom: Domestic versus OverseasRevenue Contributions

7

6

5

4

3

2

1

0

RM

(bill

ion)

Maxis Telekom

Overseas Domestic

1H-05 1H-06 1H-05 1H-06

0.0030.685

0.235

1.905

3.105

6.052

3.381

5.859

Telekom

Maxis

DiGi

Time

ASTRO

Media Prima

Pos Malaysia

1H-06

21.1

37.2

31.0

-91.1

21.8

17.2

17.9

Operating Profit Margin (%)


1H-05

17.6

39.7

20.8

-88.5

13.4

12.2

19.3

Companies

Maxis

Telekom


0.0030.685

0.2351.905

7,733.3178.1

3.1056.052

3.3815.859

8.9-3.2

1H-05 1H-06 1H-05 1H-06

RM (billion) RM (billion)

Overseas Domestic1H-05versus1H-06

(%)

1H-05versus1H-06

(%)

Companies


MALAYSIAN ADEX SCENARIO

Malaysian Adex Update: Third Quarter 2006

Malaysian adex continues to accelerate from the first 3Q of 2004-2006, recording a moderate Compound Annual Growth Rate (CAGR) of 4.5%, registering RM3.47 billion as at end September 2006. With Malaysia’s GDP keeping up its growth momentum, adex has been growing accordingly. However, industry analysts are expecting GDP growth to remain relatively moderate over the remainder of this year.

Adex:Quarter-to-Quarter Comparison

Noteworthy is 3Q-06 Malaysian adex spurred a growth of 8.4% from last year’s 3Q, registering at RM1.256 billion from RM1.159 billion. This is the highest 3Q adex when compared to the same period of the last two years. Amongst the events that contributed to the adex quarterly growth were Malaysia’s Independence Day celebrations, Mega Sale Carnival shopping event both held in the month of August 2006, including adex contribution from newly commissioned TV9.

Source: Nielsen Research, MCMC

Malaysian Adex(Jan-Sep 2004-2006)

RM

(mill

ion)

3,500

3,450

3,400

3,350

3,300

3,250

3,200

3,150

3,100

3,050

3,000

3Q G

DP

(%)

8.0

7.0

6.0

5.0

4.0

3.0

2.0

1.0

0.02004 2005 2006

3,173.5

3,342.2

3,466.0

6.8

5.3

5.9

Adex CAGR:4.5%

Quarter-to-Quarter Adex Comparison 2004-2006

Source: Nielsen Research

965.

2

1400

1200

1000

800

600

400

200

0

1,08

0.6

1,12

7.7

1,05

7.7

1,12

5.8

1,15

8.7

1,02

5.0

1,17

6.5

1,25

5.8

2004 2005 2006

RM

(mill

ion)

Q1 Q2 Q3

�3C&M Bulletin Third Quarter 2006


Adex for the month of July registered RM405.3 million, followed by a growth of 4.9% for August to RM425.1 million. However, adex eased a little for the month of September, declining by 1.2%. This could be due to September being a non-eventful month in respect of festivities unlike those expected in the fourth quarter.

As expected, print dominates the adex market share as the top medium of advertising at 62%, despite a drop by 3% from last year’s 1Q-3Q period, generating RM2.153 billion. Television and other means of advertising gained 1% and 2% slice of the pie respectively, while radio remains status quo at 4%. Interestingly, television medium surpassed the RM1 billion mark, garnering RM1.054 billion up to September 2006 and charted an impressive 10.4% growth from previous period.


Adex Market Share Q1-Q3 2005

TV 29%

Radio 4% Others

2%

Print 65%

TV 30%

Radio 4% Others

4%

Print 62%

Adex Market Share Q1-Q3 2006

Adex: Market Share

Adex: Month-to-Month Observation


Month-to-Month Adex 2006 by Medium (Jan-Sep)


1,000

100

10

0

RM

(mill

ion)

225.8182.7

254.4 226.2 251.0 265.7 239.8 250.9 246.7

100.576.1

101 97.9 107.9140.2 138.5 147.3 145.4

16.411.7

16.3 14.0 15.0 16.4 14.3 15.4 14.0

12.7 11.3 102 107 12.1 13.5 12.6 11.5 14.2

Month-to-Month Adex 2006 (Jan-Sep)

450

400

350

300

250

200

150

100

50

0

RM

(mill

ion)


355.4

281.8

381.9

348.8

386.0

435.7405.3

425.1 420.2

TV Print Radio Others



The Free-To-Air (FTA) Television adex for the third quarter shows an inclusion of TV9 that started broadcast in April 2006. Already having 3% of the FTA adex pie, TV9’s start is a positive note to the industry. Undoubtedly, Media Prima’s family takes the lion’s share of the FTA adex pie with TV3 leading the pack at 45%, followed by NTV7 (19%), 8TV (16%) and TV9 (3%). It is noted here that TV2 has gained a bigger slice of the adex pie at 13%, a 2% growth and TV1 gains 1% from the previous Jan-Sep 2005 period.


Adex: Free-To-Air Television

TV Adex by Channels Breakdown Jan-Sep 2005

NTV7 27%

8TV 16%

TV1 3%

TV2 11%

TV3 43%

NTV7 19%

8TV 16%

TV1 4%

TV2 13%

TV3 45%

TV9 3%

TV Adex by Channels Breakdown Jan-Sep 2006

Others

Radio

TV

Print

Adex Market Share by Medium

RM

(mill

ion)

2,5002,0001,5001,0005000

123.574.9

135.5128.4

1,054.2955.1

2,152.82,187.5

Q1-Q3 2005 Q1-Q3 2006




The Media Prima family has an aggregated adex revenue of RM881.4 million, a growth of 7.9% from the same period last year. As expected, TV3 collected the highest adex revenue at RM480.9 million, a growth of 17.8% from the same previous period. 8TV is doing fairly well, with 11.2% growth, registering RM166 million. The new TV9 channel earned a whopping RM33.3 million adex revenue up to September 2006, while NTV7 contrasted with a decline of 22.1% in adex revenue. Government channels enjoyed revenue growth of 44.9% for TV1 and 21.4% for TV2 from the same period last year registering RM39.7 million and RM132 million respectively.

The number of FTA advertisements up to September 2006 amounted to 597,791 translating to RM1.05 billion or 15,747,258 advertisements in seconds. As from calculated revenue market share, TV3, NTV7 and 8TV emerged as the top 3 channels in terms of ranking by number of advertisements.

500

400

300

200

100

0

RM

(mill

ion)

TV Adex (Jan-Sep)2005-2006 Comparison

27.439.7

108.7

132.0

408.2

480.9

259.7

202.4

149.3 166.0

1.833.3

TV1 TV2 TV3 NTV7 8TV TV9

2005 2006


TV1

TV2

TV3

NTV7

8TV

TV9

TOTAL

TV Adex 2006 (Jan-Sep)

Source: Nielsen, Research

Ads in Seconds

1,589,115

2,787,956

4,738,755

3,028,623

2,892,639

710,170

15,747,258

No. of Ads

49,977

93,148

198,885

117,697

110,946

27,138

597,791

RM (million)

39.8

132.8

481.1

200.7

166.3

33.3

1,054.0

Media



Adex: Radio

Undoubtedly, AMP having the biggest chunk of the market share at 79% generated the highest revenue at RM107.6 million. The achievement is underpinned by having the most sought after Malay radio station, Era FM and Chinese radio station, My FM. Radio adex revenue did fairly well, stimulating a 4% growth from the same period last year.

With highest adex revenue, Era FM tops again with RM34.3 million, followed by My FM at RM22.6 million. Star RFM radio channels managed aggregated adex revenue of RM17.2 million whereas RTM channels totalled RM10.7 million revenue up to September 2006.

Media

AMP

RTM

Star RFM

Total


RM (million)

107.6

10.7

17.18

135.5

Market Share (%)

79

8

13

100

No. of Ads

338,213

68,490

80,410

487,113

Ads in Seconds

8,880,750

1,621,630

2,243,123

12,745,503

Era

FM

hitz

.fm

Ligh

t &

Eas

y

Mix

FM

My

FM

red

i 988

red

104

.9

*KL

FM (R

MS

KL)

*Nas

iona

l FM

(RM

S 1

)

*Tra

xx F

M (R

MS

4)

*Ai F

M (R

MS

5)

*Min

nal (

RM

S 6

)

*Muz

ik F

M (R

MS

Muz

ik)

*Sel

ango

r FM

(RM

S S

’gor

)

Sin

ar F

M

THR

Xfr

esh

FM

*Oth

er R

egio

nal (

RTM

)

Radio Adex by StationsJan-Sep 2006

4035302520151050

RM

(mill

ion)

34.3

14.1

7.6

18.022.6

16.2

1.0 0.4 1.2 0.63.3 2.1 0.8 0.3

4.6 5.11.4 2.0

* Does not include September 2006 figures Source: Nielsen Research


RM (million)

102.8

10.3

17.2

130.3

MediaMarket Share

%

79

8

13

100

RM (million)

107.6

10.7

17.2

135.5

Market Share

%

79

8

13

100

2005 2006

Radio Adex Comparison(January-September)

AMP

RTM

Star RFM

TOTAL



Adex by Sector: Communications

The communications sector tops the list of the highest advertising spend at RM476.1 million for the year-to-date ending September 2006. There is a preference for print medium amounting to an adex of RM266.4 million. The toiletries sector, however, prefers television as their most used medium, generating RM223 million adex.

Communications Sector Adex: Main Telcos Advertising

Around 49% of the communications sector advertising is spent on mobile line services and 27% on mobile interactive services, both generating adex of RM233.3 million and RM130.1 million respectively.

Communications

Miscellaneous

Retail

Toiletries

Automotive

Finance

Beverage-Non Alcoholic

Foodstuff

Government, Social & Other Organisations

Entertainment

TOTAL

Top Ten Advertising by Sectors (Jan-Sep 2006)Sector Total

RM (million)

476.1

470.8

314.6

298.3

196.3

184.5

181.9

166.0

140.8

127.7

2,557.0

Print

266.4

468.6

242.7

61.7

125.8

136.2

41.8

24.2

60.3

80.6

1508.3

TV

168.0

1.5

48.0

223.0

47.3

27.9

119.3

124.5

68.9

40.1

868.5

Radio

23.5

0.3

19.8

5.8

14.5

8.4

6.1

8.2

8.9

4.0

99.5

Others

18.2

0.4

4.1

7.8

8.7

12.0

14.7

9.1

2.8

3.0

80.8



Mobile Line Services

Mobile Interactive Services

Phone & Accessories

Communication-Corporate Ads

Internet Service Provider

Others

TOTAL

%

49.0

27.3

9.3

7.4

3.9

3.0

100.0

Total

RM (million)

233.3

130.1

44.4

35.3

18.5

14.4

476.0

Communications Sector Advertising



Communications Sector Adex: Communications Companies Ads

Noteworthy is that Maxis is the leading ad spender for both mobile line services and mobile interactive services, amounting to RM122.4 million collectively, with television being their preferred medium for both services.

Total advertisements spend on phone and accessories amounted to RM44.4 million with Nokia leading the pack at RM13.5 million. Meanwhile, Telekom spent RM20.7 million on corporate advertisements. This is 58.6% out of a total of RM35.3 million communications corporate ads. DiGi, Celcom and Maxis collectively spent RM12.2 million.

Mobile Line Services Advertising

Maxis

Celcom

DiGi

Others

TOTAL

RM (million)

103.1

66.7

53.3

10.2

233.3

Print

44.4

36.3

33.5

1.5

115.7

TV

50.8

27.3

14.5

0.1

92.7

Radio

7.3

1.7

5.2

0.6

14.8

Others

0.5

1.4

0.1

8.0

10.0


Mobile Interactive Services Advertising

Maxis

Mobile Touchetek Sdn Bhd

Celcom

DiGi

Others

TOTAL

RM (million)

19.3

19.1

13.2

6.8

71.4

129.8

Print

6.0

2.4

12.0

6.5

65.6

92.5

TV

12.1

16.7

1.0

0

5.3

35.1

Radio

1.2

0

0.2

0.3

0.5

2.2


Phone & Accessories Advertising

Nokia

First Mobile Group

Mobile Distribution (M) Sdn Bhd

Others

TOTAL

RM (million)

13.5

7.3

5.8

17.8

44.4


Communications-Corporate Ad

TM

DiGi

Celcom

Maxis

Others

TOTAL

RM (million)

20.7

4.6

3.8

3.8

2.4

35.3



MALAYSIAN ECONOMY

Malaysian Economy Status Report

The Malaysian economic growth momentum remained stable edging up 5.9% in real Gross Domestic Product (GDP) in the second quarter 2006 from 5.5% (revised) expansion in the first quarter. Domestic demand was robust while exports remained favourable. Growth was supported mainly by services, manufacturing and agriculture sectors.

Quarterly GDP by Kind of Economic Activity at 1987 Prices

Source: Bank Negara Malaysia

Agriculture

Mining

Manufacturing

Construction

Services

RealGDP(AnnualChange)

RealGDP(PrecedingChange)

4.2

-1.5

3.1

-2.0

5.9

4.�

2.4

5.1

1.0

4.4

-2.2

6.4

5.�

-0.7

7.4

-1.3

8.5

-1.8

5.2

5.5

-2.5

5.8

-0.4

8.4

-0.5

6.0

5.9

2.8

6.6

-0.9

8.4

-1.1

5.6

5.7

-0.3

Annual Change (%)2Q 1H 1Q 2Q 1H

2005 2006

Indicators

Real GDP (annual change)

Sectors - Agriculture

- Mining

- Manufacturing

- Construction

- Services

Consumer Price Index

Producer Price Index

Unemployment Rate

OPR Rate (as at end June)

Base Lending Rate (as at end June)

Fixed Deposit Rate – 12 months (as at end June)

Loans to Deposits Ratio (as at end June)

Budget Deficit as % of GDP

Corporate Tax Rate

Per Capita Income (current prices in RM)

Per Capita Income (current prices in USD)

2005(%)

5.2

2.5

0.8

5.1

-1.6

6.5

3.0

6.8

3.5

2.70

5.98

3.70

76.6

3.8

28

18,039

4,948

2006 Estimate

(%)

5.8

5.3

2.4

7.3

0.7

5.7

3.9

9.4

3.5

3.5

6.72

3.70

77.2

3.5

27

19,739

5,414

2007 Forecast

(%)

6.0

4.7

4.5

6.8

3.7

6.0

-

-

3.5

-

-

-

-

3.4

26

21,168

5,806

Selected Economic Indicators

Source: Bank Negara Malaysia, Economic Report 2006/2007

2006 Estimate

(%)

2007 Forecast

(%)


MALAYSIAN ECONOMY

Malaysian Economy Status Report (cont’d)

Headline inflation, as measured by the Consumer Price Index (CPI), increased to 4.1% for the second quarter compared to 3.7% in the preceding quarter. The rise remains cost-pushed prompted by retail fuel price hike in March 2006. CPI dropped to 3.3% in August, and is expected to drop further in the later part of the year. Bank Negara has maintained the Overnight Policy Rate (OPR) at 3.5%, upholding a supportive stance for economic activity.

The MIER (Malaysian Institute of Economic Research) Consumer Sentiments and Business Conditions surveys showed that business and consumer confidence is still upbeat for the second quarter. Given the indications of continued economic expansion in private investment activity, Bank Negara is confident in continued growth in the second half of the year.

An August 2006 Bloomberg survey of 17 economists revealed a median forecast of 5.5% for 2006. The government expects a GDP growth of 5.8% for 2006. The Malaysian economy is expected to sustain its growth momentum for the latter half of the year, on the back of strong domestic demand and government expenditure, in particular, the rollout of projects under Ninth Malaysia Plan.

The US Federal Open Market Committee maintained interest rates at 5.25% on 8 August 2006 after 17 consecutive rate hikes. The US economy has indications of economic slowdown coupled with rising inflation trends, is seeing a softening of consumer sentiment.

The economic outlook for Malaysia in 2007 remains positive despite some softening in external demand and anticipated moderation in global growth. Nevertheless, domestic demand is expected to drive broad-based growth.

World GDP Developed economies Euro area Japan United Kingdom United States East Asia China Hong Kong SAR Republic of Korea Taiwan South Asia India ASEAN 5 Indonesia Malaysia Philippines Singapore Thailand

20054.8

1.32.61.83.5

9.97.34.04.1

8.4

5.65.25.16.44.5

2006e

4.9

2.12.82.5

3.25-3.5

10.45.55.14.3

7.3

6.25.8

5.5-6.26.5-7.54.5-5.5

2007f

4.7

1.92.12.8

3.0-3.25

9.35.04.94.0

7.0

6.36.05.64.65.4

Real Gross Domestic Product (GDP) Growth for Selected Countries (% change)

e – Estimate, f - Forecast Source : Ministry of Finance

2�C&M Bulletin Third Quarter 2006

FEATURE: THIRD INDUSTRIAL MASTER PLAN

IMP3 – A Brief from C&M Perspective

The Third Industrial Master Plan (IMP3) outlines the industrial strategies and policies in positioning the country to be a fully developed nation by 2020. The plan targets an annual growth of 6.3% during the IMP3 period of 2006-2020.

The objectives of the IMP3 are to build up Malaysia’s long-term global competitiveness particularly in the manufacturing and non-government services sectors through the process of transformation and innovation. Implementation will be focused on meeting the five thrusts of the National Mission of the Ninth Malaysia Plan, 2006-2010. Led by the private sector, the shift is towards a knowledge-intensive productivity, backed by adoption of new technologies and driven by skills and technological innovation.

The IMP3 indicated that despite greater investments channeled into higher technology and capital intensive projects, many SMEs are still in the preliminary stages of ICT investment. There are opportunities therefore for strategic investment in software and services and the demand thereof giving rise to potential growth areas in the services sector such as customized software development, consultancy in e-commerce and consultancy in computer, network and data security.

Close attention for public and private sector collaboration are the critical areas of industry restructuring and transformation, technological upgrading innovation and the integration of domestic companies into regional and global networks and supply chains. There are also initiatives to promote growth areas in the manufacturing sector, particularly knowledge-based

Manufacturing

Services

Real GDP 1

6.7

6.5

6.0

5.1

7.7

6.5

5.6

7.3

6.3

31.4

58.1

100

32.4

59.2

100

28.5

66.5

100

2006 to 2010

2011 to 2020

2006 to 2020

2005 2010 2020

Average Annual Growth (%) Share of GDP (%)

11987 real prices Source: Third Industrial Master Plan 2006-2020

Technologicalupgrading

Attracting&generatingqualityinvestments

Developinginnovative&creativehumancapital

IntegratingMalaysianindustries&servicesintoregional&globalnetworks&supplychains

Source: Third Industrial Master Plan 2006-2020

Key Emphasis of the IMP3


FEATURE: THIRD INDUSTRIAL MASTER PLAN

activities that support the application of leading edge technologies in order to spur activities that:o integrate knowledge and technology based activities into processes and operations;o facilitate the adoption and diffusion of advanced manufacturing technologies and practices;o develop and improve technological capabilities in areas such as microelectronics, nanotechnology, automotive engineering and biotechnology;o promote research and development and training in selected industries; ando encourage automation in manufacturing, and establish highly specialized technology parks to spearhead related activities.

ICT to be Strategically Harnessed

The services sector is set to play a bigger role in the socioeconomic development of the country. No longer simply an enabler, ICT must be strategically harnessed if the nation is to make inroads into global markets by embracing innovation and venturing into new frontiers of products and services. Development of ICT as a strategic industry will intensify under the IMP3.

The IMP3 builds on existing capabilities and resources to enhance competitiveness and resilience. With world-class ICT infrastructure in place, greater accessibility to ICT will be ramped up through initiatives such as MyICMS 886, featuring focused development of specifically identified infrastructure, services and growth areas.

Participation, especially by SMEs in science and technology, will be encouraged in terms of funding schemes and research grants. Other focus areas include shared services outsourcing, digital content development, tele-health and e-commerce. In keeping pace, intensified capital investments in the private sector and human capital development are also necessary.

In order to achieve its full potential, the IMP3 needs to ride on further improvements in institutional infrastructure and implementation system. Foremost, the implementation of strategies and policies under IMP3 require the concerted efforts of both the public and private sectors.

Source: Third Industrial Master Plan 2006-2020

Concerted Efforts of Public & Private Sectors

Delivery System

Regulatory Regime

productivity

efficiency

competitiveness


FEATURE: BUDGET 2007

Budget 2007: C&M Perspective

Budget 2007 with its five thrusts for national development is part of the 15 year National Mission1. Aptly therefore, the Budget 2007 theme is (Implementing the National Mission Towards Achieving the National Vision). Communications and multimedia (C&M) industry maintains its enabler role in initiatives and programmes, particularly for R&D and use of ICT for productivity and efficiencies.

An expansionary budget, Budget 2007 sported development spending of RM46.5 billion, with the construction sector as primary beneficiary. With 45% of development expenditure allocated to the economic sector, the government remains keen to support private sector projects, spurring economic growth. Public-private partnership is enacted in Private Financing Initiatives (PFIs) via projects on a build, lease and transfer basis supported by a RM5 billion PFI fund.

Along the same aim, corporate tax reduction in 2007 and 2008 is to improve earnings and cushion rising business costs. Specific tax benefits were accorded such as bionexus status companies undertaking biotechnology activity can opt for either 100% tax exemption for 10 years or 100% investment tax allowance for qualifying capital expenditure incurred within a 5-year period. There is also a concessionary tax of 20% for a further 10 years from the expiry of the tax exemption period.

Generating New Sources of Wealth

In keeping with the first thrust of moving the economy up the value chain, the view is to grow new sources of wealth in technology and knowledge-intensive sectors, ICT as a key enabler especially in biodiesel and biotechnology.

1 The National Mission is a framework for planning and implementation of policies and programmes from 2006 to 2020, the period under

the Ninth Malaysia Plan.

Tomovetheeconomyupthevaluechain

Toraisethecapacityforknowledgeandinnovationandnurture‘firstclassmentality’

Toaddresspersistentsocio-economicinequalitiesconstructivelyandproductively

Toimprovethestandardandsustainabilityofqualityoflife

Tostrengthentheinstitutionalandimplementationcapacity

12

345

Budget 2007 Adopts Five Key Thrusts of National Mission



The government envisages an agriculture sector that is modernized and transformed by technology. R&D is a key activity, with the emphasis on successful commercialization of new products that will not only build a competitive sector, but thrust the nation into high value-added activities such as biopharmaceuticals. To this end, funding for R&D activities in the agriculture sector is supported by various research agencies.

A total allocation of RM3.6 billion to the agriculture sector aims at boosting productivity, efficiency and marketing capabilities. Biotechnology, namely, technology based on biology, especially when used in agriculture, food science, and medicine, has been earmarked as a new growth area for the economy.

BiotechAcquisitionProgramme• Technology acquistion

BiotechnologyCommercialisationFund• Commercialisation of R&D findings

R&DFund• Genomics, molecular biology, production of pharmaceutical & neutraceutical products, agrobiotechnology

Biotecnology Development Initiatives

60

30

59

For investments In integrated Agriculture & livestock

projects

Venture capital

financing for technology-

intensive agriculture

projects

Agriculture Fund

Agriculture Fund

KHAZANAH NASIONAL

BANK NEGARA

MALAYSIA

RM200 m RM200 m

Source: Budget 2007

Agriculture R&D Fund RM193 m

Malaysian Cocoa Board

Malaysian Rubber Board

Malaysian Palm Oil Board

Malaysian Agriculture Research & Devt Institute

Pre-commercialisation & IP Acquisition

Research capabilities & expertise

Science Fund

RM194 m

Techno Fund

RM354 m

Note: Techno Fund and Science Fund is under Ninth Malaysia Plan, 2006-2020Source: Budget 2007

RM(million)



Aligned to the Ninth Malaysia Plan, Budget 2007 includes development programmes for the biotechnology sector, with RM210 million budget. A new growth area, biodiesel development is supported by a Bank Pembangunan administered fund of RM500 million.

Accelerating ICT

Clearly, ICT plays a key role in gearing up the economy towards a knowledge-based one. The development of the Multimedia Super Corridor will be accelerated with a focus on shared services and outsourcing companies. A fund of RM154 million, placed under the Malaysian Development Corporation, is to provide more comprehensive services as well as to support ICT-based SME entrepreneurs. A further allocation was made to the MSC Grant Scheme to support ICT-based R&D. MIMOS has allocated funds of RM162 million for programmes such as Mobile Broadband Engines, e-Learning applications and R&D pertaining to language and technology, particularly in Bahasa Malaysia.

The PC adoption incentive is also a boon to PC retail markets and PC peripherals. In addition, a fund of RM288 million was allocated for schools’ purchase of PCs and its peripherals.

Infrastructure rollout of telecommunications in rural areas, such as basic telephony services and Internet (including broadband), will be expedited through the Universal Service Provision Fund administered by MCMC. Rural folk will also benefit from the move for payment of bills such as quit rent, assessment rates and sewerage charges at Pos Malaysia, exploiting its comprehensive network.

Developing Local Content

Broadcasting and media companies would be able to draw on the Creative Industry Development Fund of RM25 million, an initial allocation aimed at promoting the development of local content. Other incentives include double deductions on expenses incurred in advertising Malaysian brands would also be extended to a company within the same group in addition to the company that owns the brand. The move also boosts advertising expenditure.

Conclusion

All in all, the government is keen to ensure success of its initiatives to propel Malaysia into another level of development towards developed nation status on our own terms amidst the current era of intensifying globalisation. The alignment of aims across the various sectors of the economy and the combined efforts of both government, private sector and individuals are crucial to attaining the National Mission objectives. Amongst all this, the ICT and communications and multimedia play strong enabler roles, both in government, businesses and at home.

Budget 2007 Incentives To Own PC

Eligibility period for PC purchase incentive is

five years (three years previously)

Tax rebate of RM3,000 for purchase of PC

(RM500 previously)


FEATURE: BURGEONING MOBILE MARKET IN CHINA

Demand Unlimited

The telecommunications industry in the People’s Republic of China (“China”) continues to expand at one of the fastest rates in the Asia region and has witnessed remarkable growth. China’s telecoms service revenue is robust, reaching an 11% compound annual growth rate (CAGR) over 2003-2005 and this is in line with the country’s GDP growth. Although the number of mobile phone subscribers in China surpassed the number of fixed line subscribers, note that the fixed line telephone service is still in high demand, albeit from relatively low base. The 2003-2005 CAGR for fixed line subscribers is 22%.

The telecommunications industry in China remains unique among Asia’s telecoms markets. Even though the industry is partially liberalized, all the principal operators are still majority state-owned and controlled. The government’s influence over the development and restructuring of China’s telecoms industry is significant.

Local fixed line and high speed access services are provided mainly by China Telecom Corporation Limited (China Telecom) and China Netcom Group Corporation (Hong Kong) Limited (China Netcom). Meanwhile, China Mobile Limited (China Mobile) and China Unicom Limited (China Unicom) are the main mobile services providers. As with most mobile markets today, the Chinese mobile operators face intense competition, particularly on tariffs, service quality and brand name.

China and Selected Asian Countries: Fixed Line and Mobile Markets

China’s robust growth in the telecom industry is underpinned by factors such as its huge population (2005:1.307 billion); economic and GDP per capita growth, that is, 2004 at US$1,276 and 2005 at US$1,706; and the naturally growing need for communications services. However, penetration rates are still relatively low but higher than other emerging markets in Asia.

1,000

800

600

400

200

0

US

D (m

illio

n)

10.6

10.4

10.2

10.0

9.8

9.6

9.4

9.2

9.0

Gro

wth

(%)

Communications Service Revenue versus GDP

CAGR=11%

2003 2004 2005 3Q 2006

*represents 2Q 2006 GDPSource: Ministry of Information Industry, China, 3Q 2006 China Economic Quarterly

653727

810

671

*10.5

10.2

9.59.5



In comparison to ASEAN countries and selected developed Asian countries, China shows much potential in terms of relatively low penetration rates for both fixed line and mobile services. A note is that China Telecom is branding itself as an integrated information service provider while increasing activities towards convergence of voice, Internet and information services.

Next Generation Technologies

GSM and CDMA are prevalent in Asia. Unlike Japan and South Korea who are moving rapidly on 3G systems, many other countries in Asia including China are still adopting strategy towards meeting 2G demand or nascent 3G systems.

Rank

1

2

3

4

5

6

7

8

9

10

Source: Paul Budde Communication based on Global Mobile data (www.budde.com.au)

Operator

China Mobile

China Unicom

NTT DoCoMo

KDDI

Telkomsel

Smart Communications

SK Telecom

Bharti

BSNL

Reliance

Country

China

China

Japan

Japan

Indonesia

Philippines

South Korea

India

India

India

Subscribers (million)

293

149

51

25

22

21

20

19

19

17

Top 10 Asia Mobile Operators (by subscribers) – March 2006

Penetration (%)Country

Hong KongSingaporeTaiwanMalaysiaSouth KoreaJapanThailandPhilippinesChinaIndonesia

Mobile109.1100.788.986.080.672.048.739.829.818.6

Fixed54.242.459.716.855.740.411.44.3

26.95.7

Source: Paul Budde Communication (www.budde.com.au)

China

Hong Kong

India

Japan

Malaysia

Philippines

Singapore

South Korea

Thailand

Source: Paul Budde Communication (www.budde.com.au), Portio Research, MCMC

GSM,CDMA,GPRS,CDMA2000�X

GSM, CDMA, TDMA, GPRS, EDGE, UMTS (CDMA & TDMA to be phased out by

2009, switching all subscribers to GSM networks)

GSM, CDMA, GPRS, EDGE, CDMA2000 1X, UMTS (in MTNL deployment phase)

PDC, CDMA, PHS, CDMA2000 1X EV-DO, CDMA2000 1X, UMTS

GSM,GPRS,EDGE,UMTS

GSM, iDEN, CDMA, GPRS, EDGE, UMTS (launched by Globe on a trial basis)

GSM, GPRS, UMTS

CDMA, CDMA2000 1X, CDMA2000 1X EV-DO, UMTS

GSM, GPRS, EDGE, CDMA2000 1X, UMTS (planned launch in June 2006)

Mobile Technologies



China’s 3G standard, TD-SCDMA, qualifies under IMT-2000 standard for 3G mobile service under the ITU. The MII has not awarded licenses yet. Industry expectation is for the Olympic Games in Beijing 2008 to likely drive early award of the the much awaited 3G licences in China.

Financial Snapshots - China Mobile Subscribers (million)Operating revenue (RMB billion)EBITDA (RMB billion)EBITDA Margin (%)Net Profit (RMB billion)Basic Earnings per share (RMB)

1H-05223.8114.662.754.724.01.2

1H-06273.8137.078.357.230.21.5

Financial Snapshots-China Unicom Subscribers (million)Operating revenue (RMB billion)EBITDA (RMB billion)EBITDA Margin (%)Net Profit (RMB billion)Basic Earnings per share (RMB)

1H-05120.543.214.032.42.30.2

1H-06135.146.815.533.12.80.2

300

250

200

150

100

50

0

No

. of

Sub

crib

ers

(mill

ion)

117.7141.6

204.3

246.7

2002 2003 2004 2005

Year

2002 2003 2004 2005

40

30

20

10

0

40

30

20

10

0

USD (billion) (%)

Total SubscribersOperating Revenue and Operating Income

Operating Revenue

Operating Income Margin

Operating Income

Year

16.3

6.2

20.2

6.8

24.4

7.69.4

30.938.0

33.5 30.9 30.3

CAGR= 28%

140

120

100

80

60

40

20

0

No

. of

Sub

crib

ers

(mill

ion)

43.1

80.8

112.1

127.8

2002 2003 2004 2005

Year

Total SubscribersOperating Revenue and Operating Income

Operating Revenue

Operating Income Margin

Operating Income

Year

CAGR= 44%12

10

8

6

4

2

0

20

15

10

5

0

USD (billion) (%)

5.2

0.9

8.610.1

11.1

1.1 1.0 1.0

18.0

12.610.0 9.3

Source: Company Reports Source: Company Reports

Source: Company Reports Source: Company Reports



EBITDA Comparison

Overall, EBITDA margins of operators in developing countries are high compared to those of developed countries. Setting aside differences in accounting standards for respective country operators, there is relatively higher EBITDA margin for operators heavily involved in infrastructure roll out.

The higher EBITDA margin of China Mobile compared to China Unicom could indicate its more aggressive capital expenditure as incumbent. In contrast, Malaysian operators, in view of the rapid development of the mobile segment, still have high EBITDA margins.

Spillover Effects vis-à-vis China Boom

By sheer volume of communications subscriber demand, the burgeoning mobile market in China have brought massive opportunities, for example, development in R&D capabilities for vendors both within and from outside China, let alone its impact from lower priced handsets and equipment, spillover from applications development and roll out experiences.

Chinese vendors, the likes of ZTE and Hua Wei, are making inroads into US, Europe, Russia, Africa and the Asia Pacific region. To date, Google is ready with its search engine in Chinese, poised to tap the Chinese market. The advent of deployment of 3G in China portents further opportunities – propellant for lower 3G handsets prices, for instance; foreign operators poised to enter the China 3G market, pending usually transient issues of regulation, trials and other teething issues.

EBITDA Margin Comparison (2005)

50

45

40

35

30

25

20

15

10

5

0

Rev

enue

US

D (m

illio

n)

0 10 20 30 40 50 60

EBITDA Margin (%)

Maxis

China Mobile

Celcom

SK Telecom

China Unicom

KT FreetelLG Telecom DiGi

Vodafone Japan

KDDI

NTT DoCoMo

Source: Company Reports


FEATURE: IPTV

An Introduction

Internet Protocol Television or IPTV, as the name suggests is the use of a transport protocol, that is, Internet Protocol (IP), to deliver television service to end users. In other words, IPTV is a TV service, usually a pay-TV service, delivered over an IP network using IP-based communication protocol and equipment.

The versatility of IP in a digital environment enables many modes of delivery for IPTV. That is, IPTV can be carried through fibre or combination of fibre and other technologies such as copper or coaxial cable, wireless technology, broadband fixed wireless technology, satellite or mobile broadcasting technology. To date, industry thoughts appear to skew towards fibre or xDSL broadband platform as possibly offering the eventual required full scale network stability, eventual scalability and quality for a long term workable business model.

IPTV As A New TV Experience

Technology advancements over time avail consumers to receive multi-channel and on-demand programmes at home or wherever they chose in a quadruple play environment, where mobility is offered in addition to triple play – voice, online and video offerings. Latest desired features include High Definition (HD) TV over IPTV and of course, avenue for targeted advertising.

IPTV capabilities of late compared to earlier IPTV services introduced three to four years ago have the benefit of higher compression ratios using MPEG4/H.264, which is significantly more bandwidth efficient; system-on-chip-based set top boxes; and conditional access with embedded digital rights management. The latter provides higher assurance levels on security of content rights and improved versatility in the management of content distribution and storage. Thus, facilitating rich content procurement and flexibility in user selection or purchase in interactive mode.

Despite the cost of infrastructure investment associated with IPTV deployment, operators both in terms of content providers and telcos are willing to spend in order to cater to consumer needs, enabling users to realise their desired TV viewing habits such as catching up with missed programs, special attractive content packages, extra channels and the like which are not restricted to broadcasters’ schedules but creating one for themselves. In short, demand desires increased user personalised programming style and time-shifted viewing options.

For example, KPN of the Netherlands launched an IPTV service that allows users to call up programs from their channels that was broadcast as long as 10 days ago. Users can record up to 100 hours of programs on a recorder and select broadcast from more than 100 TV and radio channels.

3�C&M Bulletin Third Quarter 2006

FEATURE: IPTV

Drivers for IPTV Services

IPTV may be offered by telcos or broadband service providers to generate new revenue streams or to capture market share through exploiting new technology in today’s highly competitive communications services arena featuring declining Average Revenue Per User (ARPU), high churn rates and business necessity to leverage network investments.

IPTV Markets

On a global basis, IPTV so far is viewed as a niche market. Reports indicate there are more than 2.5 million IPTV subscribers worldwide today, reaping revenue of just above US$0.5 billion. The potential appears to be for well over 25 million subscribers in 2010, with revenue reaching above US$20 billion.

Subscribers versus Years In Operation Until 2005

IPTV Subscribers 2005

TV International* Estimates from OVUM & GartnerSource: OVUM IPTV Market Analysis

No

. of

Sub

scri

ber

s (‘0

00)

No

. of

Sub

scri

ber

s (‘0

00)

700

600

500

400

300

200

100

0

700

600

500

400

300

200

100

0

US

Hong Kong

France

Italy

JapanSpain

Canada

UK

Ger

man

y

Can

ada

US

Sp

ain

Italy

Fran

ceHK

No. of Years (Start of service to 2005)

0 1 2 3

*Average period takenSource: MCMC Analysis, OVUM IPTV Market Analysis

IPTV Plans in Major Platforms – Worldwide Examples

Country France

Spain

Germany

IPTV HighlightsFocus on Video on Demand (VOD) as differentiator from cable and satellite. Launching HDTV. Bundling of services to include video calling into TV services.

Upgrading to MPEG4 in 2006 to enable high definition launch. Aiming also for multiroom and HD.

Deutsche Telekom (T-Online) is launching 100-channel service available to 10 German cities. Will use Bundesliga soccer and link-up with Premiere to drive take-up.

TargetsFrance Telecom (Maligne TV) aims for one million subscribers by 2008 from 200,000 subscribers currently. Another IPTV operator, Neuf TV, plans to expand coverage of service from 50% of France to 70% by end 2006.

France Telecom (Wanadoo TV) to expand reach from 5 to 7.2 million homes by end 2006. Telefonica (Imagenio) aims for 1.4 million subscribers by end-2009 from 250,000 today.

Embarking on aggressive strategy to expand coverage of service nationwide within three years. Aims to sign up one million subscribers by end-2007.

652

495

324*

243201

124*

4244*


FEATURE: IPTV

IPTV Issues

Issues in IPTV deployment remain many despite the rich potentiality of the service. Across reports from the ITU and industry analysts, the issues centre on infrastructure, content development, consumer awareness and changing tastes, including due cognizance of the locale idiosyncrasies in which IPTV is deployed and future scalability requirements as new and better standards and standardized equipment evolves.

On a global basis, the copper cable evolution from ADSL to ADSL2+ to VDSL2 facilitates IPTV take up, but IPTV performs better with FTTx (refers to several different forms of optical fibre architectures). For the moment, these platforms provide satisfactory bandwidth, increases speed of access, which is much required for smooth channel changes, for example.

CountryMalaysiaHong KongFranceItalySpainUSCanadaGermanyUK

TechnologyADSLDSLADSL2+DSLDSLDSLDSLADSL2+ & VDSLADSL2+/fibre

Country

Austria

Australia

Hong Kong

South Korea

China

India

IPTV Highlights

Telekom Austria (AonDigital TV) has more than 40 channels for its AonDigital IPTV service and similarly for VOD deals.

ReelTime (ScreenTime Media) closing on VOD content deals with Paramount and Universal. Plans to launch set-top box with an integrated DTT tuner to enable broadcast-channel element.

PCCW’s Now Broadband TV is working with Star to export Now Broadband into Asian markets with low pay-TV take-up.

Trials for IPTV.

SMG (Shanghai Media Group) is in discussion with China’s communications and media regulatory authorities on a national roll-out of IPTV services.

MTNL is seeking regulatory approval to launch IPTV. Expected to launch late 2006.

Targets

Aims for 15,000-20,000 subscribers by end 2006, with a long term goal of 1.5 million triple-play customers.

Plans to sign up ISPs and cablers in each Australian state in 2006. Aims for 45,000 subscribers by mid-2007 and 300,000 by mid-2008.

Aims for 750,000 subscribers by end 2006 and one million subscribers in the longer term. Currently there are 550,000 subscribers.

The country’s two regulators have agreed to jointly start IPTV late 2006. Once regulatory issues addressed, commercial launch of IPTV by early 2007.

Best TV, the SMG subsidiary dedicated to IPTV operations, is reported to have contracts with both China Telecom and China Netcom that cover all the major cities in China.

Test services in Delhi for more than a year and Mumbai in July 2006. The service will feature a bouquet of Free-To-Air and Pay-TV channels and VOD. Tariffs yet to be decided but are expected similar to current charges of cable TV operators.

Source: TV International 30 Jun 06, Korea Times, ipTVnews Analyst May-06, IPTV Daily 1 Sep 06

Source: OVUM IPTV market Analysis

Infrastructure


FEATURE: IPTV

Countries such as US, Germany and some Asia Pacific countries have deployed FTTx and Very high bit rate Digital Subscriber Line (VDSL) for IPTV rollout. This means that telecommunications operators going into IPTV services need to compete with cable and satellite providers that use standard, copper phone cables to deliver up to 100Mbit/s upstream and downstream. This is a ten fold increase over Asymmetric Digital Subscriber Lines (ADSL).

IPTV that utilises broadband in Malaysia is still at early stage since its introduction in 4Q-05. Both MiTV and Fine TV are reported to have 1,000 subscribers each.

Content and Consumer Awareness

While addressing the issue of getting the right content at the right price in order to retain subscribers as well as to attract new ones, the operators need to package and market content in compellingly attractive manner to suit targetted user requirements. Content is also required to be timely, for example, in the case of news. While some operators provide a library of on-demand movies as well as interactive channels to differentiate their offerings, the management of its video content distribution and digital rights are also critical success factors. Often with premium content, operators may want to take an active role in marketing and creating customer awareness.

Another important issue is billing since complicated pricing mechanism for different channel bundles, on-going promotions and royalty programs can make billing a mess. The latter needs to be addressed at the outset.

Conclusion

IPTV development in 2006 accelerated, simply because of recent advances such as in compression technologies, progress in set-top box capabilities, resolution in standards that bring the potential of IPTV services closer to the desired user experience and supplier quest for profit margin and market share, compared to pioneer IPTV in 2003/2004.

In 2006, the old thresholds to better digital TV experience appear at last surmountable, pending excellent execution of appropriate strategies, and keen vision to harness consumer wants and the awakening eyes of advertisers. Given such combination of factors, IPTV in the next few years is expected to be even more interesting as the digital environment develops further.


FEATURE: A BRIEF ON POSTAL DEVELOPMENTS

Change in the Postal Industry

The postal industry has not been spared the impact of globalisation. Liberalisation of the industry is featured by corporatisation and privatisation of postal services or public listing of postal versus strictly postal as a public service provided by the government. Another feature is the emergence of new entrants, mostly non-postal operators bringing competition to a previously monopoly operation by an incumbent.

With the new found freedom, so to speak, the postal sector though driven by external forces of change, also today operates in an environment where there is more disposal income per capita than even half a decade ago. Studies on Europe and the Americas have indicated that mail volumes per capita are directly related to GDP per capita. In that sense therefore, if this observation can be used for developing countries, there is much potential for the postal and courier industry in these countries in respect of their growing affluence of late.

Competition from New Media

Studies in developed countries have also indicated that even with the proliferation of e-mails, which was seen initially to be a threat to the postal business, was in fact a “blessing in disguise”. Parcel mail delivery was more in demand as online retail business thrived.

While the Malaysian situation may have substitution effects from mobile SMS service in the past half decade, and the growing Internet connections including broadband services, the full positive impact of e-commerce has yet to be felt.

Source: MCMC, Universal Postal Union

GD

P P

er C

apit

a (U

SD

)

19,000

17,000

15,000

13,000

11,000

9,000

7,000

5,000

3,000

1,000

(1,000)10,0000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

IndonesiaMyanmar

PhilipinesLaos

Malaysia

ThailandChina

India

South Korea

Post Items versus GDP Per Capita (2005)

Average No. of Posted Items Per Inhabitant


FEATURE: A BRIEF ON POSTAL DEVELOPMENTS

With changes in the postal industry globally, the prevalence of competition and substitution effects from services through the electronic media, the postal service as aptly pointed out by the Universal Postal Union (UPU), has to “continue developing strategies to meet customer needs while increasing quality of service and co-operation within the industry, develop new services and keep an eye on moderating costs”.

Strategies For Future

One of the strategies promoted by the UPU since the year 2001 is for the postal service to engage in direct mail marketing to tap the advertising potential of the country. For developed countries such as US, direct mail is part of the country’s advertising scene - it has been for the past 30 years.

Reports indicate that direct mail constituted 17% of US adspend in 1975 and 33% or US$55 billion out of the total US advertising pie in 2005. European countries are said to be poised for growth, for instance, UK direct mail ads is close to US$5 billion - 13% of the UK advertising pie.

With developing countries in the Asia Pacific region growing rapidly, direct mail marketing advertising revenue is an attractive alternative as competition increases in traditional postal business, thanks to new electronic media. In Malaysia, Pos Malaysia has already adopted such strategy with the company reporting positive growth in a largely still virgin direct mail market.

Short Messaging Services


No

. of

SM

S (m

illio

n)

Pen

etra

tio

n R

ates

%

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0


SM

S P

er C

apit

a

600

500

400

300

200

100

0

398

554

204

386

3,606 2,947

6,�647,554

2002 2003 2004 2005 1998 1999 2000 2001 2002 2003 2004 2005

60

50

40

30

20

10

0

Post-Mail, PCs, Internet Dial-Up Penetration Rates

PCs

Post-Mail

Internet Dial-Up


GLOSSARY

ATSCBTBNMBursa MalaysiaC&M SectorCAGRCASPChina UnicomChunghwaDeutsche TelDiGiDJIADTTBDVBEBITFar EastoneFCCGlobeGSMHutchisonIndoSatIMT-2000ITUKDDIKT CorpLG TelecomMarket Capitalisation

MaxisMESDAQMobileOneMPEGMTNLMTSFBMyICMS 886New WorldNFPNSPNTT DoCoMoPCCWPLDTPos MRTMSingTelSmartoneSTISundayTaiwan MobileTD-SCDMATelecom Corp.TMB or TelekomTelekom TBKTelstraTimeTT&TVSNL

Advanced Television Systems CommitteeBT Group PlcBank Negara Malaysia, the country’s Central BankStock exchange of Malaysia (previously KL Stock Exchange)Communications and Multimedia SectorCompound Annual Growth RateContent Applications Service Provider: Individual (I)China Unicom LtdChunghwa Telecom Co. LtdDeutsche Telekom AGDiGi.Com BerhadDow Jones Industrial AverageDigital Terrestrial Television BroadcastingDigital Video Broadcasting GroupEarnings before interest and taxFar Eastone Telecom Co. LtdFederal Communications Commission of USGlobe Telecom Inc.Global System for Mobile CommunicationsHutchison Telecom (AUST)Indonesian Satellite CorpInternational Mobile Telecommunication 2000International Telecommunication UnionKDDI CorporationKT CorporationLG Telecom LtdMarket capitalisation is the result of multiplying the number of shares outstanding by share price at the end of a periodMaxis Communications BerhadMalaysia Exchange of Securities Dealing & Automated QuotationMobileOne LtdMotion Picture Experts Group Mahanagar Telephone Nigam LtdMalaysian Technical Standards Forum BerhadMalaysian Information, Communications & Multimedia Services 886New World Cyberbase LtdNetwork Facilities Provider: Individual (I), Class (C)Network Services Provider: Individual (I), Class (C)NTT DoCoMo Inc.PCCW LimitedPhilippine Long Distance Telephone CompanyPos Malaysia & Services Holdings BerhadRadio Television MalaysiaSingapore Telecommunications LtdSmartone TelecommunicationsStraits Times Index of the Singapore Stock ExchangeSunday Communications LtdTaiwan Mobile Co. LtdTime Division-Synchronous CDMA Telecom Corporation of New ZealandTelekom Malaysia BerhadTelekomunikasi TBK PTTelstra Corporation LtdTime dotcom BerhadTT&T Public Co. LtdVidesh Sanchar Nigam Ltd


CONTACT US

Malaysian Communications and Multimedia Commission63000 Cyberjaya Selangor Darul EhsanTelephone : +603 8688 8000 Facsimile : +603 8688 1000 E-mail : [email protected] : www.mcmc.gov.myFreephone number: 1-800-888-030

Sabah Regional Office6-10-10, Tingkat 10 No. 6, Menara MAA Lorong Api-Api, Api-Api Centre 88000 Kota Kinabalu Sabah Tel : +60 88 270 550Fax : +60 88 253 205

Sarawak Regional OfficeLevel 5 (North), Wisma STA26, Jalan Datuk Abang Abdul Rahim93450 KuchingSarawakTel : +60 82 331 900 Fax : +60 82 331 901

Central Regional OfficeLevel 17, Wisma SunwayMas1, Jalan Tengku Ampuan Zabedah C9/C Section 940100 Shah AlamSelangor Darul EhsanTel : +60 3 5518 7701 Fax : +60 3 5518 7710

CONTACT US

Northern Regional OfficeUnit 3, Level 11Menara UMNO128, Jalan Macalister10400 PenangTel : +60 4 227 1657Fax : +60 4 227 1650

Eastern Regional OfficeLevel 2, Bangunan Tabung HajiJalan Bukit Ubi25200 KuantanPahangTel : +60 9 512 1100 / 1119Fax : +60 9 515 7566

Southern Regional OfficeSuite 7A, Level 7Menara AnsarJalan Trus80000 Johor BahruJohorTel : +60 7 226 6700Fax : +60 7 227 8700

EnquiriesFor any details and enquiries please contact the Market Research Department team:Yee Sye Chung (Head)Mooi Mee MeeSharmila ManoharanAzrita Abdul Kadir

Malaysian Communications and Multimedia Commission 2006The 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 Commission63000 Cyberjaya, Selangor Darul Ehsan, Malaysia. Tel: 03 - 8688 8000 Fax: 6 03 - 8688 1000Toll Free Numbers: 1-800-888-030 http://www.mcmc.gov.my

63000 Cyberjaya, Selangor Darul EhsanTel: 603 8688 8000 Facsimile: 603 8688 1000

Freephone number: 1 800 888 030Website: www.mcmc.gov.my

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