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INTRODUCTION

Telekom Malaysia Berhad ("TM") is pleased to announce that on 3 May 2006, its wholly owned subsidiary, TM International Sdn Bhd (242188-H) ("TMI") entered into a Memorandum of Understanding ("MOU") with Saudi Telecom Company of the Kingdom of Saudi Arabia("STC")to pursue an opportunity to provide to a bid vehicle to be set up by STC with certain marketing and technical services relating to the bid by STC and its consortium partners for the third mobile licence in Egypt.
INFORMATION ABOUT STC

STC is the incumbent telecommunications operator in the Kingdom of Saudi Arabia ("KSA") and among the top 15 telecommunications operators worldwide, based on market capitalisation. It is the largest operator in Middle East and North Africa ("MENA"), based on revenues (2005 revenues: US$ 8.8 billion). STC provides a full range of telecommunication products, including fixed line telephony networks and operations, wireless telephony networks and operations, public payphones, internet services provision, data services, value added services and broadband services.

SALIENT TERMS OF THE NON-BINDING MOU

If STC is awarded the third mobile licence in Egypt, it will together with its consortium partners establish a company(“Bidco”). Bidco will then enter into a management services agreement(“MSA”)with TMI on terms to be agreed between the parties. These terms will include:
a) scope of services to be provided by TMI (which is expected to cover sales and marketing services, provision of IT and network services and customer care);
b) compensation for the provision of these services; and
c) performance targets to be achieved by TMI.

If TMI meets the performance targets, TMI will have an option to acquire some equity interest in Bidco. All terms relating to the option are to be agreed by the parties. The MOU is a non-binding MOU.

RATIONALE OF THE MOU

As the international investment division of TM, TMI is constantly reviewing opportunities to enhance the group’s shareholder value. The MSA allows TMI to provide its international experience to STC, whilst establishing a presence in the Middle East with the potential to acquire an equity interest in the Bidco at a later stage.

Egypt is one of the strongest markets in theMENAregion having a large and demographically attractive population with strong Gross Domestic Product(“GDP”)growth. It has the fourth largest telecoms industry in the MENA region, with revenues representing approximately 3.5% of GDP. With a mobile penetration rate of approximately 18.05% as at 31 December 2005, the Egyptian mobile market has significant room for growth. The MSA provides an avenue for TMI to participate in the growth of Egypt’s emerging telecommunications industry whilst limiting its upfront capital commitment.

FINANCIAL EFFECTS

The entry into this MOU will not have any material impact on the consolidated earnings of TM for the current financial year ending 31 December 2006.

DIRECTORS’ AND SUBSTANTIAL SHAREHOLDERS’ INTEREST

In so far as the Directors of TM are aware, none of the Directors nor the major shareholders of TM and/or persons connected to them have any interest, whether direct or indirect, in the above transaction.