Contents :

• Telekom Malaysia Berhad (“TM”), is pleased to announce that on 12 December 2005, its subsidiary, Fiberail Sdn Bhd (“FSB”), has entered into an Agreement with Petrofibre Network (M) Sdn Bhd (”PFN”) to acquire PFN’s business and business assets (“Agreement”) at a total consideration of RM100,546,884.19
  • a) Initial cash deposit of up to RM2,000,000.00 within 14 days from the signing of the Agreement;
    
    b) Issuance to PFN of up to 1,580,000 ordinary shares of RM1.00 each in the share capital of the FSB, at a premium of RM7.08 each amounting to RM12,766,400.00; or at an adjusted Net Tangible Asset (“NTA”) per share as per the terms and conditions stipulated in the said Agreement (hereinafter referred to as “Consideration Shares”); and
    
    c) The remaining balance of the purchase consideration shall be paid in cash.
    

    • • Shareholders	Percentage Equity (%)
        	Before JVA	After JVA
        TM	60	54
        KTMB	40	36
        PFN	-	10

      · As the new strategic investor in FSB, the JVA allows PFN the right to nominate a member to the board of directors of FSB.
      
      · The equity participation of each party in the capital of FSB before and after the new JVA shall be as follows:
    
    (a) JVA
    (b) Put Option Agreement
  2.1 FSB has agreed to acquire the business of PFN which includes business assets and the assumption of certain liabilities for a total consideration of RM100,546,884.19 based on the book value of the business assets and liabilities of PFN as at 31 October 2005 or as may be further adjusted pursuant to the terms of the Agreement.
  
  2.2 The said acquisition of PFN’s business shall be satisfied by FSB in the following manner:2.3 The Agreement is conditional upon inter alia, the execution of a Joint Venture Agreement ("JVA") and a Put Option Agreement to be entered into by TM, PFN and Keretapi Tanah Melayu Berhad (“KTMB”), a shareholder of FSB. The principal terms of which are as follows:
  • • · By the Completion Date (or Extended Completion Date, as applicable) of the Agreement, FSB’s shareholders (i.e. TM and KTMB) shall enter into a Put Option Agreement with PFN wherein FSB’s shareholders shall grant PFN the option to require them to acquire the Consideration Shares from PFN as per the terms of the Put Option Agreement.
      
      · PFN shall be entitled to exercise its rights under the Put Option Agreement at any time within the period commencing 1 year from the date of execution of the Put Option Agreement and expiring 5 years thereafter or prior to the initial public offering of FSB’s shares to the public as provided in the Put Option Agreement, whichever is the earlier.
  3.1 All requisite corporate authorisations of FSB and PFN, including but not limited to the approval of the board of directors of FSB’s Shareholders and the board of directors of PFN’s shareholders having been obtained for the sale and purchase of the business and the business assets by and from PFN and the payment of the acquisition as contemplated in the Agreement;
  
  3.2 The written approval of the Foreign Investment Committee (“FIC”).
  
  3.3 Satisfactory completion of a full legal, technical and financial due diligence exercise undertaken by FSB on PFN and vice versa;
  3.4 The assignment and/or novation of relevant contracts to FSB;
  
  3.5 The execution of the Put Option Agreement;
  
  3.6 PFN to procure the consent of the relevant counterparties to the assignment and/or novation of the contracts;
  
  3.7 The execution of the Wayleave Agreement between FSB and Petronas Gas Berhad (“PGB”), granting FSB the sole and exclusive right for telecommunication services only, to utilise PGB’s right of way under the Peninsula Gas Utilisation Project; and
  
  3.8 The execution of the Joint Venture Agreement.
  The Proposed Acquisition will not have any material effect on TM Group’s earnings and NTA for the financial year ending 31 December 2005. However, in the medium to long term, the Proposed Acquisition is expected to contribute positively to the earnings of FSB specifically and TM Group in general.
  The proposed acquisition would expand FSB’s business in terms of assets and wider network coverage and position itself in the market place by providing the necessary diversity to its present network distribution.
  FSB will fund the purchase price for the proposed transaction through internally generated funds, external financing and issuance of new shares.
1. INTRODUCTION

2. SALIENT TERMS OF THE PROPOSED ACQUISITION

3. CONDITIONS TO THE COMPLETION OF THE PROPOSED TRANSACTION

Apart from conditions in item 2.3 above, the proposed acquisition by FSB is conditional upon satisfaction of inter alia, the following conditions by the Completion Date or Extended Completion Date:

4. INFORMATION ON PFN

PFN was incorporated on 4 April 1996. Its principal activity is the provision of telecommunication services including fibre optic transmission network services in Peninsula Malaysia.

PFN’s shareholders comprise of Petronas Retirement Benefit Scheme (“PRBS”) holding 60% of the company’s equity and Petroliam Nasional Berhad (“Petronas”) holding 40% of the company’s equity.

5. INFORMATION ON KTMB

KTMB, a company incorporated in Malaysia and is wholly-owned by the Minister of Finance Incorporated (“MoF”). KTMB’s principal activity is providing railway services in West Malaysia.

6. INFORMATION ON FSB

FSB was incorporated on 12 December 1989. It is a joint-venture company between TM and KTMB in the ratio of 60:40 respectively. FSB’s principal activity is the provision of telecommunication network related services through fibre optic cable network.

7. EFFECTS OF THE PROPOSED ACQUISITION

7.1 Share capital and shareholdings of substantial shareholders

The Proposed Acquisition will not have any effect on the issued and paid-up share capital and shareholdings of substantial shareholders of TM.

7.2 Financial Effect
8. RATIONALE FOR THE PROPOSED ACQUISITION

9. SOURCE OF FUNDING

10.1 Prospects

• • The Proposed Acquisition will directly enhance FSB’s business in terms of the following:
  • a) Better network coverage and reach
    b) Improved quality of products and services
    c) Increased revenue
    d) Increased profits
    e) Enlarged customer base
  • • FSB is currently licensed to operate within the railway corridor and in the area adjacent to or connecting with the railway corridor. With the new acquisition, the company is extending its operations towards PGB gas pipe corridor. The management has submitted and is currently awaiting response from Malaysian Communications and Multimedia Commission on the expansion of licence area.
    • The telecommunications industry is characterised by rapid and significant changes in technology. Currently, acquired network has the capability to provide telecommunication services through PGB gas pipe corridor. However, it is possible that future development or application of new or alternative technologies could require changes to FSB’s business model or necessitate new investments. TM also believes that the acquisition of business and business assets with a strong management team will help mitigate any risk factors.
  a) Licensing
  
  b) Rapid technology change
  
  The proposed acquisition does not require the approval of TM’s shareholders. Other approval required is from the FIC.
  In so far as the Directors of TM are aware, none of the Directors or the major shareholders of TM and/or persons connected to them have any interest, whether direct or indirect, in the above Proposed Acquisition save for the following:
  (i) MoF, holds one Special Rights Redeemable Preference Share of RM1.00 in TM and is a major shareholder of Petronas, holding 99.99% of the issued and paid-up share capital of Petronas;
  
  (ii) Save for one (1) share held by Federal Land Commissioner, Khazanah Nasional Berhad (“Khazanah”) is wholly-owned by MoF. Khazanah is a major shareholder of TM holding 35.13% of the issued and paid up capital of TM;
  
  (iii) Encik Ahmad bin Hashim and his alternate Encik Leonard Wilfred Yussin are Directors of TM nominated by MoF, whilst Dato' Azman bin Mokhtar is a Director of TM nominated by Khazanah.
  
  Encik Ahmad bin Hashim and Encik Leonard Wilfred Yussin (in the absence of Encik Ahmad bin Hashim) and Dato’ Azman bin Mokhtar have abstained and will continue to abstain from all deliberations and decisions on the Proposed Acquisition.
  The Board of Directors of TM [except Dato' Azman bin Mokhtar, Encik Ahmad bin Hashim and Encik Leonard Wilfred Yussin (in the absence of Encik Ahmad bin Hashim)] who have abstained and will continue to abstain from all board deliberations of the Proposed Acquisition, is of the opinion that the Proposed Acquisition is in the best interest of FSB and TM Group
  There is no departure from the SC Guidelines in respect of the Proposed Acquisition.
  
  The Agreement is available for inspection at the registered office of TM at Level 51, North Wing, Menara TM, Jalan Pantai Baharu, 50672 Kuala Lumpur during the normal business hours from Mondays to Fridays (except public holidays) for a period of three (3) months from the date of this announcement.

10.2 Risk Factors

11. APPROVALS REQUIRED

12. DIRECTORS' AND MAJOR SHAREHOLDERS' INTERESTS

13. STATEMENT BY THE DIRECTORS

14. DEPARTURE FROM THE SECURITIES COMMISSION ("SC")'S POLICIES AND GUIDELINES ON ISSUE /OFFER OF SECURITIES ("SC GUIDELINES")

15. DOCUMENT AVAILABLE FOR INSPECTION