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In an effort to enhance greater transparency to the public, Telekom Malaysia Berhad (“TM”) wishes to announce its Economic Profit for the 2nd Quarter ended 30 June 2006 (2Q06). Quarterly announcement of TM’s economic profit/(loss) is part of the broader performance management framework that TM has in place, as prescribed under the Government Linked Company (“GLC”) Transformation programme, and is disclosed on a voluntary basis.

Economic Profit is a yardstick to measure shareholder value as it provides a more accurate picture of underlying economic performance of TM Group vis-à-vis its financial accounting reports.

TM: 2Q06 ECONOMIC PROFIT STATEMENT



INDIVIDUAL PERIOD

CUMULATIVE PERIOD

	Current Year Quarter 2Q06 RM’Mn	Preceding Year Corresponding Quarter 2Q05 RM’Mn	Current Year To Date 2Q06 RM’Mn	Preceding Year Corresponding Period 2Q05 RM’Mn
Earning before Interest & Taxes (EBIT)	736.9	550.4	1,670.5	1,192.1
Adjusted Tax	206.3	154.1	467.7	333.8
NOPLAT	530.6	396.3	1,202.8	858.3
Average Invested Capital	5,411.5	4,792.2	10,502.6	9,705.2
WACC	9.54%	9.23%	9.55%	9.28%
ECONOMIC CHARGE	516.3	442.3	1,003.0	900.6
ECONOMIC PROFIT	14.3	(46.0)	199.8	(42.3)


*Average Invested Capital is pro-rated to correspond to the reported earnings period.

• • Cost of Equity = (Beta*Market Risk Premium) + Risk Free Rate
TM’s 2Q06 Economic Profit has significantly improved by 131.1% year-on-year to RM14.3 million as compared to 2Q05 economic loss of RM 46.0 million.

Net Operating Profit Less Adjusted Taxes (NOPLAT)

TM recorded a higher NOPLAT of RM530.6 million for 2Q06, a 33.9% increase from RM396.3 million registered in 2Q05. The increased earnings was achieved on the back of RM3.98 billion revenue, a growth of 19.9% from RM3.32 billion registered in the same quarter last year.

This was mainly attributed to higher revenue from International and Internet & Multimedia segments. Favourable performance of Internet and Multimedia was mainly contributed by higher installation of broadband customers. Whilst, significant increase in International segment revenue was mainly contributed by better revenue from Dialog Telecom and the consolidation of PT Excelcomindo Pratama Tbk (XL).

Furthermore, EBIT for 2Q06 had improved due to higher share of profit of Associates Companies which was mainly contributed by Mobile One on the back of higher revenue.

Economic Charge

TM recorded an increase of 16.7% in Economic Charge to RM516.3 million for 2Q06 as compared to 2Q05 of RM442.3 million. The increase is attributed to:
1. Increase in Average Invested Capital (AIC) - AIC had increased by RM2.48 billion due to increase in average net PPE which was mainly from the consolidation of XL Net PPE of RM3.79 billion and increase in net other operating asset.
2. Higher Weighted Average Cost of Capital (WACC) - TM recorded a slightly higher WACC of 9.54% in 2Q06 versus 9.23% during the corresponding period last year. The increase in WACC was primarily attributed to:
a. Increase in total borrowings by RM1.52 billion from 2Q05 of RM10.57 billion to 2Q06 of RM12.09 billion; and
b. Higher cost of equity that was due to increase in risk free rate (4.42% to 4.80%) and Bloomberg beta (1.22 to 1.27).
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Notes: Assumptions on parameters used in the Economic Profit calculations:

1) The cost of equity of the Company is calculated based on the following formula: -

2) The Beta used in the calculation is the 5-year adjusted Bloomberg Beta as follows: -



	Beta
2Q06	1.27
2Q05	1.22


3) The risk free rate is the rate of return of a 10-year Malaysian Government Securities (MGS) at the close of the reporting period as follows: -



As at:	Risk Free Rate (%)
30 June 2006	4.80
30 June 2005	4.42


4) The market risk premium is assumed at 5.2%, which represents the market return in excess of the return earned on risk free asset.