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We are pleased to announce that TM International (L) Limited (“TMIL”), the wholly owned subsidiary of Telekom Malaysia Berhad (“TM”) has entered into a Joint Venture Deed (the “Agreement") with Mr Adnan Asdar and Mr Nasser Khan Ghazi on 16 February 2005 relating to the investment by TMIL in Multinet Pakistan (Private) Limited (“Multinet”). Multinet is a private limited liability company incorporated in the Islamic Republic of Pakistan in 1996. Multinet is in the business of providing retail and wholesale broadband services (including installing, operating and managing fibre optic cable), non-voice communication network services, electronic information services and cable television services in Pakistan. The joint venture is through acquisition of 78% equity by TMIL in Multinet.

CORPORATE INFORMATION ON MULTINET AND INFORMATION ON MR ADNAN ASDAR AND MR NASSER KHAN GHAZI

Mr Adnan Asdar and Mr Nasser Khan Ghazi are the existing shareholders/ promoters of Multinet. Presently they hold all the equity of Multinet. The authorised capital of Multinet is Pakistani Rupees (“R”) 100,000,000 divided into 1,000,000 ordinary shares of R100 each of which 1,000,000 shares has been issued and fully paid-up.

Mr Adnan Asdar, currently a senior management member of Multinet is a Pakistani national and a civil engineer by training with a Bachelor of Science and Masters of Science in Civil Engineering from Wisconsin, United States of America. He introduced broadband services via Multinet in 2002.

Mr Nasser Khan Ghazi, also currently a senior management of Multinet, is an American citizen with degrees in computer engineering and science from the College of Engineering Guindy, Madras, India and Masters of Science from Virginia Tech, Blacksburg, Virginia, United States of America. He has extensive experience working in IT companies in the United States. His last position prior to joining Multinet was as the director, developer and platforms group for the Middle East and Africa regions in Microsoft. He also started Digicom Pakistan (Private) Limited, one of the first internet service providers in Pakistan.

SALIENT TERMS OF THE JOINT VENTURE

Under the terms of the joint venture, TMIL will acquire 780,000 shares, representing 78% of the issued and paid-up share capital from both Mr Adnan Asdar and Mr Nasser Khan Ghazi for a total cash consideration of United States Dollar (USD) 5,460,000. Upon completion of the sale and purchase of these shares or as soon as practicable thereafter (“Completion”), the parties shall cause the issued and paid-up capital of Multinet to be increased by an additional 9,000,000 ordinary shares of R100 each (“recapitalisation”). TMIL will subscribe for 7,020,000 ordinary shares in Multinet by way of a cash injection of USD11,700,000. Both Mr Adnan Asdar and Mr Nasser Khan Ghazi will subscribe for 990,000 ordinary shares each in Multinet by way of a cash injection of USD1,650,000 each. Upon completion of the recapitalisation exercise, the shareholdings of the respective parties will be as set out below:

CONSIDERATION

The total cash consideration of USD5,460,000 for the purchase of the shares in Multinet was arrived at on a willing buyer-willing seller basis. The said cash consideration and cash injection of USD11,700,000 for the recapitalisation of Multinet by TMIL will be sourced from the working capital of TMIL.

APPROVALS REQUIRED

The acquisition of the shares in Multinet by TMIL is subject to, inter alia:

a) approval by Pakistan Electronic Media Regulatory Authority to the acquisition by TMIL;

b) notification to the Pakistan Telecommunication Authority of the proposed change in ownership of Multinet;

c) management contracts being entered into with Mr Adnan Asdar and Mr Nasser Khan Ghazi;

d) approval of lenders of Multinet to the acquisition by TMIL; and

e) approval of Bank Negara Malaysia.

RATIONALE FOR THE JOINT VENTURE

TMIL’s participation in the joint venture with Mr Adnan Asdar and Mr Nasser Khan Ghazi via Multinet will allow TM to participate in the development of a fiber optic backbone in Pakistan and ultimately enable it to leverage on its presence to venture into other lucrative segments of the telecommunication industry in Pakistan.

The Pakistan telecommunication industry is expected to undergo rapid developments in the near future. Compared with the Asian and world average, Pakistan’s tele-density remains low at approximately 3% against an Asian average of 10% and world average of 17%, indicating that there is room for growth in the industry.

TM views Multinet as the ideal partner as it is one of Pakistan’s leading providers of broadband services such as DSL broadband, gigabit metro area broadband, wireless broadband and allied services such as cable television, corporate networking services and other value added services. It currently has approximately 1,000 corporate DSL subscribers, which generated a revenue of approximately USD2,000,000 in the last financial year. These subscribers include some of Pakistan’s largest corporate entities as well as multinational corporations based in Pakistan.

FINANCIAL EFFECTS

The joint venture is not expected to have any material impact on the consolidated earnings of TM for the current financial year ending 31 December 2005. However, the said transaction is expected to improve TM’s Group earnings in the long term.

DIRECTORS AND MAJOR SHAREHOLDERS' INTEREST

In so far as the Directors of TM are aware, none of the Directors, major shareholders of TM or persons connected with them have any interest, whether direct or indirect, in the proposed joint venture.

BOARD OF DIRECTORS’ RECOMMENDATION

The Board of Directors of TM is of the opinion that entering into the Agreement is in the best interest of TM Group.

DOCUMENTS AVAILABLE FOR INSPECTION

The Agreement is available for inspection at the registered office of TM at Level 51, North Wing, Menara Telekom, Off Jalan Pantai Baharu, 50672 Kualal 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.


This announcement is dated 16 February 2005.