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Telekom Malaysia Berhad (“TM”) is pleased to announce that its wholly owned subsidiary, Celcom (Malaysia) Berhad (“Celcom”), has today entered into a global settlement arrangement in relation to Celcom Timur (Sarawak) Sdn Bhd (“CT Sarawak”) (“Settlement”).

CT Sarawak was incorporated under the Companies Act, 1965 as a private limited company on 21 May 1992 under the name of Celcom Applied Network Services Sdn Bhd. Celcom Applied Network Services Sdn Bhd then changed its name to the current name on 5 May 1994. The authorised share capital of CT Sarawak as at 22 February 2005 is RM100,000,000.00 comprising 100,000,000 ordinary shares of RM1.00 each of which 25,000,000 ordinary shares of RM1.00 each have been issued and paid-up. The principal activity of CT Sarawak is telecommunication services. Celcom’s cost of investment in CT Sarawak is RM15,000,000, representing 60% of the paid up capital of CT Sarawak.

Celcom and Sarawak Electricity Supply Corporation (“SESCO”) entered into a joint venture agreement in respect of CT Sarawak on 5 May 1994. However, the joint venture encountered some difficulties resulting in the legal actions between, inter alia, Celcom, SESCO and CT Sarawak. The legal actions are described in Celcom’s announcement to the Kuala Lumpur Stock Exchange (now known as Bursa Malaysia Securities Berhad) dated 4 December 2002.

Pursuant to the Settlement, Celcom has entered into the following agreements (hereinafter collectively referred to as “the Agreements”):-

(a) an agreement between Celcom, SESCO, CT Sarawak and Sacofa Sdn Bhd(“Sacofa”) (“Main Agreement”) with the following salient terms :-

• • • • (1) the disposal by Celcom to SESCO of 8,212,270 ordinary shares of RM1.00 each (such shares being defined as the Tranche I Shares in the Main Agreement) for a total consideration of RM23.8 million to be satisfied by the novation by Celcom to SESCO, of an outstanding debt in the sum of RM23.8 million owed by Celcom to CT Sarawak (”Outstanding Debt”); and
        (2) the disposal by Celcom of the Tranche II Shares (comprising 6,787,730 ordinary shares of RM1.00 each in CT Sarawak) to Sacofa whereby the consideration of RM19.6 million shall be satisfied by the allotment and issuance to Celcom of 9,815,940 ordinary shares of RM1.00 each all credited as fully paid up calculated at RM2.00 only per new ordinary share in Sacofa.
    (i) the disposal by Celcom to SESCO and Sacofa of 15,000,000 ordinary shares of RM1.00 each in CT Sarawak for the total consideration of RM43.4 million comprising :-

• • (ii) the settlement between Celcom, SESCO and CT Sarawak of the legal actions including those described in Celcom’s announcement of 4 December 2002 whereby such legal actions will be withdrawn/ discontinued within 14 days of the completion of the sale and purchase of the Tranche I Shares.

• • (iii) The Tranche II Shares will be sold and transferred to Sacofa under the Sacofa Agreement. In the event that the Sacofa Agreement fails, SESCO shall purchase the Tranche II Shares for the cash consideration of RM19.6 million.

• • (i) the disposal by Celcom of the Tranche II Shares to Sacofa (upon the completion of the disposal of the Tranche I Shares under the Main Agreement and provided the Sacofa Agreement has become unconditional) for a consideration of RM19.6 million to be satisfied by the allotment and issuance of 9,815,940 ordinary shares of RM1.00 each all credited as fully paid up calculated at RM2.00 only per new ordinary share in Sacofa.
(b) a sale and purchase agreement between Celcom, SESCO and Sacofa (“Sacofa Agreement”) with the following salient terms:-

• • (ii) the disposal by Celcom to Sacofa of 12 Communication Towers situated in Sarawak for a total consideration of RM6.0 million to be satisfied by the allotment and issuance of 3,018,387 ordinary shares of RM1.00 each all credited as fully paid up calculated at RM2.00 only per new ordinary share in Sacofa. The said disposal is to be effected pursuant to the Tower Sale Agreement to be executed by Celcom and Sacofa.

• • • • (a) the completion of the sale and purchase of the Tranche I Shares;
        (b) the Sacofa Shareholders Agreement is executed by the Parties thereto;
        (c) Sacofa and Celcom’s Lenders’ Approval (as defined in the Sacofa Agreement) have been given in terms which are reasonable;
        (d) Celcom and Sacofa have executed the Tower Sale Agreement;
        (e) waiver from mandatory general offer has been obtained in respect of the increase of SESCO's shareholding in Sacofa;
        (f) amendment to the provision of the Memorandum of Association of Sacofa .
        
(iii) The Sacofa Agreement is subject to the following conditions precedent:-

Sacofa was incorporated under the Companies Act, 1965 as a private limited company on 11 July 2001. The authorised share capital of Sacofa as at 30 June 2004 is RM25,000,000.00 comprising 25,000,000 ordinary shares of RM1.00 each, all of which 25,000,000 ordinary shares have been issued and paid-up. The principal activity of Sacofa is Trade or Business of a Telecommunications Infrastructure and Services Company including all its Related Business. Sacofa is a licenced Network Facilities Provider defined under the Communication and Multimedia Act 1998.

The Main Agreement and the Sacofa Agreement achieve Celcom’s objective of resolving the long outstanding shareholders’ issues relating to CT Sarawak and the legal actions. Although CT Sarawak ceases to be Celcom’s subsidiary upon the completion of the sale and purchase of the Tranche I Shares, Celcom continues to maintain a presence in Sarawak via participation in Sacofa upon completion of the Sacofa Agreement. Celcom also retains indirect holding in CT Sarawak which becomes a wholly owned subsidiary of Sacofa.

The Agreements will not have any material effect on TM’s consolidated earnings for the financial year ending 31 December 2005.

Insofar as TM is able to ascertain, none of the Directors and substantial shareholders of TM or any persons connected to the Directors and/or substantial shareholders has any interest, direct or indirect, in the Agreements.

After carefully considering the terms of the Agreements, the Board of TM is of the opinion that the Agreements are in the best interest of TM.

(a) the disposal of the Tranche I Shares by Celcom to SESCO is expected to be completed within 3 days from the date of the signing of the Main Agreement ( or such date as shall be mutually agreed);

(b) the settlement of the legal actions vide withdrawal/discontinuance of the legal actions is expected to occur within 14 days of the completion of the sale and purchase of the Tranche I Shares;

(c) provided the conditions precedent have been fulfilled and the Sacofa Agreement becomes unconditional, the completion of the Sacofa Agreement is expected to take place within 30 days of the Effective Date of the Sacofa Agreement (being the date all the conditions precedent in the Sacofa Agreement are fulfilled);

(d) in the event the Sacofa Agreement does not become unconditional by the Cut-Off Date therein(180 days from date of agreement) , the disposal of the Tranche II Shares by Celcom to SESCO shall complete within 7 days of the Cut-Off Date of the Sacofa Agreement or any other date as may be mutually agreed by Celcom and SESCO.

The SC's Policies and Guidelines on Issue/Offer of Securities are not applicable to TM in undertaking the Agreements.

Copies of the Agreements can be inspected at the registered office of Celcom at 15^th Floor, Menara Celcom , No. 82, Jalan Raja Muda Abdul Aziz, 50300 Kuala Lumpur during normal office hours from Mondays to Fridays (except public holidays) for a period of 14 days from the date of this announcement.