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Reference is made to the Circular to the shareholders of TRI dated 5 June 2002 ("Circular") and the accompanying Notice of Extraordinary General Meeting to consider the removal from and appointment to the Board of TRI of certain Directors ("Proposed Resolutions").

The Board of TRI has raised several issues in the Circular and has recommended (excluding the affected Directors in respect of the Proposed Resolutions relevant to themselves) that shareholders reject the Proposed Resolutions to be tabled at the Extraordinary General Meeting on 16 July 2002.

Telekom Malaysia Berhad and Telekom Enterprise Sdn Bhd (individually and collectively "TM") wish to address the issues raised by the Board of TRI in the Circular and make clear to the shareholders of TRI, TM's intention with respect to TRI.

(i) TM’s nominees have a conflict of interest

• TM recognises that a potential conflict of interest situation may arise in certain circumstances stemming from its investments in TRI and TM Cellular Sdn Bhd ("TM Touch"), a subsidiary of TM involved in the provision of mobile telecommunication services in Malaysia. TM however wishes to state that it has made a substantial long-term capital investment in TRI and has no reason to sanction any course of action which would adversely affect the value of its investment in TRI. It is in fact the objective of TM to enhance the value of its investment in TRI.

  As stated in TM’s media release on 24 May 2002, the rationale for seeking representation on the Board of TRI is to safeguard TM’s substantial investment in TRI. This is a fundamental right of any shareholder let alone the single largest shareholder with an interest of 31.25% in TRI. The proposed appointment of four (4) representatives to the Board of TRI is reflective of the current shareholding structure of TRI vis-à-vis the representation of DeTeAsia Holding GmbH’s 15.98% equity interest in TRI by two (2) Directors on the Board of TRI. Three (3) incumbent Independent Directors of TRI will also remain on the Board of TRI in compliance with the Listing Requirements of the Kuala Lumpur Stock Exchange. Accordingly, the resulting Board of TRI, if approved by shareholders, will comprise four (4) representatives of TM and five (5) incumbent Directors of TRI and would be consistent with the best practices of the Malaysian Code on Corporate Governance.

  The representatives nominated by TM are individuals of good corporate standing in Malaysia and include two (2) Independent Non-Executive Directors of TM namely Dato’ Dr Mohd Munir bin Abdul Majid and Mr Lim Kheng Guan. Each of the representatives nominated by TM has a fiduciary duty to act in the best interest of TRI at all times.

  Notwithstanding the above, each nominee Director of TM will be required to abstain from any Board deliberation and voting on any matter which gives rise to a conflict of interest. The presence of incumbent Independent Directors of TRI will ensure that such Board meetings are conducted in accordance with the highest standards of corporate governance and in the best interest of TRI. Similarly, the two (2) Independent Non-Executive Directors of TM proposed to be appointed to the Board of TRI will have a duty to ensure that the same standards of corporate governance are observed at the relevant Board meetings of TM.

  While certain situations may give rise to a potential conflict of interest, TM wishes to reiterate that it is not in the interest of TM and its shareholders to sanction any course of action which would adversely affect the value of its investment in TRI. Coupled with corporate governance safeguards, TM is confident that any potential conflict of interest arising from the appointment of its representatives to the Board of TRI will be addressed and managed in accordance with the best practices of the Malaysian Code of Corporate Governance.

(ii) TM may attempt to take control of TRI without making an offer to all shareholders

• The Circular stated that "The acquisition of 31.25% equity stake; the appointment of four Telekom Nominees out of nine filled TRI Board seats and two Telekom Nominees out of six Celcom Board seats; and the requests for the resignation of all three executive directors including the Chairman/Chief Executive and a non-independent Director, may lead to a change in control of TRI and therefore Telekom and TM may be obliged to make an MGO".

  With respect to the above statement, TM’s legal counsel has opined that TM is not obliged to undertake a mandatory offer for the remaining voting shares of TRI pursuant to its proposal to change the composition of the Board of TRI.

  TM believes that the potential combination of TM Touch and Celcom (Malaysia) Berhad ("Celcom") will not only enhance value for the shareholders of TRI but also benefit the customers and other stakeholders of TRI and TM.

  TM wishes to reassure the shareholders of TRI that it will fulfil its obligations under the Malaysian Code on Takeovers and Mergers ("Code") in full, without seeking any waiver from such obligations, should it be required to undertake a mandatory offer under the Code as a result of the combination of the businesses and operations of TM Touch and TRI/Celcom in whatever form (hereinafter referred to as business combination).

(iii) TM has not explained its strategy for TRI

• TM's request for Board representation is a distinct issue from its business combination objectives. Notwithstanding TM's ultimate objective to combine the operations of TM Touch and TRI/Celcom, TM has a duty to its shareholders to safeguard its significant investment in TRI and accordingly, it is seeking representation on the Board of TRI.

  TM firmly believes that there are synergistic benefits to be gained from the business combination, particularly from the sharing of network and infrastructure by TM Touch and Celcom and strengthened market position which leads to enhanced shareholder value for TRI. In order to realise the synergies, the potential business combination process should be undertaken swiftly and efficiently. This is to ensure that TRI will be placed on a firmer and stronger footing in the shortest time possible to face up to competition and to continue with its investment programme in networks, services, products and new technologies such as 3G for future growth.

  If the potential business combination is approved, it is the intention of TM that the combined businesses would become TM's primary cellular platform.

(iv) The current members of the TRI Board have been mandated by the shareholders of TRI to implement the recapitalisation plan ("Recap Plan") of TRI

• Although TM has proposed to appoint four (4) of its representatives to the Board in place of four (4) Directors of TRI, the new Board of TRI, including the remaining five (5) incumbent Directors of TRI, still have the responsibility to see through the completion of the Recap Plan.

(v) The TRI Board should assess the proposal for a merger of TM Touch and Celcom without TM’s influence on the TRI Board

• The Board of TRI contends that any decision reached to combine the businesses of TM Touch and Celcom on behalf of TRI shareholders should not be influenced by TM’s conflict of interest and should solely be in the collective interest of all TRI shareholders.
  
  As the owner of TM Touch, and hence an interested party, TM would be required to abstain from voting at all Board and shareholder meetings in relation to any proposal on the business combination of TM Touch and Celcom. This is required as part of the corporate governance practices of the Kuala Lumpur Stock Exchange.
  
  Independent advisers would also have to be appointed as required under the Listing Requirements of the Kuala Lumpur Stock Exchange to advise the Independent Directors and minority shareholders of TRI on whether the transaction is fair and reasonable.
  
  The Independent Directors of TRI will therefore have an important role to play and will have to carry out their fiduciary duties to ensure that any proposed business combination between TM Touch and Celcom is in the best interest of TRI. Any decision of the Independent Directors will also be accordingly guided by the advice of the independent advisers who would be required to be appointed on such a transaction.
  
  TM has every faith that the Independent Directors of TRI will fulfil their fiduciary duties to TRI and all shareholders of TRI in full.
  
  Ultimately, any business combination proposal will need to be approved by the shareholders of TRI. TM, as a related party, will not be eligible to vote on such a transaction.
  

In conclusion, TM wishes to restate its intentions with respect to its investment in TRI:

(i) The long term strategic objective of TM is to combine the operations of TM Touch and Celcom to enhance the value of its investment in TRI for the benefit of all shareholders. TM also firmly believes that customers and other stakeholders in TRI and TM will benefit from the business combination of TM Touch and Celcom;

(ii) TM deems the potential business combination of TM Touch and Celcom a priority to place TRI on a firmer and stronger footing in the shortest possible time to face up to competition and to continue with its investment programme in network, services, products and new technologies such as 3G for future growth.

(iii) It is likely that the business combination of TM Touch and Celcom will result in the obligation on the part of TM to carry out a mandatory offer for the remaining voting shares in TRI. If the shareholders of TRI approve the business combination and an obligation to make a mandatory offer is triggered, TM will fulfil this obligation to the fullest extent required by the Code and does not have intention to seek a waiver from the obligation to make a mandatory offer.

(iv) The request for Board representation in TRI is to safeguard TM’s substantial investment in TRI. TM has a duty to its shareholders to ensure that it institutes immediate actions to ensure that its investment in TRI is safeguarded through Board representation.

TM strongly subscribes to the principles of corporate governance and wishes to assure TRI shareholders that it shall abide by the best practices of the Malaysian Code of Corporate Governance in protecting the interest of all shareholders of TRI.