Contents :

• • On behalf of the Board of Directors of TM, Commerce International Merchant Bankers Berhad is pleased to announce that TM's wholly-owned subsidiary, TM International, as a part of a consortium with ST Telemedia, through its subsidiary STT Communications Ltd ("Consortium"), has on 11 December 2004 entered into various agreements to acquire 47.7% of the enlarged equity interest in IDEA.
    
  • • • (i) Share purchase agreement ("SPA") with New Cingular to acquire from New Cingular, the entire equity interest in AT&T Cellular, which owns 25.7% of the enlarged equity interest in IDEA (after the subscription of new shares as set out in 2.4(iii) below), for a cash consideration of Rupees 9,108.6 million (approximately RM788.4 million);
        
        (ii) Consortium shareholders' agreement in relation to AT&T Cellular ("Consortium Agreement") to regulate TM International's and ST Telemedia's investment in IDEA and their respective rights and obligations as shareholders of AT&T Cellular.
    
    2.1 The Proposed Acquisition involves the acquisition by TM International and ST Telemedia of a 47.7% equity interest in IDEA for a total purchase consideration of Rupees 17,396.8 million (approximately RM1,505.7 million).
    
    2.2 IDEA, established in March 1995, is a mobile telephone operator and currently has approximately 4.5 million subscribers in India. Additional information on IDEA is set out in Section 3 below.
    
    2.3 The Consortium will acquire a 32.9% equity interest in IDEA indirectly through the acquisition of 100% of the equity interest in AT&T Cellular Private Limited ("AT&T Cellular") from New Cingular Wireless Services Inc. ("New Cingular") and simultaneously subscribe for additional shares in IDEA which will increase the equity interest of the Consortium in IDEA to 47.7%.
    
    2.4 On 11 December 2004, as part of the acquisition of a strategic stake in IDEA, the Consortium executed the following agreements:
    
  • • • • • The information on ST Telemedia and AT&T Cellular (which will be renamed Bersatu Communications Ltd.) are set out in Section 3 below. ST Telemedia, through its subsidiary, will hold 60% of the equity interest in AT&T Cellular with TM International holding the remaining 40% equity interest;
  • • • (iii) Subscription agreement ("Subscription Agreement") with AT&T Cellular, Tata Industries Limited ("TIL"), Grasim Industries Limited and other existing shareholders of IDEA ("Aditya Birla Group") and IDEA to subscribe for new IDEA shares ("Subscription Shares") representing approximately 22.0% of the enlarged equity interest in IDEA for a cash consideration of Rupees 8,288.2 million (approximately RM717.3 million); and
  • • • (iv) Shareholders' agreement in relation to IDEA ("IDEA SA") with TIL, Aditya Birla Group and IDEA providing for the terms of, amongst others, management of IDEA and its subsidiaries including the options for TIL and Aditya Birla Group to sell further shares and the Consortium to purchase their shares in IDEA, subject to certain conditions being met. The IDEA SA will become effective only upon the completion of the SPA.
  • • • (Collectively referred to as the "Transaction Agreements")
        
      • (i) New Cingular shall sell or procure to be sold with full title guarantee and ST Telemedia and TM International shall purchase the AT&T Cellular shares free from all encumbrances and together with all rights and advantages now and hereafter attaching thereto including, without limitation, the right to receive all dividends, distributions or any return of capital declared, paid or made on or after the completion date;
        (ii) New Cingular waives (and shall procure the waiver by its affiliates of) any and all rights of pre-emption on a transfer of the AT&T Cellular shares conferred either by the articles of association or other equivalent constitutional document of IDEA or in any other way and undertakes to take all steps necessary to ensure that any rights of pre-emption are waived irrevocably by the persons entitled thereto;
        
        (iii) ST Telemedia and TM International shall not be obliged to complete the purchase of any of the AT&T Cellular shares unless the purchase of all the AT&T Cellular shares is completed simultaneously;
        
        (iv) New Cingular and MMM Holding Inc. shall waive all rights to a loan in the sum of United States Dollars ("USD") 108,821,054 and all other loans advanced to AT&T Cellular (if any); and MMM Holding Inc. shall transfer its entire equity interest in AT&T Cellular (comprising 2,258,314 ordinary shares of USD10 each) to New Cingular;
        
        (v) ST Telemedia and TM International shall subscribe for, and IDEA shall (and AT&T Cellular, TIL and the Aditya Birla Group shall procure that IDEA shall) issue and allot, at the date of completion of the SPA, to ST Telemedia and TM International (or as they shall direct) the Subscription Shares upon payment of Rupees 8,288.2 million (approximately RM717.3 million);
        
        (vi) The Subscription Shares shall be issued free from all liens, charges, encumbrances and other adverse interests, together with all rights now or hereafter attaching thereto, save that the Subscription Shares will be subject to such encumbrances as may be imposed by the lenders of IDEA and its subsidiaries;
        
        (vii) AT&T Cellular, TIL and the Aditya Birla Group hereby irrevocably waives, with effect from the date of completion, for itself and its affiliates, any rights of pre-emption conferred on it or its affiliates by the articles of association of IDEA or otherwise for the issue of the Subscription Shares to each of ST Telemedia and TM International and in connection with the indirect transfer of IDEA shares pursuant to the SPA; and
    2.5 The salient terms of the Transaction Agreements are as follows:
  • • • (viii) The existing shareholders' agreement dated 15 December 2000 among the existing shareholders of IDEA shall be terminated simultaneously with the completion of the Subscription Agreement and no claims or liability whatsoever shall exist against any IDEA group of companies in relation to, or as a result of, the termination of such agreement.
      • The consideration for the Proposed Acquisition and subscription of the Subscription Shares will be funded through internally generated funds and/or borrowings.
      • Save for the purchase consideration to be paid pursuant to the Proposed Acquisition and the subscription of the Subscription Shares, there are no other liabilities to be assumed by TM.
      • • • • 
              
        The purchase consideration for the Proposed Acquisition was determined on a willing buyer-willing seller basis after taking into consideration, inter-alia, a discounted cash flow analysis, trading comparable analysis and an acquisition comparable analysis for IDEA.
    
    2.6 Source of Funding for the Purchase Consideration2.7 Liabilities to be Assumed by TM
    2.8 Purchase consideration
  • 3.1 New Cingular
    
    New Cingular is a product of a merger between Cingular Wireless Inc. and AT&T Wireless Services Inc. Cingular Wireless Inc. is the largest wireless carrier in the United States of America.
    
    3.2 IDEA
  • • • IDEA is a leading wireless operator in India with a subscriber base of approximately 4.5 million subscribers as at 31 October 2004 and a wireless market share of 10.1% in India. It has operations in eight (8) circles in India including Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Delhi, Uttar Pradesh (West), Haryana and Kerala.
        
        The financial information on IDEA for the past five (5) financial years is set out in Table 2.
  • • • ST Telemedia is a leading information-communications company with operations and investments in Asia Pacific, United States of America and Europe. Through its group of companies, ST Telemedia offers a wide array of communications and information services, including fixed and mobile communications, global internet protocol network and services, Internet Business Exchange™ (IBX®) data centres and services, satellite, and cable TV.
        
        ST Telemedia is a major shareholder in the following companies:
        
        (i) StarHub, a Singapore-based integrated information, communications and entertainment company;
        
        (ii) Indosat, Indonesia's second largest mobile operator and the primary provider of international telecommunications services;
        
        (iii) Equinix, a leading provider of network-neutral data centres and internet exchange services; and
        
        (iv) Global Crossing, a leading provider of telecommunications solutions over the world's first integrated global internet protocol -based network.
      • 
        AT&T Cellular is a company incorporated in Mauritius. Its authorised share capital is USD180,000,000 comprising 18,000,000 ordinary shares of USD10 each of which 7,547,714 ordinary shares of USD10 each have been issued and paid-up.
        
        The shareholders of AT&T Cellular are New Cingular and MMM Holdings, LLC.. AT&T Cellular holds 32.9% of the equity interest in IDEA.
        
      • 
        The Aditya Birla Group is India's first truly multinational corporation. A conglomerate with a market capitalisation of USD6.33 billion, it is anchored by an extraordinary force of 72,000 employees belonging to over 20 different nationalities. Its 66 state-of-the-art manufacturing units and sectoral services span across nine (9) countries viz. India, Thailand, Indonesia, Malaysia, Philippines, Egypt, Canada, Australia and China. It is a dominant player in all of the sectors in which it operates such as viscose staple fibre, non-ferrous metals, cement, viscose filament yarn, branded apparel, carbon black, chemicals, fertilisers, sponge iron, insulators and financial services.
      • 
        The Tata Group is India's best-known industrial group with an estimated turnover of USD14.25 billion, equivalent to 2.6 % of India's gross domestic product ("GDP"), covering 91 major companies with business operations in seven (7) business sectors - Engineering, Materials, Energy, Chemicals, Consumer Products, Services, and Communications and Information Systems. The Tata brand is India's most respected brand across consumer segments with many national and internationally renowned product and service brands: Tata Indica, Tata Indigo, Indigo Marina, Tata Safari, Tata Indicom, Taj Group of Hotels (Luxury, Business and Leisure), indiOne, Tata Tea, Tetley, Tata Salt, Tata Steelium, Tata Shaktee, Tata Tiscon, Tata Pipes, Titan, Tanishq, Voltas and Westside. By combining ethical values with business acumen, globalisation with national interests and, core businesses with emerging ones, the Tata Group aims to be the largest and most respected global brand from India, whilst fulfilling its long-standing commitment to improving the quality of life of its stakeholders.
      • TM International is the overseas investment holding company of TM, the largest and leading telecommunications group in Malaysia. Activated in 2001, TM International oversees and manages TM's international ventures, contributing approximately 28.7 per cent of the group's net profit after tax in 2003. For the first half of 2004, TM International's profit after tax stood at USD77 million (RM292.9 million) compared to USD34.4 million (RM130.6 million) in the corresponding period last year (first half 2003), a significant growth of 124.2%.
        
        Having had its origins in the international ventures division, TM International has today made the successful transition from an operating division to a wholly-owned subsidiary of TM. TM International has extensive experience in building and operating fixed and mobile networks in developing countries. It has operations and financial interests in Malawi, Guinea, Ghana, Sri Lanka, Bangladesh, Thailand and Cambodia. Recently, the company entered into an agreement to acquire a 27.3% stake in PT Exelcomindo Pratama of Indonesia, as well as divested its 12.6 per cent stake in Telkom South Africa after eight (8) years of operations.
    3.3 ST Telemedia
    
    3.4 AT&T Cellular3.5 Aditya Birla Group
    3.6 Tata Group
    3.7 TM International
    
  
  
  • • • India's mobile penetration rate of 4.5% as at November 2004 is significantly lower than other Asian countries such as China and Philippines. Its low penetration rate indicates tremendous growth potential given its position as the second most populous country in the world. It is the one of the fastest growing markets in the world and represents a unique investment opportunity for TM.
        
        As an indication of the potential opportunity, for the first ten (10) months of 2004, the total number of mobile subscribers has increased by 47.9%. Management feels that there is substantial subscriber growth potential, given the current low penetration rates and the robust economic growth recorded in 2003 (8% GDP growth).
      • 
        IDEA is a leading cellular operator in the country, with a subscriber base of over 4.5 million subscribers across the country and employee strength of approximately 2,500. IDEA operates in some of India's most attractive and mainly contiguous circles of Maharashtra (excluding Mumbai), Gujarat, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh (West), Haryana, Kerala and Delhi (inclusive of National Capital Region).
        
        Having operations in four (4) of the five (5) largest cellular circles in India, IDEA is the market leader in the Maharashtra, Uttar Pradesh (West) and Madhya Pradesh circles in terms of number of subscribers.
      • Management believes significant synergies are available between TM's regional network, namely its Bangladesh and Sri Lanka operations and IDEA. Management also sees potential for development of joint products for its regional operations.
    The Proposed Acquisition of IDEA will provide TM with a significant presence in India, which is one of the highest growth markets for telecommunications in Asia. Leveraging on TM's and ST Telemedia's extensive investment and operating experience, the aim of the Consortium is to build a leading cellular company with significant coverage across all major states in India.
    
    4.1 India is one of the highest growth markets for telecommunications in Asia
    4.2 IDEA is a suitable vehicle
    4.3 Ability to add value
    
  • The mobile telecommunications sector is one of the fastest growing sectors within the telecommunications industry in India. The mobile penetration rate in India remains relatively low compared to the mobile penetration rates in some of the more developed markets in Asia.
    
    The growth in demand for mobile telecommunications services has exceeded the growth for fixed line services, with mobile penetration overtaking the fixed line penetration. Mobile telecommunications services in India grew at a compound annual rate of approximately 108.5% for the three (3) years ended 31 December 2003, based on the total number of subscribers.
    
    Given India's growing economy and relatively low penetration rate compared to other Asian markets, it is believed that India will continue to experience growth in mobile telecommunications services.
  • IDEA operates predominantly in the business of mobile telecommunications in India. A summary of the risks that IDEA faces is set out below:
  • • • IDEA operates predominantly in India and is subject to the standard operating risks of this emerging market. These could include political risk, regulatory risk and foreign currency risk. TM does not believe that the risks that IDEA faces in India are any different than other companies in the market. TM also believes that the acquisition of a company with a strong local management team such as IDEA, will help mitigate any country risk factors.
    6.1 Country Factors
    
  • • • The market for mobile telecommunications services in India is competitive. IDEA faces competition from other mobile service providers such as Bharti Televentures Limited, Bharat Sanchar Nigam Limited, BPL Mobile Communications Limited, Reliance Infocomm Limited, Mahanagar Telephone Nigam Ltd, Hutchison Telecom India Limited and Tata Teleservices Limited. IDEA has developed a strategy for addressing competition by improving brand identification and providing a differentiated service to its target market segments.
      • The mobile telecommunications industry is characterised by rapid and significant changes in technology. Currently, TM views IDEA as a leader in India for global system for mobile communication technology and is also developing a suite of new technology products in areas such as voice over internet protocol. However, it is possible future development or application of new or alternative technologies could require changes to IDEA's business model or necessitate new investments.
    6.2 Competition
    
    6.3 Rapid technology change
    
  • The effects of the Proposed Acquisition are as follows:
    7.1 Issued and Paid-up Share Capital, Shareholdings of Substantial Shareholders and Equity Structure
    • • The Proposed Acquisition will not have any effect on the issued and paid-up share capital, shareholdings of substantial shareholders and equity structure of TM as they will be satisfied entirely by cash.
    • • The proforma effects of the Proposed Acquisition on the consolidated NTA of TM based on its latest audited consolidated financial statements as at 31 December 2003 and audited consolidated financial statements of IDEA for the financial year ended 31 March 2004 are set out in Table 1.
      • The Proposed Acquisition is not expected to have a material effect on the earnings of TM for the financial year ending 31 December 2004 as the Proposed Acquisition is only expected to be completed after 31 December 2004. However, in the medium to long term, the Proposed Acquisition is expected to contribute positively to the earnings of TM.
    7.2 Net Tangible Assets ("NTA")7.3 Earnings
  
  
  • • • Investments by foreign corporations in India are governed by the Foreign Exchange Management Act, 1999 and regulations thereunder (FEMA) and the Foreign Investment Policy of the Government of India. Foreign direct investment in telecom sector is limited to 49 per cent of equity capital.
        
        In general, profits from foreign subsidiaries can be remitted to the parent company upon the settlement of taxes.
    8.1 Policy on foreign investments
  • 8.2 Foreign exchange regime
  • • • A company may freely hold, purchase and use foreign currency in India. Subject to disclosure requirements of the Reserve Bank of India through the financial institution where the transactions are made, there is no restriction on the transfer of foreign currency from India, or to India from abroad.
  
  
  • The Proposed Acquisition is subject to, inter alia, regulatory approvals including approvals from the Foreign Investment Promotion Board of the Government of India, the Department of Telecommunications in India and Bank Negara Malaysia.
    
    The Proposed Acquisition is also subject to the approvals of the lenders of IDEA and preference shareholders of IDEA on the redemption of the preference shares of IDEA.
    
  • None of the Directors and substantial shareholders of TM and persons connected to them has any interests, direct or indirect, in the Proposed Acquisition.
  • ST Telemedia is a subsidiary of Temasek Holdings (Private) Limited, which is a substantial shareholder of TM. Premised on the relationship between TM and ST Telemedia, the Proposed Acquisition is a related party transaction as defined under the Listing Requirements of Bursa Securities Malaysia Berhad ("Bursa Securities").
  • Nevertheless, TM has obtained an exemption from Bursa Securities from classifying the Proposed Acquisition as a related party transaction.
  • The Board of Directors of TM is of the opinion that the Proposed Acquisition is in the best interest of TM.
  
  
  • Barring any unforeseen circumstances and subject to all the required approvals being obtained, the proposed acquisition of 47.7% of the enlarged issued and paid-up share capital of IDEA pursuant to the Subscription Agreement and SPA is expected to be completed within three (3) months.
  
  
  • The Proposed Acquisition does not depart from the SC's Guidelines.
  
  
  • The SPA, Subscription Agreement, Consortium Agreement and IDEA SA are available for inspection at the registered office of the Company at Level 51, North Wing, Menara TM, Off Jalan Pantai Baharu, 50672 Kuala Lumpur during normal business hours from Mondays to Fridays (except for public holidays) for a period of three (3) months from the date of this announcement.
1. INTRODUCTION
2. DETAILS OF THE PROPOSED ACQUISITION3. BACKGROUND INFORMATION
4. RATIONALE FOR THE PROPOSED ACQUISITION

5. PROSPECTS

6. RISK FACTORS

7. EFFECTS OF THE PROPOSED ACQUISITION 8. POLICIES ON FOREIGN INVESTMENT AND REPATRIATION OF PROFITS OF INDIA9. APPROVALS REQUIRED FOR THE PROPOSED ACQUISITION10. DIRECTORS' AND SUBSTANTIAL SHAREHOLDERS' INTEREST

11. STATEMENT BY THE DIRECTORS12. ESTIMATED TIME FRAME FOR THE COMPLETION OF THE PROPOSED ACQUISITION13. DEPARTURE FROM THE SC POLICIES AND GUIDELINES ON ISSUE/OFFER OF SECURITIES ("SC'S GUIDELINES")14. DOCUMENTS AVAILABLE FOR INSPECTIONThis announcement is dated 13 December 2004.