Contents :

• *For FY2005, EBIT is adjusted to exclude the one-off payment to De Te Asia of RM879.5mn (item considered non-operational)
  ** Fiscal year 2005 adjustment is due to change in accounting policy in respect of FRS121
In an effort to enhance greater transparency to the public, Telekom Malaysia Berhad (“TM”) wishes to announce its Economic Profit (EP) for the 4th Quarter ended 31st December 2006 (4Q06). 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: 4Q06 ECONOMIC PROFIT STATEMENT



INDIVIDUAL PERIOD

CUMULATIVE PERIOD

	Current Year Quarter 4Q06 RM’Mn	Preceding Year Corresponding Quarter 4Q05* RM’Mn	Current Year To Date 4Q06 RM’Mn	Preceding Year Corresponding Period 4Q05* RM’Mn
Earning before Interest & Taxes (EBIT)	990.0	620.0	3,521.1	2,750.3
Adjusted Tax	277.2	173.6	985.9	770.1
NOPLAT	712.8	446.4	2,535.2	1,980.2
Average Invested Capital	5,328.4	4,982.0	21,313.7	19,927.9
WACC	9.20%	9.59%	9.21%	9.59%
ECONOMIC CHARGE	490.2	477.8	1,963.0	1,911.1
ECONOMIC PROFIT	222.6	(31.4)**	572.2	69.1**

TM’s 4Q06 EP has marked a significant increase by RM254.0 million quarter-on-quarter to RM222.6 million (708.9%) when compared to 4Q05 economic loss of RM 31.4 million.

As for the cumulative period, the full year 2006 EP of RM572.2 million showed a significant improvement of RM503.1 million (728.1%) when compared to the full year 2005 of RM69.1 million.

Net Operating Profit Less Adjusted Taxes (NOPLAT)

TM recorded a higher NOPLAT of RM712.8 million for 4Q06, a 60.3% increase from RM444.6 million registered in 4Q05.

The higher earnings was achieved on the back of RM4.41 billion revenue, a growth of 17.4% from RM3.75 billion registered in the same quarter last year. This was mainly attributed to higher revenue from domestic and international cellular business, internet and multimedia services, and interconnect segments.

The favourable performance of domestic cellular segment was contributed by Celcom (Malaysia) Berhad (Celcom) of RM110.3 million; whilst for international segment, were jointly contributed by Dialog Telekom Limited (Dialog) (RM24.5 million), PT Excelcomindo Pratama Tbk (XL) (RM293.7 million), and TM International (Bangladesh) Limited (TMIB) (RM36.8 million).

The increase in internet and multimedia services revenue of RM57.2 million was mainly contributed by increase in the subscribers for broadband services and call centres services.

Economic Charge

TM recorded an increase of 2.6% in Economic Charge to RM490.2 million for 4Q06 as compared to 4Q05 of RM477.8 million. This was due to higher aggregated AIC in 4Q06 (RM5.33 billion) as compared to 4Q05 (RM4.98 billion) of RM346.4 million (7.0%).

Higher AIC was attributed to increase in Average Net Property Plant and Equipment (PPE) by RM2.19 billion which was due to network expansion and acquisitions of new subsidiaries. The increase was mainly attributed by Excelcomindo of RM1.29 billion, Dialog of RM 218.8 million and Celcom of RM170.5 million.

However the impact of higher AIC was slightly offset by the lower Weighted Average Cost of Capital (WACC). In 4Q06, TM’s WACC was 9.20% when compared to 9.59% in 4Q05.

The decrease in WACC was primarily attributed to reduction in total equity by RM1.16 billion. This was due to the decrease in market capitalization in 4Q06 (RM31.5 billion, average 3 months share price was RM9.28) when compared to 4Q05 (RM32.6 billion, average 3 months share price was RM9.60).
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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: -

Cost of Equity = (Beta*Market Risk Premium) + Risk Free Rate

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



	Beta
4Q06	1.21
4Q05	1.36


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 (%)
29 December 2006	4.78
29 December 2005	4.38


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.