Contents :

1. INTRODUCTION

• Telekom Malaysia Berhad (“TM”) wishes to announce that on 14 August 2007, it has entered into a Sale and Purchase Agreement (“SPA”) to dispose off its entire equity interest in its wholly owned subsidiary, TM Payphone Sdn Bhd ("TM Payphone"), for a total consideration of RM22.0 Million to Pernec Corporation Berhad (“Pernec") (“hereinafter referred to as the “Proposed Disposal”).
  
  The disposal supports the strategic intention of TM to streamline its operations and focus on its role as a mainstream Network Facilities and Service Provider.

2. DETAILS OF THE PROPOSED DISPOSAL

• • • i) The Net Tangible Liabilities (“NTL”) of TM Payphone of RM 107.4 Million as at 31 December 2006;
      
      ii) The waiver of amount owing by TM Payphone to TM, after utilizing the cash available to repay the creditors and as much of the amount owing to the TM Group. The total estimated amount to be waived by TM based on the 2006 audited accounts is RM151.0 Million, out of which RM110.0 Million has been provided for by TM in its 2006 audited accounts.
      
      iii) The current conditions of TM Payphone assets and the need for extensive renewal of these assets, particularly the phone sets, for continued operations of the business.
  
  2.1 The sale price of RM22.0 Million (“Sale Price”) was arrived on a willing buyer-willing seller basis after taking into consideration, inter-alia, the following:
  

• • • iv) The expected losses to be recorded by TM Payphone in the financial year 2007.
    • i) A sum of RM2.2 Million constituting deposit and part payment towards the Sale Price would be paid on or prior to the date of the SPA; and
      
      ii) The remaining balance of the Sale Price amounting to RM19.8 Million would be paid on Completion Date of the SPA.
  
  2.2 The consideration payable by Pernec to TM shall be satisfied fully in cash and in the following manner:
  
  2.3 TM Payphone under the ownership of Pernec, would operate and maintain a minimum of 60,000 payphones (within a year from the Completion Date) utilizing phone lines from the TM Group. TM Payphone has approximately 50,000 payphone sets in operation as at 31 July 2007.
  
  2.4 The existing Revenue Sharing Agreement (“RSA”) dated 1 January 2005 between TM and TM Payphone would be terminated and superceded by the new Telephone Lines Rental and Access Termination Services Agreement (“TLRATSA”) to be signed between the two parties for a period of at least 5 years.

2.5 The Proposed Disposal shall be conditional upon:

• • • i) The completion of a due diligence exercise by Pernec over the business, operations, legal, secretarial, assets, financial condition, human resources and records of the Company and the results of the due diligence exercise being satisfactory to Pernec;
      
      ii) The approvals of Foreign Investment Committee (FIC), Ministry of Energy, Water and Communications Malaysia (MEWC), Malaysian Communications and Multimedia Commission (MCMC) as necessary, and any governmental or regulatory body or relevant authorities having jurisdiction for the Proposed Disposal; and
      
      iii) The approval of the respective Board of Directors of Pernec, TM and TM Payphone as well as Pernec’s shareholders for the Proposed Disposal.

3. BRIEF INFORMATION ON TM PAYPHONE AND PERNEC

• • • TM Payphone was incorporated in Malaysia under the Companies Act, 1965 on 15 July 1993. It has an authorized share capital of RM100.0 Million comprising 100.0 Million ordinary shares of RM1.00 each with an issued and paid up capital of RM65.0 Million comprising 65.0 Million ordinary shares of RM1.00 each.
    • Based on the audited accounts, TM Payphone’s loss after tax for the year ended 31 December 2006 amounted to RM34.5 Million.
      
      The principal activity of TM Payphone is the provision of national payphone network and related services.
    • 
      Pernec was incorporated in Malaysia under the Companies Act, 1965 on 5 April 1973. It has an authorized share capital of RM 500.0 Million comprising 500.00 Million ordinary shares of RM 1.00 each with an issued and paid up capital of RM39.678 Million comprising 39.678 Million ordinary shares of RM1.00 each.
      
      Pernec is a Malaysian joint-venture company between Permodalan Nasional Berhad and NEC Corporation Japan, where PNB and its unit trust funds collectively hold 70% equity interest in Pernec.
      
      The company is principally engaged in the provision of information and communications technology (ICT) solutions to telecommunication operators in Malaysia and abroad.
  3.1 TM Payphone
  
  3.2 Pernec

4. RATIONALE FOR THE PROPOSED DISPOSAL

• The disposal supports the strategic intention of TM to streamline its operations and focus on its role as a mainstream Network Facilities and Service Provider. The Board is of the opinion that the Proposed Disposal is in the best interests of TM Group.
  
  Barring any unforeseen circumstances, the Proposed Disposal is expected to be completed by the end of 2007.
  

5. FINANCIAL EFFECTS OF THE PROPOSED DISPOSAL

• • • The Proposed Disposal will not have any effect on the issued and paid-up share capital of TM.
  
  5.1 Share capital
  

5.2 Earnings

• • • The Proposed Disposal would not have a material effect on the earnings of TM Group for the current financial year.
      
      TM Payphone posted losses after tax of RM34.5 Million for the year ended 31 December 2006 and RM11.4 Million for the 6 months ended 30 June 2007. On the assumption that the Proposed Disposal is completed by the end of 2007, it is expected to have a positive effect on the financial performance of TM Group for the year ending 31 December 2008.

5.3 Net Assets

• • • The Proposed Disposal would not have any material effect on the consolidated net assets of TM Group for the current financial year.
      
      On the assumption that the Proposed Disposal is completed by the end of 2007, the Proposed Disposal would have a positive effect on the consolidated net assets of TM Group for the financial year ending 31 December 2008.

6. APPROVALS REQUIRED

• Parties to the SPA have the requisite power and authority to enter into and perform the Proposed Disposal, and have taken all necessary corporate action required for the execution of the SPA.

7. DIRECTORS' AND MAJOR SHAREHOLDERS' INTEREST

• None of the Directors or major shareholders of TM or any person(s) connected to them has any interest, direct or indirect, in the Proposed Disposal.
  

8. DOCUMENTS AVAILABLE FOR INSPECTION

• The SPA is available for inspection at the registered office of TM at Level 51, North Wing, Menara TM, Jalan Pantai Baharu, 50672 Kuala Lumpur during normal office hours from Mondays to Fridays for a period of 3 months from the date of this announcement.

This announcement is dated 14 August 2007