Contents :

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.

• a. Lower risk free rate; 1Q07 (3.8%) against 1Q06 (4.2%)
  b. Lower beta; 1Q07 (1.16) against 1Q06 (1.32)

INDIVIDUAL PERIOD

CUMULATIVE PERIOD

	Current Year Quarter 1Q07 RM’Mn	Preceding Year Corresponding Quarter 1Q06 RM’Mn	Current Year To Date 1Q07 RM’Mn	Preceding Year Corresponding Period 1Q07 RM’Mn
Earning before Interest & Taxes (EBIT)	970.1	960.2	970.1	960.2
Adjusted Tax	261.9	268.9	261.9	268.9
NOPLAT	708.2	691.3	708.2	691.3
Average Invested Capital	5,472.7	5,152.2	5,472.7	5,152.2
Weighted Average Cost of Capital	8.34%	9.32%	8.34%	9.32%
ECONOMIC CHARGE	456.4	480.2	456.4	480.2
ECONOMIC PROFIT	251.8	211.1	251.8	211.1


TM’s 1Q07 EP has increased by RM40.7 million year-on-year to RM251.8 million (19.3%) when compared to 1Q06 economic profit of RM 211.1million.


Net Operating Profit Less Adjusted Taxes (NOPLAT):

TM recorded a slight increase in NOPLAT of RM708.2 million for 1Q07, a 2.4% growth from RM691.3 million registered in 1Q06.

The increased earnings was achieved on the back of higher revenue of RM4,181.2 million, a growth of 10.4% from RM3,787.6 million registered in the same period last year. The increase was mainly attributed to favourable performance of domestic and international cellular segment, higher revenue from Internet and multimedia services and other telecommunication services.

The higher revenue was attributed to the increase in cellular revenue from Celcom (Malaysia) Berhad (Celcom) of RM159.2 million, Dialog Telekom Limited (Dialog) of RM17.6 million, Telekom Malaysia International (Cambodia) Limited (TMIC) of RM7.4 million, PT Excelcomindo Pratama Tbk (XL) of RM130.6 million, TM International (Bangladesh) Limited (TMIB) of RM28.1 million, and Internet and multimedia services of RM54.4 million.

The lower adjusted tax for the current quarter of 27.0% as compared to the preceding year corresponding quarter of 28.0% has also contributed to the higher NOPLAT.


Economic Charge

TM recorded a lower economic charge of RM456.4 million in 1Q07 as compared to 1Q06 of RM480.2 million (-5.0%).

This was due to lower Weighted Average Cost of Capital (WACC) by 0.98% recorded in 1Q07 (8.34%) as compared to 1Q06 (9.32%).

The lower WACC was arising from:

1. Lower cost of debt by 0.7%; 1Q07 (4.0%) against 1Q06 (4.7%) as the Group registered lower net finance cost in line with reduced borrowings.
2. Lower cost of equity by 1.2%; 1Q07 (9.8%) against 1Q06 (11.0%) which was due to the following:
However, the impact of lower WACC was slightly offset by the higher aggregated AIC in 1Q07 (RM5.47 billion) as compared to 1Q06 (RM5.15 billion) of RM320.5 million (6.2%).

The higher AIC was attributed to increase in Average Net PPE by RM 1.5 billion from RM22.1 billion in 1Q06 to RM23.6 billion in 1Q07, which was mostly contributed by Dialog of RM363.4 million, XL of RM759.0 million, and TMIB of RM469.6 million for the network expansion.
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Notes: Assumptions on parameters used in the Economic Profit calculations:

• 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
1Q07	1.16
1Q06	1.32


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 (%)
30 March 2007	3.81
31 March 2006	4.18


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.