© 2005 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part

© 2005 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part of it may be circulated, quoted, copied or otherwise reproduced without the written approval of Frost & Sullivan.

Positioning Telekom Malaysia for Growth

Subbaraman Iyer

December 2007

2

Agenda

Malaysian market overview Major industry trends Defining the business

Communications, ICT, Finance, Entertainment, .. Industry examples on new business definitions / model

Service delivery and partnerships Ecosystem of access technologies Recommendations

3

Cellular Services Market OverviewCellular Services Market:

Revenue Forecast (Malaysia), 2002-2008

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2002 2003 2004 2005 2006 2007 2008

0%

5%

10%

15%

20%

25%

30%

35%

40%

US$ million

Cellular Services Market : Subscriber Base Forecast (Malaysia), 2002-2008

0

5,000

10,000

15,000

20,000

25,000

2002 2003 2004 2005 2006 2007 2008

-5%

5%

15%

25%

35%

45%

55%

65%

‘000 subscribers

Source: Frost & Sullivan


Penetration rate is expected to grow from 56.4% in 2004 to 70.2% by 2006.

Revenues is likely to hit $4.6 billion in 2008, with total subscriber base of 21.4 million.

Data services expected to grow from 13.3% of revenues to 23.5% of revenues by 2008

4

Fixed Line Services Market OverviewTraditional Fixed Voice Services Market: Revenue Forecast

(Malaysia), 2002-2008

1,250

1,500

1,750

2002 2003 2004 2005 2006 2007 2008

-10%

-5%

0%US$ million

Traditional Fixed Voice Services Market: Subscriber Base Forecast (Malaysia), 2002-2008

3,900

4,000

4,100

4,200

4,300

4,400

4,500

4,600

4,700

4,800

2002 2003 2004 2005 2006 2007 2008

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%‘000 subscribers



Fixed line household penetration will dip from 79.1% in 2004 to the mid-60’s by 2008.

Rising uptake of broadband phone and VoIP services would result in market disruptions to the traditional fixed line

Severe decline in traditional revenue from 2008 onwards with the growing broadband market.

Overall industry ARPU is expected to dip by at least 30% over forecast period.

5

Internet Access Services Market Overview

Internet penetration likely to hit 23.2% by 2008, up from 13.8% as at end-2004.

Explosive growth in broadband is expected to be the main growth driver of Internet revenue. National Broadband Plan targets penetration to reach 5% in 2006 and 10% in 2008, from the present 1%.

Broadband subscriber trend is envisaged to closely follow the National Broadband Plan, pushing penetration rate to 9.8% by 2008.

Figure 7-10: Internet Access Services Market: Revenue Forecast (Malaysia), 2002-2008

Figure 7-11: Internet Access Services Market: Subscriber Base Forecast (Malaysia), 2002-2008

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2002 2003 2004 2005 2006 2007 2008

0%

10%

20%

30%

40%‘000 subscribers


$0$100

$200$300

$400$500$600

$700$800

$900$1,000

2002 2003 2004 2005 2006 2007 2008

0%

20%

40%

60%

80%

US$ million


6

Cellular, $3,132 mil

Broadband, $61 mil

Narrowband, $109 mil

Traditional Fixed Voice $1,593 mil

-20%

0%

20%

40%

60%

80%

100%

-30% 20% 70% 120%

Revenue CAGR (2004-2008)

2004 Penetration rate (%)

Telecom Services Market

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

2002 2003 2004 2005 2006 2007 2008

Mobile Internet Traditional Fixed Voice

The cellular market dominates the telecoms scene

US$ million2004 Market Revenue

Negative growth for fixed voice & narrowband

Market Share & Growth Potential of Telecom Services

Telecom Service Market Trend

7

Agenda




8

Industry Disruption

“The idea of charging for calls belongs to the last century. Skype software gives people new power to affordably stay in touch with

their friends and family by taking advantage of their technology and connectivity

investments.”

Niklas Zennström, CEO & Co-founder of Skype

“I knew it was over when I downloaded Skype,” Michael Powell, chairman,

Federal Communications Commission, explained. “When the inventors of KaZaA are distributing for free a little program that you

can use to talk to anybody else, and the quality is fantastic, and it’s free – it’s over.

The world will change now inevitably.”

Fortune Magazine

The value proposition of Vonage’s competitively priced, feature-rich

communications bundles has helped the company experience tremendous growth

over the past three years. Currently, Vonage boasts over 500,000 subscribers;

Now it is moving from US to enter European markets starting with UK.

9

Paradigm Shift

TechnologyCo-existence of various technologies

CustomerIncreased productivity benefits / entertainment needs

InfrastructureRapid and Customizable provisioning of Services

10

Industry in TransitionIncumbents

Local Voice

Long Distance Voice

Data Services

Wireless Mobile Voice

Mobile Data Applications

Competitive Operators / ISPs

Internet

Data Services

Cable OperatorsCable TV

Broadband Internet

Voice

Service Providers will evolve their business operations to be more

Customer Centric than product / service centric

Telecom Market Inversion

Consumer Focused

SPs

SME Focused

SPs

LargeBusiness / MNC

FocusedSPs

Cable Operators

Mobile Wireless SPs

Incumbents, MVNOs

Competitive SPs

SIs

11

Agenda




12

The foremost challenge:Defining what business are you in?

•Communications?

•Information & Communications Technology?

•Media?

•Finance?

“ Telco’s should change their mindset - not going after only [the] voice business, but going after multiple business so they don't have to care and regret what business they are in.”

Masayoshi Son

President, CEO - Softbank

13

#1 Communications focused Business Strategy

Acquisitions and RegionalizationExpect intense competition from other service

providers for good assets

14

#2 ICT led strategy for the Enterprise

#A Managed Communication Services Grow from US$1.6bln in 2004 to $4.7bln in 2010

(Security + Voice + Routers + Switch + Content Delivery

Networks)

#B Mobile Enterprise

#C Small & Medium Businesses

#D Acquisitions / Partnerships to develop new capabilities

15

Asia Pacific Business Telecoms SpendingNote: Includes Australia, Hong Kong, India, Japan, Singapore, South Korea and Taiwan;Excludes Mobile Voice & Local Telephony Connection Charges

$mil

lio

ns

0.0

2000.0

4000.0

6000.0

8000.0

10000.0

12000.0

Local Voice DomesticVoice

InternationalVoice

InternetAccess,

Ethernet etc

TraditionalDomestic

WAN

TraditionalInternational

WAN

IP DomesticNetworking

IPInternationalNetworking

COLO &Hosting

ManagedSecurity

Market Size (2008)

-5.00%

0.00%

5.00%

10.00%

15.00%

20.00%

CAGR (2004-2008)

Market Size (2008) CAGR(2004-2008)

Total Business Market Spending increases by a CAGR of 0.7% from US$55.3bln to US$56.75bn over 2004 to 2008

16

40,000

50,000

60,000

2004 2005 2006 2007 2008

Telecom Services Telecom & Managed Services

Managed Communication Services – Is this the “New” Gold Mine?

Note: Includes Australia, Hong Kong, India, Japan, Singapore, South Korea and Taiwan;Excludes Mobile Voice & Local Telephony Connection Charges

Managed CommunicationServices

$millions

17

Opportunities & Challenges – Managed Communication Services

#Potential strong play with SMB customers# Acquire voice and data channels

# Leverage vendor channels

#Service Provider usually ends up as sub-contractor from IBM, HP, etc. for large customers

#Defensive strategy – arrest the decline of traditional services

#Challenge to get C level customer relationship

#An incremental growth strategy!!!

18

#B Why small is BIG in Malaysia?

SMB accounts for 6.74 % of total business, but 47.75 % of total

employees and 46.83% of total revenues for businesses in Malaysia

0% 20% 40% 60% 80% 100%

Percent of Total

Very Small Businesses

SMB

Enterprises

19

SMB by Vertical Segments (2002)

Verticals SMB ('000)Employees

('000)Revenue

(Mn USD)Avg Revenue per

SMB ('000)Avg Revenue per

Employee ('000)

Banking & Finance 0.5 25.3 919.2 1,853.1 36.3

Transportation 1.0 58.2 1,870.0 1,799.8 32.1

Healthcare 0.2 17.5 291.3 1,179.5 16.6

Manufacturing 8.0 864.7 53,684.9 6,681.4 62.1Hospitality 0.5 58.6 851.7 1,647.3 14.5

Professional Services 3.4 263.3 4,960.3 1,472.8 18.8

Retail 2.0 118.3 6,005.7 3,007.4 50.8Wholesale & Distribution 2.7 170.1 6,736.0 2,515.3 39.6

Government 0.5 33.3 339.0 625.5 10.2

Education 0.5 29.9 508.8 967.3 17.0Others 1.0 74.3 2,947.6 2,927.1 39.7

Total 20.5 1,713.7 79,114.6 3,868.3 46.2

SMB by Horizontal Segments (2002)

Employee Size SMB ('000)Employees

('000)Revenue

(Mn USD)Avg Revenue per

SMB ('000)Avg Revenue per

Employee ('000)

20 to 49 10.5 320.5 11,487.5 1,089.0 35.850 to 99 5.2 360.1 14,415.7 2,782.4 40.0

100 to 249 3.2 520.2 23,964.2 7,491.1 46.1250 to 499 1.5 512.9 29,247.2 19,203.7 57.0

Total 20.5 1,713.7 79,114.6 3,868.3 46.2

Malaysia SMB Demographic - Overview

These are the most lucrative verticals as is evident from high Average Revenue per

SMB and Employee

20

Asia Pacific Business Telecoms Industry – Sector Trends

# Small Business telecom spending grows from US$18.0bln to US$20.8 bln (2004-2008)

# Significant Small Business Opportunity

-not addressed

Note: Includes Australia, Hong Kong, India, Japan, Singapore, South Korea and TaiwanIncludes International Long Distance Voice and Data Services onlySmall Business for this study includes companies with less than 100 employees

13.5

13.8

13.6

13.5

13.6

18.0

18.6

19.4

20.1

20.8

0 5 10 15 20 25 30 35

2004

2005

2006

2007

2008

Corporate Small Business

21

Nextel Business OfferingStrategic Partners:

IBMEDS/SUNUNISYS

#C Mobile Enterprise

22

#D Defining the Opportunity

Related ICT NeedsAPAC: US$ 250bn

~8% Growth

Core TelecomAPAC:US$ 75bn

<1% Growth

Extending the domain of Business provides “High Multiple” Growth Opportunity

23

IBM/SIA – Case Study

US$186 million over 7 yearsServices include

SIA’s data centre End-user computing support services Help desk services

Expected savings ~ US$ 9 million per year.

Addressable

24

IBM/Lloyd’s– Case Study

US$971 million over 7 yearsServices include

Converged network for voice + video + data Integrated with mobile and call center services 70,000 IP Phones deployment VoIP enable 10,000 call center agents

Deployment across all of Europe

25

Defining the Opportunity - II

Business Process Costs> US$ 500bn~ 6%Growth

Related ICT NeedsAPAC: US$ 250bn

~8% Growth

Core TelecomAPAC:US$ 75bn

<1% Growth

Extending the domain of Business provides “High Multiple” Growth Opportunity

Customer:

“Show me business value first – technology and services second”

26

Transforming the business….

Service focused approach

# Voice

# Internet Access

# WAN

# Hosting

# .…….

TODAY

Communications as an enabler to other businesses

TOMORROW

Communications Infrastructure

FS

I

Go

vt.

Bio

tech

Ma

nu

fg.

Ho

sp

.

27

• Strategy Research & Development

• IT Services & Support

• Back-Office Processing

• Sales & Sales Generation

• Corporate Learning

• Customer Service & Call Centers

• Procurement

• Human Resources

• Finance & Accounting

Business Process Outsourcing: Addressable Opportunity

IT Services & Support

Customer Service & Call Center

Key Outsourced Business Processes

Telco Current Competence

Telco Competence Development

Sales & Sales Generation

Back-office Processing

Corporate Learning

28

To compete in ICT you need to….

#Need to extend market boundaries … redefine business statement

#Heightened emphasis on structuring and delivering services around Business Value

#Trusted partner in communications enabled business processes

29

#3 Media & Content

# Mobile Music

# Mobile Video

# Mobile Gaming

# IPTV

# Online Gaming

Mobile video is expected to account for 13% of mobile data revenues by 2009 in USEstimated ARPU – US$8 per month, 16 million subscribers

30

#4 Finance

31

A holistic approach to new service creation through understanding of customers and desire to enhance customer value

32

KT – Vision 2010

33

Legacy Telecom

BB

Wireless

DiversifiedTelecom

Solutions

Wireless

Applications

BB

E/M Payment

CommunicationsCompany

Commerce (E/M)Business

SolutionsBusiness

Media BusinessFinance Business

Telecom focused Business

Taking advantage of emerging technologies to offer new services

Beginning to develop vertical focus

Transform to be communication enablerUbiquitous and solution oriented service offeringRedefine business mission

• IP/CATV• Device specific

programming• DVB• Broadcasting

• E/M Commerce• New Customer

and Transitions• Redefine

commerce Value Chain

• Payment Gateway• Depository and

Loaning functions• Mobile

Wallet/Payment

• Vertical Specific solutions

• Home Networking

Early Vertical Specific programs

Access and early applications

Mobile Wallets and Payment

Third-party consumer and early enterprise

Access and early applications

AccessFixed

Line

HistoricTransition

Foreseeable-Future

The new business strategy: moving from communication to business domain

34

Agenda




35

External&

InternalInfluences

BusinessStrategy

CorporateBusiness

Model

DeterminesDrive

Defines

Internal BusinessProcesses

Directs theUse of

OSS

NetworkInfrastructure

ExternalRelationships

Business Strategy Paradigm

Source: Stratecast Partners

36

Service/Customer MatrixOpportunity

Area Customer Segments

ICT

Media

Entertainment

Finance

Commerce

Home Users Verticals Government SIs

Home Users Mobile Users Schools

Home Users Mobile Users Retail Outlets

Fixed User Mobile User Merchants

Un-banked Consumers

Banked Consumers

Government

Home Networking/ Applications

Applications

Businesses

ICT Integration

E/M Commerce

37

Service Delivery - EcosystemOpportunity

Area Service Delivery Platform Execution

ICT

Media

Entertainment

Finance

Commerce

IT CompaniesSystem

IntegrationBPO

Content Providers

Content Developers

Content Providers

Solution Providers

System Integrators

Merchants PSPsConsumer

Bodies

FSIsSystem

IntegratorsPSPs FSI Regulators

New Content Development

Media Regulators

38

Service Delivery: Business Models

Organic Competence Development Buy IT and or BPO company Subscription and AMC based

Revenue Sharing with Content Providers Eco-system for local content creation Pay per view/usage based

Grow the entertainment industry Revenue sharing and telecom usage Subscription/usage based

Partnership with PSPs Revenue Sharing with partners Commission based

Partnerships with PSPs Revenue Sharing with merchants and other partners Commission based

Opportunity Area

Service Delivery Platform Execution

ICT

Media

Entertainment

Finance

Commerce

Be able to do Management & Billing NGN Evolution NGOSS Implementation Transition Organizational Structure

39

Requirements of Future OSS & BSS systems

High automation and develop Low Cost

Operating Model Integrated IT Systems – CRM, OSS, BillingReal-Time Billing Converged Billing, Pre-paid Post-paid

integrationFlexibility with new business modelsReduced Time to MarketPartner-Relationship Management

40

Automation the Toyota Way

Kaizen PDCA

CC21Obeya

Plan, Do, Check, Action. Steps in the development cycle for services aimed at quick decision making. Reduce Time to Market.

•Benchmark costs (capex as well as opex) Optimize Network Engineering & Optns.•System Rationalizing & Consolidation•Consider Outsourcing;•Streamline call centers, self-service apps.

Regular brainstorming sessions with content partners, software vendors, aggregators to develop new services.

•Focus on achieving 2 to 3 percent productivity improvement every year.•Network Engineering Costs – largest contributor to labor costs – prioritize, plan, improve

41

Telecom Italia: Positioning to Profit from NGNA Convergence Strategy 2005-2007

€1.5 B synergies cumulative 2005-2007

Network & Innovation

Unified Network & IT infrastructure

Common platform for OSS & svcs.

~ € 970M

VAS Sales network & innovation

Innovative services

Optimization of channel mgt.

~ € 130 M

Customer operations & BSS

Synergies in Business Support Systems

~ € 200 M

Purchasing

Optimization of supply chain

Integrated purchasing ~€ 170 M

42

Agenda




43

Businesses/Governments

Mobile Consumers Fixed Consumers

Merchants/Retailers

Entertainment Media

Access Eco-system

2G/2.5G

PAN

O

U

T

D

O

O

R

I N D O O R

M O

B I

L I

T Y

M O

B I

L I

T Y

Broadband

VODStreaming

M-Video

M-Streaming

E-Commerce

M-Commerce

Gaming

M-Gaming

3G

HomeNetworking

WLAN

Voice

Voice

Wi-M

AX

44

Agenda




45

Recommendations

1. New Business Definition: Evolve to telecom as business enabler rather

than core business

Near Term : ICT - Partner / Acquire

Medium Term : Media, Commerce - Partner

Long Term : Home Networking, Finance (consider)

46

OrganizationOrganization

StrategyStrategy

TechnologyTechnology

ProcessProcess

SkillsStructure

SystemsSystems

Culture

CORE TEAM

Long Term – Sales and Customer Focus

Business Customers Consumers

Sales & Marketing

ICT Media Commerce

47

Recommendations …

2. Network Infrastructure Roadmap

1. Evolve Network “NGN Evolution”: Top-Down Organization wide NGN evolution

to support SDP and Access Ecosystem, Fixed-Mobile Convergence

2. Drive NGOSS Implementation: Implement SDP and built for “management &

billing” of partner relationships

3. Eco-system Partners New revenue models: Business transformation to support new usage

based/AMC type and other revenue models

Drive Leadership: Create/Help Create eco-systems rather than just “Revenue

Share”

48

Business Transformation at TM

TM:2010

Telecom Company Limited Mobile App

Partners

TM:2007

TM:2005

Media through Triple Play Entertainment with

Partners M Commerce and

Payment solutions Communication

Management

Media business with Triple Play, DVB, Mobile broadcasting

Entertainment business with eco-system partners

Commerce business leveraging E/M enablement

Home Networking Solutions Vertical industry focused ICT

solutions

Product Driven Incremental Growth

Driver

New Business Definition Customer and Solution Business Driven Organizational Transformation

49

Global Growth Consulting Company

Documents

© 2005 Frost & Sullivan. All rights reserved. This document contains highly confidential information and is the sole property of Frost & Sullivan. No part