The Malaysian ICT Industry and Economic Development

1
2nd Annual Africa-Americas-Asia Business Summit
March 17-18, 2008 Pailles, Mauritius
The Malaysian ICT Industry and Economic
Development
Tan Sri Dato' Ir. Md. Radzi Mansor Chairman,
Telekom Malaysia Bhd
2
How do we stand in the world?
1/2 GITR
2006-2007 Malaysia ranks no 26 12 CBC
countries in top 50

• Denmark tops the rankings of GITR, as a
  culmination of an upward trend since 2003.
• Denmarks outstanding levels of networked
  readiness have to do with the countrys excellent
  regulatory environment, coupled with a clear
  government leadership and vision in leveraging
  ICT for growth and promoting ICT penetration and
  usage.
• Malaysia ranks no 26 whereas Singapore at no 3,
  United Kingdom at no 9, Canada at no 11,
  Australia at no 15 and South Africa at no 47.

• The Global Information Technology Report (GITR)
  and the Networked Readiness Index (NRI) measure
  the degree of preparation of a nation or
  community to participate in and benefit from ICT
  developments.
• The NRI is composed of three component indexes
  which assess
• environment (market, political/regulatory and
  infrastructure) for ICT offered by a country or
  community
• readiness of the community's key stakeholders
  (individuals, business and governments)
• usage of ICT among these stakeholders.

Source Global IT Report (GITR) World Economic
Forum
3
Networked Readiness Index 2006 2007
Commonwealth 2/2 GITR
2006-2007 Malaysia ranks no 26 12 CBC
countries in top 50
Source INSEAD, World Economic Forum
4
Malaysias mobile penetration is at par with
leading Asian and global economies.
Source FS Analysis
5
However, Malaysias broadband penetration though
growing, is still low and needs to be
accelerated.

• Malaysias MyICMS 886 expects
• 2.8 million subscribers in 2008 50 penetration
  of households
• 75 penetration of households by 2010

Source FS Analysis
6
How has the ICT industry developed in Malaysia?
Privatisation has been the cornerstone of
national development and benefited the
telecommunications industry, with the Private
Sector as the primary engine of growth
National Development is promoted through
efficient and effective economic policy
implementation, with special focus on ICT
Vision 2020

• National Development driven by Private Sector
  (led by GLCs e.g. Telekom Malaysia in
  telecommunications) as Primary Engine of Growth
• Special Incentives to Private Sector
• Malaysia as a major ICT Multimedia Hub
• RM21bn telecoms industry (8 of GDP)
• Expand/Upgrade Comm infrastructure
• Multimedia Super Corridor (MSC)
• MSC Flagship Applications
• ICT Governance CMA
• 8th/9th Malaysia Masterplans and MyICMS886
• K-Economy K-Society
• Enhance HR development in ICT
• and other areas
• Expand Public Private Institutions
• of Higher Learning

Efficient Effective Economic Policy
Implementation
National Development
Government

• Development Initiatives
• Incentive Packages

Private Sector (Primary Engine of Growth)
7
TM for its part has invested and maintained an
expanding nationwide telecommunications network
TM Capex Investment (1987 2007) In RM millions
8
Extensive domestic telecommunications
infrastructure to support national growth
Kangar
Bkt K Hitam
Alor Star
Length of Fibre 804,363 km
Kota Bharu
Bedong
Pasir Mas
Baling
Sg Petani
Kuala Muda
Kota Kinabalu
Kulim
K. Terengganu
Kuala Krai
Sg Jaya
Bayan Baru
Labuan
Taiping
Ipoh
FOCUS
Dungun
Setiawan
Miri
Tg Malim
Bintulu
Temerloh
Rawang
Kuala Lumpur
Cherating
Trans-Borneo
Kuantan
Shah Alam
Sibu
Klang
CyberJaya
Seremban
x
Mal-Domestic South
Mersing
Sri Aman
Segamat
Kuching
Port Dickson
Kluang
Melaka
Muar
TM
K Tinggi
Batu Pahat
Fibrecomm
Skudai
Fiberail
Johor Bharu
Source TM
9
Global Cable Services International Investments
And Presence
Source TM Annual Report 2006
10
Comprehensive international connectivity to
support regional cross-border growth and
Malaysias hubbing aspirations
PanAmSat
Intelsat
Intelsat
Apstar
Measat
Asiasat
Inmarsat




To Europe, Middle East South Asia
FLAG
SMW 3
PROPOSED AAG To Thailand, Brunei, Vietnam,
Hong Kong, Philippines, Guam, Hawaii US Mainland
Kota Kinabalu
Kuala Muda
SAT-3/WASC/SAFE
KINARUT
To Africa, India Europe
KIJAL
Labuan
APCN2
To ASEAN, Asia Pacific, Oceania USA
Miri
Kuantan
APCN
K. LUMPUR
Bintulu
SMW 3
CYBERJAYA
SMW4
To Europe, Middle East South Asia
Melaka
x
Mersing
DMCS
Kuching
To Indonesia
Source TM
11
Over the years, TM has significantly contributed
towards the national agenda

• Building National and International communication
  infrastructure
• Wired/Wireless, Narrowband/Broadband
• MSC (prime example of private-public sector
  partnership)
• Internet Connectivity
• Regional/Global Hub
• Facilitating knowledge development
• Multimedia University
• Multimedia College
• RD Collaboration
• TM Smart School
• SchoolNet
• Scholarships
• Bridging the Digital Divide
• Universal Service Provision
• Rural development
• Corporate Social Responsibility

12
Overall, operational environment for ICT
development becoming more complex

• To monitor deceleration in major export markets
• GLOBAL economy to maintain growth of 4.9 for
  2007 and 2008 (IMF)
• ASEAN GDP 5.6 in 2007, edging up to 5.9 in 2008
  (ADB)
• MALAYSIA GDP growth expected - 2007 5.6 and
  20085.8 (MIER)
• Business outlook Slower but still solid
  Consumer outlook Encouraging spending

ICT Industry (Services and Hardware) is worth
RM36.6bn (IDC2006) 13.2 of Msian GDP
(BNM2006)
ECONOMIC (STABLE)

• GLC Transformation Program
• Vision 2020 8th/9th Malaysia Masterplans
  expectation for TM to expedite broadband access
  and lower data charges
• Challenges broadband penetration local market
  support and acceptance of locally-developed
  content positive adoption of technology in
  education, govt home.

GOVERNMENT ASPIRATIONS (HIGH EXPECTATIONS)

• MyICMS 886- Focused on delivering targets e.g
  bband via all techs - WIMAX licences, spectrum
  allocation
• Lack of depth (for spectrum) to supplement BB
  push beyond fixed line new competitors
• Regulatory compliance - increasing financial
  impact on TMs businesses
• Still opportunities for TM to influence
  regulators and shape industry

REGULATORY (CHALLENGING)

• Global and regional telco and IT players aiming
  for Enterprise Market
• Local price war on all fronts esp mobile and
  possibly BB too with new players in market

INDUSTRY (HIGHLY COMPETITIVE)

• More expected for less Micro-segmentation
  crucial
• Highly Personalised and Mobile CONTENT and
  Community driven
• Freedom of choice high churn
• Increasing acceptance to bundled packages,
  advantage to TM

CUSTOMER BEHAVIOURS (CHANGING)

• Broadband alternatives
• Portfolio of wireless (inc 3G/4G) and web-based
  technologies
• IP-based NGN and emerging new network tech

TECHNOLOGY (DISRUPTIVE and SUPPORTIVE)
13
ICT industry is ruled by Convergence which is
taking shape..

• There are several fundamental trends shaping the
  telecoms industry today
• substitution of fixed with mobile
• increasing rate of data transfer speed in mobile
  networks
• increasing broadband penetration
• consumers demanding ubiquitous high speed data
  access and voice services
• In the immediate short term, operators (mostly
  fixed but also mobile) must grasp the revenue
  implications of VoIP, which is yet to play out
  fully
• Over the medium term, the industry will be shaped
  by all-IP infrastructure and convergence of
  offerings on one platform

The telecoms industry globally is in the midst of
a fundamental change, contours of which are still
only emerging
Source ADLittle
14
In Malaysia we have the MyICMS 886 Strategy
(2006-2010) to promote ICT convergence and growth
The strategies revolve around these areas
(8) Infrastructure
(6) Growth
(8) Services

• HARD
• Multiservice Convergence Networks
• 3G Cellular Networks
• Satellite Networks
• SOFT
• Next Generation Internet Protocol (IPv6)
• Home Internet Adoption
• Information Network Security
• Competence Development
• Product Design Manufacturing

• High Speed Broadband
• 3G and beyond
• Mobile TV
• Digital Multimedia Broadcasting
• Digital Home
• Short Range Communications (e.g. RFID)
• VoIP/Internet telephony
• Universal Service Provision

• Content Development (e.g. education,
  entertainment, games)
• ICT Education Hub
• Digital Multimedia Receivers (set top box)
• Communication Devices (e.g. VoIP phones)
• Embedded Components Devices (e.g. RFID)
• Foreign Ventures

Source MyICMS 886 Strategy Booklet
15
The CMA 1998 was introduced to help Malaysia
change to facilitate convergence
16
CMA Licensing categories for network facilities
services, application services content services
The CMA established that within each licensing
category (NFP, NSP, ASP CASP) there are
individual class licences

• Two types of licence for each category.
• Only activities with significant economic or
  social impact are
• individually licensed.
• The long term objective is to move into less
  regulation.

17
as a result, Malaysias telecommunications
landscape today is populated by many major
providers with alternative technologies
Major wireline and wireless providers for voice
services
Major wireline and wireless providers for data
and broadband services
mitvnetworks
sdn. bhd.

• mitvnetworks

sdn. bhd.
Source TM analysis
18
TM Group has a strong foothold in all segments of
Malaysia Communications
FIXED LINE MARKET SHARE
INTERNET MARKET SHARE
LEADER IN BOTH BROADBAND
ENTRENCHED POSITION IN FIXED LINE
NARROWBAND IN MALAYSIA
Broadband
Narrowband
41.7
95.6
Others 4.4
Others 58.3
Industry Fixed Line Customers at 4.4 million Q307
-
Industry Broadband Customers at 1.23m and
Narrowband Customers at 3.9 million
MOBILE MARKET SHARE
IMPROVING REVENUE SHARE

• Malaysia Demographics
• Population 27.31
• Households 5.9 million
• Q307 Penetration Rate (per 100 population)
• Fixed Line 15.9
• Broadband 4.5
• Mobile 80.8

-
Industry Mobile Subscribers Q307 is 21.6 million
Source MCMC, TM
19
TM Broadband Customers has Surpassed 1 Million
Customer Mark
Government recently announced the largest
Public-Private-Partnership (PPP) with TM to build
the nations High Speed Broadband (HSBB) network
worth RM15.2bn over next 10 years
Stable Fixed Line Customers
20
A new future for TM Demerger
TM proposed in September to demerge its fixed and
mobile operations into 2 separate listed
entities Merits and rationale

• Demerger can create shareholder value through
  accelerated operational improvement and growth
• Each company would have the freedom to pursue
  clearly distinct aspirations and strategies
• Demerger is expected to create value in both the
  short and long term and is sound from a capital
  markets perspective
• Demerger will create two focused organisations
  while current fixed / mobile collaboration can
  continue
• RegionCo as the leading mobile operator in the
  South / Southeast Asia region
• FixedCo as a leading next generation information
  and communications provider with strong dividend
  policy

21
TM evolved to a Regional Player for future and
sustainable growth
unique portfolio with over 35.7 million
subscribers in key high growth markets
Subscribers (000) 30 Market position 23
Subscribers (000) 7,006 Market position 2
Subscribers (000) 283 Market position 3
Subscribers (000) 3,482 Market position 21/42
Subscribers (000) 6,728 Market position 2
Subscribers (000) 3,964 Market position 1
Legend
Subscribers (000) 12,810 Market position 3
TMs presence
Subscribers (000) 1,467 Market position 3
Note 1 For Punjab circle 2 For Karnataka
circle 3 For City of Esfahan Subscribers as
of end-Sept 2007
22
7 areas for ICT Growth and Potential
Collaboration (1/2)
Description

• Strengthen cooperation on ICT infrastructure
  construction fixed, mobile, satellite networks
• Development of Superhighways
• ICT/Cyber Centres

ICT Infrastructure Development

• Draw each others experience and practices in
  establishing mechanism for Universal Service
• Leverage each others experience and practices in
  narrowing the Digital Divide
• Jointly develop and promote applicable technology
  for rural and remote areas

Universal Service
Human Capacity Building

• Training of middle and high-level managers and
  technicians within 5 years
• Improve cooperation in developing ICT human
  resources
• Face-to-face discussions
• E-learning

Network and Information Security

• To establish Coordination Framework for Network
  and Information Security Emergency Responses

23
7 areas for ICT Growth and Potential
Collaboration (2/2)
Description

• Strengthen cooperation in e-commerce and
  e-governance
• Promote Mutual Recognition Arrangements (MRAs)
  for
• ICT expertise certification
• Telecom equipment certification

Trade and Investment Facilitation

• Foster exchanges of ICT development strategy and
  policy
• Explore effective market regulation model
• Strengthen consultation and coordination within
  relevant international organisations

Inter-governmental Dialogues and Exchanges

• Promote advanced products and services amidst
  regional players
• Commercial agreements

Products and Services Proliferation
24
The pillars of competition in ICT are
deregulation, privatisation and liberalisation

• ICT investments flow towards nations in which
  markets are governed more effectively by forces
  of competition
• Investor friendly government and minimal
  interference
• Well established, clear and independent
  regulatory framework
• Market liberalisation to encourage healthy
  competition

ICT is a key enabler to increase Nations
Competitiveness and attract FDI to enhance
economic development
25

• THANK YOU

www.tm.com.my
26
Malaysia has seen increasing number of licensees
at the infrastructure and service level
Network Facilities Provider (NFP)
Network Service Provider (NSP)
96
104
103
82
82
72
65
68
53
54
Class
Class
Individual
Individual
Content Application Service Provider (CASP)
Application Service Provider (ASP)
41
393
372
353
Class
231
174
Individual
Activities not highly regulated. Licenses
renewable annually Activities highly
regulated. License tenure 10 years
Effective 1 April 2005, all ASP-Individual
license migrated to ASP-Class license
Granted in Nov 2006
Source MCMC 2006 Industry Report TM analysis