OVERVIEW OF TELECOMMUNICATION SECTOR

As in most countries, communication services in Malaysia have been traditionally provided on a monopolist basis. Several
policy initiatives have been undertaken to foster competition in the country include those that are relevant to the
determination of boundaries between competitive and monopolistic markets, licensing of new entries, monitoring
performances and several practices related to maintaining sustainable competition in the market. Competition has gradually
been introduced in many sector areas including the local loop, wireless, international and value-added segments.

The key to this development trend is to enhance liberalisation efforts that have taken by the government to allow private
participation in the sector. Currently there are 6 licensed telecommunication companies which provide telephony services;
Telekom Malaysia (fixed & cellular), Celcom (fixed & cellular), Maxis Communication (fixed & cellular), TIMECel (fixed
& cellular), Digi (fixed & cellular) and Mobikom (cellular).

KEY ISSUES

For this project I have chosen Maxis Communications Berhad (Maxis), a mobile focused telecom service provider with
fixed line and IDD business to support its wireless operations. It is the number one cellular service provider in Malaysia by
quality and quantity of subscribers as well as profitability.

The major part of my research on maxis will focus on its mobile division because this currently comprises the bulk of the
company's operations (over 90% of total revenue). I have organised my analysis of the company around two key points:
company dynamics and the potential of the Malaysian market.

COMPANY BACKGROUND

Maxis was incorporated in Malaysia on 19 October 1986 under the name of Binaring Sdn Bhd as a private limited company.
The company became a public limited company on 5 September 1997, taking on the name Binariang Berhad. It changed its
name again on 12 July 1999 to what it is currently known as Maxis Communication Berhad.

In 1993, Maxis obtained telecommunications licences authorising the company to operate domestic fixed line and mobile
networks on a nation wide basis as well as an international gateway facility. Subsequently the company initiated mobile
telecommunication operations in August 1995, becoming the first digital phone service to employ GSM technology.
Shortly afterwards in 1996, the company launched its domestic and international wireline ventures. Maxis's rapid progress
in telecommunication continued with the earliest rollout of comprehensive WAP services of any operator in the country, as
well as the first GPRS and #G calls in Malaysia.

COMPANY DYNAMICS

Maxis is not only the leading market share of subscribers, but also the highest profitability on a wide range of operating
measures. The key achievements of Maxis over the last five years (1998 to 2002) have been a direct consequence of
management excellence and no accident. I believe strong branding has underpinned the company's success and built up its
competitive advantage. Its market leading position for mobile telecommunication in Malaysia is primarily attributable to
the following competitive strengths:

Market leader: Maxis obtained its licences to operate mobile, fixed and international gateway services in 1993, but
commenced mobile services only in 1995, long after TRI (which operators a cellular service branded Celcom) was well
established. Maxis's operational strategies fully leveraged the Malaysian market's robust growth trends to build up its
subscriber base even though it was initially competing with more limited resources. The company move from a latecomer
position to overtake its more established competitors, finally seizing top market shares in 2001. The company leads in
market share for both post-paid and pre-paid mobile services, earnings, revenues and on pretty much any other operational
benchmark that one can use to compute the company and its peers.

From just 18% in 1997, Maxis's market share has risen to 31% in 2001. It can be seen Digi, Telekom and Maxis all
improve their overall market share figures, but Maxis has posted the largest gains by far. Also notable is Maxis's track
record in achieving a leadership position even,y across the market in both pre-paid and p[ost-paid services. Unlike
operators such as Digi, which are skewed largely towards one segment of the market, Maxis's base is strong on both fronts.

Highest quality subscriber base: Even more impressive than the sheer market share numbers that Maxis has acquired is the
high quality of the subscriber base it has garnered. In most markets, rapid expansion of market share has involved a
sacrifice of subscriber quality and increased price-cutting, but not in Maxis'a case. That was the case when the Malaysian
mobile sector was completely liberalised in August 2000. In the immediate aftermath, there was significant price
undercutting by industry laggards such as Time and Telekom in a bid to improve market share. Rather than compete on
pricing, Maxis retaliated with innovative competitive strategies and subscriber incentives. It focused on segmenting the
market and rewarding greater usage. Furthermore, I believe that Maxis's successful avoidance of direct price competition
has had beneficial impact on the market as a whole by limiting and thus minimising the impact of price competition.

Profitability: The combination of top market share, higher revenue generating customer base and high operational standards
has meant that Maxis has done extremely well in profitability. Moving from loss of over RM300 million in 1998, Maxis's
earnings are now starting to reflect management's prudence during the Asian financial crisis. As revenue picked up and
efficiencies started in from grater economic scale; its net profit rose 173% in 2000 to RM358 million. Net profit rose
another 165% in 2002 to RM950 million. The company's Return on Equity (ROE) rose from -106.3% in 1998 to 39.4% in
2002, which reflect effective in the utilisation of capital.

Effective premium branding: Maxis ability to turn its brand into a competitive advantage is a result of a focus on creating a
premium perception in consumers' mind. Maxis understood the importance of branding. Through the currency crisis during
1997 to 1999, when most of its competitors were cutting back on advertising and product promotion, Maxis continued to
invest heavily in its brand. It was involved in sponsorship such as the premiere film "Lord of the Rings" and lately "Disney
on Ice". It is through aggressive campaign that Maxis has made a name for itself as "The Ultimate Brand" in the mobile
phone service industry. It is the brand in the market today.

Organised distribution channel: In addition to effective advertising, Maxis brand strength has been built by quality
distribution channel. Maxis has developed a loyal dealer network over the years due to timely payments and consistency.
Over time, this has made Maxis the operator of choice for independent dealers, in turn improving the hold of the brand on
consumers. The company has so far appointed 36 of its more productive dealers as Maxis Authorised Service Agents,
carrying only Maxis products. Partnerships have also been established, under which distribution is outsourced to select
distributors who in turn deal directly with the dealers. This minimise the required resources from Maxis standpoint but yet
ensures a seamless reach to a broader customer base in a highly efficient manner. Besides that the company sells its product
through a network of Maxis centres in selected high-penetration areas, such as fast moving consumer goods (FMCG) outlets
and even banks/ATM.

Segmented Marketing: With strong distribution and marketing network in place, Maxis took the next step to customising the
marketing effort by segment to achieve optimal results. Not wanting to affect the perception of the high end "Maxis" brand
for post paid users; the company launched another brand, "Hotlink", for its pre-paid service.

The company has segmented its marketing efforts further within the post-paid and pre-paid markets. On the post-paid side,
the company has broken the market down between business and consumer segments and customer care, distribution, etc. are
varied to cater to each segment's specialised needs. Post-paid customers who qualify for the company's "MOC Elite"
programme, for example, get exclusive access to the company's priority centres and counters much in the same way that
business class air travellers have their own express counters for convenience. As for the pre-paid, the company targets
youth segments and budget-conscious customers, yet at the same time trying portraying a premium image, either through
pricing and innovation. Pre-paid is marketed through its traditional agents and FMGC outlets, given their more widespread
presence. This is quite evident that most of the mobile phone outlets do sell Maxis products.

Innovative Products: Maxis's products are clearly among the most innovative in Malaysia. Particularly on the post-paid
side, the company has four packages that are creatively structured, compared with others that are available in the
marketplace. The "Maxis family package" is an excellent example of the company's innovations. Under this package,
subscribers can sign on supplementary members within the same family and they get a significant discount on monthly
access and also on calls amongst one another. Here the company is able to broaden its customer reach, yet minimise
acquisition cost and reduce credit risk at the same time. The latest product launched, known as "m-style^3", bundle voice,
data and other value added services into one fixed price plan. This product is targeted at the young professionals aged
between 25 to 35. However, it will not affect the business and high-income users who are already with their existing service
and the excellent care that comes with it.

Maxis was the first in Malaysia to launch WAP services, first to trail GPRS, first to offer roaming services, one of the few
operators that have readily available tri-band phones for corporate clients travelling overseas and the first to launch mobile
lifestyle package.
Delivery of Quality Services: Once the customer is drawn in through robust distribution, segmented marketing and
innovative products, the company creates a sense that it is always looking to provide a better level of continuing services -
be through connivance of payment, innovative products, usage discount for high users etc. This high level of service has
paid off not only in terms of subscriber numbers, but also in terms of profitability (revenue and profit has been on the
increase since 1999) because consumers have been willing to pay more for it. The reason is that superior customer service
was a Malaysian consumer need that was not being adequately met by the market. Maxis management identified this need
and catered to it.

From registration right through to billing and customer retention, the following table demonstrates how well Maxis is
structured and plays and integral part in developing the consumer perception that this is "The Premium Brand" in Malaysia.

TABLE

Integral to the company's delivery of quality customer service has been the upkeep of its network. To maintain its premium
image, the company has been investing significantly in building and micro cell coverage and will continue to do so. The
company has been upgrading its network by upgrading the spectrum and this has since been enhanced further with the
purchase of TIMECel.

Besides upgrading the network system, Maxis also continue to introduce ways to reward their existing customers. This is
especially targeted to its higher-end users and is part of the core strategy to retain customers of high value, which will help
the company to retain its premium image as well as revenue. Such measures include "Advantage Savings" rebates, the
"Maxis One Club" and "Bounslink", to name a few. Under these programme customers as given various rebates, discount
and free services. One of them is the "Maxis One Club", where membership is extended by way of invitation only. In this
programme customers are offered a wide range of services from organising your dry-cleaning to giving free tickets to the
cinema to providing exclusive facilities at various hotels and restaurants.

Strong Management Team: I believe Maxis's success in creating brands that dominate the market throughout a range
product segments is due to the strength of management. Maxis's professional team comprises a wealth of experience from
various specialised backgrounds ranging from the IT to consumer sectors. The company has an ideal blend of local and
foreign management, with 7 of the 11 members of the senior management team having more than 15 years of experience at
leading multinational companies such as IBM, Shell and Motorola, to name a few. Specific detail of the senior management
team can be found in the table below.

The company's pole position in the Malaysia telecom sector and among Malaysian corporate as well as its impressive
profitability track record demonstrates the ability of the company's strong management capabilities. The fact is that the
current management team has built Maxis into a regional operator in just over six years, despite entering the market five
years behind Celcom. Thus, in addition to surviving and thriving in a competitive environment, management has proven
their ability to weather significant macroeconomic and telecom market shock well. The company came through the
currency crisis without losing focus of its long-term goals and it was at this time that the company embarked on the
development of the "Maxis" brand. This has been the key in the company's rise to prominence.

Synergy with sister companies: Behind the placement of the talented group of managers that has achieved so much is
strategic execution by the backing of shareholder. Maxis has benefited from association with the Usaha Tegas Group (UT)
of Malaysia. UT's investment portfolio in Malaysia includes a variety of assets including media and broadcasting, leisure,
property and power in addition to telecommunication. In addition to formulating the key components of the Maxis strategy,
UT has also allowed Maxis to leverage off its sister companies to significantly improve its market standing. For example,
Tanjong operates one of the largest cinema networks in Malaysia in addition to being one of four number forecasting
operators in the country. Through these cinemas, Maxis offer its loyal customers various rewards such as free or discounted
movie tickets. Astro, which also falls under UT, is the country's dominant pay-TV operator and owns and controls a large
chunk of radio programming.

Working together, the two companies have complemented each other effectively. In addition to the advertising benefits for
Maxis's products via Astro's hold on media, Maxis provides stock quotes via SMS using software developed by Astro. The
two also corporate on sponsoring concerts and other events, and the development of practical data applications for
customers. Jointly reaching broader population base through co-branding, these companies wherein a pay-TV connection
and one or more lines can be obtained at once. Because of the synergy with sister companies, Maxis is far bettered
positioned than any of its competitors are. I believe that the relationships that Maxis enjoys with the UT group will help it
to sustain its competitive advantages.