TRUE : Annual Report 2001 by True Corporation Public Company Limited

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Contents Page n

Highlights

Message from the Chairman

Message from the President

Report of the Audit Committee

Company Background and Major Development

Nature of Business

Revenues Breakdown by Business Group

Corporate Information

References

Investment Structure

Risk Factors

Shareholders

Management

Management没s Discussion and Analysis

Connected Transactions

Financial Statements

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HIGHLIGHTS TelecomAsia Corporation Public Company Limited and Subsidiaries Selected Financial Results Operating revenues Revenues from telecommunication and other services Revenues from product sales (principally PCT handsets) Operating expense1 EBITDA (normalized)2 Margin EBIT (normalized)2 Margin Net Profit (loss) EBITDA/Interest Coverage Debt/EBITDA Foreign long-term loans as a % of total Cash flow from operations Selected Operating Results Subscriber base Fixed line telephone Wireless (PCT) Digital Data Network (bandwidth) Broadband (ADSL & Cable Modem) Internet Subscriber net additions Fixed line telephone Wireless (PCT) Digital Data Network (bandwidth) Broadband (ADSL & Cable Modem) Internet Efficiency ratio No. of employees Lines per employee3 Revenue per employee

M.Baht

2001 20,636

2000 19,388

% Change 6.4%

M.Baht

20,118

18,085

11.2%

M.Baht M.Baht M.Baht % M.Baht % M.Baht

518 19,577 10,421 51.8% 2,431 12.1% (3,425)

1,302 17,569 9,343 51.7% 1,635 9.0% (3,308)

(60.1%) 11.4% 11.5%

Times Times % M.Baht

1.9 8.1 50.1% 4,479

1.7 7.9 65.9% 3,228

14.3% 3.2% (23.9%) 38.8%

Lines Subscribers ,000 Kbps Subscribers Subscribers

1,741,345 626,944 2,593 1,613 156,321

1,524,959 393,000 1,449 73,510

14.2% 59.5% 79.0% 100.0% 112.7%

Lines Subscribers ,000 Kbps Subscribers Subscribers

216,386 233,944 1,144 1,613 82,811

123,847 205,295 709 53,510

74.7% 14.0% 61.4% 100.0% 54.8%

Persons Lines M.Baht

5,539 429 3.73

5,305 389 3.65

4.4% 10.2% 1.9%

1. Excluding out-of-period accounting adjustments of Bt157 million for 2001 and Bt685 million for 2000 2. Excluding TA Orange and product sales 3. Basing on total no. of employees for fixed line business of 4,062 for 2001 and 3,920 for 2000. 2

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MESSAGE FROM THE CHAIRMAN TelecomAsia Corporation Plc. had reached it没s 10th Anniversary in the year of 2001. Throughout these years, TelecomAsia has innovated and brought the spectacular advancement to the Thai society as we has evolved the traditional technology to the sophisticated and user friendly technology which has totally competed with high efficiency and global standard. The 2.6 million telephone numbers project is more than a successful milestone of a decade, it creates foundations of initiatives, working procedures, self-competitions as well as impulse of adventures among various organisations concerned. It represents the significant center to integrate among different divisions at every single officer, creditors and other state agencies, including the Telephone Organization of Thailand, the Communication Authority of Thailand, the Royal Thai Police and many other public and private institutions. Above all this is evident that supports of our loyal and respectful customers keep our business alive. Certainly, they are genuine basis of our company. To all we definitely please wholeheartedly to sincerely express our appreciation. In 2002, it is a great opportunity for TelecomAsia Corporation Plc. to move into another essential step ahead through this second decade smoothly which is a time to blend new inventions of dynamic together with state-of-the-art technologies and communicational services in order to perfectly adopt to the Thai life没s style. Also, these are involved with straight to core products and extensive services of value added products emerging from the combination of voice, data and image technology on the network of the 2.6 million telephone lines. We have enhanced our PCT to be more potentially useful to achieve effectively the customers' needs as well. Most importantly, the progress of launching the mobile services with 霉TA Orange没 would be the front liner for TelecomAsia to become the one leader of aggressive players in wireless communication. Furthermore, the major issue that needs to be emphasis on is the direction of concession conversion between TelecomAsia and the Telephone Organization of Thailand. This will provokes our capability clearly to negotiate for fairness among all parties involved with. Obviously, we realize and perceive all of these responsibilities carefully as we pay attention closely on the existing telecommunicational competition. As a result, international standards and strict regulations are now becoming more importance to the national level as well as the global scale, the real competition is now commencing and it also awakes everyone within TelecomAsia to response and handle any obstructions wisely. At last but not lease, we, TelecomAsia, are proud to explore our features to all of the world as we will hold self-consciousness constantly, look through the future carefully, read all problem explicitly, turn crisis to opportunities and we accomplish the mission finally.

(Mr. Dhanin Chearavanont) Chairman of the Board

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MESSAGE FROM THE PRESIDENT Despite the global economic downturn and the repercussions from the September 11th tragedy, TelecomAsia finished the year 2001 in a better strategic position than we have ever been in since our founding ten years ago. As Thailandรปs telecommunications sector moves closer towards market liberalization, the outlook for TelecomAsia has never been more promising. The year 2001 ushered in a new era for the Thai telecommunications industry. A new Telecom Act was promulgated. The government set an aggressive timeframe for the privatization of the Telephone Organization of Thailand. The frameworks for concession conversion were brought forth as a national agenda. These milestones are a testament to the importance of our sector and its imminent liberalization as the fuel for Thailandรปs future economic growth and competitiveness. It is not surprising that competition in the industry has intensified among wireless, fixed line, and Internet players alike. Because the competitors know that as the market opens up, the prizes to be won for those well positioned will be greater than ever before. On the strategic front, TelecomAsia took decisive actions to strengthen our portfolio of businesses for the post-liberalization environment. We successfully attained a 41% shareholding (through Bangkok Interteletec Co., Ltd.) in TA Orange Co., Ltd. (formerly C.P. Orange Co., Ltd.) with an option and obtain to hold up to 51%. We strongly believe in the profitable growth prospects of the mobile business in Thailand, and now we will be part and parcel of that growth. Furthermore, the knowledge transfer that we gain from our new partner, Orange, one of the worldรปs strongest brands, will go a long way towards strengthening TAรปs own brand management. In addition, there are significant synergies between our wireless, fixed line, Internet and cable TV (UBC) businesses, on both the costs and revenue sides, which we have only just begun to reap the benefits of. On the financial front, we reduced our financial risks by converting US$ 97 million of debt into Baht denomination as well as refinanced US$ 110 million of debt into Baht. Preparations have been made for significantly more foreign exchange risk reduction and balance sheet improvement in 2002. On the operational front, we have improved our organization and management in three ways. First, we have set up a system that allows us to measure and reward employees based on performance. Secondly, we have de-layered the organization, allowing us to be more responsive to our customers and the changing competitive environment. Thirdly, we have reorganized our thinking and people into value creation units, each with the responsibility for ultimately creating value for our shareholders. The year 2002 will be an exciting year for TelecomAsia as it will be our first operational year as Thailandรปs one and only integrated operator. Not only will we be focusing on achieving the synergies we have identified thus far, but we will also be further enhancing our position strategically, financially, and operationally to benefit from liberalization whichever way the story unfolds.

(Mr. Supachai Chearavanont) President and Chief Executive Officer

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REPORT OF THE AUDIT COMMITTEE By virtue of a resolution of the Board of Directors of TelecomAsia Corporation Public Company Limited (the çCompanyé) passed at its meeting No.13/1999 held on 22nd December 1999, the Audit Committee was appointed to perform duties and discharge responsibilities under the charter for the Audit Committee. During the year 2001 the Audit Committee carried out the following work : 1. held committee meetings, totaling 10 times during the year 2001 in order to discharge its functions as assigned by the Board of Directors; 2. considered and proposed the appointment and remuneration of PriceWaterhouseCoopers ABAS Limited as the Companyûs external auditor for the year 2002; 3. presented the Corporate Policy Statement and Internal Auditing Charter to the Board of Directors for consideration and approval, defining the process, scope and responsibility of the internal audit functions with a view to ensuring efficiency and effectiveness, particularly in the areas of internal control and risk management; 4. reviewed the Companyûs and subsidiariesû financial reports, monthly, quarterly and annually, to ensure correctness, reliability and adequate information reflecting good corporate governance; 5. consulted and discussed with PriceWaterhouseCoopers ABAS Limited to formulate an Internal Audit Operating Manual incorporating all necessary issues to be used as practical guidance; 6. regularly reviewed the Companyûs and its subsidiariesû practices relating to connected transactions to ensure compliance with the regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand; 7. continuously ensured that the Company improved its Internal Control System.

(Mr. Vitthya Vejjajiva) Chairman of the Audit Committee

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COMPANY BACKGROUND AND MAJOR DEVELOPMENT TelecomAsia Corporation Public Company Limited (the çCompanyé) was established on 13th November 1990 initially under the name of CP Telecommunications Company Limited to undertake the telecommunications business being awarded a Build Transfer Operate (BTO) concession by the Telephone Organization of Thailand (çTOTé) to construct, install and jointly operate a 2.6 million fixed telephone line expansion in the Bangkok Metropolitan Area (the çBMAé) (the BMA includes Bangkok, Nonthaburi, Samutprakarn and Pathumthani) for a period of 25 years. The Company must also provide maintenance of the system equipment of the 2.6 million lines throughout the term of the agreement. In addition to the original fixed line concession with the TOT, the Company has been granted the approval to expand various types of valued added services to its fixed line subscribers aiming to be a full-scaled telecommunications service provider. This includes TA Connex, public phone service, Personal Communication Telephone service (çPCTé), data transmission services, internet and multimedia services. The Company subsequently registered as a public company limited with registration no. Bor Mor Jor 82 on 11th February 1993 having Nynex Network System (Thailand) Company Limited (çNYNEXé) as a strategic partner. NYNEX is an affiliate of Verizon Communications, Inc. (çVerizoné), a leading telecommunications service provider in the U.S. As at 31st December 2001, NYNEX holds approximately 12.51% of fully paid-up capital of the Company while Charoen Pokphand Group Co., Ltd., a Thai major shareholder holds 16.40%.

Major Development in Business Operation and Management November 1990 August 1991 December 1991 July 1992 December 1993 June 1994 March

1995

September 1995 May 1996 August 1996 January 1997 May 1998 November 1999 March 2000 August 2000 November 2000 April 2001 June 2001

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Company Establishment with registered capital of Baht 1,000 million Entering into the BTO concession with the TOT to build, install, jointly operate and maintain a 2 million fixed telephone lines in the BMA for the period of 25 years Establishment of Telecom Holding Company Limited to invest in telecommunications projects Acquisition of 15% shareholding in the Company by Nynex Network System (Thailand) Company Limited Listing as a listed company on the Stock Exchange of Thailand with registered capital of Baht 22,230 million Investment in FLAG Telecom Holdings Limited (çFLAGé), providing fiber optic link for telecommunications service providers Commencement of cable TV service of UTV Cable Network Company Limited (UTV), one of the Company's affiliates. Approval granted by TOT to the Company for additional 600,000 fixed line expansion in the BMA. Approval granted by TOT to the Company to provide various value added services such as digital network services and TA Connex Approval granted by TOT to the Company to provide PCT service Approval granted by TOT to the Company to provide public telephone service in the BMA Merger between UTV and International Broadcasting Corporation PLC (IBC) to become a leading cable TV service provider under the name of United Broadcasting Corporation PLC (UBC) Official commencement of PCT service Debt restructuring successfully completed with a principle term that Kreditanstalt fur.. Wiederaufbau (KfW), major foreign creditor, subscribes 702 million preference shares totaling USD 150 million equal to 24% of total shares of the Company after capital increase Commencement of Click TA service, a new alternative of Internet services Announcement of çTA 1234é service, an economical rate for long distance calls Commencement of prepaid PCT service Approval of shareholders in a shareholdersû meeting to swap 41% shares of Bangkok Inter Teletec Co., Ltd. (çBITCOé), holding 99.81% of shares of CP Orange Company Limited (furtherly changed its name to TA Orange Co., Ltd.) awarded a concession by the Communications Authority of Thailand (çCATé) to provide GSM 1800 cellular phones services Entering into the share swap with BITCO and registration of paid-up capital increase with the Ministry of Commerce on 6th November 2001

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NATURE OF BUSINESS Products and Services under the Build Transfer Operate Concession with TOT and CAT The Company is a leading telecommunications service provider of wire line and voice, video, data and web-based applications based on the integrated multi-platform network. As of 31st December 2001, the Company has achieved higher market share in wire line business in the Bangkok Metropolitan Area (Ă§BMAĂŠ), ThailandĂťs largest business center, than its competitor and is aiming to provide its customers with a full range of telecommunications services, emphasizing both the best service from its well-trained personnel and the best quality of products from its high technology-based network. The Company's wire line network, as the core network, combines a fiber optic network and a high-speed digital network to not only enable the Company to provide its customers with the best quality of wire line service, but also to help the Company develop its new value added services which better serve its customers' various needs, e.g. Personal Cordless Telephone (PCT), multimedia services, data transmission services and Internet and e-commerce services. Moreover, the Company has installed ATM (Asynchronous Transfer Mode) and IP (Internet Protocol) networks on its core network to expand the capacity and speed of data transmission and to offer new alternatives of services to its customers. The Company believes that its core network will become the key to telecommunications services of today and to the next era of telecommunications business, emphasizing voice, video and data. Apart from its high technology core network, the Company has procured a Network Management System which will enable it to track errors and provide highly effective maintenance 24 hours a day including the advanced Computerized Customer Service System or CCSS to help meet its customers' satisfaction in its services. Products and Services of the Company and its subsidiaries and affiliates can be classified as follows: 1. Wire Line and its Value Added Services 2. Wireless Service (PCT) 3. Multimedia Services 4. Data Transmission Services 5. Internet and E-Commerce Services

(1) Wire Line and its Value Added Services In 1991, the Company was formally awarded a Build Transfer Operate (BTO) concession by TOT to construct, install and jointly operate a 2.6 million wire line telephone expansion in the BMA for a 25-year period. The Company shares its revenue with TOT. TOT collects service charges from customers and then calculates the proportion of revenue sharing to the Company, based upon the revenue amount before deduction of related expenses, pursuant to the concession, at the revenue sharing rate of 84% for 2 million lines and 79% for 600,000 lines. With regard to value added services, the Company has 82% revenue sharing from each service and 76.5% of the public phone service. As of 31st December 2001, the Company has 1,741,345 telephone subscribers. Telephone Subscription and Installation Upon the request for telephone installation from the customer, the Company will quickly proceed and complete the installation as scheduled. As part of providing excellent service and convenience to all customers, customers can subscribe for wire line telephone at 21 branches of TA Outlet located throughout the BMA area or via Tele-ordering Center at the telephone number 0-29009000. In case of having a network problem, the subscriber can dial 1177 Service Center for assistance 24 hours a day. The Company will provide technical support through well-experienced technicians from its Network Maintenance Centers located throughout the BMA area to solve problems immediately as needed. Moreover, the Company has established a Call Center to provide relevant information and address customer concerns. A n n u a l

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Value Added Services In addition to the wire line service, the Company offers various value added services to serve its customers' needs, e.g. Public Phone Service, 1177 Service Center, TA Voice Mailbox, TA Connex, Direct Inward Dialing, TA Hunting Lines and Integrated Service Digital Network. - Public Phone Service : Since 1997, the Company has provided public phone service in the BMA area for 20,000 telephone units, and is currently seeking approval for 6,000 additional telephone units to be installed in 2002. - 1177 Service Center and Drop Wire Maintenance : Also since 1997, the Company has operated a service center for receiving notifications of network problems and for drop wire maintenance. - TA Voice Mailbox : This is an automatic telephone answering service which answers incoming calls when the line is engaged or there is no answer. This service does not require any additional equipment, and allows customers to receive their voice mails by just calling the Voice Mailbox Center. - TA Connex : This service consists of following features: Call Waiting, Conference Calling, Call Forwarding, Hot Line, Abbreviated Dialing, Automatic Call Repetition and Outgoing Call Barring. Apart from the foregoing services, the Company also provides services for corporate customers that require a great amount of telephone lines and anticipate various types of services through the direct sale staffs to visit the customers to introduce new technology of valued added services compatible with the wire line telephone system as follows: - Direct Inward Dialing (DID) : DID directs incoming calls to a party through a PABX, without an operatorûs intervention. - TA Hunting Lines : This service bundles 2 or more telephone lines at one location into a single number (Pilot Number). - Integrated Service Digital Network (ISDN) : ISDN enables a telephone network to handle the growing need for all forms of voice, data and image communications to be used simultaneously on the same telephone line. - Other Services : The Company will soon be launching new value added services such as Calling Card and Free Phone 1-800.

(2) Personal Communication Telephone (PCT) Along with Asia Wireless Communication Company Limited (çAWCé), a TA subsidiary, the Company officially launched PCT Service in November 1999. PCT is a service that brings convenience to its users through use of a single telephone number as the wire line telephone with a cordless handset that can be used anywhere within the BMA. PCT combines 2 leading technologies into the existing network: the Personal Handy Phone System (PHS) developed from the Cordless Telephone System and the Public Switched Telephone Network (PSTN) and the advanced Intelligent Network with its enhanced network capability that allows the PCT cordless number to use the same number as the wire line phone. In 2001, the Company launched the PCT Prepaid Service under the Company's wire line network in order to satisfy customers who want greater control over the cost of usage. PCT Buddy was also introduced during 2001 to serve apartment residents who do not have their own fixed-line telephone numbers. PCT is provided under the BTO concession with TOT. All revenue from PCT service is collected by TOT and the Company is paid 82% of revenue, before deduction of related expenses, of which approximately 70% is paid to AWC as compensation for operating the PCT service. PCT service is also available to TOT subscribers. Because the PCT network belongs to the Company, TOT shares approximately 80% of revenue received from its subscribers to the Company as a PCT network rental fee with the 8

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Company (in the event that the forex rate is below Baht 38 per USD1) or approximately 82% of revenue (in the event that the forex rate is Baht 38-45 per USD1).

(3) Multimedia Services Multimedia service is provided through Asia Multimedia Company Limited (çAMé), the Company's subsidiary that owns exclusively a large scale Hybrid Fiber-optic Coaxial (HFC) network. AM has been operating under TOT permission since 20th October 1997. AM currently jointly operates a cable TV business with United Broadcasting Corporation Public Company Limited (çUBCé), a Company affiliate and Thailandûs leading cable TV service provider. AM has rented its HFC network of 35 analog channels to UBC for broadcasting cable TV programs. In addition, AM is a drop wire distributor and provides UBC customers with drop wire installation services, including the maintenance of the set-top Boxes. AM is recognized as the first company in Thailand to launch broadband Internet services based upon cable modem technology which allows computers to send and receive data via the HFC network at very high speed. Transmission speed through AMûs cable modem service, introduced in 1999, is up to 100 times higher than other dial-upmodems currently used among internet users. Because it is always connected to the Internet, cable modem service eliminates the delay of dial up procedures, saving users time, and it does not require a separate telephone line.

(4) Data Transmission Services The Company offers various alternatives in both speed and flexibility for data transmission to best fit its customers' needs. After the installation of ATM/IP and Remote Access Server (RAS) in the middle of the year 2000, the capacity of data transmission has increased in terms of both higher speeds and improved quality. Data transmission services available to customers are as follows: - Digital Data Network (DDN) : DDN facilitates voice, data and image transmission between two different points over the intelligent network of the Company. Users can use this special route to transmit data that is suitable for business institutions, e.g. banks and financial institutions, which rely upon continuous transmission of accurate data or information, often in large volumes. - Asymmetric Digital Subscriber Line (ADSL) : ADSL allows high and stable speed data transmission service over the wire line service, suitable for each userû s requirements for on-line data normal telephone line functionality, and is marketed under the name of TA Express. - IP Access Service (IPAS) : This service, offered under the name çTA Megaporté, is another alternative to Trunk Access that provides RAS management services for customers who require external Access Port, e.g. Internet service providers, web information providers, and business groups which require a Virtual Private Network Service (VPN), without having to incur any additional expenses for equipment and management for the Access Port.

(5) Internet and E-Commerce Services Since receiving approval from CAT in November 1996, the Company's subsidiary Asia Infonet Company Limited (çAIé) has provided Internet and e-commerce services to its customers under the name of çAsianeté AI customers are offered various service alternatives: for example, corporate customers can select leased line, ISDN and web hosting services, while private users can select from monthly or hourly membership packages, or purchase and Internet kit ready for use or International Roaming services. In addition to AIûs Internet service, the Company has created its own website: ClickTA.com, which is an economical Internet service designed to serve its telephone subscribers exclusively. ClickTA.com is accessed through an on-line portal which provides its customers with high speed data transmission through a special gateway to the Internet. Moreover, ClickTA.com contains a variety of useful and entertaining information and has free e-mail service for its subscribers. Service charges collected by AI are shared with A n n u a l

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the Company. The revenue sharing ratios depend upon the number of ClickTA.com subscribers. In addition to the foregoing, the Company also provides its corporate and institutional customers with e-commerce services i.e. End-to-end Web Development Solutions, e.g. Web Design, Web Development Implementation, Hosting. Our services are capable of serving even the most complicated interactive website with graphic and motion pictures or animation and multimedia components.

Marketing Strategy The Company seeks to provide its customers with a complementary variety of bundled telecommunications services. The Company also believes that the demand for the combination of the wire line, wireless, Internet and multimedia products and services will be increasing significantly. As high technology products and services develop, the Company and its subsidiaries have jointly determined their marketing strategy and targeted customers, together with distribution channels, as follows: Marketing Strategy and Market Environment The main objective of the Company is to best serve its customers via its advanced telephone network in order to facilitate and better its customers' quality of life by considering the market demand and the quality of service. As a consequence, the market strategy emphasizes public relations activities to improve the perception of and understanding towards the Company's products and services, including the ongoing marketing campaign corresponding to the customers' needs. Nature of Customers and Target Group The Company recently reorganized its marketing organization into the Business Segmentation and Consumer Segmentation. The Company has classified its Business Segmentation into 1) Small and Medium Enterprises, 2) Banking, Finance and Insurance, 3) Government and State Enterprises, and 4) Wholesale Services and Solutions in order to provide them with the most appropriate service. With regard to the Consumer Segmentation, the Company has categorized its customers by the market environment into 1) Teenager Group, 2) Housewife and Family Group, 3) Businessman and Professional Group, and 4) New Housing Resident Group in order to offer best service and high technology products to such customers throughout the BMA. Distribution Scheme and Distribution Channel Distribution channels are divided into : 1. Business Channel is categorized into - Small and Medium Enterprises : The distribution channel for this customer group is based upon the territory and area approach. Each area is under the responsibility of a sales manager and sales executives in charge of a specific territory. The marketing strategy is tailored and is adjustable to meet the requirements of the targeted customers. In addition, the sale executives are trained to possess good skills in presentation, negotiation and creating marketing activities to facilitate the sale, e.g. direct marketing. - Banking, Finance and Insurance : The Company has an Account Executive (Ă§AEĂŠ) who is responsible for certain customers. Each AE surveys the total communication requirements of the customers and, correspondingly, offers them a total solution package of voice, image, data and information transmission. Moreover, each AE acts as a single point of contact for those customers in order to accommodate and provide customer care service appropriately. - Government and State Enterprises : The Company established a specific sales department responsible for this customer segment, in order to ensure compliance with relevant rules and regulations and to serve them with well-suited services. 10

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- Wholesales Service and Solution : This customer group includes telecommunications business, Internet service providers, e-commerce business, etc. which have huge demand for telephone usage with high technology functions. The Company, therefore, has technical specialists available for giving technical advice and assistance to this customer group. 2. Consumer Channel is categorized into : - Retail and Telesales Channel Management (RTM) : This involves the telesales to prospective customers through 21 outlets in order to accommodate them in subscribing to telephone line and other services from the Company. - Direct Sales : This distribution channel is based upon the territory and area approach under the responsibility of a sales manager and sales executives for each specific territory. Marketing strategy is tailored to be adjustable to provide the most appropriate services such as mail drop, promotional campaign and activities, and mobile outlets to facilitate those who are living in certain residential area.

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Industry and Competition 1. Fixed Line Business Currently, there are 3 fixed line operators comprising 2 private concessionaires namely, the Company (offering services in greater Bangkok and vicinities) and Thai Telephone and Telecommunication Plc.-TT&T (offering services in provincial areas). The TOT, a state enterprise, also offers services with nationwide coverage. As of September 30, 2001, there were totally 3,190,667 fixed line subscribers in Bangkok and vicinities. This represented a growth rate of 8.8 % year over year. Table: Fixed Line Telephone - Lines in Service Service Provider TOT* TA** TT&T* Total

As of September 30, 2001 Bangkok Provinces Total Metropolitan 1,474,421 1,653,689 3,128,110 1,716,246 1,716,246 1,184,126 1,184,126 3,190,667 2,837,815 6,028,482

As of September 30, 2000 Bangkok Provinces Total Metropolitan 1,439,382 1,437,212 2,876,594 1,493,646 1,493,646 1,183,393 1,183,393 2,933,028 2,620,605 5,553,633

Source : * www.tot.or.th ** the Company's data

The penetration rate in Bangkok Metropolitan is still considerably low when compared with other developed Asian cities. Therefore, there is still opportunity for growth. However the growth rate will depend on the pace of economic recovery and the expansion in the Internet and data market, which will stimulate customer need for additional fixed telephone lines. Table: Asian Cities没 Fixed Line Penetration Rates Country Hong Kong Malaysia Taiwan Korea Bangkok Metropolitan1

Connected Lines per 100 Population 52.1 20.2 54.1 48.6 35.9

Source : CIA Fact Book 2000 and the Company

Competition is not intense at present. Under the current regulatory scheme, there are limited number of concessionaires under the concession contracts between the concessionaires and the TOT. However, commencing the early 2001, the TOT has adopted a more aggressive marketing scheme. This heated up the degree of competition. Since the Company has engaged in a more aggressive marketing approach than the TOT and the TOT had a limited number available for sale, it managed to seize almost all of the net additions market share and hence resulting in the Company's market share surpassing the TOT没s. As at September 30, 2001, the Company managed to posses 54% market share for Bangkok and vicinities while the TOT captured the balance of 46%. The competitive strategy implemented by the Company included the continuous sales promotion for new application fee waiving, bundling sales with other products, management by type of customers, emphasis on corporate client group including the concentration on the service quality and customer satisfaction. The Company believes that its strength in fixed line services lies on its fixed line 1

Bangkok Metropolitan includes Nontaburee, Patumthanee and Samut Prakarn

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network technology which is modern and highly flexible. It, therefore, enhances the Company to offer services with high efficiency and low maintenance cost. However, with the hyper growth in cellular subscribers that almost doubled within the year 2001 and with the intense sales promotions from cellular operators, the tariff has effectively declined. This affected the Company's fixed line business. There was some migration of subscribers from fixed line to cellular. The said impact will still continuously exist for the next few years when the subscriber growth is expected to be increase rapidly. However, part of the said impact will be offset by higher call to mobile due to a higher destination phone number to call to.

2. Personal Communication Telephone (PCT) Business The Company has commenced the PCT official launch since November 1999 with its unique characteristic of çone numberé concept as the first and the only operator in the world. It is, therefore, considered as value added service extending the service coverage area of its fixed line. It enables subscriber to use their home phone numbers anywhere within service footprint. This has positioned PCT uniquely as an extension to fixed line services and thus differentiated PCT from cellular service. Moreover, the Company emphasizes the features of PCT with a slogan of çeasy to remember, convenient, safe, and economyé. Since PCT carries the same number as of the fixed line, the number is easy to be remembered. As PCT handsets transmit 200 times less microwave power than that of GSM 2 Watts (a cellular handset), they are relatively safer to use. However, PCT only cover the footprint of Bangkok metropolitan. The tariff for PCT is about half of cellular. Calls made from fixed line telephones to PCTs are charged at Baht 3 per call, while, outgoing call from fixed line to PCT is charged at fixed rate of Bath 3 per call comparing with the time metering rate for calls made from fixed line telephones to cellulars. Another unique characteristic of PCT is the higher data transmission speed than that of the cellular. Moreover, enhancing the data transmission speed capability costs less than cellular due to additional software upgrade requirement. In 2001, the Company has introduced a new sales promotion by reducing tariff for outgoing call from PCT to fixed line or PCT within the same area to Baht 3 per call. Monthly fee was also reduced to Baht 200 per number rather than per handset. The installation fee was also waived. Hence, PCT was positioned as virtual fixed line. By the end of the year, the Company has further reduced the barrier to entry by lending PCT handsets to subscribers for 3 years without any conditions. Moreover, the Company put emphasis on product acknowledgement in order to manage customer's expectations and maintaining the customer service quality. The target customers for PCT differ from those of the cellulars. They include housewives, civil servants, entry-level company staff and school children, etc. The Company believes PCT is the value added service to the fixed line rather than being cellular and suits the target customers who spend most of their time in Bangkok. Despite the Company positioning the market segment for PCT to be differentiated from cellular, there are some consumer groups still perceive PCT as a substitute to cellular. Therefore, the fierce competition of the cellular phone business has, in part, inevitably affected the PCTûs operating results. In 2001, cellular subscribers have doubled the number within the first 9 months to 6.4 million amid the more intense competition. The cellular hyper growth has started to develop since the second half of 2000 due to handset and equipment price reductions. Moreover, there were other sales promotions such as the all-inclusive charge that caused tariff reduction. This was done in order to expand and build their subscriber base prior to the entrance of the new operators such as TA Orange Co., Ltd., ACT Mobile, and Hutchison-Tawan Mobile. Despite PCT facing a tougher competition from cellular and the service area being limited to Bangkok Metropolitan, the Company still managed to add subscribers at the growth rate of 60% from 2000 to 626,944 as at December 30, 2001. This reflected the success in its appropriate market positioning and the effective marketing activities. Moreover, it resulted from the wireless service

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as a whole still having high growth potential. Currently, Thailand still has a low penetration rate of 12% for wireless service comparing to Hong Kong (53%), Singapore (36%), Korea (50%), Taiwan (45%), and Malaysia (13%). (Source: International Data Corporation, 2000 and CIA Fact Book)

3. Data Communications and Broadband Services Data Communications Service At present the market for data network business has expanded at the rate of 23%-30% due to much higher popularity of on-line data transmission. There were higher number of foreign conglomerate participation in business including branch expansion of Department Stores, super stores, and industries. The state also implemented the policy of implementing the IT system high-speed data network for country development through different projects such as, GI-Net, SchoolNet, Information Superhighway or software -park, etc. The private sector that has enhanced its efficiency towards the competitive advantage began to efficiently utilize the data network for mass data communications. Moreover, the higher demand for Internet was attributable to the expansion in this business. Since the economic crisis in 1997, several private companies and the government sector have accelerated the data network installation in order to support the work expansion and to add leverage in the competition. Moreover, the higher popularity in Internet usage was another factor affecting growth in this business sector. Currently, there are 5 major DDN operators namely: TOT, UIH, TA, ADC and CAT. Competition in data network services is very high, as there are many operators. The key success factors in this business are service quality and reliability, high service coverage, and the ability to offer high-speed services demanded by customers. The Company now captures the market share of approximately 30% in both numbers of circuits and Bandwidth aspect. It is considered to be at par with TOT who is another major operator. The Company does have significant competitive advantages over its competitors as results of its modern network technology that yields higher service quality and reliability. In additions, the Company's data network was enhanced with the completion of ATM/IP overlay network during the second half of 2000. This enables the Company to offer high-speed services suitable for growing needs of subscribers. Moreover, the Company emphasizes on the service quality continuously. In 2001 the Company has opened the new modern data center to cope with the expansion of data network demand. It has also set up a call center for data network services to help customers who need high technical advice than normal fixed line. Moreover, the installation staff was integrated into Services Area and Network Operation of the fixed line service in order to accelerate the process of installation and maintenance. Broadband Service The Company officially launched the broadband services in September 2001 with the complete broadband solution namely: Cable Modem service, TA Express (ADSL) service and TA Megaport, which is the IP Access Service (IPAS). The market for ADSL and Cable Modem in Thailand is still in the infant stage with the Company being the sole Cable Modem operator owning the only cable TV network in the country. There are a limited number of ADSL operators namely: UBAHT and LENSO. The broadband service competition is still mild due to the rapid expansion of the market. Total broadband market expansion is expected to grow at the rate of 40%-50% p.a. for the next few years. Currently, the broadband services still limited to high-speed Internet usage. Therefore, the growth for broadband services will depend on the expansion of Internet users including the development of contents that can attract more users. There is, however, factor that hinders growth for this business namely: the service fee, which is considerably higher than dial-up Internet. A typical modem costs around Baht 5,000-6,000 while average service fee is set at approximately Baht 1,500-2,000 per month. The Company enjoys the advantage of its ability to offer the service for both Cable Modem and ADSL with a higher coverage area. The Cable Modem service, which is the cable TV network, covers 80,000 home pass in Bangkok Metropolitan. The ADSL 14

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service is offered through the fiber-rich core fixed line network with a very short last mile copper enabling the Company to offer high quality services. Moreover the launch this year enables the Company to enjoy the first mover advantage.

4. Internet Service Business The total number of Internet users in Thailand is estimated at around 3 millions, representing a 5% penetration rate. This is relatively low comparing to developed countries such as: Korea (33.9%), Japan (20.6%), Hong Kong (32.7%), Taiwan (28.9%) and Singapore (45.1%). (Source: International Telecommunication Union, 2000). Key factors that have limited the size of Thai Internet usage are high cost of PCs and access charge, expensive international leased circuits, a shortage of local content, linguistic problems and the slow development of business application for the domestic market. Furthermore, most of the ISPs currently have the CAT, the regulator, holding a free stake of 35% of total share equity as a part of the ISP concession requirement, thereby discouraging business expansion. At present, the competition in the ISP business is severe due to the existence of many (18) operators. The Company offers the service through its subsidiary namely, Asia Infonet Co., Ltd (AI) who is a major ISP. Other major ISPs comprise CS Communications, Internet Thailand, KSC Internet, Loxley Information and A-Net. The severe competition has caused an abrupt decline in Internet service fee at the rate of 50% in the past few years. The dial-up service rate now cost around Baht 7-10 per hour. The Company, (under AI), has put emphasis on being a leader in corporate market and is presently one of the major players in this market segment. This year, it has concentrated in marketing the high-speed Internet via both ADSL and Cable Modem in order to offer choices for customers. The Company's advantages over its competitors are that it operates via its own modern network ensuring higher service quality and a lower cost structure. The Company can bundle its Internet products with other telecommunications services offered by various companies amongst the TA group.

Regulatory Update The telecommunications business in Thailand is in the preparation stage for liberalization. Under the commitment with WTO, the foreign telecommunications firms will be allowed to enter the local market to join free competition by 2006. In order to prepare the local operators to be ready for the global competition, the National Telecommunications Master Plan offers the local liberalization as an initial stage. Under the National Telecommunications Master Plan, the National Telecommunications Commission (NTC) is to be established to regulate and oversee the country's telecommunications business replacing the Telephone Organization of Thailand (TOT) and the Communications Authority of Thailand (CAT). The selection process for 7 out of 14 proposed appropriate committee members by the House of Senate is still pending for the reason that the selection process not being transparent enough. The Enactment of Telecommunications Business Act (Telecom Act) In March 2000, the Radio Frequency Allocation Act was enacted with an Article indicating the establishment of the National Telecommunications Commission (NTC) to regulate and oversee the country's telecommunications business. In November 2001, the Telecommunications Business Act was enacted. The said Telecom Act is the law that sets the framework for the to-be-established NTC to regulate and oversee the telecommunications business. This is considered to be another vital step towards the country's telecommunications liberalization. However, there may be some controversial issues in this Act to practice which the government is expected to amend. The 25% foreign ownership limit in Article 8th may affect some existing operators with the shareholding structure already reach 49%. The Article 57th prohibits the license holders from collecting deposits or other type of advanced payments. This has forced some operators that collected deposits to return the said money to their subscribers. The Company has collected deposits on behalf of the TOT and hence the TOT will return the money to the Company's subscribers. Moreover, the prepaid services offered by many operators are unintentionally declared illegal by the Act. However, amendment is expected to be made in order not to affect the consumers at large. The Article 77th indicated that concessionaires still have the same rights to operate telecommunications business as assigned under A n n u a l

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the principle of the Telecom Act and other conditions set by the NTC, and are entitled to be granted license after the concession conversion process are completed Concession Conversion Currently, all the private telecommunications operators engage in their business under the Joint Operation and Joint Investment for Expansion of Telecommunications Services Agreements with the government agencies. With the conditions of BuildTransfer-Operate (BAHTO), private operators transferred their operating assets to the state agencies and will receive return from investment in the form of revenue sharing from the counter party. The balance of revenue belongs to the agencies granting the concessions namely: TOT and CAT, who have the role to regulate and oversee the national telecommunications business and, at the same time, being operators that engaged in the business to compete with its own private concessionaires. The previous governments have been trying to convert the said Joint Operation and Joint Investment for Expansion of Telecommunications Services Agreements in order to lead to the level playing field which will be the core element leading to the telecommunications liberalization. However, it is not yet successful due to several operation complexities. The current government has set up the Concession Conversion Sub-Committee chaired by Minister Pongpol Adireksarn. The Sub-Committee has hired the Chulalongkorn University Intellectual Property Institute to study the guideline for concession conversion in September 2001. Until now, there are still different opinions from various parties that contradict to the Chulalongkorn University Intellectual Property Institute没s study result that was proposed to the said committee in the aspect of concessionaires to stop paying revenue sharing in the year 2006. TOT and CAT Privatization Under the plan to privatize state agencies, the government has the policy to accelerate and stipulate a plan for the privatization of the TOT and the CAT to be completed by 2002. The TOT is set to privatize and be listed in the SET by the middle of 2002. The CAT is also set to follow the suit. After that, acceleration was made to the TOT listing process to April 2002 due to the success in listing of the Petroleum Authority of Thailand, one of the state enterprises. Currently, the said schedule may have to be postponed again with the proposed time frame to be after the establishment of the NTC due to several disputed aspects of regulations and overseeing the concession conversion under the TOT. This includes the unequivocal in different concession conversion under the TOT.

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REVENUES BREAKDOWN BY BUSINESS GROUP Business group/Operation by

Percentage 2001 of Shares Baht % Held by Million the Company

1. Business in Telephone and Value Added Service1 TelecomAsia Corporation Public Company Limited Revenues 2. Business in Personal Communication Telephone TelecomAsia Corporation Public Company Limited Asia Wireless Communication Co., Ltd. Wire & Wireless Co., Ltd. Revenues 3. Business in Service Multimedia Network Provider Asia Multimedia Co., Ltd. Revenues 4. Business in Data Service TelecomAsia Corporation Public Company Limited Revenues 5 Business in Internet and E-Commerce Asia Infonet Co., Ltd. Revenues 6. Other Business W7 Rental Services Co., Ltd. Nilubon Co., Ltd. Wire & Wireless Co., Ltd. Other Company Revenues Total Revenues

2000 Baht Million

1999 %

Baht Million

12,497 83.6%

15,618

75.7%

14,732

75.9%

3,072

14.9%

3,034

15.6%

843

5.6%

894

4.3%

881

4.5%

905

6.1%

503

2.4%

342

1.8%

195

1.3%

154

0.8%

0.5%

395 20,636

1.9% 100%

304 19,388

1.6% 100%

427 14,943

2.9% 100%

99.99% 87.50%

90.45%

65.00%

99.99% 99.99% 87.50%

Source : The Company

Includes Fault Reporting and Dropwiring, Public Phone Audiotext A n n u a l

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CORPORATE INFORMATION The Company was established on 13th November 1990 initially under the name of CP Telecommunication Co., Ltd. with a registered capital of Baht 1,000 million to undertake Thailand没s major telecommunication infrastructures project and registered as a public company limited with registration no. Bor Mor Jor 82 on 11th February 1993. As at 31st December 2001, the Company's registered capital is Baht 33,906,499,780, consisting of 2,688,649,978 common shares with a par value of Baht 10 per share and 702 million preference shares with a par value of Baht 10 per share, of which Baht 32,324,999,780 is paid-up capital, comprising of 2,530,499,978 common shares with a par value of Baht 10 per share and 702 million preference shares with a par value of Baht 10 per share. The Company没 s head office is located at : 18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320 Telephone : (662) 643-1111 Fax : (662) 643-1651 Website : www.telecomasia.co.th

The Company's subsidiaries, associated companies and other investments are as follows : Company Name

Address

Telecom Holding Co., Ltd.

Telecom International Co., Ltd. K.I.N. (Thailand) Co., Ltd.

K.I.N. (Thailand) Co., Ltd. (BVI)

P.O. Box 957 Offshore Incorporations Road Town, Tortola British Virgin Islands

Asia Wireless Communication Co., Ltd. (Formerly named Multimedia Network Co., Ltd.) Interactive Media Services Co., Ltd. W7 Rental Services Co., Ltd. Telecom Training and Development Co., Ltd. Tele Engineering and Services Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Nilubon Co., Ltd.

Yai Kaew Co., Ltd. U-Net Co., Ltd.

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18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320 18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320 18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320 719 KPN Tower, 9/F Rama 9 Road, Bangkapi Huai Khwang, Bangkok 18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320 18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

2 0 0 1

Type of Business Investment company both locally and internationally Real estate developer and provider of office space Investment in telecom projects both locally and internationally Investment in international telecommunication projects including FLAG Project Investment in international telecommunication projects and FLAG Project Investment in PCT Project and distributor of telecommunications equipment

Paid-up Capital (THB Million) 12,000 900 300 75 USD 1 3,900

AUDIOTEX service provider

Car rental services

professional training and seminar organizer Dropwire installation contractor and distributor of telecommunications equipment Real estate investment and land acquisition for RCU Supplier of cable TV accessories and telecommunications equipment

50 25 10 5

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Type of Business

Paid-up Capital (THB Million) TA Orient Telecom Hing Yip Commercial Centre, 3/F 272 Des Voeux Investment in telecommunication USD 15 Investment Co., Ltd. Road C. Hong Kong projects in PR China Million Telecom Asia (China) P.O. Box 71, Craigmuir Chambers Road Town, Investment in telecommunication USD 10 Co., Ltd. Tortola British Virgin Islands projects in PR China Asia Multimedia Co., Ltd. 18 Telecom Tower Ratchadaphisek Road Multimedia network service 6,127 Huai Khwang, Bangkok 10320 provider Asia DBS PLC 18 Telecom Tower Ratchadaphisek Road Concessionaire with MCOT 100 Huai Khwang, Bangkok 10320 to provide satellite broadcasting services Wire & Wireless Co., Ltd. 719 KPN Tower, 9/F Rama 9 Road, Bangkapi Dropwire and outside plant 100 Huai Khwang, Bangkok installation contractor Asia Infonet Co., Ltd. 1 Fortune Town Bldg., 17/F Ratchadaphisek Road Internet service provider 15 Din-Dang, Bangkok Telecom Equipment 111/2 Moo 2 Nikom Pattana Subdistrict Manufacturer of switching 24 Manufacturing Co., Ltd. Nikom Pattana District Rayong Province equipment for 2.6 million fixed line project United Broadcasting 118/1 Tipco Building Rama 6 Road, Phayathai, Cable TV service provider 7,408 Corporation PLC Bangkok Chongqing Communication 140 Daping Zhengjie Chongqing, PR China Distributor of telecommunications USD 35 Equipment Co., Ltd. equipment Million Public Radio Network 900/9 SVOA Tower Building Rama 3 Road, Public radio network service 10 Co., Ltd. Bangpongpang Yannawa, Bangkok provider NEC Communication 9/25 Moo 5 Phaholyothin Road Klong Luang Manufacturer of digital 343 Systems (Thailand) Co., Ltd. District Pathumthani Province switching equipment N.T.U. (Thailand) 518/5 Maneeya Center Building, 6th Floor, Telecommunication 12 Limited Ploenchit Road, Lum Pinee, Pratumwan, Bangkok

REFERENCES The Registrar

Thailand Securities Depository Co., Ltd. 62 Stock Exchange of Thailand Building, 4, 6, 7/F Ratchadapisek Road, Khet Klong Toey Bangkok 10110 Telephone : (662) 359-1200-1 Fax : (662) 359-1259

Auditor

Mr. Somchai Jinnovart (CPA Registration No.3271) or Mr. Kajornkiet Aroonpirodkul (CPA Registration No.3445) or Mr. Boonmee Ngotngamwong (CPA Registration No.3673) or Mr. Soontorn Dentham (CPA Registration No.3340) PricewaterhouseCoopers ABAS Ltd. 15th Floor, Bangkok City Tower 179/74-80 South Sathorn Road, Khet Sathorn Bangkok 10120 Telephone : (662) 286-9999, (662) 344-1000 Fax : (662) 286-5050 A n n u a l

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INVESTMENT STRUCTURE (As at 31 December 2001) TelecomAsia Corporation Public Company Limited Personal Communication Telephone, Value Added Service and Digital Data Network 99.99% Telecom Holding Co., Ltd.

Personal Communication Telephone 99.99%

Service Multimedia Network Provider 90.45%

Asia Wireless Communication Co., Ltd.

Asia Multimedia Co., Ltd.

Subsidiary Company Associated Company Other Company 20

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41.00% Bangkok Inter Teletech Co., Ltd.

Other Business 99.99% Nilubon Co., Ltd. 99.99% K.I.N. (Thailand) Co., Ltd. 99.99% Interactive Media Services Co., Ltd. 99.99% W7 Rental Services Ltd. 99.99% Telecom Training and Development Co., Ltd. 99.99% Tele Engineering and Services Co., Ltd. 99.99% Yai Kaew Co., Ltd. 99.99% U-Net Co., Ltd. 99.99% Telecom International Co., Ltd. 89.99% Asia DBS Public Company Limited 87.50% Wire & Wireless Co., Ltd. 59.99% Telecom Equipment Manufacturing Co., Ltd. 40.96% United Broadcasting Corporation Public Company Limited 32.00% Public Radio Network Co., Ltd. 16.67% N.T.U. (Thailand) Limited 9.62% NEC Communication Systems (Thailand) Co., Ltd.

The Operator of GSM1800 Cellular Telephone Services 99.81% TA Orange Co., Ltd.

99.99% Telecom Asia (China) Co., Ltd. 99.99% Telecom International China Co., Ltd. 99.99% TA Orient Telecom Investment Co., Ltd. 38.21% Chongqing Communication Equipment Co., Ltd. 99.99% K.I.N. (Thailand) Co., Ltd. (BVI) 10.91% FLAG Telecom Holdings Limited

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RISK FACTORS 1. Risk Related to Operations 1.1 The Companyûs concessions can be modified or cancelled. The Telephone Organization of Thailand or çthe TOTé has granted the Company concessions to provide wireline and related communications and data communications services on a build-transfer-operate basis. Build-transfer-operate concessions require the concession holders to acquire all capital assets required for the operation of its business and to transfer these assets to the grantor of the concession while retaining the exclusive right to use the assets during the term of the concession. The TOT can cancel the Companyûs wireline concession if it willfully and continually breaches the concession agreement in any material respect. The Company has in the past, and expects to continue to have in the future, differences of opinion with the TOT about the terms and scope of the Companyûs concession agreement. Differences with the TOT, over the interpretation of material terms of the Companyûs concessions could impair its ability to conduct business or result in the TOT denying the Company rights that it believes have been granted under its concessions. If the Companyûs concessions are cancelled, it would no longer be able to control a substantial portion of its businesses and its operations would be significantly impacted. Because the counter-party to the Companyûs concession agreements are agency of the Government of Thailand, it may not be able to enforce its rights or collect damages under the concession agreements, if the TOT breaches its obligations. The TOT is required to compensate the Company at a price equal to the book value of its network should the concession be cancelled. 1.2 The Companyûs principal revenue is controlled by a third party. Pursuant to the Companyûs concession agreements, all of the revenues generated from its wireline and data services operations are collected by the TOT. It retains a portion of such proceeds and pays to the Company the balance according to a revenue sharing agreement. Because substantially all of the Companyûs revenues are directed to the TOT, it can withhold or delay the forwarding of payments to the Company or offset obligations it believes the Company owes to it. This means that the Company may not be able to receive all of its revenues and could be required to pay significant sums to the TOT. 1.3 The Company competes with its regulator. Maintaining a good relationship with the TOT is important to the successful operation of the Companyûs business. The TOT acts both as regulator and as a direct competitor. At times its interests may be different to that of the Company. The TOT can disrupt the Companyûs ability to offer services to its customers. The Company must receive the TOTûs approval before it can change its tariffs, or charge its customers for new products or services. Before approving a charge for a new service, the TOT considers whether it can offer a similar service and whether the service is covered under the Companyûs revenue sharing plan. The TOT is not bound by any time limit in approving any request by the Company to offer a new service. The Company believes that maintaining good relationship with the TOT can limit this type of risk, which the Company has adopted as the major policy in operation under the concession agreement. 1.4 Market liberalization causes intensified competition. The Thai telecommunications industry is moving towards liberalization. The government has a plan to liberalize the telecommunications business locally before 2006. After that the market will be free to competition from international operators. Therefore, it is most likely there will be new entrants to the market and competition in business will increase. In order to prepare for the market liberalization, most of operators have strengthened their competitive advantages by implementing various strategies, which have created a more competitive market environment before the market is actually liberalized. The Companyûs PCT business is currently facing higher competition from cellular operators who aggressively 22

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promote their business whereas the Companyûs fixed line business is facing the competition from both fixed line and cellular operators. Existing cellular operators have added their subscribers significantly during the year 2001. These subscribers may make more calls from cellular phones, which could consequently affect the revenues from the fixed line service of the Company. 1.5 Concession conversion may be on terms less favorable than its competitors. The government policy is to liberalize the telecommunication business and the business of the Company and some subsidiaries engaged in the concession contracts with the TOT and the CAT. The government therefore has the policy to convert the concessions in order to create a level playing field for free market competition. The Concession Conversion Sub-Committee was established in order to supervise the concession conversion process between the states and the private sector. Private operators can decide whether or not to convert their concessions. The conditions in the concession conversion will be agreed between the private operator and the TOT on a case by case basis. If other telecommunication operators negotiate better terms than the Company for their concession conversions, the Company could be placed at a competitive disadvantage, which could affect its operations. 1.6 Investment in new telecommunication services may not be successful. The Company has its plan to expand into other types of telecommunication services such as high speed Internet (ADSL & Cable Modem), E-Commerce and new services offered on the fixed line network such as Calling Card and Free Phone 1-800 Service. Such services are new to the market and the Companyûs success depends upon many factors such as market demand and the competition from other competitors. The result of the Companyûs inability to expand its telecommunication business as planned will affect its operation plan as a whole and in return impact its operating results. The Company has recently expanded into cellular business by acquiring a 41% ownership interest in TA Orange Co., Ltd. (TA Orange) has been granted a concession by the Communication Authority of Thailand to install and operate a GSM 1800 MHz mobile cellular telecommunication network in the Kingdom of Thailand. TA Orange will be the new entrant in the Thai cellular market whereby two major operators have gained most of market share. While TA Orange has Orange SA, a leading international cellular operator as its strategic partner, the success of investment in Thailandûs highly competitive cellular business depend on various factors. The business performance of TA Orange will have a significant impact to the Companyûs financial results.

2. Risk Related to Financial Situation 2.1 The Companyûs operations are restricted by various financial agreements. The agreements covering long-term debt, and restructured debt, contain conditions and limitations on the Companyûs operations. They place limitations on the Companyûs ability to issue equity or debt, sell or acquire assets and pay dividends, as well as contain various covenants that could delay the implementation of its business strategies. These limitations may force the Company to pursue less than optimal business strategies or forego business arrangements that could be financially advantageous to it and to its shareholders. 2.2 Repayment of the Companyûs indebtedness could be accelerated without its control. The Companyûs restructuring agreements permit its creditors to accelerate the repayment of its secured indebtedness if: - TOT materially breaches its concession agreement with the Company; - principal shareholders are unable to direct the Companyûs management; or - The C.P. Group or Verizon Communications sells shares of the Company more than 10% of their holdings prior to March 31, 2003. A n n u a l

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These events could occur but are beyond the Company没s control. If any of these events occur, the Company没s creditors could request immediate repayment of the indebtedness to them. If the indebtedness is accelerated, the Company may not have sufficient funds to repay these amounts, which could affect its financial position. 2.3 Subject to exchange rate fluctuations between the Thai Baht and the U.S. Dollar. All of the Company没s revenues are denominated in Thai Baht, while approximately 50% of its total liabilities at December 31, 2001 were denominated in foreign currencies, principally the U.S. Dollar. Further depreciation of the Thai Baht would increase, in Baht terms, the outstanding foreign currency denominated debt, the related interest expense and the cost of additional credit. A portion of capital expenditures is also denominated in foreign currencies, principally the U.S. Dollar. Any further depreciation of the Thai Baht against those foreign currencies would increase the amount of Baht revenue required to meet capital expenditure plans. In Baht terms the costs of capital expenditures would increase. Therefore, any sudden and substantial increase in the U.S. dollar relative to the Thai Baht could affect results of operations and the Company没s ability to meet its future payment obligations on debt. The Company would, however, be a beneficiary of any decrease in the value of the Dollar versus the Thai Baht.

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SHAREHOLDERS TelecomAsia Corporation Public Company Limited List of Top 10 Major Shareholders1 (As of 22nd February 2002) NAME 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

CHAROEN POKPHAND GROUP CO., LTD. NYNEX NETWORK..SYSTEMS (THAILAND) COMPANY THAI TRUST FUND2 .. KREDITANSTALT FUR WIEDERAUFBAU (çKfWé) THANA HOLDING CO., LTD. UNIQUE NETWORK COMPANY LIMITED WIDE BROADCAST COMPANY LIMITED CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED CLEARSTREAM NOMINEES LTD. HSBC SECURITIES (SINGAPORE) PTE LIMITED

No. of Shares % of Total (Million Shares) Issued and Paid-up Shares 530.00 404.35 358.02 343.98 305.00 120.00 80.00 80.00 59.29 38.52

16.40 12.51 11.07 10.64 9.44 3.71 2.47 2.47 1.83 1.19

Shares include ordinary shares and preference shares. All shares in Thai Trust Fund are preference shares held by KfW, which shall not have right to vote.

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MANAGEMENT Management Structure of the Company consists of the Board of Directors, the Committees and the executive officers, details of which are as follows :

Board of Directors As of 31st December 2001, the Board of Directors Consisted of 24 directors who are (a) Executive Directors, those who were involved with day-to-day operations of the Company, (b) Non-Executive Directors, those who were not involved with day-to-day operations of the Company, which included Directors representing the secured creditors, and (c) Independent Directors. The members of the Board of Directors of the Company is as follows : 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24.

Mr. Narong Mr. Vitthya Dr. Kosol Mr. Joti Mr. Dhanin Mr. Sumet Dr. Ajva Mr. Chaleo Mr. Athueck Mr. Supachai Mr. Soopakij Mr. Chatchaval Mr. Vichaow Mr. Umroong Mr. Daniel Mr. Stephen Mr. Heinrich Mr. Klaus Ms. Gabriele Mr. Claus Mr. Andreas Mr. Harald Mr. Ho Hon Mr. John

Srisa-an Vejjajiva Petchsuwan Bhokavanij Chearavanont Jiaravanon Taulananda Souvannakitti Asvanund Chearavanont Chearavanont Jiaravanon Rakphongphairoj Sanphasitvong C.Petri* G. Parker* Heims** Tuengeler** Gunia** Stadler** Klocke** Link** Cheong*** J.Lack*

Independent Director Independent Director and Chairman of the Audit Committee Independent Director and Member of the Audit Committee Independent Director and Member of the Audit Committee Chairman Vice Chairman Vice Chairman Vice Chairman Vice Chairman and Group General Counsel Director, President and Chief Executive Officer Director Director Managing Director Director Director Director Director Director Director Director Director Director Director Director

* Verizon-nominated Director ** KfW-nominated Director *** Secured Creditor-nominated Director Remark : Additional information related to the Company's Board of Directors is as follows : a) History of Offence : none b) Debt owned to the Company or its Subsidiaries : none c) Material Connected Transactions : none

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Authority and responsibility of the Board of Directors The Board of Directors is granted the authority and has the duty to manage the Company in compliance with the objects and articles of association of the Company and the resolutions of the shareholders meeting. With regard to the management of the Company, the Board of Directors has authority to make any decision related to the Company's regular operation except for matters that require the approval of the shareholders meeting as specified by law. In addition, the Board of Directors may grant the authority to one Director or more or to any other person to perform for any acts on its behalf, however, for any decision on major operational matters such as investment and procurement of loans, the management team must propose said matters to the Board of Directors for approval.

Authorized Directors Mr. Supachai Chearavanont or Mr. Stephen G. Parker jointly sign with Mr. Athueck Asvanund or Mr. Soopakij Chearavanont or Mr. Chatchaval Jiaravanon to, with the Company's seal affixed, execute any act, thing or legal action whatsoever on the Company's behalf.

Appointment of Directors The Company has established the Compensation and Nominating Committee as part of the good corporate governance initiative of the Company. The Compensation and Nominating Committee will assist the Board of Directors in reviewing and nominating Directors of the Company prior to proposing to the Company's shareholders meeting for final approval. With regard to the right of shareholders to appoint Directors, each Director shall be appointed by a majority vote of the shareholders. All Shareholders have the right to vote on the appointment of Directors. Each shareholder shall have one vote per one share and shall exercise all the votes he has to appoint one or several person(s) to be director(s), provided that he can not divide his votes to any person to any extent.

Independent Audit Committee As of 31st December 2001, the Audit Committee of the Company consisted of 3 persons as follows : 1. Mr. Vitthya 2. Dr. Kosol 3. Mr. Joti

Vejjajiva Petchsuwan Bhokavanij

Chairman of the Audit Committee Member of the Audit Committee Member of the Audit Committee

The scope of duty and responsibility of the Audit Committee is as follows : 1. 2. 3. 4.

To review the Company没s financial reports to ensure accuracy and adequate information for public disclosure; To ensure the appropriateness and effectiveness of internal control system and internal auditing system of the Company; To consider and propose the appointment and remuneration of an external auditor of the Company; To regularly review the practice of the Company to ensure the compliance with the regulations of the Securities and Exchange Commission and related law and regulations; 5. To review the disclosure of information of the Company to ensure the accuracy and adequacy of said information in case that there is a connected transaction that may lead to a conflict of interest; 6. To prepare the Audit Committee Report on the Corporate Governance with the approval of the Chairman of the Audit Committee appeared therein to be disclosed in the annual report of the Company; and 7. To perform any other act as required by law or as delegated by the Board of Directors. A n n u a l

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Independent Committee The Independent Committee is responsible for reviewing and monitoring the entering into any connected transactions, which may involve a conflict of interest with the Company. The Committee consists of the following members : 1. Mr. Narong 2. Mr. Joti 3. Mr. Daniel C.

Srisa-an Bhokavanij Petri

4. Mr. Klaus

Tuengeler

5. Mr. Athueck 6. Mr. Supachai

Asvanund Chearavanont

Independent Director Independent Director Verizon-nominated Director (alternates being Mr. Stephen G. Parker or Mr. John J. Lack) KfW-nominated Director (alternates being Mr. Andreas Klocke or Mr. Claus Stadler) CP-nominated Director CP-nominated Director

In the event that any major shareholder has a conflict of interest, Directors nominated by said shareholder will abstain from the Independent Committee Meeting.

Compensation and Nominating Committee The Compensation and Nominating Committee is responsible for determining the compensation and considering the nomination of the directors of the Company and is comprised of the following members : 1. 2. 3. 4. 5.

Mr. Dhanin Mr. Heinrich Mr. Daniel C. Mr. Soopakij Mr. Umroong

Chearavanont Heims Petri Chearavanont Sanphasitvong

Finance Committee The Finance Committee assists the Company in reviewing and monitoring the financial management of the Company and consists of the following members : 1. 2. 3. 4. 5.

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Dr. Ajva Mr. Chaleo Mr. Daniel C. Mr. Heinrich Mr. Umroong

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Taulananda Souvannakitti Petri Heims Sanphasitvong

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alternate being Mr. John J. Lack alternate being Mr. Klaus Tuengeler

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Executive Officers As of 31st December 2001, the executive officers of the Company consisted of 13 persons as follows : 1. 2. 3. 4. 5. 6. 7. 8. 9.

Mr. Supachai Mr. Vichaow Mr. Athueck Mr. William E. Mr. Polpan Mr. Frank D. Dr. Jen Mr. Thada Mr. Boonserm

Chearavanont Rakphongphairoj Asvanund Harris Uttapap Mercer Sriwattanathamma Savetsila Ungphakorn

10. Mr. Chookiat

Poapongsakorn

11. Mr. Carl 12. Mr. Kashem 13. Mr. Adhiruth

Goodier Kornseri Thothaveesansuk

Director, President and Chief Executive Officer Managing Director Vice Chairman and Group General Counsel Chief Financial Officer Co-Executive Vice President - Service Area & Network Operation Co-Executive Vice President - Service Area & Network Operation Executive Vice President - Information & Technology Executive Vice President - Business & Enterprise Special Advisor to Managing Director and Co-Executive Vice President - Corporate Affairs and Human Resources Co-Executive Vice President - Corporate Affairs and Human Resources, and Customer Services Management Co-Executive Vice President - Customer Services Management Executive Vice President - Consumer and Mass Marketing Executive Vice President - Business and Product

Remark : Additional information related to the Company's executive officers is as follows : a) History of Offence : none b) Debt owned to the Company or its Subsidiaries : none c) Material Connected Transactions : none

Authority and Responsibility of the President The Company is currently in the process of reviewing the scope of authority and responsibility of the President. Therefore, at the present time, any significant decision relating to the Company's operations such as new investment and procurement of loan are proposed to the Board of Directors for approval.

Remuneration for the Company's Directors and Executive Officers Remuneration of the Directors in the year 2001 is as follows : No. of Directors 24

Compensation

Amount (Baht)

Salary Directors没 Remuneration Other Total

33,950,000.00 33,950,000.00

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Remuneration of the Executive Officers in the 2001 is as follows : No. of Executive Officers 13

Compensation

Amount (Baht)

Salary Bonus Other Total

102,958,000.00 11,277,000.00 35,063,000.00 149,298,000.00

Other Compensation Stock Option Plan 2000 The Ordinary General Meeting of the Shareholders of the Company No. 1/2000 held on April 27, 2000 approved the issuance and the offer of non-transferable warrants in the total of 58,150,000 units (Stock Option Plan) to subscribe ordinary shares of the Company to Directors and officers at or equivalent to the Executive Vice President level and upwards not exceeding 35 persons (the Ă§Warrant HoldersĂŠ), conditions of which are summarized as follows :

Number of Warrant 58,150,000 units (approximately 1.99% of the total issued and paid-up ordinary shares of the Company as Offering : of March 31, 2000 of 2,925,000,000 shares) divided into 2 types : (a) Warrant Type 1 in the amount of 39,600,000 units (b) Warrant Type 2 in the amount of 18,550,000 units

Offering Method : Allotted to Directors and officers at or equivalent to the Executive Vice President level and upwards, not exceeding 35 persons whose names are as follows : 1. 2. 3. 4. 5. 6. 7. 8.

Directors Dr. Ajva Taulananda Dr. Veeravat Kanchanadul Dr. Vallobh Vimolvanich Mr. Supachai Chearavanont Mr. Soopakij Chearavanont Mr. Chatchaval Jiaravanon Mr. Athueck Asvanund Mr. John N. Doherty Total

1. 2. 3. 4. 5.

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Warrant Type 1 3,200,000 2,800,000 4,200,000 6,800,000 4,400,000 4,400,000 5,600,000 1,000,000 32,400,000

Warrant Type 2 0 0 1,400,000 3,500,000 2,100,000 2,100,000 2,800,000 1,400,000 13,300,000

Warrant Type 1

Warrant Type 2

3,000,000 2,200,000 600,000 800,000 600,000 7,200,000 39,600,000

1,400,000 1,050,000 700,000 1,050.000 1,050,000 5,250,000 18,550,000

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Maturity : Exercise Period :

Exercise Ratio : Exercise Price :

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10 years (a) Warrant Type 1 : Each Warrant Holder received 3 separate warrant certificates. Each certificate represented 1/3 of the whole amount of warrants allotted and is exercisable for subscribing ordinary shares starting from June 30, 2000, 2001 and 2002, respectively. (b) Warrant Type 2 : Each Warrant Holder received 3 separate warrant certificates. Each certificate represented 1/3 of the whole amount of warrants allotted and is exercisable for subscribing ordinary shares starting from December 31, 2000, 2001 and 2002, respectively. One unit of warrant entitles its holder to purchase one ordinary share of the Company. 1. Warrant Type 1 (in the total of 39,600,000 units) = Baht 30.00 per one ordinary share 2. Warrant Type 2 (in the total of 18,550,000 units) = Baht 51.55 per one ordinary share

Good Corporate Governance 1. Board Composition In 2001, the Board consisted of (a) Executive Directors, those who were involved with day-to-day operations of the Company, and (b) Non-Executive Directors, those who were not involved with day-to-day operations of the Company, which included Directors representing the interests of secured creditors and (c) independent Directors.

2. Roles and Responsibilities of Directors Throughout the year 2001 the Directors were in full compliance with items 2.1 through 2.8 of the Code of Best Practice for Directors of Listed Companies of the Stock Exchange of Thailand.

3. Appointment to the Board The major shareholders have agreed on a policy concerning appointment of Directors, and have used the legal requirements as guidelines for selection of the Directors. The Board has appointed the following committees: (a) Independent Audit Committee, (b) Finance Committee, (c) Independent Committee, and (d) Compensation and Nominating Committee.

4. Holding of a Director没s Position Efforts continue to achieve compliance with item 4 of the Code of Best Practices for Directors of Listed Companies of the Stock Exchange of Thailand.

5. Directors没 Remuneration Remuneration of Directors are approved by the Shareholders Meeting. Remuneration for the performance of Executive Directors for their respective day-to-day responsibilities in the Company is fixed by the Chairman and the CEO. The Board has approved formation of a five-member Compensation and Nominating Committee that will, commencing in 2002, determine remuneration for Directors and the Chief Executive Officer.

6. Board & Shareholders没 Meetings Board meetings are held at least five times annually. Commencing in 2001, the schedule of Board meetings for the entire year is announced in advance. The meetings are scheduled, among other matters, to review the Company's 56-1 Report and quarterly financial statements prior to submission of the same to the Stock Exchange of Thailand. A n n u a l

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7. Reports The Company is in full compliance with item 7 of the Code of Best Practices for Directors of Listed Companies of the Stock Exchange of Thailand.

8. Corporate Governance Guidelines Through a committee appointed by the Board in 2000, throughout the year 2001 the Board actively analyzed corporate governance practices and policies of foreign countries and international organizations, such as the Organization for Economic Co-operation and Development (OECD), for adaptation for use in the Company's Code of Corporate Conduct and Code of Ethics. After working through several preliminary drafts, in November a draft proposal of Corporate Governance Guidelines was presented to the general meeting of the full Board for review and consideration. The draft proposal includes a policy regarding transactions with parties related to a Director, intended to avoid conflicts of interest and to maintain the DirectorĂťs fiduciary obligation to the Company. Throughout the past year and at the present time, the independent Directors review Connected Transactions that may be related to the interests of a major shareholder. In 2001 these Directors issued a formal policy entitled Guideline for Reviewing Connected Transactions. For further detail of the connected transactions in the past year, please refer to the Connected Transactions section.

9. Independent Committee In order to ensure transparency and to avoid conflicting interests, in this particular case for purposes of review and decisionmaking in connection with the Company's purchase of shares of Bangkok Inter-Teletec Company Limited from the CP Group, the Board constituted a four member Independent Committee, comprised of Directors independent of the CP Group. The Directors who were nominated to the Board by the CP Group voluntarily recused themselves from all Board decisions concerning the share purchase. The Board approved making the Independent Committee a chartered committee of the Board as of 2002, and it will include independent Directors as well as Directors representing secured creditors and all major shareholders. Because this committee is charged with ensuring transparency and avoiding conflicting interests in extraordinary transactions concerning the Company, any Director with a conflicting interest shall be recused from matters concerning the conflict.

Insider Trading Policy The Company is currently in compliance with applicable laws which monitor and prevent the personal use of confidential information of the Company by its management, including the use of said information for the purpose of insider trading. Material information which has not yet been disclosed will be kept confidential but will be disclosed only to the relevant senior management of the Company. The relevant senior management of the Company who have access or receive said information are required to report their trading of shares in the Company pursuant to the Regulations of the Stock Exchange of Thailand and the Securities and Exchange Commission Regarding Rules, Conditions, and Procedures Governing the Preparation and Disclosure of Reports on Securities Holdings, in order to prevent insider trading using internal information, and to ensure that the trading of shares by Ă§insidersĂŠ of the Company is transparent. In addition, the Company has been carrying on the comparative study of the insider trading policies of various foreign institutions to be applied as a guideline to enhance transparency and boost the confidence in the Company amongst the analyst and investor community.

Internal Controls The Board of Directors acknowledged the opinion of the Independent Audit Committee, which concurred with the external auditor, that the Company's internal controls are adequate and suitable, and are capable of protecting the assets of the Company 32

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from misuse or unauthorized use by the management. Thus, there has been no defect in the internal controls of the Company, which could have a material and adverse effect on the opinion of the external auditor. The Board also emphasized the development of the Company's a Corporate Governance in order to help improve the internal controls within the Company on a continuing basis.

Personnel As of 31st December 2001, the total number of employees is as follows : Work Group and Classification Management Service Area & Network Operation Marketing & Sales Information Technology Customer Services Finance & Accounting Supporting Total

No. of Employee 39 2,025 385 349 756 239 269 4,062

Source : the Company

Remuneration for the Company's Employees Remuneration In 2001, the total remuneration for employees is Baht 1,672 million (salary, bonus, overtime compensation and commission) Other Compensation & Benefits - Health Plans and Employee Welfare - In-house clinic - Annual Medical Check-up - New Employee没 Medical Check-up - Group Health Insurance - Group Accident Insurance - Group life Insurance In case of death : Baht 30,000. - /Person - Social Security Fund Each of the Company and employees shall contribute 3% of monthly salary (but not exceeding Baht 450/month). Said employee will gain special benefits from the Fund to have medical treatment at designated hospitals. - Paid Annual Leave In case that the employee is unable to take annual leave due to having urgent assignment, annual leave can be accumulated to the subsequent year subject to the approval of an authorized superior. - Employee at the level of Vice President and upwards can take annual leave for 15 days and can accumulate remaining annual leave to the subsequent year but can carry a balance of no more than 30 days. If the accumulated annual leave balance exceeds 30 days, the Company will compensate for the excess. - Employee at the level lower than Vice President can take annual leave for 10 days and can accumulate remaining annual A n n u a l

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leave to the subsequent year but can carry a balance of no more than 20 days. If the accumulated annual leave balance exceeds 20 days, the company will compensate for the excess. Compensation Monthly Salary Annual Performance Pay : between 0-4 times of monthly salary subject to the Company's performance and financial status. Retirement : the employee must be at the age of 60 years. In case of early retirement, the employee must be at the age of 55 years and severance pay will be paid depending on the number of service years.

Employee没s Training and Development Employee没s Training and Development Policy To encourage all employees to develop their knowledge, skills and attitude to be able to perform their jobs effectively and to be more competent for career advancement, which assists the Company in achieving its corporate strategy and goals. At present, the Company has provided the employees with various training and development programs such as Core Competency Program, Functional Competency Program, TA Core Business Program etc.

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Directors没 Information (as of 31ST December 2001) Name Mr. Narong Srisa-an Mr. Vitthya Vejjajiva

Position Independent Director Independent Director and Chairman of Audit Committee

Age TA Share Ownership (31st December 2001) 74 10,000 Present

Past Present

1991-1992 Dr. Kosol Petchsuwan

Independent Director and Member of Audit Committee

1999- Present 1999- Present

1998-2000 1997- Present

Mr. Joti Bhokavanij

Independent Director and Member of Audit Committee

1997- Present Present 2000-2001 1994-1997 1992-1994

Mr. Dhanin Chearavanont

Mr. Sumet Jiaravanon

Chairman

1989-Present

Vice Chairman

150,000

1993-Present

Experience - Independent Director TelecomAsia Corporation Plc. - Vice Chairman, Thai Farmers Bank Plc. - Independent Director and Chairman of Audit Committee, TelecomAsia Corporation Plc. - Chairman, K Line (Thailand) Ltd. and its subsidiaries - Permanent Secretary of the Ministry of Foreign Affairs - Audit Committee, TelecomAsia Corporation Plc. - President The Telecommunications Association of Thailand - Independent Director and Member of Audit Committee, PTTEP - Independent Director, TelecomAsia Corporation Plc. - Director, The Press Council of Thailand - Business Consultant - Executive Chairman TISCO Finance Public Company Limited - Executive Chairman, Thai Wah Group of Companies - Managing Director and Consult-General of Denmark for Bangkok The East Asiatic Company (Thailand) Limited - Chairman, TelecomAsia Corporation Plc. - Chairman and Chief Executive Officer, Charoen Pokphand Group Co., Ltd. and Chia Tai Group Co., Ltd. - Chairman, Charoen Pokphand Foods Plc. - Vice Chairman, TelecomAsia Corporation Plc. - Executive Chairman, Charoen Pokphand Group Co., Ltd. A n n u a l

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Name

Position

Dr. Ajva Taulananda Vice Chairman

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Age TA Share Ownership (31st December 2001) 64 Present

1993-1999 1991-1992 Mr. Chaleo Souvannakitti

Vice Chairman

3,486,900

1992-Present

Mr. Athueck* Asvanund

Vice Chairman and Group General Counsel

1997-Present

1978-1997 1999-Present

Mr. Supachai* Chearavanont

Director, President 34 and Chief Executive Officer

Mr. Soopakij* Chearavanont

Director

1992-1999

Present 2000-Present 1998-Present 1991-Present

*Authorized Signatory

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Experience - Vice Chairman, TelecomAsia Corporation Plc. - Vice Chairman Charoen Pokphand Group Co., Ltd. - Chairman The Thai Chamber of Commerce and Board of Trade of Thailand - Director, Charoen Pokphand Foods Plc. - Director and President TelecomAsia Corporation Plc. - Deputy Minister, Ministry of Agriculture and Cooperatives - Vice Chairman, TelecomAsia Corporation Plc. - Director, Telecom Holding Co., Ltd. - Director, TelecomAsia Corporation Plc. - Director, Telecom Holding Co., Ltd. - Group General Counsel, TelecomAsia Corporation Plc. - Director, United Broadcasting Corporation Plc. - Director, Asia Multimedia Co., Ltd. - Baker & McKenzie - Director, President and Chief Executive Officer, TelecomAsia Corporation Plc. - Director and Senior Executive Vice President TelecomAsia Corporation Plc. - Director, TelecomAsia Corporation Plc. - Executive Chairman, Telecom Holding Co., Ltd. - Executive Chairman United Broadcasting Corporation Plc. - Chairman, AT&T Network Technology (Thailand) Co., Ltd.

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Name

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Position

Age TA Share Ownership Experience st (31 December 2001) Mr. Chatchaval* Director 39 Present - Director, TelecomAsia Corporation Plc. Jiaravanon 2001-Present - Independent Director, Ticon Industrial Connection Public Company Limited 2000-Present - President and C.E.O., Telecom Holding Co., Ltd. - Independent Director, Cal-Comp Electronics (Thailand) Plc. 1998-Present - Executive Chairman, Cambodia Mobile Telephone Co., Ltd. 1997-Present - President and C.E.O., Asia Multimedia Co., Ltd. - President, Interactive Media Services Co., Ltd. - President, Asia Infonet Co., Ltd. 1987-Present - Director, Metro Machinery Plc. - Vice Chairman, Thai Co Poly Industry Co., Ltd. - Independent Director, SEAMICO Securities Plc. Mr. Vichaow Managing Director 44 50,000 2000-Present - Managing Director, Rakphongphairoj TelecomAsia Corporation Plc. 1998-2000 - E.V.P., Business & Enterprise, TelecomAsia Corporation Plc. 1997-1998 - E.V.P., Central Operation & Information Technology, TelecomAsia Corporation Plc. 1996-1997 - Region Director, Bangkok-Southeast Region, TelecomAsia Corporation Plc. 1995-1996 - Region Director, Bangkok-West Region TelecomAsia Corporation Plc. Mr. Umroong Director 48 384,000 Present - Vice President - Finance and Accounting Sanphasitvong Charoen Pokphand Group Co., Ltd. - Director, C.P. Seven Eleven Plc. - Director, Vinythai Plc. Mr. Daniel C. Petri Director 53 2000-Present - President - International, Europe and Asia, Verizon Communications - Director, TelecomAsia Corporation Plc. 1998-2000 - President - International, Bell Atlantic Corp. 1995-1998 - President - Global Systems Bell Atlantic/ NYNEX *Authorized Signatory A n n u a l

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Name

Position

Mr. Stephen G. Parker*

Director

Mr. Heinrich Heims

Director

Mr. Klaus Tuengeler

Director

Ms. Gabriele Gunia

Director

Mr. Claus Stadler Mr. Andreas Karl Klocke

Director Director

44 45

Mr. Harald Link Mr. Ho Hon Cheong

Director Director

47 47

*Authorized Signatory 38

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Age TA Share Ownership (31st December 2001) 55 Present 2000-2002

C o m p a n y

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Experience

- Director, TelecomAsia Corporation. Plc. - Executive Director, Verizon International - Asia 1995-2000 - Managing Director, NYNEX Network Systems Siam Limited, Bangkok, Thailand 1992-1995 - Executive Managing Director, NYNEX Network Systems Company Hong Kong 1998- Present - Senior Vice President - Export and Project Finance, KfW 1978-1998 - Export Finance, KfW Present - First Vice President-Export and Project Finance Telecommunications, Natural Resources, KfW Present - Vice President, Investor Relations, KfW 1997-2001 - Export and Project Finance Telecommunications, KfW 1995-1996 - Delegation to the Ministry of Finance, Bonn 1988-1995 - Position in the areas of Secretariat of Domestic and European Credit Affairs, Export and Project Finance, KfW Present - Senior Legal Counsel, KfW Present - Vice President - Export and Project Finance, KfW (Frankfurt) Delegate Director in Charge of KfW Affairs in Thailand and South-East Asia Region Experience - German - Thai Chamber of Commerce, Bangkok 1997- Present - Managing Partner, B. Grimm & Co. ROP 1997- Present - Country Corporate Officer (CCO), Citibank Thailand Experience - Country Business Manager for Emerging Markets, Citibank Thailand - Corporate Bank Head for Emerging Market Head, Citibank Thailand - Head of Pan-Asia Corporate, Citibank Singapore

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Name Mr. John J. Lack

Position Director

C o r p o r a t i o n

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Age TA Share Ownership Experience st (31 December 2001) 45 2000-Present - Group Vice President Asia, the Verizon Corporation 1998-2000 - Vice President Asia Pacific, Bell Atlantic International Wireless 1995-1998 - Chief Operating Officer, Excelcomindo Pratama, Indonesia

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Executive Officers没 Information (as of 31ST December 2001) Name

Age TA Share Ownership Experience st (31 December 2001) Mr. Supachai Director, President 34 1999-Present - Director, President and Chief Executive Chearavanont and Chief Officer, TelecomAsia Corporation Plc. Executive Officer 1992-1999 - Director and Senior Executive Vice President, TelecomAsia Corporation Plc. Mr. Vichaow Managing Director 44 50,000 2000- Present - Managing Director, TelecomAsia Rakphongphairoj Corporation Plc. 1998-2000 - E.V.P., Business & Enterprise, TelecomAsia Corporation Plc. 1997-1998 - E.V.P., Central Operation & Information Technology, TelecomAsia Corporation Plc. 1996-1997 - Region Director, Bangkok - Southeast Region, TelecomAsia Corporation Plc. 1995-1996 - Region Director, Bangkok - West Region TelecomAsia Corporation Plc. Mr. Athueck Vice Chairman 50 1997-Present - Director, TelecomAsia Corporation Plc. Asvanund and Group - Director, Telecom Holding Co., Ltd. General Counsel - Group General Counsel, TelecomAsia Corporation Plc. - Director, United Broadcasting Corporation Plc. - Director, Asia Multimedia Co., Ltd. 1978-1997 - Baker & McKenzie Mr. William Chief Financial 40 Present - Chief Financial Officer E. Harris Officer 1998-2000 - Executive Vice President - Corporate Finance, TelecomAsia Corporation Plc. 1993-1998 - Director, Office of Credit Policy, Verizon, Philadelphia Mr. Frank D. Mercer Co-Executive Vice 52 1996-1999 - Assistant Vice President, GTE Network President - Service Service Area and Network 1994-1996 - General Manager, GTE Network Operation Services, Florida Region Mr. Polpan Uttapap Co-Executive Vice 49 26,000 1999-2000 - Senior Vice President, Bangkok Service President-Service Area and Maintenance, TelecomAsia Area and Network Corporation Plc. Operation 1994-1999 - Senior Vice President, Bangkok - North Region Service and Maintenance, TelecomAsia Corporation Plc. 1991-1994 - Region Director, Operation Project 40

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Name Dr. Jen Sriwattanathamma

Mr. Thada Savetsila

C o r p o r a t i o n

Position Executive Vice President Information and Technology Executive Vice PresidentBusiness and Enterprise

P u b l i c

C o m p a n y

Age TA Share Ownership (31st December 2001) 50 1998-1999

1994-1998 45

2001 1999-2001 1998-1999

Mr. Boonserm Ungphakorn

Mr.Chookiat Poapongsakorn

Mr.Carl Goodier

Mr. Kashem Kornseri

Special Advisor to Managing Director and Co-Executive Vice PresidentCorporate Affairs and Human Resources Co-Executive Vice PresidentCorporate Affairs and Human Resources and Customer Services Management

10,000

1997-2001

1995-1997

Co-Executive 37 Vice PresidentCustomer Services Management Executive Vice 52 PresidentConsumer and Mass Marketing

20,000

1,000

L i m i t e d

Experience - Senior Vice President-Information Technology TelecomAsia Corporation Plc. - Vice President, Information Systems and Support, TelecomAsia Corporation Plc. - Executive Vice President-Business and Enterprise, TelecomAsia Corporation Plc. - Country Manager, Dell Computer (Thailand) - Enterprise Computing Director, Compaq Computer (Thailand) - Co-Executive Vice President Human Resources and Corporate Affairs TelecomAsia Corporation Plc. - Senior Vice President, Network Planning and Engineering - Region Director, Bangkok - West Region TelecomAsia Corporation Plc.

2001-Present - Co-EVP Corporate Affairs and Human Resources 1999-2001 - SVP-Customer and Public Services Center 1998-1999 - VP-Customer Services Center, Acting VP-Public Services Center 1997-1998 - VP-17 and Customer Services Center, Acting VP-Public Services Center 1996-1997 - AIM Superintendent, Bangkok - Southeast, Acting VP-Public Services Center 1995-1996 - AIM Superintendent, Bangkok - East and Southeast, Acting VP-Public Services Center 1999-Present - Co-Executive Vice President - Customer Services Management, TelecomAsia Corporation Plc. 1997-2001

- Senior Vice President - Consumer and Mass Marketing TelecomAsia Corporation Plc.

A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

Name Mr. Adhiruth Thothaveesansuk

A n n u a l

R e p o r t

Position Executive Vice PresidentBusiness and Product Development

2 0 0 1

C o r p o r a t i o n

P u b l i c

C o m p a n y

L i m i t e d

Age TA Share Ownership Experience st (31 December 2001) 40 2001-Present - Executive Vice President - Business and Product Development, TelecomAsia Corporation Plc. 1998-Present - President Asia Wireless Communication Co., Ltd. 1998-1998 - Managing Director Wire and Wireless Co., Ltd.

Te l e c o m A s i a

C o r p o r a t i o n

P u b l i c

C o m p a n y

L i m i t e d

Directors没 Shareholding in TA没s affiliates as of 31st December 2001 Director Mr. Dhanin Chearavanont Mr. Chaleo Souvannakitti

Mr. Vichaow Rakphongphairoj

Dr. Ajva Taulananda

Mr. Chatchaval Jiaravanon

Mr. Soopakij Chearavanont

Company Telecom Holding Co., Ltd. Telecom Holding Co., Ltd. Telecom International Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. Telecom International Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. U-Net Co., Ltd. Interactive Media Services Co., Ltd. Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd. Telecom International Co., Ltd. Telecom Training and Development Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. U-Net Co., Ltd. Interactive Media Services Co., Ltd. Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd. Yai Kaew Co., Ltd. Telecom International Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. Wire & Wireless Co., Ltd. U-Net Co., Ltd. Interactive Media Services Co., Ltd. Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd. Telecom International Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. U-Net Co., Ltd. Interactive Media Services Co., Ltd. Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd.

Change in 2001 Outstanding Share(s) 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 5 1 1 1 1 1 1 1 1 1 1 1 1 1 1 A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

Director

A n n u a l

R e p o r t

P u b l i c

C o m p a n y

Company

Mr. Supachai Chearavanont

C o r p o r a t i o n

2 0 0 1

Telecom Holding Co., Ltd. Telecom International Co., Ltd. Telecom Training and Development Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. Wire & Wireless Co., Ltd. U-Net Co., Ltd. Interactive Media Services Co., Ltd. Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd.

L i m i t e d

Change in 2001 Outstanding Share(s) 1 1 1 1 1 5 1 1 1 1 1 1

Te l e c o m A s i a

C o r p o r a t i o n

P u b l i c

C o m p a n y

L i m i t e d

MANAGEMENT没S DISCUSSION AND ANALYSIS Consolidated Results of Operations In reviewing the Company没s operating performance, the results of operations are discussed on a normalized basis as it clearly demonstrates the trend of operating performance from period to period. In the fourth quarter 2001, the Company has invested in TA Orange Co., Ltd. (TA Orange) at the proportion of 41%. Consolidated financial statements were prepared with proportionate consolidation of TA Orange transactions, which yielded significant impact to the Company没s financial statements. Therefore, in the analysis, the Company discusses its results from operations for both pre and post TA Orange consolidation. In 2001, the Company recognized a loss contribution from TA Orange of Baht 1,255 million or a loss of Baht 971 million after offsetting effect of Baht 284 million for amortization of negative goodwill. Non-recurring items affecting the 2001 results consisted of Baht 955 million foreign exchange gain, Baht 47 million other revenue and Baht 157 million accounting adjustment. The non-recurring items for 2000 comprised Baht 2,642 million foreign exchange loss, Baht 2,472 million gain on sales of investment, Baht 175 million other expenses, Baht 1,378 million gain from debt restructuring and Baht 685 million accounting adjustment. The accounting adjustments were recorded to adjust the underbooking or the overbooking of accrued conduit and leased circuit rental for prior years due to the TOT's first approval of tariff in 2000 and upward adjustment to the conduit rental tariff in 2001 with retroactive effect. The Company increased its accrued conduit rental expenses for prior years of Baht 157 million in 2001 and decreased its accrued leased circuit and conduit rental of Baht 685 million in 2000. Reported financial results for 2001 were a net loss of Baht 3,425 million, a higher loss compared with a Baht 3,308 million loss in 2000 due mainly to those non-recurring items and the recognition of loss from TA Orange. The results from ongoing operations without taking into account TA Orange for 2001 were Baht 2,455 million loss, an improvement of Baht 1,456 million or 37.2% compared to 2000. Net loss without TA Orange should have been Baht 2,458 million in 2001 compared to a loss of Baht 3,308 million in 2000.

Consolidated Results of Operations - Adjusted Basis Years Ended December 31, Revenues Revenues from telephone and other services Revenues from product sales Total revenues Operating expenses Cost of services1 Cost of sales Selling and administrative expenses Directors没 remuneration Total operating expenses EBITDA Depreciation & amortization Operating profit Interest income Interest expense

(In million Baht, unless otherwise indicated) 2001 2000 % Change 20,118 518 20,636

18,085 1,302 19,387

11.2 (60.2) 6.4

14,084 684 4,763 46 19,577 9,063 8,004 1,059 42 (4,718)

13,373 1,119 3,031 46 17,569 9,526 7,708 1,818 23 (5,676)

5.3 (38.9) 57.1 11.4 (4.9) 3.8 ( 41.7) 82.6 (16.9)

A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

C o r p o r a t i o n

Years Ended December 31, Tax Income (loss) from continuing operations2 Share of loss in associates Non recurring items Gain (loss) on foreign exchange Other income (expenses) Gain on sale of investments Accounting adjustment Gain from debt restructuring Net profit (loss) before minority interest Minority interest NET PROFIT (LOSS) BASIC AND DILUTED LOSS PER SHARE (BAHT ) Balance Sheets Current assets Property, plant and equipment, net Total assets Current liabilities Borrowings Total liabilities Shareholders没 equity Cash Flows Cash flows from operating sctivities Cash flows from investing activities Cash flows from financing activities Ending balance

P u b l i c

C o m p a n y

L i m i t e d

(In million Baht, unless otherwise indicated) 2001 2000 % Change (69) (76) (9.2) (3,686) (3,911) (5.8) (628) (1,128) 44.3 845 1,718 (50.3) 955 (2,642) 136.1 47 (175) 126.9 2,472 (100.0) (157) 685 (122.9) 1,378 (100.0) (3,469) (3,321) (4.5) 44 13 238.5 (3,425) (3,308) (3.5) (1.81) (1.73) (4.6) 16,884 64,033 86,472 10,594 61,944 81,577 4,895

13,601 64,263 88,384 6,101 63,820 79,757 8,627

24.1 (0.5) (2.2) 73.6 (2.9) 2.3 (43.3)

4,479 (1,400) (1,450) 2,684

3,229 (245) (3,227) 1,055

38.7 (47.1) 55.1 154.4

Remarks 1. The reported cost of service were adjusted by the reversal of Baht 157 million out-of-period upward adjustment for 2001 and 685 million out-of-period downward adjustment for 2000 to the accrued leased circuit and conduit rental in previous years. The accounting adjustments were to reflect the approval and adjustment of tariff by the TOT. 2. The calculation for Income (Loss) from Ongoing Operations differed from that of 2000 Annual Report due to the exclusion of sharing in gain (loss) from affiliates. 46

A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

C o r p o r a t i o n

P u b l i c

C o m p a n y

L i m i t e d

The results from core operations (excluding product sales) without TA Orange were basically in line with the Company's expectation, despite the economic downturn, the intense competitive environment and an impact from economy domestic long distance çTA 1234é service. This was due to the Company's success in acquiring subscriber base and implementing strict cost control. The Company has employed lowering barrier to entry and bundling strategies that has resulted in a remarkable growth in subscriber base. Revenue from telephone and other services, the Company's core source of revenues, grew 11.2%. Core operating expenses were capped at 2000ûs 32.2% of total revenues, thus generating an 11.5% growth in normalized EBITDA to Baht 10,421 million with a stable margin at 51.8%. In addition, the Company had lower interest burden due to loan prepayment and reduced interest rates. Normalized results from continuing operations including contributions from affiliates and TA Orange improved Baht 725 million to a loss of Baht 4,314 million. This was derived mainly by increase in revenue from telephone and other services of Baht 2,033 million or 11.2% and lower interest burden of Baht 958 million together with improved contribution from affiliates of Baht 500 million, including amortization of negative goodwill for investment in TA Orange. However, operating expenses, excluding cost of product sales, increased Baht 2,443 million or 14.9 % over the year 2000 due partly to TA Orange expenses. In addition, there was a lower contribution from product sales, principally PCT handsets, of Baht 349 million due mainly to the lower selling prices of PCT handsets in order to reduce the remaining stock and to fulfill the marketing purpose. The number of handsets sold was also declined due to the Company lending PCT handsets to customers for use over 3 years.

Consolidated Operating Revenues

Consolidated Operating Expenses

EBITDA

EBITDA (without TA Orange & Product Sales)

20,636 10,421

9,526 19,387

19,577

9,063 9,343

17,569

M. Baht FY 2000

FY 2001

6% G

M. Baht FY 2000

FY 2001

11 % G

M. Baht FY 2000

FY 2001

M. Baht FY 2000

-5% G

FY 2001

12% G

The revenue from core business continued to grow with growth in fixed line and various value added services. This was due to the Company's emphasizing on expansion into different high growth value added services in order to offer variety of services to customers. This also helps leverage the already invested assets and diversify its revenues. Evidence could be seen from the revenues from various value added services including PCT increasing from 24.1% in 1999 to 32.8% in 2000 and to 36.1% in 2001 while the total revenues still growing. In 2001, the Company generated total revenues of Baht 20,636 million, up Baht 1,249 million or 6.4% year-over-year, due mainly to the higher revenue from telephone and other services, which grew 11.2% to Baht 20,118 million. The revenues from product sales declined Baht 784 million to Baht 518 million due mainly to lower-price handsets and the sales promotion of lending handsets for 3 years. The telephone and other service revenue growth were mainly from the value added services to the fixed line such as public phone, ISDN, network rental, etc. which posted an increase of Baht 730 million, or 42.8%, to Baht 2,437 million. In addition, the service revenue from PCT grew Baht 782 million, up 42.5%, while the revenues from DDN and Internet grew rapidly at 47.0% and 61.4% respectively, despite contributing lower absolute amounts. A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

C o r p o r a t i o n

P u b l i c

C o m p a n y

L i m i t e d

The revenue from fixed line services, excluding value added services grew 1.2% year-over-year to Baht 13,181 million, representing a milder growth than 14.9% of 2001, due mainly to lower installation revenues. This was resulted from the free installation promotion, which was in line with the policy to lower the barrier to entry of the customers and the impact from the slowing economy. Moreover, the introduction of economy local long distance rate (TA 1234), and the competition from cellular services, which reduced tariffs on special sales promotions (despite part of the impact being offset by higher revenues from more cellular numbers to call to) also affected the revenues. Consequently, the average revenue per user (ARPU) declined by 7.8% year-over-year from Baht 686 to Baht 633 this year. However, with the help from the strategy of adding subscribers rapidly by reducing the barrier to entry, the Company managed to add 216,386 more subscribers, a 74.7% year-over-year growth, resulting in a 14.2% increase in the total billable lines from the previous year balance to 1,741,345. And this led to continued growth in the total revenues from telephone services. The reported consolidated operating expenses were Baht 19,734 million in 2001. Excluding the non-recurring expense of Baht 157 million relating to an upward out-of-period accounting adjustment to the conduit rental as the TOT increased the previously approved conduit rental fee, the adjusted operating expenses should have been Baht 19,577 million, up Baht 2,008 million or 11.4% year-over-year from Baht 17,569 million in 2000. The 2000 operating expenses excluded the accounting adjustment of Baht 685 million to reduce the balance of conduit rental and long distance leased circuit fee in the previous years in accordance with the TOT's former approval. The main cause of the increased expenses was from Baht 711 million higher cost of service, up 5.3%, to Baht 14,084 million due to higher revenue sharing (in line with higher revenue), higher depreciation (in line with additional assets). Moreover, the selling & administrative expenses of Baht 4,763 million (which included expenses from TA Orange partly service launch-related items) grew Baht 1,732 million, up 57.1% year-over-year due to higher selling & administrative expenses and employee expenses while the cost of sales declined Baht 434 million, in line with the lower revenue. Core operating expenses (all cash operating expenses except cost of sales and revenue sharing) was Baht 7,662 million, increasing Baht 1,822 million or 31.2% year-over-year due mainly to inclusion of TA Orange expenses. Core operating expenses, excluding TA Orange, grew 11.0% year-over-year, considered to be a declining rate comparing to a growth of 17.3% in 2000. A ratio of the adjusted core operating expenses as a percentage of the consolidated revenues declined slightly from 32.3% in 2000 to 32.2% 2001. This was the result of the Company's disciplined cost control. Major cost control measure implemented in 2001 in order to help sooth the impact from softer economic situation was 2 rounds of budget cut. The Company's management will continue to focus on cost control further in 2002 in which budgeted operating expenses is set at zero growth while the budget for capital expenditure is to be used from cash flows generated from operations only. EBITDA Margin

Cash Flow from Operations 4,479

51.7%

51.8%

3,229

M. Baht FY 2000

FY 2001

FY 2000

FY 2001

39% G

The earnings before interest, tax, depreciation and amortization (EBITDA) was reported for the year 2001 as Baht 9,063 million, declined 4.9% year-over-year. Excluding the contributions from product sales and TA Orange, the normalized EBITDA this year would have been Baht 10,421 million, up 11.5% year-over-year, with a 51.8% margin, remained stable when compared to the previous year. This reflected the success in the policy to add customers and control cost in order to sooth the impact from the slowing economy and the higher competition. 48

A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

C o r p o r a t i o n

P u b l i c

C o m p a n y

L i m i t e d

Moreover, the Company has an increased cash flow from operations resulting in a continually improved liquidity. This was partly due to a lower interest expense burden from the declining interest rate and the prepayment of principal through the debt restructuring process. With the better liquidity, the Company managed to prepay more than Baht 900 million of its loans in 2001. The interest coverage ratio increased from 1.0 time in 1998 to 1.3, 1.7 and 1.9 times in 1999, 2000, and 2001 respectively.

Segment Results Wireline-voice Business The revenues from fixed line and value added services were reported for the year 2001 as Baht 15,618 million, up 6.0% yearover-year. These were comprising Baht 13,181 million revenue from fixed line business and Baht 2,437 million from value added services (public phone, fault reporting service, etc.), up 1.2% and 42.8% year-over-year respectively. The rapid increase in revenue from value added services helped sooth the impact from the slowing growth of revenue from fixed line services, which was industrywide phenomenon. Total Revenue - Wireline

Net Additions-Fixed Line Telephone

15.618

14,731 216,386

123,847

M. Baht FY 2000

Lines

FY 2001

FY 2000

6% G

75% G

2001 15,618 503 3,072 154 894 395 20,636

Turnover 2000 % Change 14,732 6.0 342 47.1 3,034 1.3 95 62.1 881 1.5 303 29.9 19,387 6.4

20,636

19,387

(In Millions Baht ) Wireline - voice Wireline - data (DDN) Wireless Ă§PCTĂŠ Internet Multimedia Others Group Unallocated Costs & Depreciation Net

FY 2001

6.4

2001 5,023 238 441 75 82 9 5,868 (4,809) 1,059

Segment Results* 2000 % Change 4,318 16.3 151 57.6 318 38.7 40 87.5 104 (21.2) (36) 125 4,895 19.9 (3,077) 56.3 1,818 (41.8)

* Excluding non-recurring items

The fixed line telephone service (excluding value added services) recorded a milder growth rate than 14.9% of 2000 due to Baht 357 million less installation fee (from installation waive campaign). The service revenue of Baht 13,194 million grew at a milder rate of 4.1% comparing to 15.6% of the previous year due to 7.8% decline in ARPU. However, the higher number of subscriber base still causes the service revenue to grow. The decline in ARPU was resulted from the slowing economy and the reduction in local long distance rate of TA 1234. Moreover, the higher competition from cellular services due to higher subscriber number and the lower tariffs through various promotions may have caused higher outgoing calls from cellulars. However, the said impact was partly compensated by higher revenues from calls to mobile due to more cellular numbers to call to. Revenues from value added services were reported as Baht 2,437 million, up Baht 730 million or 42.8% year-over-year, most of which were from public phone and other services e.g. ISDN, network rental, etc. In 2001, the Company recorded Baht 1,402 million A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

C o r p o r a t i o n

P u b l i c

C o m p a n y

L i m i t e d

revenues from public phone, up 21.1% year-over-year. With the higher efficiency management, the revenue per line grew 18.2% while the number in service was equal to the previous year of 20,000 sets. The Company has the plan to add another 6,000 sets in 2002 after the approval from the TOT. The Company managed to increase significant fixed line telephone subscribers in 2001 despite the slowing economy. This was considered a success from the lowering of barrier to entry and bundling strategy. The billable lines grew 216,386, up 74.4% yearover-year from 123,847 in 2000. Consequently, there were 1,741,345 cumulative billable lines as of December 31, 2001. The said success was mainly from the sales promotions of installation fee waive in conjunction with product and service bundling such as PCT services. Discount or lending PCT handset strategy was implemented, including lowering PCT tariff for outgoing call to fixed line or PCT in the same area to be the same as fixed line which was flat at Baht 3 per call. In addition, there were bundling sales with Internet service and other telecommunications equipment. At the end of the year, the deposit amounting to Baht 3,000 was also waived in accordance with the new Telecommunications Business Act that was enacted in November 2001. ARPU declined 7.8% year-over-year to Baht 633 in 2001 comparing to Baht 686 in 2000. The decline was partly due to the rapid growth in new subscribers and the said reasons. However, when considering the ARPU for fixed lines plus PCT as being value added service that carries the same number, the average yearly ARPU should have been Baht 737, which declined slightly at 3.9% year-over-year from Baht 766. This, again, reflects the success in the policy of leveraging the already invested assets. TA 1234 is the economy domestic long distance service, which was commenced on November 16, 2000. The tariffs for TA 1234 is approximately 33%-67% lower than the normal fixed line depending on distance and time of the day. Since October 2001, the Company has leased the IP network from the TOT for offering TA 1234 service at the rate of Baht 1 per minute in replacement of the previously used fixed line network. The Company and the TOT are in the process of negotiation for the new tariff for the VOIP service. Wireless (Personal Communication Telephone-PCT) PCT revenue grew 1.3% to Baht 3,072 million, which was considered to be a decelerated growth from 2000 due to Baht 744 million less revenue from handset sales (from Baht 1,191 million in 2000 to Baht 447 million this year). This was due to lower sales and special prices through several marketing promotion campaigns in order to clear the inventory and the bundling promotion with the fixed line sales to add subscribers to both fixed line and PCT. However, the service revenue still grew at the high rate of 42.5% from Baht 1,843 million in 2000 to Baht 2,625 million in 2001 due to subscriber additions. Asia Wireless Communication Co., Ltd. (AWC), a subsidiary offering PCT service, has gained 60% net additions for 2001 to 626,944 amid the more intense competition from cellular operators. This is considered to be a success from bundling sales promotion with the fixed line. Fixed line subscriber can buy PCT handset at a discount price or borrow handset (1 fixed line per handset). In addition, AWC has adjusted its tariff downward by charging Baht 200 monthly fee per fixed line number instead of previously per PCT handset (1 fixed line number can handle up to 9 PCT handsets) plus waiving installation fee. Part of the success is resulted from offering prepaid service under the name of PCT Buddy. AWC commenced the PCT Buddy service since April 2001 in order to attract the subscribers who do not have fixed line numbers or those who want to keep home phone numbers privately. The tariff for PCT Buddy is the same with normal PCT with only different in the monthly fee, which has been adjusted downward to Baht 22 per handset per month (equivalent to 1/9 of Baht 200) from November 2001 until October 31, 2004. The balance of PCT Buddy users is 60,000 out of total subscribers of 626,944. Since the end of 2000, the Company has proceeded with the plan to reposition PCT to be virtual fixed line with mobility through different market promotions such as: adjustment of tariff downward to be close to fixed line as earlier discussed. Consequently, PCT has possessed the economy tariff in addition to other values namely: same number as of home phone, low transmission power of 0.01 watt being safe for user. The repositioning helped differentiate the Company's PCT service from those traditional cellular service and created its own market segment. 50

A n n u a l

R e p o r t

2 0 0 1

Te l e c o m A s i a

C o r p o r a t i o n

Revenue from Service - PCT

P u b l i c

C o m p a n y

L i m i t e d

Cumulative Subscribers-PCT 626,944

2,625 1,843 393,000

M. Baht FY 2000

FY 2001

As of 31 Dec 00

42% G

As of 31 Dec 01

60% G

The average ARPU for the Company's customers for the year 2001 was Baht 440, declined 6.4% year-over-year from Baht 470. The decline in ARPU was primarily due to the tariff reduction corresponding to the strategy of market repositioning, the impact from economic situation and higher competitive environment. AWC is preparing itself to offer 霉One Number Service没 to all PCT users with the trial launch to the Company's staffs in January 2001. One Number Service will enable subscriber to have the same number for fixed line, PCT and TA Orange cellular phone through the intelligent network of AWC. The One Number Service is another program that bundles different services among the group, which will differentiate from its peer and reduce the impact from cannibalization among fixed line, PCT and TA Orange cellular service. This year, the Company has commenced the expansion of IN network in order to extend the service to 1,000,000 subscribers from currently 600,000. The expansion process is expected to be completed by early 2002 with total investment of Baht 600 million. Moreover, data communication speed of 32 Kbps capability was also applicable for all area. It is also planning to upgrade the data transmission speed to 64 Kbps for some selected area by early next year with minimal investment due to only software investment being required. Data Network - DDN and Broadband This year the Company recorded Baht 503 million in revenue from DDN, up 47.0% year-over-year. The total number of billed circuits was up 23% to 4,564. Additional bandwidth in service at year-end was 2,593,000 kbps up 79.0% year-over-year whereas the revenue per circuit grew 8% resulting from the Company's concentration on high bandwidth customers. In 2001, the Company has improved its service quality of DDN. A new, more modern, network management center was opened with a higher capability to serve the additional demand for DDN service. In addition, a call center for DDN was also established to serve the need of majority customers for technical advice. Additional staffs for the Installation and maintenance team were hired to ensure prompt service to customers. These are continual quality enhancement of DDN service from the previous year in which ATM network was installed. Consequently, the Company can offer high-speed services and guarantee service quality including offering variety of services that fit the customer needs. The Company has officially launched the Complete Broadband Solution in July 2001 with success. At the end of 2001, there were approximately 1,600 broadband customers separated into 700 TA Express (ADSL) and 900 cable modem users. The Company expected to have its market share of 40%-45%. The policy in offering the broadband service is to become partnership with different Revenue - DDN

Bandwidth Additions

503

342 1,144

709

M. Baht FY 2000

FY 2001

47% G

FY 2000

FY 2001

61% G

A n n u a l

R e p o r t

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Te l e c o m A s i a

C o r p o r a t i o n

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content providers including the promotion of different contents to stimulate more demand for broadband services. Currently, the broadband services are still in the infant stage with most usage being for high speed Internet services. Growth potential is therefore depending on the increased number of Internet users, content and application development, including the push from the government to have more on-line communications as in other developed countries. It is expected that the broadband services will grow at the rate of 40%-50% per year for the next few years. TA has the competitive advantages over its peer group on its most modern and fiber-rich network with shortest local loop, thus ensuring higher quality of service and no need to qualify the lines prior to the service. Moreover, its broadband service covers more than 80% of the business and 50% residential population. Cable modem, on the other hand, covers approximately 2 million households or 800,000 home-pass. Internet Service This year the Company recorded proportionate revenue from Asia Infonet Co., Ltd. (AI), an Internet service provider, of Baht 154 million, up 61.4% year-over-year. This is considered to be a higher growth than 25.0% of the year 2000 most of which was from ClickTA service and corporate customers. The Internet subscriber number this year doubled the previous year with 112.7% growth to 156,321 comparing to 73,510 at the end of previous year. Most of the growth was from KIT customers (sell by number of usage hours) and 45,000 monthly ClickTA (up 20,000 subscribers from the year 2000). The corporate customers, who were the group that the Company paid most attention to, grew at the rate of 11.1% to 700. ClickTA is the Internet service developed by the company with the attractive fee. Customers can log-on for as long as they wish with the cut off in every 2 hours. The Company has officially launched ClickTA in the year 2000 and re-launched again in April 2001 with service fee ranging from Baht 100 to Baht 500 per month depending on the customer usage. Proportionate Revenue - Internet

Cumulative Subscribers - Internet 156,321

154

95 73,510

M. Baht FY 2000

FY 2001

As of 31 Dec 00

61% G

As of 31 Dec 01

113% G

Multimedia Service Asia Multimedia Co., Ltd. (AM), the service provider for hybrid fiber-optic coaxial (HFC) network registered Baht 894 million in revenue in 2001, up 1.5% year-over-year. Most of AM没s revenues were from leasing its network to UBC for cable TV service. In the year 2001, AM has the opportunity to enhance its service revenue by leasing its transmission link in the provinces to TA Orange. Revenue - Multimedia 894 881

M. Baht FY 2000

FY 2001

2% G

A n n u a l

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Te l e c o m A s i a

C o r p o r a t i o n

P u b l i c

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Financial Conditions Analysis of Consolidated Balance Sheets Assets Assets as at December 31, 2001 were Baht 86,472 million representing a decline of Baht 1,912 million from December 31, 2000 due mainly to the depreciation of property, plant & equipment and the decline in value of available-for-sale securities from the sluggish market situation. Current assets as of December 31, 2001 were Baht 16,884 million, up Baht 3,283 million from Baht 13,601 million of December 31, 2000 attributable to the Baht 1,629 million increase in cash and the increase in other current assets of Baht 1,283 million which was mainly from TA Orange. Trade accounts receivable, net, as of December 31, 2001 was reported as Baht 5,541 million reflecting a decline of Baht 292 million from Baht 5,833 million of December 31, 2000. This was due mainly to the decline in value added tax for the assets transferred to the TOT and the accrued fault notification and dropwire maintenance service charge to the TOT while the average collection period was 50 days, equivalent to the previous year. The total investment in associates as of December 31, 2001 dropped Baht 885 million from the previous year to Baht 4,544 million due mainly to the loss from UBC. Other current assets increased Baht 1,282 million to Baht 2,641 million, most of which was from the increase in advance payment from contractor (partly from TA Orange). Property, plant and equipment as of December 31, 2001 was Baht 64,033 million, dropped Baht 230 million from the end of 2000 due mainly to depreciation. The Company has invested additionally in property, plant and equipment in the year 2001 at the amount of Baht 4,693 million, or Baht 7,576 million if including those from acquisition of joint venture. Most of the additional investment was related to Baht 1,450 million investment in fixed line business, Baht 4,573 million in wireless business and Baht 545 million in DDN. Other non-current assets increased Baht 895 million from the previous year to Baht 1,453 million due to the cost of PCT handsets lent to subscribers for 3 years for sales promotion purpose. The Company will depreciate for the period of 3 years.

Liabilities Total liabilities as of December 31, 2001 were Baht 81,577 million, up Baht 1,820 million from the year 2000 due mainly to the increase in trade accounts payable and the accrued expenses most of which related to TA Orange. The Company repaid its longterm loans of Baht 1,527 million in 2000, including the prepayment fee of Baht 904 million. The Company also refinanced US$ 113 million loan with new Baht loan facility of Baht 5 billion and has incurred an additional long term borrowing of Baht 1,009 million, most of which were from financial lease. Long term trade payable arising from the supply and installation of PCT project declined by Baht 972 million. This amount included the Baht 783 million from the Baht appreciation against Japanese Yen and the repayment. As of December 31, 2001, total foreign currency denominated long-term loans were reported as USD 561 million and JPY 22,897 million or equivalent to Baht 32,671 million or representing approximately 50.1% of total long-term loans.

Shareholders没 equity Shareholders没 equity as of December 31, 2001 declined Baht 3,732 million from Baht 8,627 million as of end 2000 to Baht 4,895 million due to the loss in the year 2001. The Baht 2,706 million net increase in share capital relating to the new issuance of 307,499,978 shares for TA Orange share swap, was offset by the Baht 3,020 million decline in FLAG share price. A n n u a l

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Capital structure The capital structure of the Company was still at the high level of debt. As of December 31, 2001, the debt to equity ratio was standing at 15.01 times comparing to 8.68 times as of December 31, 2001 due partly to the decrease in shareholders equity resulting from foreign exchange loss and the drop in FLAG share price. Currently, the Company has the policy not to incur additional debt. All investment will be made from its internal cash flows. In case of surplus cash available from operation, the Company will prepay debt and reduce foreign currency risk by reducing foreign currency borrowing.

Cash flow and source of fund The main source of fund of the Company in 2001 was from operations, the equity increase of 307.5 million shares and the additional borrowing, most of which through leasing. The major uses of fund were capital expenditure and loan repayment. Cash flow from operating activities for full year 2001 increased Baht 1,250 million, or 38.7%, to Baht 4,479 million partly due to increased EBITDA and decreased interest expenses. This enabled the Company to prepay more than Baht 900 million to creditors this year. Net cash flow from investing activity was a net use of Baht 1,399 million in 2001 after consolidating cash flow of Baht 2,782 million of TA Orange on the merging date. Most of the use of fund for investment was mainly capital expenditure amounting to Baht 3,930 million, most of which was investment in fixed line, wireless and DDN business. Cash flow from financing activities was a net use of Baht 1,450 million, a result of the long-term debt repayment of Baht 1,715 million and the additional borrowing of Baht 265 million, not taking into account the refinancing facility of Baht 5 billion.

FX Exposure Reduction The Company remains committed to reducing its risk from foreign currency fluctuation. In 2001, the Company was able to reduce its foreign currency denominated loans by US$ 223 million or 28.4% of its total US Dollar loans. This was executed via various activities. In September 2001, the Company entered into a Payment and Indemnity Agreement with KfW which effectively swapped US$ 96.65 million of loans into Thai Baht. In December 2001, the Company borrowed Baht 5 billion from 4 major Thai banks to repay approximately US$113 million. The Company has also prepaid its long-term borrowing of more than Baht 900 million including an amount of US$13 million to its foreign creditors. The Company is now implementing hedging activities to reduce foreign exchange risk via deployment of financial instruments such as forward contract and cross currency swaps. In addition, the Company expects to issue Baht denominated debentures during the course at 2002 and 2003 to fully repay its US Dollar denominated debt.

Investment in TA Orange On October 31, 2001, the Company acquired a 41% shareholding interest in Bangkok Inter Teletech Co., Ltd., (BITCO), which owns 99.81% of the total shareholding in TA Orange. TA Orange has been granted a concession by the Communications Authority of Thailand (the CAT) to install and operate a GSM 1800 MHz mobile cellular telecommunication network in the kingdom of Thailand. TA Orange has Orange SA as its strategic partner. Orange SA is currently operating cellular business under Orange brand, the world没s first wirefree brand, in 20 countries worldwide.

The acquisition was executed via a share swap transaction with CP Group and was negotiated on behalf of TA by a group of non-CP directors. In the share swap, CP Group transferred to the Company 614,999,956 common shares of Baht 10 par value 54

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per share in BITCO. In return, CP Group received 307,499,978 newly issued common shares and 100 million equity warrants the Company. Each warrant is exercisable into one fully paid-up ordinary share of the Company at Baht 32 per share in cash within a period of no earlier than May 2002, and no later than October 2003. The Company has an option to buy the remaining 10% of ordinary shares in BITCO from CP Group at IPO price at the time of a future listing of BITCO. However, in the event the Company chooses not to exercise this right, the Voting agreement jointly signed between the Company and CP Group shall be terminated. Two important conditions indicated in the Voting Agreement are as follows: the Company and CP Group would vote in the same direction as a combined block of approximately 51%; and lock-up provisions on all the Company's shares held by CP Group exist until May 2002 (not applicable to sales, transfers or disposals of shares of the Company to Affiliates).

Valuation. The Company cost of investment was Baht 2,835 million, comprising Baht 2,706 million for common shares valued at market price of Baht 8.8 per share (closing price on the completion date), Baht 52 million for warrant priced at Baht 0.52 per unit and Baht 76 million for cash relating to payments for various fees. Fair value for the Company's interest in TA Orange is Baht 5,456 million. Therefore the Company acquired TA Orange at a Baht 2,621 million or 48% discount to its fair value. Details of the calculation are provided in note no. 4 of TA's audited financial statements. Accounting treatment. The discount is treated as a negative goodwill, which is presented as a separate item in the balance sheet and amortized based on the expected losses of TA Orange at the time of the acquisition. The amortization of negative goodwill was recorded under share of profit (loss) in subsidiaries and associates. In terms of the recognition of TA Orange's financial results, the Company applies proportionate consolidation or joint venture accounting following the conditions set in the share swap agreement. The results of TA Orange are included in results for wireless segment since the acquisition on October 31, 2001. For fourth quarter and full year 2001 results, the amortization for negative goodwill was recorded at Baht 284.4 million. The proportionate loss from TA Orange was booked at Baht 1,255 million, or Baht 971 million after the offsetting impact of the amortization of goodwill. The remaining Baht 2,337 million of negative goodwill will be amortized in full in 2002.

The completion of the acquisition positions the Company as the only fully integrated network operator and service provider for both wireline and wireless and is expected to yield significant synergies to both the Company and TA Orange. The restructure and pricing of this transaction also demonstrate TA's commitment to strong corporate governance and confirm the strong support of the CP Group.

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Selected Financial Ratios TelecomAsia Corporation Public Company Limited and Subsidiaries 2001 Liquidity Ratios Current Ratio Receivable Turnover Ratio Average Collection Period *

2000

Times Times Days

1.59 3.63 49.91

2.23 3.39 50.24

% % % % % % % %

43.92% 49.80% 51.80% 5.13% 11.10% 12.10% (3.92%) (50.66%)

49.14% 49.10% 51.70% 9.38% 10.40% 9.00% (3.62%) (39.51%)

Efficiency Ratios Assets Turnover Ratio

Times

0.24

0.21

Leverage Ratios EBITDA/Interest Coverage Ratio Debt /EBITDA Net Debt /Equity Ratio

Times Times Times

1.92 8.11 15.01

1.68 7.86 8.68

Per Share Analysis Book Value per Share Earnings (Loss) per Share (Basic and Diluted) Dividend per Share Stock Price at Year End

Baht Baht Baht Baht

1.51 (1.81) 0.00 10.20

2.95 (1.73) 0.00 18.00

*Excluding accounts receivable from the TOT which represents the amount that was already paid by customers but TA has not yet received its revenue sharing from the TOT.

Profitability Ratios EBITDA Margin EBITDA Margin (Excluding TA Orange) EBITDA Margin (Excluding TA Orange & Product Sales) EBIT Margin EBIT Margin (Excluding TA Orange) EBIT Margin (Excluding TA Orange & Product Sales) Return on Total Assets Return on Equity

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CONNECTED TRANSACTIONS During the year 2001, the Group were carried out the transactions with subsidiaries, associates, joint ventures and related companies as disclosed in Note 4, Note 10, Note 13, Note 18 (under Currency Swap item) Note 23 and Note 32 to financial statements for year ended 31 December 2001.

Measures and Procedures for Approving the Entering into of Connected Transactions In addition to the Companyûs measures and procedures for approving the entering into the connected transactions in compliance with the Rules and Regulations of the Securities and Exchange Commission (çSECé) and the Stock Exchange of Thailand (çSETé), and the provisions of the Public Companies Act, the Company must comply with the terms and conditions of the Security Agreement Amendment and Restatement Agreement (the çSAARAé) which is the principal debt restructuring agreement executed between the Company and its Secured Creditors. The key terms and conditions in the SAARA with regard to connected transactions specifies that the Company shall not enter into any contract, agreement, or arrangement with any affiliates other than on the armsû length open market terms. In any event the Company wishes to enter into any contract which creates material payment with the Companyûs affiliates, Telecom Holding Company Limited or any affiliate thereof, Charoen Pokphand Group Company Limited or group of companies or affiliate thereof, Nynex Network Systems (Thailand) Company Limited or group of companies of affiliate thereof, any individual not relating to the authorized business, any individual not relating to the PCT business and other relevant businesses, the Company shall disclose said transaction in its annual budget. Nonetheless, the Secured Creditors of the Company shall have right to make certain objection on the Companyûs annual budget. Apart from the obligations under the SAARA, the terms .. Wiederaufbau dated 22nd December 1999 specifies that and conditions of the Shareholders Agreement executed with Kreditanstalt fur the Company shall have to disclose the entering into any connected transactions of the major shareholders or its affiliates. In addition to the foregoing obligations, in the event of a material connected transaction involving affiliates of major shareholders of the Company, the Company shall propose to the Board of Directors to appoint the Committee comprising of the independent directors and directors nominated by non-interested shareholders to consider and negotiate the terms of said transaction. (The directors nominated by the interested major shareholders shall abstain from attending and voting at said meeting.) As part of its consideration and negotiation process, the Committee is authorized to appoint an independent financial advisor, an independent legal advisor and other advisors to assist, as it deems appropriate. The executive directors appointed by interested shareholders shall also refrain from participating in said connected transaction. In the event the Committee approves said connected transaction, it will then be proposed to the Board of Directorsû meeting (the directors nominated by interested major shareholders shall abstain from voting.) After the approval of the Board of Directors, it will then be proposed to the shareholdersû meeting for approval with at least three-fourths of the vote of the shareholders present and entitled to vote at such meeting provided that the interested shareholders shall abstain in the vote on said connected transaction.

Policy for Future Connected Transactions In addition to strictly compliance with the rules and regulations of the SEC and the SET, the Company has applied said rules and regulations to implement an internal guideline for connected transactions by carrying on the comparative study of the connected transactions guidelines from various foreign institutions to enhance transparency and create the parallel understanding with the foreign analysts and investors. With regard to future connected transactions, the Company anticipates that there will be only the connected transactions under the ordinary course of business of the Company with its affiliates and the Company shall proceed such transactions in a transparent manner pursuant to the good corporate governance policy of the Company as well as all relevant regulations.

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AUDITOR没S REPORT

To the Shareholders of TelecomAsia Corporation Public Company Limited I have audited the accompanying consolidated and Company balance sheets as at 31 December 2001 and 2000 of TelecomAsia Corporation Public Company Limited and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively and the related consolidated and Company statements of income (loss), changes in shareholders没 equity, deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company没s management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the consolidated and Company financial statements referred to above present fairly, in all material respects, the consolidated and Company financial position as at 31 December 2001 and 2000 of TelecomAsia Corporation Public Company Limited and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively, and the consolidated and Company results of operations and cash flows for the years then ended in accordance with generally accepted accounting principles.

SOMCHAI JINNOVART Certified Public Accountant (Thailand) No. 3271 PricewaterhouseCoopers ABAS Limited Bangkok 22 February 2002

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To the Shareholders of TelecomAsia Corporation Public Company Limited

I have audited the accompanying consolidated and Company balance sheets as at 31 December 2001 and 2000 of TelecomAsia Corporation Public Company Limited and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively and the related consolidated and Company statements of income (loss), changes in shareholdersâ&#x20AC;&#x2122; equity, deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Companyâ&#x20AC;&#x2122;s management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the consolidated and Company financial statements referred to above present fairly, in all material respects, the consolidated and Company financial position as at 31 December 2001 and 2000 of TelecomAsia Corporation Public Company Limited and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively, and the consolidated and Company results of operations and cash flows for the years then ended in accordance with generally accepted accounting principles.

SOMCHAI JINNOVART

Certified Public Accountant (Thailand) No. 3271 PricewaterhouseCoopers ABAS Limited

Bangkok 22 February 2002

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2001 and 2000

Notes Assets Current assets Cash and cash equivalents Restricted cash Short-term investments Trade accounts receivable, net Due from related parties Inventories, net Other current assets Total current assets Non-current assets Investments: - Available-for-sale securities - Investments in subsidiaries, associates and others - Investment property Property, plant and equipment, net Other assets: - Intangible assets, net - Negative goodwill, net - Other non-current assets Total non-current assets Total assets

Consolidated 31 December 31 December 2001 2000 Baht Baht

Company 31 December 2001 Baht

253,486,485 4,018,292,184 5,421,028,911 86,673,536 782,827,348 1,854,723,783 12,417,032,247

31 December 2000 Baht

6 7 8 9 10 11 12

2,684,255,574 4,576,450,120 177,337,181 5,540,686,448 151,616,016 1,113,378,391 2,640,554,733 16,884,278,463

1,054,621,457 4,308,366,909 38,574,852 5,832,815,465 133,076,930 875,720,727 1,358,001,816 13,601,178,156

1,036,273,212

3,960,783,332

13 14

4,544,451,457 54,293,898

5,430,041,857 57,972,973

11,155,634,650 -

10,879,509,891 -

64,032,659,405

64,262,597,055

46,733,374,436

50,627,073,770

16 4 17

804,299,872 (2,336,785,064) 1,452,822,446 69,588,015,226

512,919,260 558,160,344 74,782,474,821

206,622,576 (2,336,785,064) 1,051,309,851 56,810,156,449

352,841,588 61,859,425,249

86,472,293,689

88,383,652,977

69,227,188,696

73,455,015,809

153,811,825 4,058,137,434 5,723,964,912 67,086,414 529,425,032 1,063,164,943 11,595,590,560

The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements. 2

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2001 and 2000

Notes Liabilities and shareholders' equity Current liabilities Borrowings Trade accounts payable Accrued expenses Due to related parties Other current liabilities Total current liabilities Non-current liabilities Borrowings Long-term trade accounts payable Other non-current liabilities Total non-current liabilities

Company 31 December 2001 Baht

31 December 2000 Baht

3,214,292,423 2,584,804,955 2,495,300,207 155,217,768 2,143,970,461 10,593,585,814

1,782,478,411 1,695,819,407 1,014,500,918 88,428,870 1,519,547,125 6,100,774,731

1,170,657,842 953,699,929 647,407,215 1,167,837,994 1,594,979,819 5,534,582,799

672,606,758 324,783,800 1,621,544,478 1,353,706,242 3,972,641,278

61,944,182,485 8,299,424,585 740,060,396 70,983,667,466

63,819,640,430 9,255,711,558 580,641,279 73,655,993,267

58,737,800,080 514,122,739 59,251,922,819

60,777,882,313 576,255,247 61,354,137,560

81,577,253,280

79,756,767,998

64,786,505,618

65,326,778,838

7,020,000,000

23 23 23

25,304,999,780 (1,498,478,153) 11,115,406,488 104,344,130 34,880,969 (32,937,104,061)

22,230,000,000 (1,498,478,153) 11,432,046,462 104,344,130 34,880,969 (29,511,977,179)

25,304,999,780 (1,498,478,153) 11,115,406,488 104,344,130 34,880,969 (32,937,104,061)

22,230,000,000 (1,498,478,153) 11,432,046,462 104,344,130 34,880,969 (29,511,977,179)

(4,703,366,075) 454,357,331 4,895,040,409

(1,682,579,258) 498,648,008 8,626,884,979

(4,703,366,075) 4,440,683,078

(1,682,579,258) 8,128,236,971

86,472,293,689

88,383,652,977

69,227,188,696

73,455,015,809

19 10 20

18 21 22

Total liabilities Shareholders' equity Share capital Authorised share capital 3,390.65 million shares Preferred shares 702 million shares issued and fully paid Common shares 2,530.50 million shares issued and fully paid Discount on preferred shares Premium on common shares Cumulative translation adjustment Appropriated legal reserve Deficit Unrealised loss on available-for-sale securities Minority interest in subsidiaries Total shareholdersâ&#x20AC;&#x2122; equity Total liabilities and shareholders' equity

Consolidated 31 December 31 December 2001 2000 Baht Baht

The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements. 3

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Income (Loss) For the years ended 31 December 2001 and 2000

Revenues Revenues from telephone and other services Revenues from product sales Total revenues

Notes 10

Operating expenses Cost of services Cost of sales Selling and administrative expenses Directorsâ&#x20AC;&#x2122; remuneration Total operating expenses

10 26

Operating profit Gain on sale of investment Share of profit (loss) in subsidiaries and associates Interest income Interest expense Foreign exchange gain (loss) Other non operating income (expenses) Loss before income tax Income tax Loss before extraordinary item Extraordinary item - Gain from debt restructuring Loss before minority interest Loss attributable to minority interest

Net loss for the year Basic and diluted loss per share Loss from ordinary activities Extraordinary item - Gain from debt restructuring Net loss for the year

Consolidated 31 December 31 December 2001 2000 Baht Baht

Company 31 December 2001 Baht

31 December 2000 Baht

20,117,763,719 518,678,786 20,636,442,505

18,085,305,046 1,302,258,537 19,387,563,583

18,746,108,803 191,645,371 18,937,754,174

16,916,102,439 110,774,706 17,026,877,145

14,241,481,957 684,642,471 4,762,782,736 45,724,125 19,734,631,289

12,688,408,350 1,119,159,026 3,030,574,658 45,975,112 16,884,117,146

13,572,242,369 309,325,616 2,840,498,324 33,950,000 16,756,016,309

11,784,686,612 141,243,863 2,251,210,937 25,613,987 14,202,755,399

901,811,216 -

2,503,446,437 2,472,154,845

2,181,737,865 -

2,824,121,746 -

(628,472,598) 42,417,539 (4,718,426,956) 954,874,217 47,312,187 (3,400,484,395) (68,933,164) (3,469,417,559)

(1,128,453,711) 23,382,612 (5,676,505,756) (2,642,423,012) (174,718,341) (4,623,116,926) (76,444,287) (4,699,561,213)

(1,874,652,529) 18,428,141 (3,718,396,991) 80,251,840 (112,495,208) (3,425,126,882) (3,425,126,882)

2,107,068,609 10,099,937 (4,624,588,093) (4,747,039,313) (255,868,769) (4,686,205,883) (4,686,205,883)

(3,469,417,559) 44,290,677

1,378,055,738 (3,321,505,475) 13,355,330

(3,425,126,882) -

1,378,055,738 (3,308,150,145) -

(3,425,126,882)

(3,308,150,145)

(3,425,126,882)

(3,308,150,145)

(1.81)

(2.35)

(1.81)

(2.35)

(1.81)

0.62 (1.73)

(1.81)

0.62 (1.73)

The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements. 4

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes in Shareholdersâ&#x20AC;&#x2122; Equity For the years ended 31 December 2001 and 2000

Preferred shares Beginning balance Increase during the year Decrease during the year Ending balance

Notes 23

Common shares Beginning balance Increase during the year Decrease during the year Ending balance

Discount on preferred shares Beginning balance Increase during the year Decrease during the year Ending balance

Premium on common shares Beginning balance Increase during the year Decrease during the year Ending balance

Cumulative translation adjustment Beginning balance Increase during the year Decrease during the year Ending balance Appropriated legal reserve Beginning balance Increase during the year Decrease during the year Ending balance

Consolidated 31 December 31 December 2001 2000 Baht Baht

Company 31 December 2001 Baht

31 December 2000 Baht

7,020,000,000 7,020,000,000

22,230,000,000 3,074,999,780 25,304,999,780

22,230,000,000 22,230,000,000

22,230,000,000 3,074,999,780 25,304,999,780

22,230,000,000 22,230,000,000

(1,498,478,153) (1,498,478,153)

11,432,046,462 (316,639,974) 11,115,406,488

11,432,046,462 11,432,046,462

11,432,046,462 (316,639,974) 11,115,406,488

11,432,046,462 11,432,046,462

104,344,130 104,344,130

34,880,969 34,880,969

34,880,969

24 34,880,969

The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements. 5

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes in Shareholdersâ&#x20AC;&#x2122; Equity (Continued) For the years ended 31 December 2001 and 2000

Note Deficit Beginning balance Increase during the year Decrease during the year Ending balance Unrealised gain (loss) on available-for-sale securities Beginning balance Increase during the year Decrease during the year Ending balance Minority interest in subsidiaries Beginning balance Increase during the year Share of loss of subsidiaries Ending balance Total shareholdersâ&#x20AC;&#x2122; equity

Consolidated 31 December 31 December 2001 2000 Baht Baht

Company 31 December 2001 Baht

(29,511,977,179) (3,425,126,882) (32,937,104,061)

(26,203,827,034) (3,308,150,145) (29,511,977,179)

(29,511,977,179) (3,425,126,882) (32,937,104,061)

(26,203,827,034) (3,308,150,145) (29,511,977,179)

(1,682,579,258) (3,020,786,817) (4,703,366,075)

9,844,400

(1,692,423,658) (1,682,579,258)

(1,682,579,258) (3,020,786,817) (4,703,366,075)

498,648,008 (44,290,677) 454,357,331

512,003,338 (13,355,330) 498,648,008

4,895,040,409

8,626,884,979

4,440,683,078

31 December 2000 Baht

(1,692,423,658) (1,682,579,258)

8,128,236,971

The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements. 6

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Deficit For the years ended 31 December 2001 and 2000

Note Deficit Beginning balance Net loss for the year Ending balance Appropriated legal reserve Total deficit

Consolidated 31 December 31 December 2001 2000 Baht Baht

Company 31 December 2001 Baht

(29,511,977,179) (3,425,126,882) (32,937,104,061)

(26,203,827,034) (3,308,150,145) (29,511,977,179)

(29,511,977,179) (3,425,126,882) (32,937,104,061)

(26,203,827,034) (3,308,150,145) (29,511,977,179)

34,880,969

(32,902,223,092)

(29,477,096,210)

(32,902,223,092)

(29,477,096,210)

31 December 2000 Baht

The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements. 7

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Cash Flows For the years ended 31 December 2001 and 2000

Notes Cash flows from operating activities Cash flows from investing activities Deposit in restricted cash Deposit in time deposit Payments on liquidated subsidiaries Acquisition of joint venture, net of cash acquired Acquisition of investment in other company Purchase of property, plant and equipment Purchase of intangible assets Proceeds from sale of available-for-sale securities and other Proceeds from disposal of property, plant and equipment Net cash used in investing activities

Consolidated 31 December 31 December 2001 2000 Baht Baht

Company 31 December 2001 Baht

31 December 2000 Baht

4,479,031,257

3,228,635,110

3,281,925,149

3,699,827,743

(251,124,483) (82,810,932) -

(1,586,445,319) (15,378,042) (133,024)

39,845,250 -

(1,740,283,962) -

2,782,125,446

(100,000)

(3,930,955,821) (33,881,549) -

(1,695,087,745) 3,003,508,766

(76,419,234) (2,207,308,673) (33,881,549) -

(1,387,231,901) -

117,267,777 (1,399,479,562)

48,905,523 (244,629,841)

232,643 (2,277,531,563)

806,219 (3,126,709,644)

5,265,404,643

5,521,521,847 657,757,200

5,000,000,000

5,521,521,847 -

(187,972,765) (6,527,349,456) (1,449,917,578)

(531,831,359) (8,874,703,476) (3,227,255,788)

(5,904,718,926) (904,718,926)

(6,006,432,873) (484,911,026)

Increase (decrease) in cash and cash equivalents Beginning balance

1,629,634,117 1,054,621,457

(243,250,519) 1,297,871,976

99,674,660 153,811,825

88,207,073 65,604,752

Ending balance

2,684,255,574

1,054,621,457

253,486,485

153,811,825

Cash flows from financing activities Issue of preferred shares Proceeds from borrowings Repayments on long-term trade accounts payable Repayments on borrowings Net cash used in financing activities

18 21 18

Non cash transactions The principal non cash transactions for the year ended 31 December 2001 are as follows: 1. The acquisition of property, plant and equipment using finance leases and other payables amounting to Baht 666.88 million (Note 18) and Baht 67.20 million, respectively. 2. Currency swap of US Dollar loan amounting to US Dollars 96.65 million to Thai Baht 4,483.48 million (Note 18). 3. Acquisition of joint venture in exchange for issuance of shares (Note 4 and Note 23). The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements. 8

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 1.

General information TelecomAsia Corporation Public Company Limited (“the Company”) is a public limited company and is incorporated and domiciled in Thailand. The registered office of the Company is located at 18 Telecom Tower, Ratchadaphisek Road, Huai Khwang, Bangkok, Thailand. The Company is listed on the Stock Exchange of Thailand. The Company and its subsidiaries, associates and other related companies (together the “TelecomAsia Group”, or “the Group”) are principally engaged in the telecommunications and diversified communications industries. The Group’s core business is providing telecommunications services and various value-added services, which include, among others, Digital Data Network (“DDN”), Public Telephone, Personal Communication Telephone (“PCT”) Service, Multimedia and Internet Service Provider (“ISP”), and cellular telephone service.

Concession agreements Telephone services In August 1991, the Company entered into the Joint Operation and Joint Investment for Expansion of Telephone Services Agreement (“the Concession”) with the Telephone Organization of Thailand (“TOT”). The Concession, a Build Transfer Operate (“BTO”) Concession, as amended and supplemented, granted the Company the right to construct and provide fixed line telephone services for up to 2.6 million new lines in the Bangkok Metropolitan Area. The Company was responsible for: 1) Procuring and constructing the expansion of the existing TOT network. 2) Upon completion of construction of the network expansion, transferring legal ownership of certain network assets, land and buildings to TOT. 3) In consideration for the transferred assets receiving 25 years right to operate and maintain the network and provide certain services including: • • • • • •

Fixed line telephone Personal Communication Telephone (PCT) Public telephone (Build Operate Transfer) Digital Data Network (DDN) Acceptance of fault notification and drop wire maintenance Customer service center

Under the provisions of the Concession, TOT and the Company share the gross revenues collected from operating the networks in the percentages stipulated. Additionally, as required by the Concession, the Company has placed letters of guarantee issued by certain local banks in favour of TOT totaling Baht 300 million to guarantee the Company’s compliance with the terms of the Concession. NON-POTS services 9

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 In August 1997, the Group has entered into a Joint Investment in the NON-POTS services through multimedia network agreement with the Telephone Organisation of Thailand (“TOT”). Under the terms of the agreement, the Group has certain commitments such as, among others, to acquire, install, manage and maintain the hardware and equipment for NON-POTS services. The Group is also committed to transfer to the TOT all hardware and equipment pertaining to such system when the installation is completed. This agreement is for a period of twenty years commencing from the agreement date, and the Group is unable to terminate it unless certain criteria specified in the agreement have been met. During the term of the agreement, the Group is entitled to collect the service fees, membership fees and other service fees from customers as stipulated in the agreement. The Group has placed letter of guarantee issued by certain local bank in favour of TOT amounting to Baht 5 million to guarantee the Group’s compliance with the terms of the agreement.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 2.

Concession agreements (Continued) Internet services In October 1996, the Group entered into the Joint Investment in the Internet Services Agreement (the “Agreement”) with the Communication Authority of Thailand (“CAT”) to provide commercial internet services to users throughout Thailand for a 10 year term. Under the terms of the Agreement, the Group is required to provide its Internet service over facilities leased from CAT or authorities approved by CAT. Under the terms of the Agreement, the Group has certain commitments including acquiring, installing, managing and maintaining all equipment necessary to provide Internet services. The legal ownership of the system assets is transferred to CAT as installations are completed. In consideration for the transferred system assets, CAT granted the Group a ten year operating right to provide Internet services and collect customer deposits, membership and other service fees as stipulated in the Agreement. The Group has placed letters of guarantee issued by certain local banks in favour of CAT totaling Baht 0.5 million to guarantee the Group’s compliance with the terms of the Agreement. Cellular telephone service As set out in Note 4, on 31 October 2001, the Company acquired 41.00% of shares capital of Bangkok Inter Teletech Co., Ltd. (“BITCO”), the sole shareholders of CP Orange Co., Ltd. (“CPO”) (CPO had changed its company name as TA Orange Co., Ltd. in January 2002), formerly known as Wireless Communication Services Co., Ltd. CPO is an operator of the nationwide cellular network under a Build Transfer Operate concession granted by the CAT dated 20 June 1996 which was subsequently amended on 8 September 2000. Under the term of the concession agreement, CPO has certain commitments including acquiring, installing, managing and maintaining all equipment necessary to provide nationwide cellular telephone services. The legal ownership of the system assets is transferred to the CAT as installations are completed. In addition, CPO is required to pay annual fees to the CAT based on the percentage of service income or at the minimum fees as specified in the agreement whichever is higher. In consideration for the transferred system assets and committed fees, CAT granted CPO a seventeen year exclusive right to provide cellular telephone services and collect customer service fees as stipulated in the agreement. The Group has placed letters of guarantee issued by certain foreign and local banks in favour of CAT totaling Baht 133.33 million to guarantee the Group’s compliance with the terms of the agreement.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 3.

Accounting policies The principal accounting policies adopted in the preparation of these consolidated and Company financial statements are set out below: a) Basis of preparation The consolidated and Company financial statements have been prepared in accordance with Thai Generally Accepted Accounting Principles under the Accounting Act B.E. 2543 being those Thai Accounting Standards issued by the Institute of Certified Accountants and Auditors of Thailand and approved under law by the Board of Supervision of Auditing Practice appointed by the Minister of Commerce under the Auditor Act B.E. 2505, and the financial reporting requirements of the Securities and Exchange Commission. The consolidated and Company financial statements are prepared under the historical cost convention except as disclosed in the accounting policies below. For example, available-for-sale investment is shown at fair value. b) Group accounting (1) Subsidiary undertakings Subsidiary undertakings, which are those companies in which the Group, directly or indirectly, has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operations are consolidated. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are no longer consolidated from the date that control ceases. All intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. (2) Associated undertakings Investments in associated undertakings are accounted for by the equity method of accounting. These are undertakings over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associated undertaking are eliminated to the extent of the Groupâ&#x20AC;&#x2122;s interest in the associated undertakings; unrealised losses are also eliminated unless the transactions provides evidence of an impairment of the asset transferred. Goodwill represents the excess of the cost of an acquisition over the fair value of the Groupâ&#x20AC;&#x2122;s share of the net assets of the acquired associated undertaking at the date of acquisition. Goodwill on acquisitions of associated undertaking is included in the balance sheet as part of investment in associates, and is amortised using the straight-line method over its estimated useful life, 15 years. 12

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 The Group’s investment in associated undertakings includes goodwill (net of accumulated amortisation) on acquisition. Equity accounting is discontinued when the carrying amount of the investment in an associated undertakings reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated undertakings. (3) Joint venture The Group’s interests in a jointly controlled entities are accounted for by proportionate consolidation. Under this method the Group includes its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows in the relevant components of the financial statements.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 3.

Accounting policies (Continued) c) Foreign currency translation Income statements of foreign entities are translated into the Group’s reporting currency at weighted average exchange rates for the year and balance sheets are translated at the exchange rates ruling on 31 December. Exchange differences arising from the translation of the net investment in foreign subsidiaries, have been recorded in the “Cumulative Translation Adjustment” in shareholders’ equity. On disposal of a foreign entity, accumulated differences are recognised in the income statement as part of the gain or loss on sale. Income statements of the foreign operations that are integral to the operations of the Group are translated into the Group’s reporting currency at average exchange rates for the year and the monetary items are translated at the exchange rates ruling on 31 December, while the non monetary items are translated at the date of the transactions. Exchange differences arising from the translation have been recorded as income or expense for the year. Foreign currency transactions in Group companies are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Such balances are translated at year-end exchange rates unless hedged by forward foreign exchange contracts, in which case the rates specified in such forward contracts are used. d) Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, short-term deposits with banks and financial institution with original maturity of 3 months or less, other short-term highly liquid investments, and bank overdrafts. In balance sheet, bank overdrafts are included in borrowings in current liabilities. e) Investments The Group classifies its investments into the following categories; trading, held-tomaturity, available-for-sale and general investment. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investments and included in current assets; during the period the Group did not hold any investments in this category. Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets; during the period the Group did not hold any investments in this category. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; these are 14

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Investments in equity securities that are not listed in the stock exchange are classified as general investment. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis. All purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Trading and available-for-sale investments are subsequently carried at fair value, whilst held-to-maturity investments are carried at amortised cost using the effective yield method. General investment is carried at original cost. Unrealised gains and losses arising from changes in the fair value of trading investments and availablefor-sale investments are included in the income statement in the period in which they arise and in the shareholdersâ&#x20AC;&#x2122; equity, respectively. Realised gains and losses are determined on the weighted average method and are reflected in income statement.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 3.

Accounting policies (Continued) f) Trade accounts receivable Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables. The Group records an allowance for doubtful accounts which is equivalent to the estimated collection losses that may be incurred in the collection of all receivables. The estimated losses are based on historical collection experience combined with a review of all outstanding receivables at the balance sheet date. Bad debts are written-off when identified. g) Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined by the moving average cost method. Allowance is made against cost of supplies for network where, in the opinion of the management, there is diminution in value arising on obsolete, slow-moving and defective inventories, or, is otherwise required by changes in circumstances. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of selling expenses. h) Investment properties Investment properties, principally comprising land, are carried at cost. Investment properties are not subject to depreciation. A review of impairment is periodically undertaken by the Group’s management. On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statement. i) Property, plant and equipment Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on a straight-line method to write-off the cost of each asset to its residual value over its estimated useful life of the respective assets, or if shorter, the lease term as follows: Land Land improvement Buildings and improvements Leasehold building improvements Furniture, fixtures, tools and office equipment Power supply and computer Multimedia network equipment Vehicle

Years Nil 10 5 – 20 Lease period 5 – 10 5 8 – 20 5

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 Expenditures for additions, renewal and betterment, which result in a substantial increase in an assetâ&#x20AC;&#x2122;s current replacement value, are capitalised. Repair and maintenance costs are recognised as an expense when incurred. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposals of property, plant and equipment are determined by comparing proceeds with carrying amounts and are recognised as other income (loss) in the statement of income.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 3.

Accounting policies (Continued) i) Property, plant and equipment (Continued) Included in property, plant and equipment is property, plant and equipment under Concessions and Agreements as described in Note 2. Such property, plant and equipment is depreciated over the shorter of their useful lives or the remaining concession periods, as follows: Land Land improvement Buildings Telephone network equipment - Switching equipment - Transmission - Outside plant - Mobile phone network equipment Public phone Power supply and computer Network management systems

Years Nil 10 10 – 20 12 10 10 – 25 10 7 5 10

Borrowing costs to finance the construction of property, plant and equipment and assets under the Concessions and Agreements are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the property, plant and equipment for its intended use. Costs of mobile phone network equipment under concession agreement represent costs of certain equipment and other assets which have been or have to be transferred to the CAT. The cost of mobile phone network equipment under concession agreement is depreciated on the straight-line method over its estimated useful life of 10 years not exceeding the remaining concession period. j) Accounting for leases – where a group company is the lessee Leases of equipment where the Group assumes substantially all risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased equipment or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowing. The interest element of the finance cost is charged to the income statement over the lease period. Equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term. Leases of assets where a significant portion of the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Payments made

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 under operating leases are charged to the income statement on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 3.

Accounting policies (Continued) k) Intangible assets (1) Negative goodwill Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition. Negative goodwill is presented separately as an item in the balance sheet. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group’s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities, that portion of negative goodwill is recognised in the income statement when the future losses and expenses are recognised. (2) Computer software development costs Generally, costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. However, costs that are directly associated with identifiable and unique software products controlled by the Group and have probable economic benefit exceeding the cost beyond one year, are recognised as intangible assets. Direct costs include staff costs of the software development team and an appropriate portion of relevant overheads. Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives, not exceeding a period of 5 years. (3) Trademarks and licenses Expenditure on acquired trademarks and licenses by a joint venture is capitalised and amortised using the straight-line method over its estimated useful life of 20 years. The trademark is not revalued. The carrying amount of the trademark is reviewed annually and adjusted for impairment where it is considered necessary. (4) Other intangible assets Other intangible assets represent fair value of subsidiaries’ shares issued in exchange for rights to operate NON-POTS and to hang dropwire. This intangible asset is amortised using the straight-line method over its estimated useful life, ranging from 20 – 25 years. (5) Impairment of intangible assets Where an indication of impairment exists, the carrying amount of intangible assets is assessed annually and written down immediately to its recoverable amount. l) Borrowings Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 the redemption value is recognised in the income statement over the period of the borrowings. m) Troubled debt restructuring - where the group company is the debtor When the Group transfers its assets or equities in settlement of its debts as part of the debt restructuring, the excess of the carrying amount of the payable settled (including accrued interest, unamortised premium or discount, finance charges, or issue costs) over the fair value of the assets or equities transferred to the lender is recognised as a gain on restructuring. Legal fees and other direct costs incurred in transferring equities are deducted from the amount recorded for that equity. All other direct costs affecting the debt restructuring are deducted in measuring the gain on restructuring or included in expense for the period if no gain on restructuring is recognised. Where the debt restructuring involves modification of terms of payables, the Group accounts for the effects of the restructuring prospectively from the time of restructuring and does not change the carrying amount of the payable at the time of the restructuring, unless the carrying amount exceeds the total undiscounted future cash payment specified by the new terms. If it does exceed this, the carrying amount of payable is reduced to the amount equal to the total undiscounted future cash payments specified by the new terms and a gain on restructuring is recognised in the statement of income if the amount is determinable.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 3.

Accounting policies (Continued) n) Revenue recognition Telephone usage revenues for local and domestic long distance calls are recognised based on completed call time at the tariffs set by TOT. Where a billing period does not coincide with a calendar month, the Company has estimated the local call usage based on historical usage. Telephone usage revenue earned but not billed is included in the balance sheets within accounts receivable. Inbound and outbound international long distance calls are connected through the CAT network. CAT bills the Company’s customers directly for international calls. CAT pays each carrier Baht 6 per minute of inbound and outbound international traffic. The Company recognises international long distance call revenue based on customer usage reported to the Company by CAT. Revenue from DDN service is recognised ratably over the service period. Annual revenues from DDN service billed but unearned are included in the balance sheets within other current liabilities. Revenue derived from the installation of fixed lines and the activation of PCT services is recognised upon the completion of installation services and activation of services. Advance receipts but unearned are included in the balance sheets within other current liabilities. Revenues from public telephones service are recognised based upon metered usage. Revenues from Internet services are recognised based on actual time incurred by the customer. Sales of telephone equipment and PCT handsets are recognised upon delivery of equipment and handsets and customer acceptance. In accordance with the Concession described in Note 2, TOT is entitled to receive a share of certain revenues generated by the Company. The Company presents revenue gross of the TOT share in the statements of income, ranging from 16 % to 23.5% of revenues collected. The TOT share of revenue is included within cost of services. All revenues have been presented net of value added tax, cash discounts and related cash-based promotions. Other revenues earned by the Group are recognised on the following bases: Royalty and rental income – on an accrual basis. Interest income – on an effective yield basis. Dividend income – when the Group’s right to receive payment is established. o) Related parties

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 Enterprises and individuals that directly, of indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the Company and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 3.

Accounting policies (Continued) p) Construction contacts When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable; and contract costs are recognised when incurred. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised over the period of the contract, respectively, as revenue and expenses. The Group uses the percentage of completion method to determine the appropriate amount of revenue and costs to recognised in a given period; the stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract and the proportion that contract costs incurred for work performed to date bear to the estimated total costs for the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as a expense immediately. In determining costs incurred up to the year end, any costs relating to future activity on a contract are excluded and shown as contract work in progress. The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings up to the year end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as due from customers on construction contracts, under receivables and prepayments. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as due to customers on construction contract, under trade and other payables. q) Financial instruments Financial instruments carried on the balance sheet include cash and bank balances, investments, receivables, trade creditors, leases and borrowings. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. The Group is also party to financial instruments that reduce exposure to fluctuations in foreign currency exchange. These instruments, which mainly comprise foreign currency forward contracts, are not recognised in the financial statement on inception. Foreign currency forward contracts protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset and liability will be settled. Any increase or decrease in the amount required to settle the asset or liability is off-set by a corresponding movement in the value of the forward exchange contract. The gains and losses are therefore off-set for financial reporting purposes and are not recognised in the financial statements. The fee incurred in establishing each agreement is amortised over the contract period, if any. r) Share capital 24

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 (1) Ordinary shares and non-redeemable preferred shares with discretionary dividends are both classified as equity. (2) External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition. (3) Dividends on ordinary shares are recognised in equity in the period in which they are declared. (4) The directors and executive management are entitled to participate in the Stock Option Plan under which non-transferable warrants are issued to the directors and executive management. If the warrants are granted at a discount on the market price no compensation cost is recognised in the income statement based on that discount. When options are exercised, the proceeds received net of any transaction costs are credited to share capital (par value) and share premium. s) Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 4.

Acquisition On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company, the shareholders approved the acquisition by the Company of shares of Bangkok Inter Teletech Co., Ltd. ("BITCO") from Charoen Pokphan Group Co., Ltd.. (the "CP Group"). CP Group will transfer to the Company 614,999,956 common shares of Baht 10 par value per share in BITCO, representing approximately 41% of the total issued shares of BITCO. In consideration for the acquisition of the BITCO shares, the Company will issue common shares and equity warrants to the CP Group as follows: a. 307,499,978 new common shares of Baht 10 par value per share of the Company; and b. 100,000,000 equity warrants of the Company, each of which is exercisable into one fully paid-up common share of the Company within a period of no earlier than 6 months, and no later than 2 years from the date of completion of the transaction at the exercise price of Baht 32 per share in cash. No value has been attributed to the equity for the issued warrants. On exercise of the warrants proceeds received net of transaction costs will be credited to share capital (par value) and share premium. In order to effect the proposed acquisition together with the issue of securities by the Company (referred as the “Transaction”), the Company and CP Group entered into a Share Swap Agreement and a Voting Agreement dated 5 June 2001 (collectively, the “Transaction Documents”). Material clauses contained in the Voting Agreement include: a. Subject to the terms of the Voting Agreement, the Company and CP Group will vote in the same direction as a combined block of approximately 51%; b. At the time of a future listing of BITCO on a stock exchange, the Company may acquire from CP Group the remaining 10% of common shares in BITCO, at the IPO price. In the event the Company does not exercise this right, the Voting Agreement shall be terminated; and c. Lock-up provisions on all the Company’s shares (newly issued or otherwise) held by CP Group for the period of 6 months from the date on which the Company receives BITCO shares. The foregoing provision, however, does not apply to sales, transfers or disposals of shares of the Company to Affiliates. The Company obtained consent from its creditors for this Transaction. On 31 October 2001, the Transaction was consummated, and BITCO was accounted for as a joint venture from that date. As a result the Company’s interests are accounted for by proportionate consolidation. Details of net assets acquired and negative goodwill are as follows: Baht Purchase consideration: 26

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 - Cash paid - Fair value of share and warrant issued (Note 23) Total purchase consideration Fair value of net asset acquired Negative goodwill

76,419,234 2,758,359,80 6 2,834,779,04 0 (5,455,967,4 38) (2,621,188,3 98)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 4.

Acquisition (Continued) The proportional assets and liabilities arising from the acquisition are as follows:

Cash and cash equivalents Short-term investments Advances to contractors Other accounts receivable Other current assets Property, plant and equipment, net - Network equipment - Non - network equipment Trademark, net Other assets Other accounts payable Amount due to related company Accrued expenses and other current liabilities Fair value of net assets acquired Negative goodwill Total purchase consideration

Baht 2,858,544,68 0 82,000,000 305,912,302 153,856,230 56,752,771 2,669,541,82 2 213,946,536 113,938,878 21,369,103 (509,512,403 ) (208,914,181 ) (301,468,300 ) 5,455,967,43 8 (2,621,188,3 98) 2,834,779,04 0

As a result, cash inflow from this acquisition is shown below: Cash and cash equivalents Less: cash paid for directly attributable acquisition costs Net cash inflow on acquisition

Baht 2,858,544,68 0 (76,419,234) 2,782,125,44 6

Movement of negative goodwill is as follows: Opening net book balance Acquisition of joint venture Amortisation Closing net book balance

Baht (2,621,188,3 98) 284,403,334 (2,336,785,0 64)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 5.

Debt restructuring 5.1

Debt restructuring of the Company On 22 December 1999, the Company signed an Outline Term Sheet for Restructuring and the Company subsequently entered into debt restructuring agreements with its creditors, comprising both secured and unsecured creditors, which became effective on 31 March 2000. The principal provisions included, among others, the following: Secured creditors (a) on 31 March 2000, the Company issued 702,000,000 convertible preference shares to a secured creditor for cash proceeds of U.S. Dollars 150 million. The cash proceeds from the offering were used to repay unsecured liabilities under the debt restructuring plan. The preference shares have Baht 10 par value with conversion rights to common shares in the second to eighth year from issue at a ratio of 1:1. The preference shares are entitled to a dividend for the first eight years, set at the rate of 10% per annum, cumulative plus dividend payable, if any, to the holders of common shares. With effect from the eighth anniversary of issue, the preference shares are entitled to a non-cumulative dividend at the rate of 0.1% per annum, plus dividend payable, if any, to the holders of common shares;

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 5.

Debt restructuring (Continued) 5.1

Debt restructuring of the Company (Continued) Secured creditors (Continued) (b) the secured creditors have agreed to defer the repayment term of their long-term loans. The repayment will be first due in the second quarter of the year 2002, and repaid through the year 2008. Interest rates were changed from fixed rates to rates based on the average MLR of the certain local banks plus 0.75% per annum for the Baht loans and on LIBOR plus agreed margins ranging from 1%-1.75% per annum for the U.S. Dollar loans, payable on a monthly basis; (c) the secured creditors agreed to extend the repayment term of their overdraft credit facilities to be due in December 2008. Interest rates are based on the average MOR of banks specified in the agreement; and (d) the Company was granted permission to withdraw the loan facility under a Standby Letter of Credit, which certain local banks issued to a subsidiary under the conditions of a joint-loan agreement entered into between the subsidiary and the said banks, of Baht 5,000 million to finance the Companyâ&#x20AC;&#x2122;s operations under certain conditions. Unsecured creditors Two options of repayment were offered to unsecured creditors, the principal terms of which were as follows: 1

the Company offered to repay the unsecured creditors 50% of the principal amount outstanding with the condition that the remaining balance of principal and the defaulted accrued interest were waived; and alternatively

the Company offered to repay the unsecured creditors 40% of the principal amount outstanding. The remaining 60% would be repaid in eight semi-annual installments starting from January 2014, with compound interest of 2% per annum. The remaining amount owing to the unsecured creditors is subordinated to the repayments of debt payable to the secured creditors and the preference dividend referred to above.

The financial results of the debt restructuring of the Company are summarised as follows: Secured creditors

Loans in U.S. Dollars (U.S. Dollars)

Debt before Restructuring Currency Million 770.49

Debt after Restructuring Currency Million 770.49 30

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 Loans in Baht (Baht)

18,833.68

Restructuring of the secured liabilities represented changes to the terms of loan repayments and changes in interest rates only. Therefore, there has been no change in the carrying value of liabilities. Unsecured creditors

Creditors without gain from restructuring Creditors with gain from restructuring Gain from debt restructuring, net of related expenses Gain from debt restructuring, net of related expenses per share (Baht)

Debt before Restructuri ng Baht Million 8,869.49

Debt after Restructuri ng Baht Million 9,737.26

Gain on Restructuri ng Baht Million -

6,600.85

5,021.87

1,578.98 1,378.06 0.62

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 5.

Debt restructuring (Continued) 5.1

Debt restructuring of the Company (Continued) Debt before restructuring included principal amount and accrued interest. Debt after restructuring represents principal amount payable at restructuring or to be paid after restructuring, future interest until full settlement and withholding taxes absorbed by the Company.

5.2

Debt restructuring of subsidiary On 2 March 2000, a subsidiary of the Group entered into a debt restructuring agreement for the amount of Baht 4,033.2 million with certain local banks and financial institutions. The principal provisions included the following: −

−

the group of creditors agreed to extend the repayment date to 31 December 2002, and to allow the due date to be extended on a yearly basis. The said extended date will not be extended beyond 31 December 2009. The subsidiary must pay for an extension fee of 0.5% - 2% of the loan as stipulated in the agreement; the subsidiary agreed to pay interest at the rate of MLR + 2% (MLR being the average MLR of four principal banks) at the month end; and under the provision of the debt restructuring agreement, the subsidiary has pledged the shares of its four subsidiaries as collateral.

Cash and cash equivalents As at 31 December Cash on hand and at banks Saving deposits

Consolidated 2001 2000 Baht Baht 57,611,146 35,175,501 2,626,644,42 1,019,445,95 8 6 2,684,255,57 1,054,621,45 4 7

Company 2001 2000 Baht Baht 22,244,088 13,694,676 231,242,397 140,117,14 9 253,486,485 153,811,82 5

The average effective interest rates on cash at bank deposits were 0.26% and in the range of 0.75% - 2.0% in 2001 and 2000, respectively. These deposits have an average maturity of 74 days. 7.

Restricted cash As at 31 December Saving deposits

Consolidated Company 2001 2000 2001 2000 Baht Baht Baht Baht 2,406,064,98 4,058,137,43 2,218,978,58 4,058,137,4 32

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000 Timed deposit

3 4 9 34 2,170,385,13 250,229,475 1,799,313,59 7 5 4,576,450,12 4,308,366,90 4,018,292,18 4,058,137,4 0 9 4 34

The average effective interest rates for time deposit accounts were 0.26% and in the range of 0.75% - 2.0% in 2001 and 2000, respectively. These deposits have an average maturity of 93 days. Under the terms of loan and supplier agreements, the Company and certain subsidiaries have pledged the above bank accounts as collateral with the contracted parties.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Investments As at 31 December Investments Current Non-current Total

Current: Available-for-sale securities General investment - Time deposit Total Non-current: Available-for-sale securities General investment â&#x20AC;&#x201C; non-marketable equity securities (Note 13) Total

Consolidated 2001 2000 Baht Baht 177,337,181 1,088,595,21 2 1,265,932,39 3

38,574,852 3,985,822,33 2 4,024,397,18 4

12,326,189 165,010,992 177,337,181

21,416,064 17,158,788 38,574,852

1,036,273,21 2 52,322,000

3,960,783,33 2 25,039,000

1,088,595,21 2

3,985,822,33 2

General investment â&#x20AC;&#x201C; Time deposit The average effective interest rates on short-term bank fixed deposits were 2.0% and in the range of 0.75% - 2.0% for 2001 and 2000, respectively. These deposits have an average maturity of 102 days. Available-for-sale securities Movement of available-for-sale-securities: Year ended 31 December Current: Opening net book amount Reclassify Exchange differences Additions Disposals Revaluation deficit Closing net book amount Non current: Opening net book amount Reclassify from investment in others

Consolidated 2001 2000 Baht Baht 21,416,064 728,311,850 (20,166,557) 27,918 (6,308,383) 1,249,564 (680,722,310) (948,100) (9,117,793) 12,326,189 21,416,064

3,960,783,332 2,871,637,943 34

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Exchange differences Revaluation deficit Closing net book amount

87,158,904 2,780,620,947 (3,011,669,02 (1,691,475,55 8) 4) 1,036,273,212 3,960,783,332

Available-for-sale investments, comprising principally marketable securities, are fair valued annually at the close of business on 31 December. Fair value is determined by reference to Stock Exchange quoted bid prices. Available-for-sale investments are classified as non-current assets, unless they are expected to be realised within twelve months of the balance sheet date or unless they will need to be sold to raise operating capital. Non-current investments are shares in FLAG Telecom Holdings Limited ("FLAG") that have been pledged as collateral against borrowings (as mentioned in Note 31).

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Trade accounts receivable, net As at 31 December Receivable from TOT Billed customers Other accounts receivable Less: Allowance for doubtful accounts Trade accounts receivable, net

Consolidated 2001 2000 Baht Baht 2,979,419,89 3,495,552,89 0 2 2,867,110,18 2,512,019,61 4 5 166,268,260 176,410,002 6,012,798,33 6,183,982,50 4 9 (472,111,886 (351,167,044 ) ) 5,540,686,44 5,832,815,46 8 5

Company 2001 2000 Baht Baht 2,979,419,89 3,495,552,8 0 92 2,867,110,18 2,512,019,6 4 15 5,846,530,07 6,007,572,5 4 07 (425,501,163 (283,607,59 ) 5) 5,421,028,91 5,723,964,9 1 12

Outstanding trade accounts receivable as at 31 December can be analysed as follows: As at 31 December Current Less than 3 months 3 - 6 months 6 - 12 months More than 12 months

Less: Allowance for doubtful account Trade accounts receivable, net

Consolidated Company 2001 2000 2001 2000 Baht Baht Baht Baht 2,321,712,51 1,934,075,40 2,216,809,76 1,848,916,8 7 4 2 53 1,112,133,87 1,503,146,10 1,104,781,73 1,459,208,6 1 3 3 47 407,779,582 222,568,966 404,717,702 221,889,32 4 442,358,294 483,677,870 438,119,156 481,744,52 6 1,728,814,07 2,040,514,16 1,682,101,72 1,995,813,1 0 6 1 57 6,012,798,33 6,183,982,50 5,846,530,07 6,007,572,5 4 9 4 07 (472,111,88 (351,167,044 (425,501,163 (283,607,59 6) ) ) 5) 5,540,686,44 5,832,815,46 5,421,028,91 5,723,964,9 8 5 1 12

In outstanding trade accounts receivable aged more than 6 months is a receivable of Baht 1,546.42 million (2000: Baht 2,156.84 million) relating to disputed revenue sharing on value added tax amounting to Baht 889.67 million (2000: Baht 889.67 million), which is expected to be settled by the rental of network facilities payable to TOT. The Management believes that the remaining of receivables more than 6 months consisted of value added tax of assets transferred to TOT by Baht 57.03 million (2000: Baht 398.43 million) and fault notification and dropwire maintenance services charged to TOT of Baht 599.72 million (2000: Baht 868.74 million) will be collectible. Hence, no allowance has been established against the outstanding amount. 36

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Concentrations of credit risk with respect to trade accounts receivable are limited due to the Group's large number of customers, who are end users of telephone services, covering business and residential (other than TOT as mentioned above). The Group's historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group's trade accounts receivable.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

10.

Related party transactions The following transactions were carried out with related parties: i) Sales of goods and services For the years ended 31 December Sales of goods: Subsidiaries: Asia Wireless Communication Co., Ltd. Wire & Wireless Co., Ltd. W7 Rental Services Ltd. Joint venture: Asia Infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related company: CP Group of companies Sales of services: Subsidiaries: Asia Wireless Communication Co., Ltd. Wire & Wireless Co., Ltd. Joint ventures: BITCO Group of companies Asia Infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related company: CP Group of companies

Consolidated 2001 2000

Company 2001 2000

Baht’000

27.74 -

12.16

1,334.82

36,489.89 36,884.66

4,549.03 5,896.01

27.74

1,197.35

15,110.28 2,144.70

5.79 284.49

394.77

Baht’000

192.45 962.80 42.10

23,320.32 7,638.96

602.64

23.22 988.80

142.50

873,265.7 9

866,498.0 5

13.30

63.84

146,417.4 2 1,050,642. 49

29,553.33 896,654.0 2

1,494.49

1,083.94

19,774.79

1,580.56

Sales to the related companies, are carried out on commercial terms and conditions and at market prices. CP Group holds 26.20% of the Company’s equity interest. ii) Purchases of goods and services For the years ended 31 December

Consolidated 2001 2000 Baht’000

Baht’000

Company 2001 2000 Baht’000

Baht’000

Purchases of goods: 38

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Subsidiaries: Wire & Wireless Co., Ltd. Asia Wireless Communication Co., Ltd. Nilubon Co., Ltd. Telecom Holding Co., Ltd. Asia Multimedia Co., Ltd. Yai Kaew Co., Ltd. Joint venture: Asia infonet Co., Ltd. Related company: NEC Communication Systems (Thailand) Co., Ltd. CP Group of companies

217,752.75

20,796.86

31,028.00 1,151.83 61.00 13.72 -

16.37 8,468.98

26.44

148.92

0.93

337.52

70,343.84 70,481.50 140,851.7 8

17,363.44 58,200.71

70,343.84 62,608.59

17,363.44 52,005.81

75,713.07

382,960.66

98,988.98

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

10.

Related party transactions (Continued) ii) Purchases of goods and services (Continued) Consolidated Company For the years ended 31 2001 2000 2001 2000 December Baht’000 Baht’000 Baht’000 Baht’000 Purchases of services: Subsidiaries: Asia Wireless Communication 1,492,731.6 1,062,193.3 Co., Ltd. 3 0 Nilubon Co., Ltd. 356,514.82 352,645.72 W7 Rental Services Ltd. 129,506.43 129,105.66 Wire & Wireless Co., Ltd. 78,037.30 18,419.31 Telecom Training and Development Co., Ltd. 18,000.00 18,000.00 Interactive Media Services Co., Ltd. 4,729.38 6,324.96 Telecom Holding Co., Ltd. 4.70 Telecom Equipment Manufacturing Co., Ltd. 54.56 Asia Multimedia Co., Ltd. 9.67 Joint ventures: BITCO Group of companies 19,782.23 33,529.20 Asia Infonet Co., Ltd. 1,850.80 6,353.00 2,641.76 16,957.42 Associated: UBC Cable Network Public Co., Ltd. 1,800.45 1,520.65 61.43 44.98 Related companies: CP Group of companies 49,546.11 34,471.72 21,133.65 20,422.96 NEC Communication Systems (Thailand) Co., Ltd. 18,296.84 16,966.49 18,296.84 16,966.49 Verizon Group of companies 4,214.17 5,357.54 4,214.17 5,357.54 2,159,401.3 1,646,502.5 95,490.60 64,669.40 1 7 Purchases from related companies were carried out on commercial terms and conditions and at market prices. The Group holds 9.62% equity interest in NEC Communication Systems (Thailand) Co., Ltd. and Verizon Group of companies holds 12.51% of the Company’s equity interest.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

10.

Related party transactions (Continued) iii) Outstanding balances arising from sales and purchases of goods and services. As at 31 December Receivables from related parties: Subsidiaries: Asia Wireless Communication Co., Ltd. Nilubon Co., Ltd. Wire & Wireless Co., Ltd. Telecom Holding Co., Ltd. W7 Rental Services Ltd. Asia Multimedia Co., Ltd. Joint ventures: BITCO Group of companies Asia Infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related companies: CP Group of companies Others

Payables to related parties: Subsidiaries: Asia Wireless Communication Co., Ltd. Telecom Holding Co., Ltd. Nilubon Co., Ltd. Wire & Wireless Co., Ltd. W7 Rental Services Ltd. Telecom Training and Development Co., Ltd. Interactive Media Services Co., Ltd. Tele Engineering and Services Co., Ltd. Yai Kaew Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. Joint ventures: BITCO Group of companies

Consolidated 2001 2000 Baht’000 Baht’000

14,286.65 9,101.53

8,968.62

82,758.73

96,173.09

45,060.32 10,787.25 408.78 17,147.97 151,616.0 1 133,076.93

56,931.15 26,399.59 1,378.93 734.39 45.05 7.06 419.79 625.73

18,044.99 46,824.95 1,314.68 695.93 45.05 11.34

131.85 86,673.54

Company 2001 2000 Baht’000 Baht’000

56.92 92.55 67,086.41

661,565.59 232,288.48 48,817.70 39,136.87 12,305.06

1,168,665.8 9 231,460.37 51,008.23 21,811.75 37,870.39

1,605.00

1,222.11

650.17

170.13 -

170.13 15,449.95

19,782.23

33,529.20

58.37 41

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Asia Infonet Co., Ltd. 5,681.76 Associated: UBC Cable Network Public Co., 258.17 Ltd. Related companies: NEC Communication System (Thailand) 58,964.05 Co., Ltd. Verizon Group of companies 42,080.70 CP Group of companies 19,514.76 Kreditanstalt fuer Wiederaufbau 7,569.33 1,366.77 Others 155,217.7 7

6,409.02

12,010.23

17,505.72

2,040.86 4.60

82.67 58,964.05 82.67 42,080.70 49,072.13 16,568.95 11,341.62 7,569.33 14,792.09 1,167,838.0 1,621,544.4 88,428.87 0 8

49,072.13 12,934.48 14,792.09 3,097.62

Kreditanstalt fuer Wiederaufbau is the only preference shareholder of the Company and holds 21.72% interest in total voting right.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

10.

Related party transactions (Continued) iv) Loans from a related party Consolidated and Company 2001 2000 Baht Baht

As at 31 December Loans from Kreditanstalt fuer Wiederaufbau

18,693,172,592

21,655,967,271

The secured loans from Kreditanstalt fuer Wiederaufbau (KfW), the Companyâ&#x20AC;&#x2122;s preferred shareholder ranks pari passu with other secured lenders. The loans are denominated in United States Dollars and carry interest at rates of LIBOR +1% - 1.75% per annum. During 2001, the Company refinanced US Dollars 96.65 million into Thai Baht of approximately Baht 4,483.48 million (Note 18). The related interest expense were Baht 1,268.31 million and Baht 1,669.65 million for the years ended 31 December 2001 and 2000, respectively. These loans present in balance sheet as part of borrowings (Note 18). Maturity of loans from related party: Consolidated and Company 2001 2000 Baht Baht 1,623,916,425 414,002,892 8,500,003,791 7,102,374,600 8,569,252,376 14,139,589,779 18,693,172,592 21,655,967,271

As at 31 December Between 1 and 2 years Between 2 and 5 years Over 5 years

v) Directors and key managementâ&#x20AC;&#x2122;s remuneration Directors and key management of the Company are listed in the Annual Report. In 2001 the total remuneration of the directors of the Company and the Group were Baht 33.95 million and Baht 45.72 million (2000: Baht 25.61 million and Baht 45.98 million), respectively. Besides directors fees as presented in the statements of income, the key management of the Company had salaries and other benefits paid in 2001 and 2000 of Baht 149.30 million and Baht 81.95 million, respectively. vi) Stock option granted to directors and senior executives No stock options were granted to directors and senior executives of the Company during 2001. (2000: 58.15 million shares). The outstanding number of stock options granted to directors and senior executives of the Company at 31 December was 42.25 million shares (2000: 42.25 million shares) (Note 23). 11.

Inventories, net Consolidated

Company

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

As at 31 December Spareparts for networks (at cost) Allowance for declining in value

2001 Baht 802,985,568

Spareparts for networks - net

(202,204,91 6) 600,780,652

Merchandise (at cost)

578,513,407

Allowance for declining in value

(69,591,909 ) 508,921,498

Merchandise - net Work in process (at cost)

2,712,846

Goods in transit (at cost) Inventories, net

963,395 1,113,378,3 91

2000 2001 2000 Baht Baht Baht 712,743,52 550,798,1 433,197,2 5 52 74 (215,687,5 (57,685,70 (27,552,77 38) 9) 1) 497,055,98 493,112,4 405,644,5 7 43 03 382,771,27 289,714,9 109,439,3 2 05 50 (25,477,75 4) 357,293,51 289,714,9 109,439,3 8 05 50 14,376,672 14,341,17 9 6,994,550 875,720,72 782,827,3 529,425,0 7 48 32

No inventories have been pledged as collateral for trust receipt at end of the year 2001 (2000: Baht 65.30 million).

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

12.

Other current assets Consolidated 2001 2000 Baht Baht

As at 31 December Advances to contractors

Company 2001 2000 Baht Baht

1,220,738,9 197,898,268 88 875,052,582 182,335,381 508,497,083 515,714,355 498,377,491 492,726,436 352,957,567 255,943,208 36,232,548 39,449,059

Income tax deducted at source Claimable value added tax Value added tax pending receipt of tax invoices 158,148,758 97,515,334 121,955,193 85,032,853 Interest receivable 132,235,348 127,271,361 123,433,039 123,220,875 Others 267,976,989 163,659,290 199,672,930 140,400,339 2,640,554,7 1,358,001,8 1,854,723,7 1,063,164,9 33 16 83 43 13.

Investments in subsidiaries, associates and others Principal subsidiary undertakings Name of subsidiaries

Business

Country incorporation

Asia DBS Public Company Limited (89.99%)

DBS system operator

Asia Multimedia Co., Ltd.(90.45%)

NON-POTS and multimedia services

Thailand

Asia Wireless Communication Co., Ltd.

PCT operator

Thailand

Interactive Media Services Co., Ltd.

Audio text services

Thailand

K.I.N. (Thailand) Co., Ltd.

Holding company

Thailand

K.I.N. (Thailand) Co., Ltd. (BVI)

Holding company

British Virgin Island

Nilubon Co., Ltd.

Rental services

Thailand

TA Orient Telecom Investment Co., Ltd.

Holding company

British Virgin Island

Tele Engineering and Services Co., Ltd.

Construction and distributor

Thailand

Communication

British Virgin Island

Telecom Asia (China) Co., Ltd.

Thailand

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Telecom Equipment Manufacturing Co., Ltd.(59.99%)

Telecom equipment manufacturer

Thailand

Telecom Holding Co., Ltd.

Holding company

Thailand

Telecom International Co., Ltd.

Holding company

Thailand

Telecom International China Co., Ltd.

Communication

British Virgin Island

Telecom Training and Development Co., Ltd.

Training service

Thailand

U-Net Co., Ltd.

Construction and distributor

Thailand

Construction and distributor

Thailand

W 7 Rental Services Ltd.

Rental services

Thailand

Yai Kaew Co., Ltd.

Investment in property

Thailand

Wire & Wireless Co., Ltd. (87.50%)

All subsidiaries, besides Telecom Holding Co., Ltd. which are 99.99% directly owned, are indirectly wholly owned by the Company unless otherwise stated. All holdings are in the ordinary share capital of the undertaking concerned and are unchanged from 2000.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

13.

Investments in subsidiaries, associates and others (Continued) Investments in associates and others are as follows: At 31 December 2001

Consolidated

Business

Investm ent-At % Cost Paid-up Ownersh Method Relations Capital ip Baht’00 hip Baht’000 interest 0

Associates: United Broadcasting Corporation Public Company Pay Sharehold Limited Television er Public Radio Network Telecommuni Sharehold Co., Ltd. cation er Total investment in associates

7,407,736

40.96

10,000

32.00

Investm ent-At Equity Method Baht’00 0

4,619,75 4,492,13 0 0 3,200 4,622,95 4,492,13 0 0

General investments: Investments in non-marketable equity securities (net allowance for impairment of Baht 960,991)

52,322 4,544,45 2

Total investment in associates and others At 31 December 2000

Consolidated

Business Associates: United Broadcasting Corporation Public Company Limited Public Radio Network Co., Ltd.

Relations hip

Pay Sharehold Television er Telecommun Sharehold ication er

Paid-up Capital Bah’000

7,407,736 10,000

Investm ent-At % Cost Ownersh Method Baht’00 ip interest 0

Investm ent-At Equity Method Baht’00 0

4,619,75 5,405,00 40.96 0 3 32.00

3,200

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

4,622,95 5,405,00 0 3

Total investments in associates General investments: Investments in non-marketable equity securities (net allowance for impairment of Baht 960,991)

5,430,04 2

Total investment in associates and others At 31 December 2001

Company

Business Subsidiary Telecom Holding Co., Ltd. Joint venture Bangkok Inter Teletech Co., Ltd. Total

Invest Investme mentntPaidup % At Cost At Capital Owners Method Equity Relation Baht’0 hip Baht’0 Method ship interest 00 Baht’000 00

Investment Sharehol Holding der

12,000, 000

Cellular Sharehol Operator der

15,000, 000

At 31 December 2000

99.99 41.00

12,000, 000 6,941,334 5,455,9 68 4,214,301 17,455, 11,155,63 968 5

Company

Business Subsidiary Telecom Holding Co., Ltd. Total

25,039

Invest Investme Paidmentntup % At Cost At Capital Owners Method Equity Relation Baht’0 hip Baht’0 Method ship 00 interest 00 Baht’000

Investment Sharehol Holding der

12,000, 000

99.99

12,000, 10,879,51 0 000 12,000, 10,879,51 000 0

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

13.

Investments in subsidiaries, associates and others (Continued) Movement of investments in associates is as follows: Year ended 31 December At the beginning of year Acquisition (Note 4) Share of results Unrealised loss on available-for-sale securities At end of year

Consolidated 2001 2000 Baht’000 Baht’000

Company 2001 2000 Baht’000 Baht’000

5,405,003 6,533,457 10,879,510 10,464,865 5,455,968 (912,873) (1,128,454) (2,159,056) 2,107,069 4,492,130

(3,020,787) (1,692,424) 5,405,003 11,155,635 10,879,510

The share of result includes Baht 332.84 million (2000: Baht 275.98 million) representing the amortisation charge of goodwill in respect of acquisition of associated undertakings. Investments in associated undertakings at 31 December 2001 include goodwill of Baht 4,655.75 million, net of accumulated amortisation of Baht 1,081.92 million (2000: Baht 4,988.59 million, net of accumulated amortisation of Baht 749.08 million). Investment in associates at the carrying value of Baht 4.49 billion is secured against a subsidiary’s borrowings (Note 18). Share of results from subsidiaries and associates in the statements of income (loss) for the year ended 31 December 2001 are the net of the amortisation of negative goodwill amounting to Baht 284.40 million (Note 4). 14.

Investment property Year ended 31 December Opening net book amount Disposals Reclassify Closing net book amount As at 31 December Cost Allowance for decline in value Net book amount

Consolidated 2001 2000 Baht Baht 57,972,973 (3,679,075) 54,293,898

63,898,148 (7,400,000) 1,474,825 57,972,973

124,930,289 135,978,619 (70,636,391) (78,005,646) 54,293,898 57,972,973

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

15. Property, plant and equipment, net As at 31 December

Consolidated 2001 2000 Baht Baht

Company 2001 2000 Baht Baht

Network equipment Opening net book amount

61,816,021,9 68,143,550,1 49,979,486,6 55,214,725,5 27 27 50 15 Additions 3,483,560,23 1,104,455,20 1,873,125,51 858,747,320 2 5 2 Acquisition of joint venture 213,946,536 (Note 4) Disposals (7,593,892) (348,053,05 (4,724,464) (344,313,14 1) 3) Adjustments/Reclassified 2,033,984,99 118,234,993 455,645,281 148,426,648 5 Impairment charge (179,604,89 (11,709,306) (192,614,19 1) 8) Depreciation charge (7,354,977,7 (7,190,456,0 (5,989,290,8 (5,898,099,6 29) 41) 35) 90) Closing net book amount 60,005,337,1 61,816,021,9 46,121,627,9 49,979,486,6 78 27 46 50 Non-network equipment Opening net book amount

2,446,575,12 8 Additions 1,210,439,29 7 Acquisition of joint venture 2,669,541,82 (Note 4) 2 Disposals (10,604,733) Adjustments/Reclassified (1,774,896,8 20) Impairment charge (31,382,317) Depreciation charge (482,350,15 0) Closing net book amount 4,027,322,22 7 Total

2,109,377,20 5 815,291,973

647,587,120 334,183,162

313,989,127 528,484,582

(11,280,230) (30,875,992)

(3,127,180) (4,171,469) (211,214,07 (39,943,769) 3) (155,682,53 (150,771,35 9) 1)

(435,937,82 8) 2,446,575,12 8 611,746,490

647,587,120

64,032,659,4 64,262,597,0 46,733,374,4 50,627,073,7 05 55 36 70

Network equipment Borrowing costs of Baht 14.11 million (2000: nil) were capitalised as cost of assets during the year. A capitalisation rate of 6.57% (2000: nil) was used, representing the borrowing cost of the loan used to finance the project.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Network equipment in the consolidated financial statements at net book value of Baht 48,761.53 million, net of accumulated depreciation and allowances of Baht 34,465.44 million (2000: Baht 55,078.62 million, net of accumulated depreciation of Baht 28,033.27 million), was transferred to TOT under the concession agreement (Note 2). According to the agreement, the Company has the right to operate and maintain these assets over the concession periods. Borrowings are secured by the right to operate network equipment of the Company and the Group (Note 31). Non â&#x20AC;&#x201C; network equipment Additions include Baht 734.08 million (2000: Baht 217.43 million) assets leased under finance leases (where the Group is the lessee). Leased assets included in the table on page 33, where the Group is a lessee under a finance lease of vehicles as follows: Consolidated 2001 2000 Baht Baht Cost - capitalised finance leases 951,515,626 217,427,552 Accumulated depreciation (87,738,968) (23,782,622) Net book amount

863,776,658

193,644,930

Borrowings are secured by buildings of non-network at the net book value of Baht 943.76 million (2000: Baht 1,007.02 million) (Note 18 and Note 31).

Adjustments/Reclassified

Acquisition of joint venture (Note 4) Disposals

Additions

Year ended 31 December 2001 Opening net book amount

Net book amount

Allowance

Accumulated depreciation

At 31 December 2000 Cost

Network equipment

Work in Progress

Total

1,680,083

298,754

(856,159) (3,868,305 ) 2,431,687,832 64,315,267

213,946,536

1,508,865,7 52,724,320,485 654,825,74 98 7 2,015,142,711 5,041,700

1,867,629, 316 -

8,052,251

(2,869,428)

3,135,097,9 40 92,357,519

3,135,097,9 40

38,781,074

(510,830,26

2,033,984,995

(7,593,892)

1,686,560,8 238,721,798 61,816,021,927 43 1,371,018,3 3,483,560,232 02 213,946,536

1,686,560,8 43 238,721,798 61,816,021,927

1,508,865,7 654,825,74 98 52,724,320,485 7

Power Supply and Computer

1,867,629, 316

Consolidated MultiPublic Media Phone Network Equipment

1,938,640,5 78,880,937,337 976,047,84 5,007,440,8 3,528,798,1 238,721,798 92,438,215,899 15 8 96 89 (429,774,71 (26,143,607,54 (321,222,1 (1,717,642,9 (1,842,237,3 (30,454,484,66 7) 6) 01) 56) 46) 6) (13,009,306) (154,700,00 (167,709,306) 0)

Telephone Network Equipment

1,867,629, 316 -

Land & Building & Land Improveme Improvem nt ent

15. Property, plant and equipment (Continued)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Net book amount

Allowance

Accumulated depreciation

At 31 December 2001 Cost

Closing net book amount

Depreciation charge

(68,885,492)

2,678,137,2 34

1,258,680,2 39

1,413,204,8 575,738,05 25 51,112,738,922 4

(110,286,02 5) (356,375,65 3) 1,258,680,2 39

1,867,928, 070

(554,501,04 8) 2,678,137,2 34

1,940,320,5 83,484,743,973 1,043,332, 5,260,635,8 3,567,880,6 98 161 55 75 (526,682,39 (32,290,110,25 (467,594,1 (2,427,798,6 (2,198,914,4 9) 3) 07) 21) 11) (433,374) (81,894,798) (154,700,00 (110,286,02 0) 5)

(96,907,682 (6,202,616,991 (144,576,3 ) ) 55) 1,413,204,8 575,738,05 25 51,112,738,922 4

(433,374)

1,867,928, 070 -

1,867,928, 070

Impairment charge

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

(7,354,977,729 )

(179,604,891)

1,098,909,8 34 60,005,337,178

1,098,909,8 98,263,751,166 34 (37,910,799,79 1) (347,314,197)

1,098,909,8 34 60,005,337,178

(3,700,000) (732,604)

Depreciation charge

1,568,517

Disposals Adjustments/Reclassified

Impairment charge

46,353,452

Acquisition of joint venture (Note 4)

192,873,530

Year ended 31 December 2001 Opening net book amount

Additions

192,873,530

Net book amount

(13,517,637)

Accumulated depreciation

Allowance

206,391,167

At 31 December 2000 Cost

Non - network equipment

Land and Land Improveme nt

15. Property, plant and equipment (Continued)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Consolidated Power Supply & Computer Vehicles

Work in Progress

Total

454,695,74 4 152,576,64 5 56,430,148

343,159,54 272,415,625 132,939,204 2,446,575,128 0 3,558,553 236,912,46 737,593,091 79,798,546 1,210,439,297 2 135,110,260 84,568,219 9,459,962 2,337,619,7 2,669,541,822 81 (1,229,762) (2,933,864) (941,619) (5,499,488) (10,604,733) 21,508,203 44,906,405 (71,464,521 (1,771,415,4 (1,774,896,820 ) 24) ) 1,017,683 (28,700,000 (31,382,317) ) (94,635,129) (142,828,71 (98,671,865 (145,481,84 (482,350,150)

1,050,491,485

1,625,929,999 1,353,606,7 1,006,248,5 615,367,981 132,939,204 4,940,483,619 17 51 (570,933,133) (886,391,79 (663,089,01 (341,934,67 (2,475,866,252 8) 1) 3) ) (4,505,381) (12,519,175 (1,017,683) (18,042,239) ) 454,695,74 343,159,54 1,050,491,485 4 0 272,415,625 132,939,204 2,446,575,128

Building & Improvement

Furniture, Fixtures and Equipment

236,362,895 245,211,581 (5,148,686) (3,700,000) 236,362,895

Closing net book amount

At 31 December 2001 Cost

Accumulated depreciation

Allowance

Net book amount

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

1,114,803,610

562,846,36 7

4,027,322,227

493,562,21 6 869,505,032 750,242,107

4,027,322,227

1,154,227,7 778,942,107 6,549,337,080 34 (284,722,70 (2,472,590,298 2) ) (28,700,000 ) (49,424,555)

) 1) 493,562,21 6 869,505,032 750,242,107

1,788,089,143 1,575,416,4 1,007,450,0 97 18 (668,780,153) (1,000,050, (513,887,80 955) 2) (12,519,175 (4,505,380) ) -

1,114,803,610

1) 562,846,36 7

Depreciation charge

Public Phone

Company

(81,894,798)

(856,159) 861,400,368

44,022,883,1 49 497,065,509

(3,868,305) 64,315,267

5,041,700

654,825,746

39,907,166,9

575,738,053

(96,907,68 (5,391,431,14 (144,576,355 2) 6) )

(433,374)

1,867,928,07 1,413,204,8

Impairment charge

1,680,083

1,867,629,31 1,508,865,7 6 98 298,754

Closing net book amount

Telephone Network Equipment

1,867,629,31 1,938,640,5 69,416,059,8 976,047,848 6 15 56 (429,774,7 (25,393,176,7 (321,222,102 17) 07) ) 1,867,629,31 1,508,865,7 44,022,883,1 6 98 49 654,825,746

Land & Building & Land Improvem Improvemen ent t

Disposals Adjustments/Reclassified

Additions

Year ended 31 December 2001 Opening net book amount

Net book amount

Accumulated depreciation

At 31 December 2000 Cost

Network equipment

15. Property, plant and equipment (Continued)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Total

238,721,79 77,965,897,5 8 22 (27,986,410,8 72) 238,721,79 49,979,486,6 8 50

Work in Progress

1,258,680,2

1,098,909,8

46,121,627,9

238,721,79 49,979,486,6 8 50 1,371,018,3 1,873,125,51 03 2 (4,724,464) 38,781,074 (510,830,26 455,645,281 5) (110,286,02 (192,614,198 6) ) (356,375,65 (5,989,290,83 2) 5)

1,686,560,8 43 -

3,528,798,1 89 (1,842,237, 346) 1,686,560,8 43

Power Supply and Computer

Net book amount

Allowance

Accumulated depreciation

At 31 December 2001 Cost

1,867,928,07 1,413,204,8 0 25

39,907,166,9 23 575,738,053

1,867,928,07 1,940,320,5 70,722,920,1 1,043,332,16 0 99 49 1 (526,682,4 (30,733,858,4 (467,594,108 00) 28) ) (433,374) (81,894,798) -

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

3,567,880,6 75 (2,198,914, 410) (110,286,02 6) 1,258,680,2 39

1,098,909,8 80,241,291,4 36 90 (33,927,049,3 46) (192,614,198 ) 1,098,909,8 46,121,627,9 36 46

401,346,554

Net book amount

Accumulated depreciation

69,854,668

At 31 December 2001 Cost

27,799,718

168,169,769

(42,054,950) (283,779,946)

451,949,715

168,169,769

27,799,718

Closing net book amount

145,580,013 145,580,013 60,626,651 (2,185,555) 12,048,907 (47,900,247)

25,908,363

(30,616,199) (255,766,541)

56,524,562

Furniture, Leasehold and Fixtures and Improvement Equipment

25,908,363 229,824 (6) 15,332,357 (13,670,820)

Year ended 31 December 2001 Opening net book amount Additions Disposals Adjustments/Reclassified Depreciation charge

Net book amount

Accumulated depreciation

At 31 December 2000 Cost

Non - network equipment

15. Property, plant and equipment (Continued)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

374,977,408

(498,684,477)

873,661,885

374,977,408

343,159,540 198,335,480 (941,619) (71,464,521) (94,111,472)

343,159,540

(663,089,011)

1,006,248,551

Company Power Supply & Computer

647,587,120

1,597,058,87 1 (949,471,751)

Total

40,799,595

611,746,490

1,436,265,86 3 (824,519,373)

611,746,490

132,939,204 647,587,120 74,991,207 334,183,162 (3,127,180) (167,130,816) (211,214,073) (155,682,539)

132,939,204

Work in Progress

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

16.

Intangible assets Consolidated Right to Right to Computer operate hang Trademar software NONDropwire k POTS Baht Baht Baht Baht At 31 December 2000 Cost -

33,881,54 9

Accumulated amortisation Net book amount

Year ended 31 December 2001 Opening net book amount Additions

Acquisition of joint venture 113,938,8 (Note 4) 78 Adjustment/Reclassified 222,510,1 58 Impairment charge (9,000,000 ) Amortisation charge (1,013,392 (40,769,13 ) 1) Closing net book amount 112,925,4 206,622,5 86 76 At 31 December 2001 Cost Accumulated amortisation Allowance Net book amount

Total Baht

381,489,00 227,325,0 608,814,0 0 00 00 (61,038,24 (34,856,5 (95,894,7 0) 00) 40) 320,450,76 192,468,5 512,919,2 0 00 60

320,450,76 192,468,5 512,919,2 0 00 60 33,881,54 9 113,938,8 78 222,510,1 58 (9,000,00 0) (19,074,45 (9,093,00 (69,949,9 0) 0) 73) 301,376,31 183,375,5 804,299,8 0 00 72

121,159,3 503,790,0 381,489,00 227,325,0 1,233,763, 77 47 0 00 424 (8,233,891 (288,167,4 (80,112,69 (43,949,5 (420,463, ) 71) 0) 00) 552) (9,000,000 (9,000,00 ) 0) 112,925,4 206,622,5 301,376,31 183,375,5 804,299,8 86 76 0 00 72

The Company reclassified the net book value of computer software as at 31 December 2000 amounting to Baht 222,510,158 from property, plant and equipment to intangible assets in 2001 in accordance with International Accounting Standard No. 38, â&#x20AC;&#x153;Intangible Assetsâ&#x20AC;?. 60

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Trademark represents the consideration paid by a joint venture to use another venturer's trademark in Thailand for the period from September 2000 to December 2020 or the expiration, termination or cancellation of the concession agreement which is earlier. The right to operate NON-POTS represents the fair value of TOT's interest in the nationwide NON-POTS concession for which Asia Multimedia Co., Ltd. (â&#x20AC;&#x153;AMâ&#x20AC;?) issued 18.5 million ordinary shares in exchange for the concession. The right to hang dropwire represents the fair value of TOT's interest in the multimedia network which AM issued 40.0 million ordinary shares in exchange for this privilege. Company Computer software Baht Year ended 31 December 2001 Opening net book amount Additions Adjustment/Reclassified Impairment charge Amortisation charge Closing net book amount At 31 December 2001 Cost Accumulated amortisation Allowance Net book amount

33,881,549 222,510,158 (9,000,000) (40,769,131) 206,622,576 503,790,047 (288,167,471) (9,000,000) 206,622,576

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

17.

Other non-current assets As at 31 December Subscribers acquisition cost, net Value added tax pending receipt of tax invoices related to debt restructuring Prepaid withholding tax Deposits Others Total

Consolidated 2001 2000 Baht Baht

Company 2001 Baht

2000 Baht

841,746,064

733,951,538

287,984,062 237,305,437 68,506,688 17,280,195 1,452,822,44 6

322,787,370 188,683,035 45,463,811 1,226,128

287,984,062 29,374,251 1,051,309,8 51

322,787,370 30,054,218 -

558,160,344

352,841,588

Subscribers acquisition cost is the cost of PCT handsets distributed to subscribers free of charges under the 3-year usage contract campaign. Subscribers acquisition cost is amortised over the contract period. The amortisation for the year in the consolidation and the Company financial statements are Baht 58.01 million and Baht 54.94 million, respectively. 18.

Borrowings The borrowings are mainly denominated in Thai Baht, United States Dollars and Japanese Yen. As at 31 December Current - Bank overdrafts - Bank and finance institution borrowings - Finance leases Total Current Non-Current - Bank and finance institution borrowings - Finance leases

Consolidated 2001 2000 Baht Baht -

152,525

2001 Baht

Company

2000 Baht

2,982,358,69 3 231,933,730 3,214,292,42 3

1,735,017,30 0 47,308,586 1,782,478,41 1

1,170,657,84 2 1,170,657,84 2

- Supplier Credit Total Non-Current

53,780,559,5 96 400,071,152 7,763,551,73 7 61,944,182,4 85

55,025,092,4 12 143,371,296 8,651,176,72 2 63,819,640,4 30

50,974,248,3 43 7,763,551,73 7 58,737,800,0 80

52,126,705,5 91 8,651,176,72 2 60,777,882,3 13

Total Borrowings

65,158,474,9 08

65,602,118,8 41

59,908,457,9 22

60,777,882,3 13

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

The movements in borrowings can be analysed as follows: Year ended 31 December 2001 Opening amount, net Additional borrowings - principal - non cash finance leases - interest Acquisition of joint venture Repayment of borrowings Currency translation Reclassify Amortised debt issuance cost Closing amount, net

Consolidated Baht 65,602,118,841

Company Baht 60,777,882,313

5,265,404,643 666,887,097 48,856,924 28,955,635 (6,527,349,456) (31,794,115) 74,554,158 30,841,181 65,158,474,908

5,000,000,000 48,856,924 (5,904,718,926) (44,403,570) 30,841,181 59,908,457,922

The borrowing amounts are net of unamortised debt issuance costs, amounting to Baht 145.84 million.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

18.

Borrowings (Continued) Secured borrowings: The borrowings include secured liabilities (leases and bank and finance institution borrowings) in total amount of Baht 57.39 billion (2000: Baht 56.95 billion) and Baht 52.14 billion (2000: Baht 52.13 billion) for the consolidated and the Company financial statements, respectively. The bank borrowings are secured over certain available-for-sale securities, shares of subsidiaries and associates, network property and equipment, land and building of the Group (as mentioned in Note 31.6). Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. Bank and finance institution borrowings under current and non-current liabilities included the secured loans amounting to Baht 18.63 billion (2000: Baht 21.66 billion) from Kreditanstalt fuer Wiederaufbau (KfW) which as at March 2000 became a related party (Note 10). On 12 February 2001, K.I.N. (Thailand) Co., Ltd. (“K.I.N.”), registered under the laws of the British Virgin Island, a subsidiary of Telecom Holding Company Limited, entered into the Terms and Conditions for Private SAILS (Shared Appreciation Income Linked Securities) (“SAILS”) and SAILS Pledge Agreement with Credit Suisse First Boston International (“CSFBI”) for a second tranche of the SAILS transaction in relation to up to 1,000,000 common shares of FLAG. In actuality, only 685,000 common shares of FLAG were monetised in total in the second tranche. The principal provisions include, among others, the followings: 1. K.I.N. agreed to deposit in a Collateral Account with CSFBI up to 1,000,000 common shares of FLAG, registered in the name of CSFBI, in exchange for the proceeds of 79% of the aggregate contract price, less 2% of the front end as stipulated in the contracts. The partial proceeds amount of US Dollars 1,000,000 was derived by K.I.N. on 20 February, 2001 and the remainder of the proceeds from the monetisation of the 685,000 common shares of FLAG was paid to K.I.N. on the closing date; and 2. K.I.N. agreed to assign and pledge up to 1,000,000 common shares of FLAG to CSFBI and grant to CSFBI all of its rights, title and interest to such common shares including income, proceeds and collection received or to be received on the date the shares were delivered to the Custodian or anytime thereafter. On 26 March 2001, K.I.N. entered into two additional contracts for the second tranche of the SAILS program with CSFBI, namely the SAILS Mandatorily Exchangeable Securities Contract and the Amended and Restated Pledge Agreement. The principal provisions include, among others, the followings: 1. The Pledged Shares can be further pledged; 2. Unless K.I.N. has elected to exercise its Cash Settlement Option, K.I.N. shall on the maturity date deliver to CSFBI 685,000 common shares in FLAG Telecom Holdings Limited. If K.I.N. fails to deliver the said shares, then delivery shall be effected by delivery of the pledged shares to CSFBI from the Collateral Account;

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

3. In the event K.I.N. exercises its Cash Settlement Opinion, it must deliver to CSFBI the Cash Settlement Amount in accordance with the provisions in the agreement on the maturity date. Therefore, the pledge over the said shares in favor of CSFBI would be released; and 4. K.I.N has the right, in 3 years time, to receive a percentage of the proceeds from any appreciation in the price of the FLAG shares. If at the end of the 3-year period the price of the FLAG shares appreciates up to 120% of the initial sale price, then K.I.N will receive 100% of this gain. If the price of the shares appreciates beyond 120%, then K.I.N will receive an additional 16.67% of the gain over 120%.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

18.

Borrowings (Continued) Refinancing: New Baht Agreement On 13 December 2001 the Company entered into the New Baht Agreement (“Agreement”) with four major local commercial banks providing a term loan facility of Baht 5.00 billion. The new facility will bear interest rate at MLR+0.75% per annum. The proceeds of the term loan will be used to prepay pro rata each Repayment Installment of the dollardenominated Secured Indebtedness outstanding under the US Dollar Amendment Agreement. The repayment amounts to each repayment date are set forth in the Agreement starting from 30 June 2002 to 15 December 2008. On 27 December 2001 the total of Baht 5.00 billion under the Agreement was drawndown and used to prepay US dollar denominated debt in the amount of US dollar 112.87 million. Baht debentures On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company, the shareholders approved the Company to issue and offer to sell various types of debentures domestically to the public and/or institutional investors in whole or in part which could be single or multiple offering in order to repay existing debt. The debentures will be issued in Thai Baht, within the principal amount of not over Baht 36,000 million, or equivalent, in any other foreign currencies. The type of debentures issued will be amortisation or bullet payment, secured or unsecured debentures, which suit prevailing market conditions at interest rate, subject to the prevailing market conditions at the time of the issue and offering. The said debentures will not mature over in excess of 20 years. The completion of the above transaction is also subject to approval from relevant creditors of the Company, and the satisfaction of certain other conditions precedent. Presently, the Company is in the process of requesting consent from its Creditors. Currency Swap: On 7 September 2001, the Company entered into the Payment and Indemnity Agreement (the “Agreement”) with Kreditanstalt fuer Wiederaufbau (“KfW”), a secured lender, to reduce its exposure to currency exchange rate fluctuation. The principal provisions include, among others, the followings: 1. The Company will pay a fixed amount in Thai Baht to KfW on each relevant repayment date from 30 June 2002 onwards as specified in the Schedule to the Agreement for the total amount of approximately Baht 4,483.48 million, equalling to US Dollars 96.65 million (out of total loans of Baht 18.63 billion). This arrangement will make the Company to satisfy the corresponding portion of its payment obligation in United States Dollars under the US Dollar Amendment Agreement.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

2. The Company will reimburse and indemnify KfW for the costs, expenses and losses incurred by KfW in connection with the Agreement, the Swap Agreement between KfW and the counterparty and other relevant agreements as stipulated in the Agreement. The Company recorded the said portion of loans in the balance sheet in Thai Baht as a result of the binding of the agreements. The expenses incurred in this arrangement were charged to statements of income. No further loss is anticipated. Reschedule of borrowings: Telecom Holding Company Limited (“Telecom Holding”), a subsidiary of the Company requested consent from its local commercial banks (“Creditors”) to extend the deadline for repayment of the remainder of the 60% of its total Outstanding Debts, amounting to Baht 1.17 billion pursuant to the Debt Restructuring Agreement, from 30 December 2000 to 30 December 2001. Subsequently, the Creditors consented to reschedule the amount due and payable by Telecom Holding to 30 December 2001.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

18.

Borrowings (Continued) In December 2001, Telecom Holding has commenced the process of negotiating with its Creditors to extend the deadline for repayment of the remaining amount of the rescheduled 60% (Baht 1.17 billion) plus the 5% (Baht 155.8 million) of the total Outstanding Debts from 30 December 2001 to 30 December 2002. At 31 December 2001 negotiations with the creditors were ongoing, and the debt of Baht 1.17 billion is included in current borrowings. On 12 December 2001, a subsidiary of Telecom Holding (“Assignee”) entered into the Assignment Agreement (“Agreement”) with a certain mutual fund, acting on behalf of certain finance and securities companies (“Assignor”) to purchase the debt of Telecom Holding at the Transfer Price as stipulated under the Agreement. The principal provisions include, among other, the following: 1. A Assignee shall pay the Transfer Price to the Assignor in six installments in the respective amounts set forth in the Agreement starting 17 December 2001 to 15 may 2002. 2. The Assignor has agreed to transfer to the Assignee all the Assignor’s rights, title, benefits, interest in and obligations to and under the Original Loan Agreement on and with effect from the Closing Date defined at the date on which the Assignee has satisfied its obligation to pay the installment payments. On 17 December 2001, Assignee paid the first installment to Assignor amounting to Baht 216.81 million. The interest rate exposure of the borrowings of the Group is as follows:

Total borrowings: - at fixed rates - at floating rates

Weighted average effective interest rates: - bank overdrafts - bank and finance institution borrowings - lease liabilities - supplier credit

Consolidated Company 2001 2000 2001 2000 Baht Baht Baht Baht 9,365,633,96 9,439,102,50 7,763,551,73 8,651,176,72 0 5 7 2 55,792,840,9 56,163,016,3 52,144,906,1 52,126,705,5 48 36 85 91 65,158,474,9 65,602,118,8 59,908,457,9 60,777,882,3 08 41 22 13 Consolidated 2001 2000

Company 2001 2000

8.59%

9.05%

8.59%

9.05%

5.94% 9.10% 1.00%

8.31% 10.78% 1.00%

5.70% 1.00%

8.24% 1.00%

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

The carrying amounts and fair values of certain non-current borrowings (excluding finance lease liabilities) of the Group are as follows: Fair values Carrying amounts 2001 2000 2001 2000 Baht Baht Baht Baht Non-current bank borrowings

35,087,387,0 04

33,369,125,1 41

35,705,654,2 15

34,100,466,6 89

Loan from a related company 18,693,172,5 (Note 10) 92 7,763,551,73 Supplier credit 7

21,655,967,2 71 8,651,176,72 2

18,895,679,4 76 7,102,289,55 0

21,521,554,5 62 7,950,739,96 2

The fair values are based on discounted cash flows using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at the balance sheet date. The carrying amounts of current borrowings and lease obligations approximate to their fair value.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

18.

Borrowings (Continued) Maturity of non-current borrowings (excluding finance lease liabilities):

Between 1 and 2 years Between 2 and 5 years Over 5 years

Consolidated 2001 2000 Baht Baht 3,915,836,85 1,483,026,11 2 0 25,414,166,8 18,464,007,0 30 42 32,214,107,6 43,729,235,9 82 51 61,544,111,3 63,676,269,1 34 33

Company 2001 Baht 3,320,282,39 4 23,586,010,0 35 31,831,507,6 51 58,737,800,0 80

2000 Baht 973,990,880 17,103,208,2 96 42,700,683,1 37 60,777,882,3 13

Finance lease liabilities-minimum lease payments

Not later than 1 year Later than 1 year and not later than 5 years Future finance charges on finance leases Present value of finance lease liabilities Representing lease liabilities: - current - non-current

Consolidated 2001 2000 Baht Baht 265,177,858 66,017,154 361,795,037 157,730,502 626,972,895 223,747,656 5,031,983 (33,067,774) 632,004,878 190,679,882 231,933,726 400,071,152 632,004,878

47,308,586 143,371,296 190,679,882

The present value of finance lease liabilities is as follows:

Not later than 1 year Later than 1 year and not later than 5 years

Consolidated 2001 2000 Baht Baht 231,933,726 47,308,586 400,071,152 143,371,296 632,004,878 190,679,882

Facilities: The Group has the following undrawn committed borrowing facilities: Consolidated 2001 2000 Baht Baht

Company 2001 2000 Baht Baht

Floating rate 70

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

- expiring within one year - expiring beyond one year Fixed rate - expiring within one year - expiring beyond one year

5,120,000,0 5,120,000,00 120,000,000 00 120,000,000 0 -

5,120,000,0 5,120,000,00 120,000,000 00 120,000,000 0

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

19.

Accrued expenses Included in accrued expenses at 31 December 2001 is an amount of Baht 446.48 million (2000: 227.96 million) related to long distance circuit and conduit rental as described below. Previously, the Company has been in dispute with TOT on the tariff basis and methodology for computing rental charges for leased circuit and conduits. The Company claimed that the rental as charged by TOT was not in compliance with a condition under the joint agreement with TOT, which allows TOT to charge the Company a reasonable and fair rental, considering that the Company is a joint partner with TOT. In November 2000, the Board of TOT approved tariffs for leased circuit and conduit rentals for the Company with such tariffs becoming effective as of the date of network utilisation by the Company. As a result, the amount booked for the leased circuit and conduit rentals by the Company since 1992 was reduced by Baht 685.21 million, with the reduction recognised in the 2000 financial statements as a change in accounting estimation in accordance with TAS 39, Net Profit, or Loss for the Period, Fundamental Errors and Accounting Changes. The details of the amount of leased circuits and conduit rentals correctly recorded by the Company up to year ended 2000 and the amount of adjustment up to 31 December 1999 resulting from such tariff changes was as follows: Financial information for the year ended 31 December 2000

Amount recorded after adjustment 1992-1999 2000 Baht million Baht million Leased circuit â&#x20AC;&#x201C; direct route Leased circuit â&#x20AC;&#x201C; mixed traffic Conduit rental Total

501.49 412.61 1,249.66 2,163.76

145.92 66.95 208.79 421.66

Amount Over recorded 1992-1999 Baht million 337.88 138.52 208.81 685.21

During 2001, the Board of TOT reconsidered and reapproved an increase in the tariffs of conduit rental from the previous approval given in November 2000. As a result, the amount recognised for conduit rental by the Company for the period 1992 - 2000 increased by Baht 156.88 million with the increase recognised in the 2001 financial statements as a change in accounting estimation in accordance with TAS 39, Net Profit, and Loss for the Period, Fundamental Errors and Accounting Changes. The details of amount adjusted up to 31 December 2001 are as follows:

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Amount recorded 1992-2000 Baht million Conduit rental

1,458.45

Amount under recorded

Amount recorded after adjustment 1992-2000 1992-2000 Baht million Baht million 1,615.33

156.88

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

20.

Other current liabilities As at 31 December Other payable Output VAT pending tax invoice Unearned income Others Total

21.

Consolidated 2001 2000 Baht Baht 1,383,910,5 61 956,689,056

Company 2001 Baht 1,093,943,91 3

904,400,260

231,377,049 246,276,731 227,978,608 204,097,289 300,704,243 112,484,049 2,143,970,4 1,519,547,1 61 25

176,577,602 166,339,153 158,119,151 1,594,979,81 9

177,693,375 186,157,643 85,454,964 1,353,706,24 2

2000 Baht

Long-term trade accounts payable This account represents trade accounts payable pertaining to the supply and installation of PCT project. On 5 November 1999, three subsidiaries (consisting of Telecom Holding Co., Ltd. (TH), Tele Engineering and Services Co., Ltd. (TE), and Asia Wireless Communication Co., Ltd. (AWC), operator of the Personal Communication Telephone System and obligor under debt restructuring agreements) entered into debt restructuring agreements with certain local and foreign creditors. As a result of this debt restructuring, there were no changes in the carrying amount of the debt payable at the time of the restructuring, since the total future cash payments exceed the carrying amount. The outstanding restructured trade accounts payable and terms of payment are as follows: Consolidated 2001 Foreign Currency Interest rate Million Current (included in trade accounts payable) Average MLR USD 0.63 JLTPR + 0.5% & 2.0% JPY 407.45 Average MLR Baht 10.48 Non-Current Average MLR JLTPR + 0.5% & 2.0%

USD 23.92 JPY 19,167.82

2000 Baht Million

Foreign Currency Million

Baht Million

28.10 138.15 10.48 176.73

USD 0.63 JPY 407.45 Baht 10.48

27.52 154.85 10.48 192.85

1,060.90 6,499.22

USD 24.55 JPY 19,575.27

1,066.41 7,439.51

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Average MLR

Baht 739.31

Total

739.31 8,299.43 8,476.16

Baht 749.79

749.79 9,255.71 9,448.56

Under the provisions of the debt restructuring the subsidiaries have commitments in respect of payment of the above principal and interest at the amounts per payment, interest rates and terms stipulated in the related agreements, covering the periods starting from November 1999 to August 2014. Moreover, the subsidiaries have to pledge certain assets (Note 31.6) as specified in the agreements to the related contracted creditors as collateral. Furthermore, the debt restructuring agreements set forth certain conditions and restrictions with which these subsidiaries, as contracted parties, are required to comply. Movement of long-term trade accounts payable can be analysed as follows: Year ended 31 December 2001

Opening amount Repayment Currency translation Closing amount

Consolidate d Baht Million 9,448.56 (189.58) (782.82) 8,476.16

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

21.

Long-term trade accounts payable (Continued) The interest rate exposure and fair values of debt under restructuring agreements as at 31 December are as follows: 2001 2000 Baht Million Baht Million Total debt under restructuring exposure from interest rate â&#x20AC;&#x201C; borrowing at floating rates Weighted average effective interest rates - Denominated in Japan Yen - Denominated in U.S. Dollars - Denominated in Thai Baht Fair values of non-current restructuring debts - Denominated in Japan Yen - Denominated in U.S. Dollars - Denominated in Thai Baht

8,860.75

9,893.17

3.16% 7.08% 7.08%

3.24% 7.85% 7.85%

7,033.37 1,042.98 717.28 8,793.63

7,729.24 1,100.35 764.88 9,594.47

The fair values of restructuring debts are based on discounted cash flows using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at the balance sheet date. 22.

Other non-current liabilities As at 31 December Valued added tax pending receipt of tax invoices related to debt restructuring Withholding tax related to debt restructuring Other payable Deposit received from customers Total

Consolidated 2001 2000 Baht Baht

Company 2001 Baht

2000 Baht

287,984,062

322,787,370

287,984,062

322,787,370

226,138,677 220,503,235

253,467,877 -

226,138,677 -

253,467,877 -

4,386,032 5,434,422 740,060,396 580,641,279

514,122,739

576,255,247

23. Share capital, premium and discount on share capital

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Number of Shares Million At 31 December 2000 - Issue of shares acquisition (Note 4) At 31 December 2001

Common Shares Baht Million

Preferre d Shares Baht Million

Share Premium (Discount)

2,925

22,230

7,020

Baht Million 9,934

308 3,233

3,075 25,305

7,020

(317) 9,617

Total Baht Million 39,184 2,758 41,942

The total authorised number of shares is 3,390.65 million shares (2000: 2,983.15 million shares) with a par value of Baht 10 per share (2000: Baht 10 per share). All issued shares are fully paid. The unissued shares totaling of 158 million will be issued as follows: - To directors and senior executives under Stock Option Plan of year 2000 58 million shares - To concerned parties in consideration of additional interest in joint venture (Note 4)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

23. Share capital, premium and discount on share capital (Continued) Preferred shares The preferred shares of the Company shall confer the following rights on the holders thereof: Dividends

Dividends for the first eight years are set at the rate of 10% p.a., cumulative plus the dividend payable to the holders of common shares, if any, and thereafter at the rate of 0.1% p.a. non-cumulative plus the dividend payable to the holders of common shares, if any. As at 31 December 2001, the undeclared cumulative dividends was Baht 1,231.38 million (2000 : Baht 529.38 million).

Liquidation :

Upon liquidation or dissolution of the Company, any amount remaining after payment of preference shares, all amounts payable in respect of indebtedness and other obligations of the Company shall be divided among the holders of the preferred shares pro rata to the number of the preferred shares held by each holder and paid in equal amount per share to such holders of the preferred shares in priority to the holders of the common shares.

Redemption :

The preferred shares shall not be redeemable by the Company.

Conversion :

The preferred shares have a conversion right to common shares at ratio of 1:1 during any period from the 2nd to the 8th anniversary of the issuance of the preferred shares. To the extent that the preferred shareholders have not exercised, their conversion right will expire.

Voting rights

: Each preferred share shall carry the right to one vote at any meeting of the shareholders of the Company.

On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company, the shareholders approved an increase of authorised share capital from 2,281,150,000 common shares with a par value of Baht 10 per share and 702,000,000 preferred shares with a par value of Baht 10 per share to 2,688,649,978 common shares with a par value of Baht 10 per share and 702,000,000 preferred shares with a par value of Baht 10 per share, in consideration for Bangkok Inter Teletech Co., Ltd. (“BITCO”) shares acquired by the Company. The allotment of additional 407,499,978 authorised shares capital are as follows: a. of the 307,499,978 ordinary shares to be issued to Charoen Pokphand Group Co., Ltd. and N.T.K. Technology Co., Ltd. (previously known as Chanloe Co., Ltd.) (“CP Group”); and b. of the 100,000,000 ordinary shares to be reserved as the allocation for the exercise of the equity warrants to be issued.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

The ordinary shares issued in exchange of ordinary shares of BITCO were issued at a discount amounting to Baht 316,639,974 (Note 4). The Company registered the increase of the 3,390,649,978 authorised and the 3,232,499,978 paid-up share capital with the Ministry of Commerce on 17 September 2001 and 6 November 2001, respectively. Stock options a. The Company’s Stock Option Plan of year 2000 (the “Plan”) is open to senior executives and directors of the Company. Under the terms of the Plan, non-transferable warrants of 58,150,000 shares will be issued to these senior executives and directors within the three year periods commencing 27 April 2000, divided into two types of option: amounting to 39.60 million units with an exercise price of Baht 30.00 (“Type 1”) and amounting to 18.55 million units with an exercise price of Baht 51.55 (“Type 2”). Stock option rights issued for both Type 1 and Type 2 will be expired on 9 June 2010. Stock options which have not been exercised are subject to cancellation upon expiration or termination of employment. None of the eligible stock options have been exercised as at 31 December 2001. b. On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company, the shareholders approved the issuance of 100,000,000 equity warrants to CP Group as a portion of consideration for the BITCO shares acquired by the Company. Each equity warrant is exercisable into one fully paid-up ordinary share of the Company within a period of no earlier than 6 months, and no later than 2 years from the date of completion of the Transaction at the exercise price of Baht 32 per share. Equity warrants issued to CP Group will be expired on 31 October 2003.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

23. Share capital, premium and discount on share capital (Continued) Movements in the number of stock options outstanding are as follows: 2001 In thousand At beginning of year 58,150 Granted 100,000 Exercised Lapsed At end of year 158,150

2000 In thousand 58,150 58,150

A compensation cost is not recognised in these financial statements for the fair value or the intrinsic value of share options granted. Stock options outstanding at the end of the year have the following terms: Expiry date 31 October 2003 30 June 2010 31 December 2010

24.

Exercise price Baht 32.00 30.00 51.55

2001 In thousand 100,000 39,600 18,550 158,150

2000 In thousand 39,600 18,550 58,150

Legal reserve The legal reserve of the Company was established in accordance with the provisions of the Public Company Limited Act B.E. 2535, which requires the appropriation as legal reserve of at least 5% of net income for the year until the reserve reaches 10% of the authorised share capital. This reserve is not available for dividend distribution.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

25. Segment information Primary reporting format - business segments Baht : Million For the year ended 31 December 2001 Revenues Segment result Unallocated costs Operating profit Finance cost Share of associates Other income and other non operating expenses Loss before tax Income tax Loss before minority interests Minority interests Net loss for the year

Wirelin DDN Wireles Multimed Interne Other Group e s ia t 15,618

503

3,072

894

154

395

20,636

4,866

238

441

5,711 (4,809) 902 (3,721) (601) 20 (3,400) (69) (3,469) 44 (3,425)

Segment assets Associates Unallocated asset Consolidated total assets

48,291 1,245

18,982

4,069

68 3,059

75,714 5,581 5,177 86,472

Segment liabilities Unallocated liabilities Consolidated total liabilities

62,335

11,634

571

41 1,625

76,281 5,296 81,577

1,450

545

4,573

158

Capital expenditure Unallocated capital expenditure Consolidated total capital expenditure Depreciation and amortisation Unallocated depreciation and amortisation Consolidated total depreciation and amortisation

748

7,480 246 7,726

(5,498) (120) (1,318)

(595)

(4) (288)

(7,823) (181) (8,004)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

25.

Consolidated business segment (Continued) Primary reporting format - business segments Baht : Million For the year ended 31 December 2000 Revenues

Wirelin DDN Wireles Multimed Internet Other Group e s ia 14,732

342

3,034

881

304

19,388

Segment result Unallocated costs Operating profit Finance cost Share of associates Other income and other non operating expenses Loss before tax Income tax Loss from ordinary activities Extraordinary item Loss before minority interest Minority interest Net loss for the year

5,003

151

318

104

(36)

5,580 (3,077) 2,503 (5,823) (1,129)

Segment assets Associates Unallocated asset Consolidated total assets

51,371

773

14,655

4,317

2,433

73,596 9,391 5,397 88,384

Segment liabilities Unallocated liabilities Consolidated total liabilities

62,870

10,110

663

1,253

74,980 4,777 79,757

858

178

256

1,363 676

Capital expenditure Unallocated capital expenditure Consolidated total capital expenditure Depreciation and amortisation

(174) (4,623) (76) (4,699) 1,378 (3,321) 13 (3,308)

2,039 (5,458 )

(67) (1,180)

(575)

(3)

(245) (7,528)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Unallocated depreciation and amortisation Consolidated total depreciation and amortisation

(180) (7,708)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

25.

Consolidated business segment (Continued) The Group is organised into five main business segments: •

Wireline

- to install and provide services of 2.6 million fixed lines including public telephone and related value added service;

•

DDN

- to provide a lease line connecting between two places in the form of voice, data and image;

•

Wireless

•

Multimedia - to provide multimedia services, NON-POTS and cable modem; and

•

Internet

to provide Personal Communication Telephone (PCT) and cellular telephone services, sales of handsets and related accessories;

- to provide internet services, online-portal in name of Click TA.com and corporate network and technology services.

On 31 October 2001, the Group had acquired a joint venture, an operator of cellular telephone services (Note 4) and reports its operations under wireless segment. Other operations of the Group mainly comprise holding of investment and providing of vehicle and building rental services, neither of which are of a sufficient size to be reported separately. The sales transactions between business segments were eliminated. Unallocated costs represent corporate expenses. Segment assets consist of property, plant and equipment, intangible assets, inventories, receivables and operating cash, and excluding investments. Segment liabilities comprise operating liabilities and borrowings. Capital expenditure comprises additions to property, plant and equipment (Note 15) and intangible assets (Note 16), including additions resulting from acquisition through business combination (Note 15, Note 16 and Note 4). The Group is operating only in Thailand. Therefore, no geographical segments to report as secondary reporting format. 26.

Cost of services Cost of services includes major operating and administrative expenses directly related to the provision of telephone and other services. Consolidated 31 31 December December 2001 2000

Company 31 31 December December 2001 2000

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Baht Million Cost of services: Depreciation and amortisation Revenue sharing Network operating expenses Total

Baht Million

7,784.28

7,535.50

6,109.87

5,959.14

3,227.36 3,229.84

2,901.82 2,251.08

4,719.78 2,742.59

3,963.96 1,861.57

14,241.48

12,688.40

13,572.24

11,784.67

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

27. Operating profit The following items have been included in arriving at operating profit: Consolidated For the year ended 31 December

Company

2001 Baht

2000 Baht

2001 Baht

2000 Baht

7,691,373,5 62

7,539,360,2 54

6,144,973,37 4

6,048,871,0 41

81,997,971

63,250,993

63,956,346

23,782,622

Impairment charge (Reverse) - Property, plant and equipment (Note 15) - Intangible assets (Note 16)

210,987,208 9,000,000

(10,667,338 ) -

192,614,198 9,000,000

(Profit)/loss on disposal of property, plant and equipment

(101,751,16 4) 307,845,209

7,619,003

347,711,160

Repairs and maintenance expenditure on property, plant and equipment

877,910,200

995,596,534

801,275,628

932,705,197

Amortisation of intangible assets (included in â&#x20AC;&#x153;selling and administration expenses and cost of services) (Note 16)

69,949,973

28,167,450

40,769,131

Operating lease rentals - building - vehicle

98,294,563 40,419,464

151,426,184 14,634,686

388,041,577 378,404,280 152,357,093 129,708,688

Inventories - cost of inventories recognised as expense (included in cost of sales) 684,642,472 - obsolescence 30,631,533

1,119,159,0 26 17,232,885

309,325,616 30,132,937

Depreciation on property, plant and equipment (Note 15) - owned assets - owned assets (vehicles) leased out under operating leases - leased assets under finance lease

141,243,863 -

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Trade receivables - doubtful debts Staff cost - Wages and salaries - Social security cost - Other benefits

166,698,861

132,742,049

130,625,657

106,328,637

2,083,134,6 71 30,161,691 100,608,171

1,866,802,1 02 28,644,960 75,815,650

1,452,214,19 5 21,923,418 93,620,794

1,313,560,2 03 21,076,830 63,928,235

The number of persons employed by the Group at the end of year are as follows: Consolidated 2001 2000 Full time Part time

Company 2001 2000

7,438 1,174

5,305 921

4,062 696

3,920 500

8,612

6,226

4,758

4,420

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

28.

Loss per share Basic loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding during the years (2,274 and 2,223 million shares for the years ended 31 December 2001 and 2000, respectively).

Net loss attributable to shareholder Cumulative dividend of preferred shares Net loss used to determine basic loss per share Weighted average number of ordinary shares in issue (million shares) Basic loss per share (Baht per share)

2001 2000 Baht Million Baht Million (3,425.13) (3,308.15) (702.00) (529.38) (4,127.13) (3,837.53) 2,274 2,223 (1.81)

(1.73)

Diluted earnings (loss) per share for the year ended 31 December 2001 include the effect of 702,000,000 shares (2000: 702,000,000 shares) of convertible preferred share and 158,150,000 (2000: 58,150,000) stock options on an as-if-converted method, the results of their inclusion is antidilutive. Therefore, the basic loss per share and diluted loss per share are presented in the same amount. Supplementary earnings per share data excluding the extraordinary item (for this purpose the weighted average shares number is not changed).

Net loss attributable to shareholder Cumulative dividend of preferred shares Extraordinary item (Note 5) Net loss used to determine basic loss per share Weighted average number of ordinary shares in issue (million shares) Basic loss per share excluding extraordinary item (Baht per share)

2001 2000 Baht Million Baht Million (3,425.13) (3,308.15) (702.00) (529.38) (1,378.05) (4,127.13) (5,215.58) 2,274 2,223 (1.81)

(2.35)

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

29.

Cash flows from operating activities Reconciliation of loss before minority interest to cash flows from operating activities:

Loss before minority interest Add : Interest expense Income tax Profit before interest and tax

Consolidated Company 2001 2000 2001 2000 Baht Baht Baht Baht (3,469,417,5 (3,321,505,47 (3,425,126,88 (3,308,150,14 59) 5) 2) 5) 4,718,426,95 6 5,676,505,756 3,718,396,991 4,624,588,093 68,933,164 76,444,287 1,317,942,56 1 2,431,444,568 293,270,109 1,316,437,948

Adjustments for: Depreciation and amortisation 8,004,148,66 6 (Gain) loss on disposal of property, plant and equipment (101,751,164 ) Doubtful accounts 166,698,861 Loss (reverse) on impairment (Note 27) 192,804,209 Loss on of inventories obsolescence 30,631,533 Other operating assets and liabilities write-off (13,995,918) Gain from sales of availablefor-sale securities Loss from liquidation of other investments Unrealised (gain) loss on foreign exchange (944,939,754 ) Gain from debt restructuring (Note 5) Gain from forgivingness (348,058) Reverse accrued rental of conduit and lease circuit (Note 19) Share of loss (profit) in subsidiaries and associates 628,472,598

7,707,915,267 6,271,532,549 6,079,796,706

307,845,209 132,742,049

7,619,003 130,625,657

347,711,160 106,328,637

(10,667,338)

201,614,198

17,232,885

30,132,937

(6,098,908)

(2,472,154,84 5)

1,522,252

2,526,566,189 (1,378,055,73 8) (26,528,236) (685,203,383)

(71,454,366) 4,779,238,526 (1,378,055,73 8) (348,058) (26,528,236) -

1,128,453,711 1,874,652,529

(685,203,383) (2,107,068,60 9) 90

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Changes in operating assets and liabilities (excluding the effects of acquisition of joint venture) - Trade accounts receivable - Due from related parties - Inventories - Other current assets

140,066,853 (78,367,877) (1,499,311,2 82) (590,371,410 ) (20,031,494) 405,073,571 119,290,315 1,535,614,64 7 (195,111)

(359,964,565) 82,488,741

130,858,609 (597,264,846) (19,587,121) (1,727,710) (1,399,950,62 (189,655,230) 3) (224,044,338)

571,893,605 (648,480,715) 190,386,954 - Other non-current assets 35,117,471 (1,573,687) 6,754,965 - Trade accounts payable (218,664,229) 281,712,483 297,987,750 - Due to related parties 16,656,252 (401,205,066) 612,269,083 - Accrued expenses and other (1,244,870,87 current liabilities 7) 369,035,051 (761,758,501) - Other non-current liabilities (10,867,212) Cash generated from operating activities 9,291,431,7 8,357,147,63 7,048,453,48 7,955,260,36 46 8 9 8 Less : Interest paid (4,481,730, (4,840,729,7 (3,610,557,2 (4,121,555,4 402) 21) 07) 98) Income tax paid (330,670,08 (287,782,807 (155,971,13 (133,877,12 ) 3) 7) 7) Net cash from operating 4,479,031,2 3,228,635,11 3,281,925,14 3,699,827,74 activities 57 0 9 3

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

30. Financial instruments i) Objective and significant terms and conditions In order to manage the risks arising from fluctuations in currency exchange rates, the Company and its subsidiaries adopt the following foreign currency risk management practices: • Entering into forward foreign exchange contracts • Negotiating payment terms for foreign currency settlements on an individual transaction basis • Negotiating with foreign suppliers to share the foreign exchange exposure Transactions risk is calculated in each foreign currency and is projected six months forward. Exchange rates are monitored and forecasting information supplied by recognised research and financial analysis is used to estimate the future exchange rates. These are compared against premiums on forward exchange contracts, and after making adjustments for the related risk, a decision is taken on whether to cover foreign currency transactions. Transactions, if hedged with forward exchange contracts, are not hedged on a net basis, but rather on a transaction by transaction basis. At 31 December 2001 and 2000, the Company and its subsidiaries had outstanding foreign currency assets and liabilities as follows: Consolidated 2001 2000 Currency Currency Million Million Assets US dollars GBP Liabilities US dollars Japanese Yen GBP EUR

Company 2001 2000 Currency Currency Million Million

23.87 0.08

91.44 -

601.37 43,230.84 2.75 0.17

814.11 43,619.05 -

547.73 22,896.67 -

770.49 22,763.50 -

Foreign currencies assets represents investment in available-for-sale securities whilst the above foreign currencies liabilities represent trade accounts payable, long-term trade accounts payable, borrowings and other payables. Forward foreign exchange contracts Forward foreign exchange contracts are entered into to manage exposure to fluctuations in foreign currency exchange rates on specific transactions. A subsidiary and a joint

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

ventureâ&#x20AC;&#x2122;s policy is to enter into forward foreign exchange contracts for 100% of shortterm loans anticipated in each month over the following six months. At 31 December 2001, the settlement dates on open forward contracts is in January 2002. The Baht amounts to be received and contractual exchange rates of the Company's outstanding contracts were: Consolidated 2001 2000 Baht Baht United States dollars 14.39 million (2000: USD 1.48 million) at rates averaging USD Baht 43.99/USD (2000: Baht 41.49 - 43.49/USD)

632,888,39 7

61,289,847

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

30. Financial instruments (Continued) i) Objective and significant terms and conditions (continued) Net fair values The net fair values of the Company's derivative financial instruments at the balance sheet date were: Consolidated 2001 2000 Million Million Baht Baht Favorable (unfavorable) forward foreign exchange contracts

3.96

(2.4)

The fair values of forward foreign exchange contracts have been calculated based on rates quoted by the Company's lending bankers at balance sheet date, as if these agreements had been terminated. ii) Other interest rate exposures Refer to borrowings Note 18 for details on the average interest rates and maturities of these balances. iii) Credit risk The Company and the Group have no significant concentrations of credit risk (other than TOT which represents 34.51% (2000: 43.48%) of receivables overdue, as discussed in Note 9). Derivative instruments are entered into with, and cash is placed with substantial financial institutions. The credit exposure of derivatives are represented by the net fair values of the contracts, as disclosed above. iv) Other fair values Certain financial assets and liabilities which are accounted for at historical cost are carried at values which may differ materially from the fair value. The carrying amounts of cash, trade receivables, trade payables, other payables, short-term borrowings, floating rate long-term borrowings, preference shares and dividends payable approximate to their fair values. Information on the fair values of borrowings, and foreign currency forward exchange contracts is included in Note 18 and in section (i) of this note, respectively.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

31. Contracts and commitments 31.1 The Company entered into the agreement for Joint-Operation and Investments for Expansion of 2.6 million lines Telephone Services with TOT and other supplements to the Agreement for the following services: -

Wireline Services Value Added Services Personal Communication Telephone Services Public Telephone Services Receiving telephone service orders, and receiving payment for installation charges, deposits and monthly usage Fault notification and dropwire maintenance TOT lease of fibre optic network from a subsidiary in order to sublease to the Company Personal Communication Telephone Service for TOT subscribers

Under the provisions of the “Agreement”, the “Amendment” and the Supplementary Agreements, TOT and the Company will share the gross revenues collected from operating the telephone network in accordance with the percentages stipulated in the agreements. Among the Company’s responsibilities are the acquisition, installation, project management, operation and maintenance of the system as set forth in the agreements. In addition, the Company is required to transfer to TOT certain equipment pertaining to such system together with the land and buildings acquired by the Company related to the project. In compliance with the terms of the agreements, the Company has placed letters of guarantee issued by certain local banks in favor of TOT totaling Baht 300 million. 31.2 Agreement for PCT operation According to the Concession Agreement and the PCT Supplemental Agreement (“the Concession Agreement”) between the Company and TOT to jointly operate and invest in the expansion of basic telephone services, including a personal communication telephone system in the telephone areas of Bangkok using the same long-distance telephone area code (the “Territory”), the Company shall be responsible to operate and comply with the Concession Agreement. Asia Wireless Communication Co., Ltd. (“AWC”), a subsidiary of the Company is awarded to operate and share revenues with the Company in accordance with the PCT Contract (the “Contract”). In July 2001, the Company entered into the Contract with AWC, which became effective on 25 July 2001. The principal terms and conditions include, among others, the following: a. AWC shall be responsible, at its own cost and expense, to procure, purchase, install, operate and maintain a personal communication telephone system in the Territory, all of which shall be performed in accordance with the requirements of the Concession Agreement; and

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

b. In consideration of the foregoing, AWC shall be entitled to receive a portion of the revenue generated by the PCT services in accordance with the calculation methodology set forth in the Contract.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

31.

Contracts and commitments (Continued) 31.3 Two subsidiaries and two joint ventures have agreements with state enterprises, namely the Communication Authority of Thailand (CAT) and the Telephone Organization of Thailand (TOT) to provide internet service, nationwide cellular telephone service and the lease of long distance circuits, respectively. Under the terms of the agreements, the subsidiaries and joint ventures have certain commitments to acquire, install, manage and maintain all equipment. The subsidiaries and joint ventures are also committed to transfer to TOT and CAT all equipment pertaining to such systems as the installations are completed. During the term of the agreements, the subsidiaries and joint ventures are entitled to collect the deposits, membership fees and other service fees from customers as stipulated in the agreements. In addition, the subsidiaries and joint ventures were contingently liable to certain foreign and local banks for letters of guarantee totaling Baht 60.17 million issued by said banks in favor of TOT and CAT. The letters of guarantee covered the guarantee for the subsidiaries and joint ventures in compliance with the provisions of the agreements referred to above. 31.4 The Company, subsidiaries and joint ventures were contingently liable to certain foreign and local banks for letters of guarantee in favor of certain government agencies, certain state enterprises and companies amounting to Baht 42.32 million for the Company and Baht 324.68 million and US Dollars 2.80 million for the subsidiaries and joint ventures. 31.5 The Company had issued a letter to a finance company to support the business of one of its wholly owned subsidiaries and to confirm to that finance company that the Company holds 99.99% of the total shares in said subsidiary. The Company has also committed that the Company and/or its affiliates will maintain their holding percentage in the subsidiary at no less than 51% of the total shares until all obligations of the subsidiary liable to the said finance company are settled. As at 31 December 2001, the subsidiary has an outstanding loan with the finance company amounting to Baht 205.26 million. 31.6 Under the terms of various agreements, the Companyâ&#x20AC;&#x2122;s and certain subsidiariesâ&#x20AC;&#x2122; assets have been pledged and/or mortgaged as collateral with contracted parties, details of which are as follows: Carrying Value at 31 December Consolidated Company Mortgaged Value 2001 2000 2001 2000 2001 2000 Baht Baht Baht Baht Baht Baht Million Million Million Million Million Million

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

Fixed and savings deposits Investment in available-forsale securities Investment in shares of subsidiaries and associates (excluding investment in shares of certain subsidiaries pledged as collateral, which have been eliminated in the consolidated financial statements) Land, building and machinery

4,505.9 4,308.3 7 7 1,036.2 3,960.7 7 8

4,488.9 5,430.0 1 5 943.76 1,007.0 1,000.0 1,000.0 2 0 0

4,018.29 4,058.14

10,879.5 1 -

In addition, the Group and the Companyâ&#x20AC;&#x2122;s right to operate network assets under concession are secured against borrowings (Note 18). 31.7 The Company has entered into contracts with various contractors to supply and install additional network and expansion of network equipment capability. Total commitments as at 31 December 2001 is approximately Baht 1,426.00 million. In addition the Company has commitments with TOT to construct and transfer building and network equipment amounting to approximately Baht 222.50 million.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

32.

Interest in joint venture The Group has a 65% interest in a joint venture, Asia Infonet Co., Ltd.,(“AI”) which operates as an Internet provider and 41% in Bangkok Inter Teletech Co., Ltd.,(“BITCO”) that holds 99.99% in C.P. Orange Co., Ltd. an operator of 1800 MHz cellular telephone system. The following amounts represent the Group’s share of the assets and liabilities and revenue and expenses of the joint venture included in the consolidated balance sheet and income statement: 2001

Current assets Non-current assets Property, plant and equipment Intangible asset, net

BITCO Baht 2,313,086,217 22,733,750 3,936,674,781 323,882,163

AI Baht 40,601,122 9,077,456 18,604,846 -

2000 AI Baht 25,935,220 4,384,285 16,411,756 -

Total assets

6,596,376,911

68,283,424

46,731,261

Current liabilities Non-current liabilities

(2,163,355,083) (232,468,305)

(39,828,008) (920,057)

(40,573,371) (558,720)

Total liabilities

(2,395,823,388)

(40,748,065)

(41,132,091)

4,200,553,523

27,535,359

5,599,170

153,837,901

95,274,938

Net assets Sales

Profit (loss) before tax Income tax

(1,255,084,559) -

19,437,672 -

10,331,796 -

Profit (loss) after tax

(1,255,084,559)

19,437,672

10,331,796

Proportionate interest in joint venture capital commitments Proportionate interest in joint venture contingent liabilities

8.68 billion

nil

218.59 million

0.90 million

The number of employees in the joint venture in 2001 was 2,131 (2000: 96). 33.

Concession conversion

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

In November 1997, the Thai government adopted the Telecommunications Master Plan that calls for several liberalisation initiatives; amongst those were the privatisation of TOT and CAT and conversion of the concessions under their operations. The process of concession conversion involved comprehensive proposals and negotiations with the TOT commencing in November 2000. After extensive discussions, none of the concessions qualified for conversion were successfully concluded prior to the change of government in early 2001. Following the change of government, the new government decided to completely revise the Concession Conversion Framework set forth by the former government and it is expected to consider a more pragmatic approach in order to improve opportunity for successful conversion of most concessions.

100

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

34.

Post balance sheet events On 22 February 2002, at the Board of Directors’ Meeting 1/2002 of the Company, the Board of Directors approved the followings: 1. The issuance and offering of the warrants to purchase the Company’s common shares to directors and employees at executive level of the Company and its subsidiaries in the total number of not exceeding 35 persons (“ESOP”). The total number of warrants to be offered is not exceeding 37,131,597 units at the exercise price of Baht 10.60. The warrant will be exercisable within a period of not exceeding 5 years from the issuance and offering date. 2. The increase of registered capital from Baht 33,906,499,780 to Baht 34,277,815,750 by issuing 37,131,597 new common shares at a par value of Baht 10 per share for the exercise of the rights to purchase the common shares of the Company under the warrants to be issued and offered under the ESOP. All above matters shall be proposed to the Annual General Shareholders Meeting for further consideration and approval. 3. The Company’s Board of Directors authorised these financial statements for issue.

101

TelecomAsia Corporation Public Company Limited Financial Statements 31 December 2001