Management's Discussion and Analysis Overview During the first quarter of 2006 (1Q06), Thailand's mobile subscribers grew by 6.1% to 32.2 million from 30.3 million as at year-end 2005. Penetration rate increased from 47% as of Dec-05 to 50% as of Mar-06. The rapid subscriber growth was a result of increased competition during the quarter. Catalysts were competitors'short term aggressive promotions such as give-away SIM cards, undercut tariff on a trial period, and caravan sales in upcountry. For 1Q06, the Group had the total of 16,633,900 mobile phone subscribers, comprising of 1,918,000 postpaid subscribers (GSM Advance and GSM 1800) and 14,715,900 prepaid (One-2-Call!) subscribers. This represented an increase of 225,000 subscribers or 1.4% from the net subscribers at the end of 2005. The slow subscriber growth during this quarter was a result of fewer marketing activities following political unrest. Albeit a small increase in subscriber growth, service revenue in 1Q06 improved 3.3% q-o-q to Baht 21,267 million as a result of upward tariff adjustment since the beginning of January 2006. EBITDA was Baht 12,493 million, increased 5.3% q-o-q based on higher service revenues. Nevertheless, the amount declined by 4.2% y-o-y primarily due to rising of postpaid revenues shares from 25% to 30% since the beginning of 4Q05. The Group posted a net profit of Baht 5,290 million, declined by 5.3% y-o-y. The Group has early adopted TAS 56, Accounting for Incomes Taxes, in the 1Q06. The adjustment as a result of the adoption has been accounted for retrospectively. The Group and the Company adjusted the consolidated and company balance sheet as at 31 December 2005, and income statements for the three-month period ended 31 March 2005. Results of operations- Quarterly Comparison Million Baht 1Q 2006 1Q 2005 % change Service revenue 21,267 21,186 0.4% Sales revenue 3,421 2,537 34.9% Total revenue 24,688 23,722 4.1% Total cost 14,123 12,994 8.7% Gross profit 10,565 10,729 (1.5%) Selling and administrative expense 2,817 2,382 18.3% Net Profit-Adjusted deferred tax 5,290 5,584 (5.3%) Net Profit-Before adjustment 5,151 5,369 (4.1%) Revenues & Profitability Total Revenue The Group reported the service revenues of Baht 21,267 million, represented a growth of 3.3% q-o-q and 0.4% y-o-y. Despite lower net additions in this quarter (225,000 in 1Q06 versus 315,700 in 4Q05), higher revenues were driven by rising tariff since the beginning of January. Revenues from sales were Baht 3,421 million, an increase of 34.9% y-o-y due to higher unit sales of handset. Sales margin remained relatively flat at 12.3% in 1Q06 compared to 12.5% in 1Q05. Total Cost Total cost includes cost of services and equipment rentals, concession fee and excise tax, and cost of sales. In 1Q06 The Group incurred Baht 14,123 million of total cost, rising by 8.7% from Baht 12,994 million in 1Q05. Cost of services and equipment rentals declined to Baht 5,876 million in this quarter compared to Baht 6,236 million in the previous quarter. This was due to a decline of network amortization of Baht 310 million following the increased portion of fully amortized asset under concession agreement. The concession fee and excise tax were Baht 5,247 million, increased by 1.8% q-o-q and 6.0% y-o-y given higher service revenues and rise in the postpaid revenues sharing from 25% to 30% since October 2005. Selling and administrative expenses were Baht 2,817 million in 1Q06, increased 8.4% q-o-q and 18.3% y-o-y as the result of rising staff cost following higher headcount, annual payroll increase and bonus payment in February. Marketing expenses, however, decreased to Baht 541 million in 1Q06 from Baht 675 million in 4Q05. This represented the marketing expenses to total revenue of 2.2% (2.8% in 4Q05). The reason came from lower marketing activities during this period. Income Tax As a result of the early deferred taxes adoption in this quarter as above mention, impact to The Group's financial statement are as follows; Million Baht Before adopted After adopted Deferred taxes Deferred taxes Beginning retained earnings 2005 43,483 52,514 Beginning retained earnings 2006 45,817 54,664 1Q/2005 profit 5,369 5,584 For the 1st quarter of 2006, the Group income tax incurred Baht 2,447 million, a decline of Baht 70 million or 2.8% y-o-y. Net Profit The Group posted a net profit of Baht 5,290 million, declined by 5.3% y-o-y. Liquidity In 1Q06, liquidity improved shown in the rising current ratio to 71% from 55% in the previous quarter. This was resulted from higher cash and cash equivalents and lower debt levels. Current assets The Group's current assets grew from Baht 20,346 million at the end of year 2005 to Baht 29,294 million as of the end of the 1Q06, representing an increase of 44% q-o-q. The majority of this increase was a result of additional cash and cash equivalents of Baht 8,603 million from Baht 11,456 million at the end of year 2005. Current liabilities Current liabilities was Baht 41,507 million as of the end of the 1Q06, increased from Baht 36,734 million at the end of year 2005 primarily due to increase in current portion of debentures and other current liabilities. The current portion of long-term debts and debentures amounted to Baht 16,495 million as at the end of 1Q06. Other current liabilities increased Baht 1,905 million or 12.6% q-o-q, majority of which came from increase in income tax payable. 31 March 2006 31 December 2005 Million % Total Million % Total Baht Liabilities Baht* Liabilities Current portion of long-term borrowings & debentures 16,495 33.6% 14,241 29.7% Concession right payable, accrued concession fee and excise tax 7,968 16.2% 7,354 15.3% Other current liabilities 17,044 34.8% 15,139 31.5% * Restated for deferred tax liabilities Assets As of 31 March 2006, total assets amounted to Baht 134,302 million, an increase of 5.0% from Baht 127,959 million as of 31 December 2005. Current assets accounted for 21.8% of total assets while non-current assets stood at 78.2%. Details of major items were as follows. 31 March 2006 31 December 2005 Million % of Million % of Baht Total Baht* Total assets assets Current assets 29,294 21.8% 20,346 15.9% Property, plant and equipment, net 9,580 7.1% 9,700 7.6% Asset under concession agreement,net 73,610 54.8% 75,842 59.3% Deferred tax asset 9,089 6.8% 8,946 7.0% Other non-current assets 12,729 9.5% 13,125 10.2% *Restated with deferred tax asset After adoption of deferred tax accounting, the consolidated balance sheet as of 31 March 2006 recorded an additional Baht 9,089 million of deferred tax asset. For comparison, the consolidated balance sheet for the year ended 2005 was also restated with an increase of Baht 8,946 million in deferred tax asset. Based on TAS 56 accounting standard, deferred tax accounting principally would adjust tax on the reported financial statement to be the same as statutory tax rate of 30% which tend to minimize the fluctuation of reported earnings after tax. Deferred tax asset represents cumulative amount of pre-paying tax above the statutory rate of 30% over the years. In the future, the deferred tax asset would be reversed as actual tax payment goes below the statutory tax rate. Capital structure The Group's balance sheet remained solid with strong capital structure. Total liabilities to equity continued to decline to 58% in 1Q06 compared to 60% in 4Q05. Net debt to equity was reported at 5% in this quarter given by excess cash on hand reserved for the announced dividend payment to be paid on 8 May 2006. After adjusting the dividend, net debt to equity would be 16% compared to 18% in 4Q05. Debentures and Loans Debentures and loan were Baht 23,963 million in 1Q06, decreased from Baht 25,451 million in 4Q05. The company repaid long-term debentures Baht 1,500 million in this quarter. 31 March 2006 31 December 2005 Million % Total Million % Total Baht Liabilities Baht Liabilities Current portion of long-term borrowings & debentures 16,495 33.6% 14,241 29.7% Long-term borrowings 25 0.1% 19 0.0% Long-term debentures 7,443 15.2% 11,191 23.3% Total long-term borrowings 23,963 48.9% 25,451 53.0% Shareholders'equity The Group's shareholders' equity was strengthening from Baht 79,935 million as of 31 December 2005 to Baht 85,260 million as of 31 March 2006, attributed by Baht 5,290 million of net profit of and Baht 35 million net of additional shares, share subscription, fair value of securities, and loss to minorities. Cash Flow Due to Baht 4,534 million restricted cash in bank deposit in compliance to the notification of Bank of Thailand which requires cash reserve for Group's cash card business, an ending balance of cash and cash equivalents as of the 1Q06 must be deducted by Baht 4,534 of restricted bank deposit for comparison with cash flow statement. In 1Q06, cash flow from operations was Baht 12,684 million, which was sufficient to finance an investment in capex of 2,486 million and service repayment of long-term debentures of Bath 1,500 million. The remaining cash flow was kept on the balance sheet, reserving for the announced dividend payment to be paid on 8 May 2006.