Management's Discussion and Analysis Overview For 3Q07, AIS and its subsidiaries ("The Group") reported net additions of 513,000. The slow net addition compared to 1.6 million in 2Q07 was a result of weak seasonality and economic slowdown in the period. Of total net additions,prepaid subscribers increased 734,200 but postpaid subscriber declined 221,200 as the Group did not push the postpaid market as aggressively as in the previous two quarters and more conservative credit screening policy in acquiring new postpaid subscribers. As at end of September 2007, the Group recorded the total subscriber of 23.2 million, a 31% growth over the same period of 2006. The Group has successfully sustained its subscriber market share and stabilized its revenue market share during the last three quarters. As a result,service revenues continued to grow 5.7% y-o-y to Bt19,079 million in 3Q07 from Bt18,046 million in 3Q06. However, on a quarterly basis, service revenues declined 2.6% from Bt19,597 million in 2Q07as third quarter was normally a weak season. Marketing expenses as a percentage of total revenue in 3Q07 declined to 3.3% from 3.5% in 3Q06 and 3.8% in 2Q07 as marketing activities were slowed down during the low season. For the full year, the Group maintains the marketing budget at 4% of total revenue. Bad debt provision improved to 7.0% in 3Q07 down from 8.1% in 2Q07 based on the Group's conservative credit policy in screening new postpaid subscriber. Quality of debtors remained high with over 90% of gross account receivable aging are current and due less than 3 months. The Group posted a net profit of Bt3,512 million in 3Q07, a fall of 3.9% y-o-y and 4.1% q-o-q. For the nine-month period of 2007 (9M07), service revenues were Bt58,168 million, increased 0.7% y-o-y from Bt57,735 million in 9M06 while sales revenues declined 8.3% y-o-y to Bt10,416 million in 9M07 from Bt11,364 million in 9M06. This would not have material impact to company's bottom line since sales margin were normally thin and contributed marginally to the consolidated net profit. Total revenues were relatively stable at Bt68,584 million in 9M07 or 0.7% declined y-o-y from Bt69,100 million in 9M06. Total costs were flat in 9M07 at Bt42,004 million compared to Bt41,967 million in 9M06. Cost of service increased 3.4% y-o-y in 9M07 from higher operating cost for network quality improvement. SG&A expenses increased 17.4% y-o-y to Bt9,386 million in 9M07 from Bt7,997 million in 9M06 due to higher marketing expenses and bad debt provision. For 9M07, net profit was Bt11,159 million, decreased 14.6% y-o-y from Bt13,069 million in 9M06. On 14 August 2007, the Board of Director approved an interim dividend for 2,957.16 million shares totaling of Bt8,871 million, implying a dividend per share of Bt3.00. Dividends were paid to shareholders on 10 September 2007. Financial summary (Bt million) 3Q07 3Q06 % change 2Q07 % change y-o-y q-o-q Service revenue 19,079 18,046 5.7% 19,597 (2.6%) Sales revenue 3,328 3,858 (13.7%) 3,082 8.0% Total revenue 22,407 21,903 2.3% 22,678 (1.2%) Total cost 13,984 13,876 0.8% 13,728 1.9% Gross profit 8,423 8,027 4.9% 8,950 (5.9%) SG&A 2,959 2,621 12.9% 3,301 (10.4%) Earnings before 5,593 5,665 (1.3%) 5,795 (3.5%) interest and tax Net profit 3,512 3,653 (3.9%) 3,663 (4.1%) 9M07 9M06 % change (9-mths) (9-mths) y-o-y Service revenue 58,168 57,735 0.7% Sales revenue 10,416 11,364 (8.3%) Total revenue 68,584 69,100 (0.7%) Total cost 42,004 41,967 0.1% Gross profit 26,580 27,133 (2.0%) SG&A 9,386 7,997 17.4% Earnings before interest and tax 17,657 19,947 (11.5%) Net profit 11,159 13,069 (14.6%) Revenues & Profitability Total Revenue Total revenues in 3Q07 were Bt22,407 million, increased 2.3% y-o-y from Bt21,903 million in 3Q06 mainly from strong subscriber growth. Of total revenues, 85% represented revenues from mobile services and the rest 15% from handset and SIM card sales. Service revenues improved 5.7% y-o-y to Bt19,079 million in 3Q07 from Bt18,046 million in 3Q06 from strong subscriber growth. On a quarterly basis, service revenues dropped 2.6% due to low seasonality and slow economic condition. Sales revenues dropped to Bt3,328 million in 3Q07, a decline of 13.7% y-o-y from Bt3,858 million in 3Q06 but improved 8.0% q-o-q from Bt3,082 million in 2Q07. Despite higher handset unit sales in this period, sales revenues dropped due to lower handset selling prices and higher rebate to distributors. For the nine-month period of 2007 (9M07), total revenues were relatively stable at Bt68,584 million in 9M07, a slight decline of 0.7% y-o-y from Bt69,100 million in 9M06. Service revenues were Bt58,168 million in 9M07, 0.7% growth y-o-y from Bt57,735 million in 9M06 while sales revenues declined 8.3% y-o-y to Bt10,416 million in 9M07 from Bt11,364 million in 9M06. Total Cost Total cost comprises of (1) cost of services and equipment rentals, (2) concession fee, and (3) cost of sales. For 3Q07, the Group incurred total cost of Bt13,984 million, an increase of 0.8% y-o-y and 1.9% q-o-q due to higher cost of service and cost of sales. (1) Cost of services and equipment rentals in 3Q07 were Bt6,239 million, increased 7.1% y-o-y and 3.6% q-o-q from higher amortization cost, utilities and other network related expenses following a large spending on network investment last year and shortening concession life. (2) Concession fee were Bt4,627 million in 3Q07, increased 4.9% y-o-y but declined 4.4% q-o-q in proportion to service revenue. Concession fee as a percentage of service revenue declined slightly to 24.2% in 3Q07 from 24.7% in both 3Q06 and 2Q07. (3) Cost of sales in 3Q07 was Bt3,118 million, decreased 14.3% y-o-y from Bt3,638 million in 3Q06. On a quarterly basis, cost of sales increased 8.6% due to higher rebate to distributors. For 9M07, total costs were relatively flat at Bt42,004 million compared to Bt41,967 million in 9M06. Selling and administrative expenses (SG&A) SG&A were Bt2,959 million in 3Q07, increased 12.9% y-o-y from Bt2,621 million in 3Q06 from higher bad debt provision. In 3Q07, bad debt provision as a percentage to total postpaid revenue was 7.0% compared to 1.4% in 3Q06 due to aggressive postpaid subscriber acquisitions since the beginning of 2007. However, bad debt provision improved to 7.0% in 3Q07 from 8.1% in 2Q07 based on the Group's conservative credit policy in screening new postpaid subscribers. Quality of debtors remained high with over 90% of gross account receivable aging are current and due less than 3 months. Marketing expenses as a percentage to total revenue in 3Q07 declined to 3.3% from 3.5% in 3Q06 and 3.8% in 2Q07 as marketing activities were slowed down during the low season. For the full year, the Group maintains the marketing budget at 4% to total revenue. For 9M07, SG&A expenses increased 17.4% y-o-y to Bt9,386 million in 9M07 from Bt7,997 million in 9M06 from higher marketing expenses and bad debt provision. Net Profit The Group posted a net profit of Bt3,512 million in 3Q07, a fall of 3.9% y-o-y and 4.1% q-o-q. For 9M07, net profit was Bt11,159 million, decreased 14.6% y-o-y from Bt13,069 million in 9M06. Liquidity As of 30 September 2007, current ratio declined to 52% from 74% as of 31 December 2006 due to less cash outstanding from dividend payment during 3Q07. Current assets The current assets as of 30 September 2007 were Bt 16,755 million, declined 26.8% from Bt22,893 million at the end of 2006 mainly from less cash and cash equivalents. 30 September 2007 31 December 2006 Million % Total Million % Total Baht assets Baht assets Cash and cash equivalents 7,470 5.9% 12,742 9.5% Trade receivables 5,024 4.0% 4,898 3.6% Inventories for network spare part 1,298 1.0% 2,055 1.5% Other current assets 2,963 2.3% 3,198 2.4% Total current assets 16,755 13.2% 22,893 17.0% Current liabilities Current liabilities slightly increased to Bt32,013 million from Bt 31,039 million at the end of 2006 as a result of increase in short term borrowings. 30 September 2007 31 December 2006 Million % Total Million % Total Baht Liabilities Baht Liabilities Short term loans 6,937 12.3% 1,000 1.8% Trade payable 4,089 7.3% 5,760 10.2% Portion of long-term debt due 2,516 4.5% 6,507 11.5% in 1 year Concession right payable, 10,668 19.0% 7,155 12.6% accrued concession fee and excise tax Unearned income 3,191 5.7% 3,659 6.5% Income tax payable 1,102 2.0% 2,963 5.2% Other current liabilities 3,510 6.2% 3,995 7.0% Total current liabilities 32,013 57.0% 31,039 54.7% Assets Total assets as of 30 September 2007 was Bt126,481 million, decreased from Bt 134,301 million as of 31 December 2006 mainly because of lower current asset. Fixed assets including Property Plant and Equipment and assets under concession represented 71% of total assets. 30 September 2007 31 December 2006 Million % of assets Million % of assets Baht Total Baht Total Current assets 16,755 13.2% 22,893 17.0% Property, plant and equipment, 7,966 6.3% 7,797 5.8% net Asset under concession 80,185 63.4% 81,096 60.4% agreement, net Intangible assets 11,031 8.7% 12,197 9.1% Deferred tax assets 9,873 7.8% 9,763 7.3% Other non-current assets 671 0.5% 555 0.4% Total assets 126,481 100% 134,301 100% Capital structure The Group's capital structure remained strong with debt to equity ratio at 48% as of 30 September 2007. Net debt to equity (Net debt = total debentures and borrowings minus cash) was 37%, slightly increased from 26% as of 31 December 2006. 30 September 2007 31 December 2006 Total liabilities to equity 80% 73% Debt to equity 48% 43% Net debt to equity 37% 26% Debentures and Loans As of 30 September 2007, total debentures and borrowings were Bt33,601 million, increased from Bt33,149 million at the end of 4Q06. The increase in borrowing was to finance operating activity and network capacity expansion. 30 September 2007 31 December 2006 Million % Total Million % Total Baht Liabilities Baht Liabilities Short term borrowing 6,937 12.3% 1,000 1.8% Portion of long-term debt 2,516 4.5% 6,507 11.5% due in 1 year Long-term debt 24,148* 42.9% 25,642* 45.2% Total debts 33,601 59.8% 33,149 58.5% * including swap contract payable incurred from JPY-denominated syndicated loan which was swapped into Thai Baht in total of Baht 9,485 million Shareholders' equity The Group's shareholder's equity was Bt70,308 million as of 30 September 2007 compared to Bt77,599 million as of 31 December 2006, a decline due to an interim dividend payment in 3Q07. Cash Flow For the nine-month period, the Group generated Bt26,812 million of cash flow from operations (after interest, tax, and changes in working capital) and had net increase in short term borrowing of Bt5,868 million. Of this amount, the group spent Bt13,373 million on capital expenditures, repaid Bt5,515 million of long-term debentures and finance lease, and paid Bt18,622 million in dividend. As a result, the group had net decrease in cash of Bt4,666 million for the period. This document contains certain forward-looking statements. They refer to future events and to the future financial performance of the Companies. Forward-looking statements generally can be identified by the use of forward- looking terminology such as "may", "will", "expect", "intend", "estimate", "anticipate", "believe" or "continue". Although the Companies believe that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements