Management's Discussion and Analysis Overview For 3Q06, AIS and its subsidiaries ("The Group") reported a total of 17,723,100 mobile subscribers, comprising of 1,973,600 postpaid subscribers (GSM Advance and GSM 1800) and 15,749,500 prepaid (One-2-Call!) subscribers. This represented net additions of 405,200 for the period. For the nine-month period of 2006 (9M06), the Group added a total of 1,314,200 subscribers, represented an increase of 45% y-o-y from 909,200 over the same period of last year. Service revenues in 3Q06 were dampened by lower usage due to an ending of the low-price promotions in July 2006 and seasonality impact as third quarter usually has the lowest usage in a year. As a result, service revenues in 3Q06 declined 5% y-o-y and 2% q-o-q to Baht 18,046 million. Sales revenues increased 19.4% y-o-y based on strong handset unit sales since the beginning of the year but declined 5.6% from the previous quarter. For the nine-month period of 2006 (9M06), service revenues were Baht 57,736 million, decreased 3.7% from Baht 59,956 million in 9M05 as the low-price promotions were launched earlier in late March this year compared to May for last year. Sales revenues were improved to Baht 11,364 million, represented an increase of 37% from Baht 8,293 million in 9M05. The Group incurred higher total cost of Baht 41,967 million in 9M06 compared to Baht 39,463 million in 9M05, represented an increase of 6.3% y-o-y due to higher cost of sales and increasing operating cost for network quality improvement and capacity expansion. Net profit was Baht 13,069 million in 9M06, declined 7.4% from Baht 14,109 million in 9M05. For the period, the Group issued new long-term debentures of Baht 11,427 million to finance capital expenditure, refinance a portion of matured debentures and to support its operations. Results of operations - Quarterly Comparison Million Baht 3Q06 3Q05 % change 2Q06 % change restated y-o-y q-o-q Service revenue 18,046 18,989 (5.0%) 18,422 (2.0%) Sales revenue 3,858 3,230 19.4% 4,086 (5.6%) Total revenue 21,903 22,219 (1.4%) 22,508 (2.7%) Total cost 13,876 13,435 3.3% 13,968 (0.7%) Gross profit 8,027 8,784 (8.6%) 8,540 (6.0%) SG&A 2,621 2,433 7.6% 2,559 2.4% Earnings before tax 5,293 6,113 (13.4%) 5,919 (10.6%) Net profit 3,653 4,178 (12.6%) 4,126 (11.5%) 9M06 (9-month)9M05 (9-month) restated% change y-o-y Service revenue 57,736 59,956 (3.7%) Sales revenue 11,364 8,293 37.0% Total revenue 69,100 68,249 1.2% Total cost 41,967 39,463 6.3% Gross profit 27,133 28,786 (5.7%) SG&A 7,997 7,468 7.1% Earnings before tax 18,920 20,572 (8.0%) Net profit 13,069 14,109 (7.4%) Revenues & Profitability Total Revenue Total revenues in 3Q06 were Baht 21,903 million, decreased 1.4% y-o-y and 2.7% q-o-q, resulted mainly from the decrease in service revenues. Of total revenues, 82% represented revenues from mobile services and the rest 18% from handset and SIM card sales. Service revenues in 3Q06 were Baht 18,046 million, a fall of 5% y-o-y and 2% q-o-q due to lower usage following an ending of low-price promotions in July 2006 and quarterly seasonal effect as September was normally the lowest usage month in a year. Revenues from handset and SIM card sales were Baht 3,858 million, improved 19.4% y-o-y but declined 5.6% q-o-q. The growth from last year was driven by strong handset sales as handset selling prices continued to decline since the beginning of the year. For 9M06, the Group generated total revenues of Baht 69,100 million, increased 1.2% from Baht 68,249 million in the same period last year due to higher sales from handset and SIM card. Total Cost Total cost includes cost of services and equipment rentals, concession fee and excise tax, and cost of sales. In 3Q06 The Group incurred Baht 13,876 million of total cost, increased 3.3% y-o-y but decreased 0.7% q-o-q. Cost of services and equipment rentals declined 4.2% y-o-y to Baht 5,826 million in 3Q06 from Baht 6,081 million in 3Q05 attributed to lower amortization as some portion of assets under concession agreement had been fully amortized. However, the cost of service increased slightly by 1.1% q-o-q due to higher maintenance expense and numbering fee. The Group started to pay numbering fee to the National Telecommunications Commission (NTC) since September 2006 at Baht 1/number/month. The concession fee and excise tax were Baht 4,411 million in 3Q06, decreased 1% y-o-y and 3% q-o-q resulted from lower service revenues during the period. For the nine-month period of 2006, concession fee and excise tax as percentage of service revenue were 24.6%, compared to 23.4% for the same period in 2005 due to the increase of concession fee on postpaid service from 25% last year to 30% currently. Cost of sales were Baht 3,638 million in 3Q06 increased from Baht 2,898 million in 3Q05 but declined slightly from Baht 3,660 million in 2Q06. This represented a sales margin of 5.7% in 3Q06 compared to 10.3% in 3Q05 and 10.4% in 2Q06. Sales margin was usually fluctuated from quarter to quarter depending on the launches of new handset models. Selling and administrative expenses were Baht 2,621 million in 3Q06, represented an increase of 7.7% y-o-y and 2.4% q-o-q. The higher expenses were mainly caused by higher marketing expenses following increasing marketing activities on refreshments of the Group's three brands - GSM Advance, One-2-call and Sawasdee. SG&A to total revenues increased to 12% in 3Q06 compared to 11% in 3Q05 and 11.4% in 2Q06. In 3Q06, interest expenses were Baht 372 million, increased from Baht 327 million in 2Q06 as the Group issued a new debenture of total Baht 11,427 million in September 2006. Net Profit The Group posted a net profit of Baht 3,653 million in 3Q06, a fall of 12.6% y-o-y and 11.5% q-o-q. For 9M06, net profit was Baht 13,069 million, decreased 7.4% from Baht 14,109 million in 9M05. Liquidity During the first nine month period of 2006, current ratio improved slightly to 57% as at end of September 2006 from 55% as at end of December 2005. This was resulted from an increase in amount of cash and cash equivalents from Baht 11,456 million as at the end of 2005 to Baht 13,828 million as at the end of September 2006. Current assets As of 30 September 2006, the Group's current assets was Baht 23,235 million, increased 14% from Baht 20,347 million as of 31 December 2005 due to increase in cash and prepaid expenses such as concession fee and excise tax. Current liabilities Total current liabilities also increased to Baht 40,746 million from Baht 36,734 million at the end of December 2005 due to increase in trade accounts payable and current portion of long-term debentures. 30 September 2006 31 December 2005 Million % Total Million % Total Baht Liabilities Baht Liabilities Trade accounts payable 6,519 16.0% 4,520 12.3% Current portion of 16,499 40.5% 14,241 38.8% long-term borrowings & debentures Concession right payable, 8,536 20.9% 7,354 20.0% accrued concession fee and excise tax Other current liabilities 9,192 22.6% 10,619 28.9% Assets Total assets, as of 30 September 2006 was Baht 132,368 million, grew by Baht 4,408 million from Baht 127,960 million as of 31 December 2005. The increase primarily came from increases in cash & cash equivalents and asset under concession agreement as the Company continued to invest in network capacity and quality. Current assets accounted for 17.6% of total assets. Details of major items were as follows. 30 September 2006 31 December 2005 Million % of Million % of Baht Total assets Baht Total Assets Current assets 23,235 17.6% 20,347 15.9% Property, plant and equipment, net 7,754 5.9% 8,259 6.5% Asset under concession agreement, net 78,327 59.2% 75,843 59.3% Deferred tax asset 9,816 7.4% 8,946 7.0% Other non-current assets 13,236 10.0% 14,565 11.4% Capital structure The Group's balance sheet and capital structure remained strong, which support company's ability to continue paying high dividend pay-out. The strong capital structure reflected in low total liabilities to equity at 78% as of 30 September 2006, compared to 60% as of 31 December 2005. The slight increase in ratio was a result of an issuance of debentures of total Baht 11,427 million in September 2006. Net debt to equity (Net debt = total debentures and borrowings minus cash) also increased to 27% as of 30 September 2006 from 18% as of 31 December 2005. Debentures and Loans Total debentures and loans as of 30 September 2006 were Baht 33,632 million, increased from Baht 25,451 million as of 31 December 2005. In September 2006, the Group issued new long-term debentures of total Baht 11,427 million. These debentures had maturity of 3-7 years with an average interest rate of 5.9% per annum. 30 September 2006 31 December 2005 Million % Total Million % Total Baht Liabilities Baht Liabilities Current portion of long-term borrowings & debentures 16,499 28.5% 14,241 29.7% Long-term borrowings 23 0.04% 19 0.04% Long-term debentures 17,110 29.5% 11,191 23.3% Total interest bearing debts 33,632 58.1% 25,451 53.0% Shareholders' equity The Group's shareholder's equity decreased to Baht 74,451 million as of 30 September 2006 from Baht 79,935 million as of 31 December 2005, mainly due to dividend payment of total Baht 18,623 million. Cash Flow For the first nine-month period of 2006, the Group continued to show strong cash flow position. The Group generated net cash flow from operations of Baht 27,656 million and had net additional cash inflow from Baht 11,410 million new debentures. The use of funds was to spend on capital expenditure of Baht 12,477 million, refinance Baht 3,261 million of long- term debt, pay Baht 18,623 million dividends, and the rest kept as cash on hand.