TM OFFERS SPECIAL ESOS

Telekom Malaysia Berhad today announced that it will implement a Special Employee Share Option Scheme (ESOS) for all employees in the Group to ensure the success of the demerger exercise. In conjunction with this scheme, a total of 137, 592, 300 ordinary shares of RM1.00 each in TM, representing approximately 4% of TM’s existing issued and paid-up share capital, were issued today to TM ESOS Management Sdn. Bhd., which has been established to act as trustee under the Special ESOS.

The shares were issued at a price of RM9.70, which represents a discount of approximately 5.6% to the 5-day weighted average market price of TM shares to 14 March 2008. RM9.70 is also the exercise price of the options granted to TM employees on 17 March 2008.

In September last year, TM announced that it is undertaking a demerger exercise to separate its mobile and fixed businesses into two distinct entities; namely TM (FixedCo) and TMI (RegionCo). TM obtained approval from its shareholders at an Extraordinary General Meeting on 6 March 2008 for the demerger, listing of TMI and a Special ESOS.

“The Special ESOS which we are about to implement is different from the previous schemes that we have implemented before. The Special ESOS has been structured in such a manner to ensure the continued alignment and collaboration of both TM and TMI employees over the next 18 months, the critical period in our demerger exercise. On average, an employee will get more shares under the Special ESOS as compared to the previous scheme. In addition, the other attractive features of the Special ESOS also include the offer of TMI shares and opportunity for low-risk transaction via “Selling Flexibility”, said Dato’ Sri Abdul Wahid Omar, Group CEO of TM

Only staff who have served the Company for more than a year are eligible for the Special ESOS. The main difference between the Special ESOS as compared to the previous schemes is the fact that the Special ESOS is implemented to reward and recognise “forward loyalty” by the staff, as compared to “past loyalty”, in the previous schemes.

“The demerger exercise is an important corporate exercise for TM, and this requires commitment from all employees to succeed. Employees’ support is crucial, especially during the initial stage after the completion of the demerger when both companies start to operate as separate entities,” added Dato’ Sri Abdul Wahid.

“The main objective for the Company to implement the Special ESOS is to ensure that employees remain with the Company and stay focused throughout the demerger period. Employees will have to ensure that it will be business as usual and customers’ needs are not compromised. Quality of service remains our top priority and we will work hard to ensure that there will not be an impact to our customer services. As a reward for their loyalty and commitment for the critical next 18 months, the shareholders gave their approval to implement the Special ESOS. Based on that same purpose, distribution of shares under the scheme will be done in tranches, i.e. 40% today, 30% on 17 September 2008 and the remaining 30% on 17 March 2009. So, for example, those who are no longer serving TM or TMI from 1 July 2008 will only receive 40% of the ESOS share allocation, “ explained Dato’ Sri Abdul Wahid.

Rationale for the implementation of the Special ESOS prior to the completion of demerger

The last ESOS scheme by TM named ESOS 3 expired on 31 July 2007. In view of the proposed demerger exercise, a new 5-year ESOS, if any, would only be launched after the completion of the demerger, where TM (FixedCo) employees would only enjoy TM (FixedCo) scheme, and likewise TMI (RegionCo) employees would only enjoy TMI (RegionCo). Nevertheless, the Management has convinced the Board of Directors and shareholders about the importance of this 18-month Special ESOS to be implemented prior to the demerger. This will enable TM staff to obtain share option in TMI, which is expected to be listed soon on Bursa Malaysia.

Amount of Shares Allocated

The amount of shares allocated for staff for this Special ESOS is more than as compared to previous ESOS, considering the shorter timeframe. For example:

• Under ESOS 3, which was carried out over 5 years (2002 to 2007), the average allocation given to non-executive staff was 5,167 shares per staff. This amount is over the ESOS 3 timeframe of 5 years, or on average 1,550 shares over 18 months period.
• Under the Special ESOS, non-executives on the higher grades will be getting 3,000 shares, while those on lower grades will be receiving 2,000 shares. This is more than the average amount of 1,550 shares as stated above.

Hence, on average, most employees will be receiving more shares under this scheme, as compared to ESOS 3 which was concluded in July last year.

Other Benefits of the Special Demerger ESOS

After the listing of TM International Berhad (TMI) next month, for every TM share held, employees will receive one TMI share. This will enable them to benefit from the growth of both companies, regardless of whether they are in TM or TMI.

“In addition, TM has introduced the “Selling Flexibility” method to help employees in their transaction. Under this method, they don’t have to find their own financing to exercise their shares. This means that they don’t have to pay interest on loan, and they are free from the risk of forced selling if the market price is lower than your exercise price. So, whenever they are ready to sell, they just have to contact the party helping us to manage this method, and then they will receive profit based on the difference between the Exercise Price and Offer Price. Since they don’t have to use their own money or take up a loan to exercise the ESOS, they will have sufficient time to exercise before the deadline of 16 September 2009. The deadline of 16 September 2009 is also used for those on mandatory retirement, Medical Board-out (MBO) and death,”

“Clearly, the special ESOS has numerous benefits and TM has made it simple and straightforward for all employees to exercise their option and we hope they will take advantage of this special scheme,” concluded Dato’ Sri Abdul Wahid.

For further information on TM, visit www.tm.com.my.

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