3. Nature of Business

3.1 Key Development

Key Development before 2011

September

  - AIS launched Rebranding campaign featuring new logo and new motto
  ‘AIS: Your World. Your Way.’ As the leader in wireless communication,
  AIS has proven to never stop improving ourselves and bringing the best
  to our customers.

Key Events in 2012

February

  - AIS and Krungthai Bank co-developed a new innovation ‘Simple
  Withdrawal by Password at ATM, enabling customers who apply for mPAY
  to simply transfer and withdraw money around the clock by using the
  given password at Krungthai Bank ATMs without having to use a card.

March

  - AIS opened up a call center operations office at the Mahatai
  Foundation for People with Disabilities in Chonburi province to
  provide employment opportunities for the disabled in the regional
  areas.

  - In collaboration with newspaper publishers, AIS launched the first
  online newspaper service in Thailand through the AIS Bookstore.

April

  - Creating a new level of service, AIS opened a new type of AIS Shop
  in Pitsanulok. The eService Kiosk enables customers to make
  transactions 24 hours a day.

May

  - AIS started the new "AIS The StartUP" project to train highly
  creative application developers to become entrepreneurs in local and
  international markets. With firm support from AIS, these young
  business operators will be given professional advice, experience in
  co-developing and testing applications on advanced technology
  platforms, and an excellent opportunity to meet investors.    

  - To demonstrate its readiness to play a part in the AEC from 2015,
  AIS created a language database with Nong Oon Jai. The database is
  composed of 10 ASEAN languages on www.ais.co.th and can be downloaded
  for free through the AIS Bookstore.

June

- AIS’ network was to ready to comply with the advanced IPv6 technology
that replaced the expiring IPv4 connections. This development was
announced at the ‘Thailand IPv6 Conference Day 2012’ organised by the
Ministry of Information and Technology of Thailand on 26 June 2012.

July

  - AIS in collaboration with the National Electronics and Computer
  Technology Center (NECTEC) co-developed a new free application called
  “Traffy bSafe” to provide convenience for AIS customers and people in
  general. This innovation was created to help users to select the most
  convenient route for their commute. iOs users can download Traffy
  bSafe through the App Store, while Android users can get the
  application from the Android Market. For AIS customers, dial *900 and
  select AIS Apps Store, and then click download Traffy bSafe.

August

- AIS and HOODDUDE co-developed “AIS Guide & Go”, the most effective GPS
for Smartphones. Under the concept of a Social Navigator, AIS Guide & Go
is the first mobile application that can be connected to social media
platforms and allows users to log-in to their Facebook accounts through
the application.

October

  - AIS joined hands with the Ministry of Information and Technology of
  Thailand to launch ‘ICT Free WiFi for the Public by AIS’. With 50,000
  WiFi hotspots, Thai people are able to connect wirelessly to hi-speed
  Internet for free.

November

  - AIS became the first operator in Asia to provide advanced digital
  services when it launched the “AIS Smart Table” service, enabling AIS
  customers to enjoy multimedia form of smart device function,
  applications, promotion packages through touch-screen technology at
  the AIS Shop, the Mall Bang Kapi branch.

December

  - Advanced Wireless Network Company Limited, a wholly owned subsidiary
  of AIS, was officially awarded the 2.1GHz license from the National
  Broadcasting and Telecommunications Commission (NBTC)

  - AIS launched AIS Flagship Store which combines technology with
  services for total experience to AIS customers at 4^(th) floor, the
  CentralWorld

3.2 Business Overview

Advanced Info Services Public Company Limited (AIS) is the leading Thai
mobile telecommunication service company with 54% of revenue market
share and serving 44% of subscriber market share (nearly 36 million
subscribers) as of December 2012. Utilising our 22 years of extensive
experience in the industry, AIS is committed to delivering the highest
standard of mobile services to Thai society through our premium quality
mobile network, which covers 97% of the country.

AIS and our subsidiaries provide mobile telecommunication services on
900MHz, 1800MHz, and 2.1GHz with GSM and 3G technology. Having entered
into a 25-year BTO (Build-Transfer-Operate) contract with TOT
Corporation Public Company Limited (TOT) in 1990, AIS provides mobile
telecommunication services on 900MHz on a revenue share basis with TOT.
In 1997, our subsidiary, the Digital Phone Company Limited (DPC),
entered into a 16-year BTO contract with CAT Telecom Public Company
Limited (CAT) to operate mobile telephone services on 1800MHz. DPC has a
network roaming agreement with AIS, allowing both operators’ subscribers
to enjoy a nationwide mobile phone service. In addition, our subscribers
can use our international roaming services in 214 countries worldwide.
Through our joint venture company, the Bridge Mobile Pte. Ltd. (BMB),
AIS is a member of Bridge Alliance, a partnership of 11 leading mobile
operators in the Asia Pacific region, which results in our subscribers
having extensive privileges and services when roaming within the
countries covered by the alliance’s networks. We also provide an
international direct dialling (IDD) service which can be activated by
dialling the prefix 005 or 00500 via AIN GlobalComm Company Limited
(AIN). Customers can use this service to make international calls to 240
countries around the world.

In 2012, AIS enhanced the mobile Internet customer experience by
increasing data network capacity in response to growing data usage and
the evolving digital lifestyle of Thais. Our subscribers can access the
Internet seamlessly through our quality data network which incorporates
3G, Wi-Fi and EDGE⁺ technology. In 2012, AIS continued to focus on the
quality of our services to create better customer experiences. We
increased the number of our 3G-900MHz base stations from 1,884 in 2011
to 3,500, expanding the coverage to include Bangkok and 17 other
provinces. In collaboration with Jasmine International Public Company
Limited, we provided WiFi services through more than 50,000 WiFi
hotspots nationwide with speeds of up to 6mbps. Subscribers can surf the
Internet nationwide with “EDGE⁺” technology, which is an improved
version of the conventional version of EDGE and has a maximum speed of
296kbps. In 2013, AIS subscribers will enjoy a better 3G experience from
Advanced Wireless Network Company Limited (AWN), a wholly-owned
subsidiary of AIS. AWN attended the 2.1GHz spectrum auction and received
operating licenses from the NBTC in December 2012.

Understanding customers’ needs and delivering a quality experience
through customer relations management programmes is our service
philosophy. Our call center service is a key success factor and
differentiates AIS from our competitors. In addition to handling general
inquiries and providing after sales service, AIS call centers can
recommend new marketing campaigns as well as products and services to
customers. For faster and more convenient access, callers can contact
our call centers through several channels, ranging from iCall, a chat
and VDO call application, to the social networks which are most popular
among Thais, such as the Pantip webboard, Facebook and Twitter. We have
also developed the “iSign” application for hearing impaired customers,
allowing them to use sign language via a webcam. As the usage of smart
devices such as Smartphones, Tablets and Aircards continues to grow, in
both the daily and working life of consumers, AIS has responded to this
trend by training more than 694 device gurus in the relevant smart
device technologies so that they can educate and advise smart device
users, especially in terms of technical aspects. Customers can meet with
our device gurus at AIS service centers, AIS Serenade service centers
and AIS call centers. To provide our customers with greater independency
and freedom, we also launched our “eService” application, allowing
customers to check their balance and usage, change their promotions and
pay their bills online. In addition, AIS has developed the “mPAY”
service to enable customers to use their mobile phones to make
transactions, such as paying their mobile phone service bills, shopping
online, topping up their mobile phone service credit and playing games
online.

Effective distribution channels are important to our growth as they
provide our customers with easy access to handsets. Through the Wireless
Device Supply Company Limited (WDS), our handsets, SIM cards and refill
cards are distributed to more than 950 dealers countrywide. The variety
of channels and nationwide coverage of our distribution network are
important factors in supporting our growth strategy. WDS also sells SIM
cards and refill cards via electronic channels to prepaid subscribers,
who represent 90% of our total subscriber base.

Structure of the group of companies

As of as of 31 December 2012, the group of companies and percentage of
shareholding can be shown as follows;

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3.  Revenue structure

Revenue structure from providing service & sales income in AIS group to
the third party within 3 years.

[TABLE]

4.  Business Direction over the next 3-5 years

  The next 3-5 years is set to be an important period as the Thai mobile
  telecommunications industry will undergo a variety of changes.
  Firstly, the business model will be shifted from
  Build-Transfer-Operate (BTO) contracts - used for more than 20 years -
  to operating licenses issued by the National Broadcasting and
  Telecommunications Commission (NBTC), an independent industry
  regulator. Secondly, full-scale 3G services will be launched on 2.1GHz
  licenses in 2013, while the existing BTO contracts will expire in 2013
  for 1800MHz and in 2015 for 900MHz. As the leading Thai mobile
  operator, AIS views these changes as business opportunities to offer
  new services in response to the evolving consumer behaviour of relying
  more on digital technology. By combining 2G, 3G and future 4G
  technology platforms, we can render services tailored to each consumer
  segment. To enhance operating efficiency, we will integrate and
  utilise the advantages of our current mobile spectrums of 900MHz,
  1800MHz and 2.1GHz with the new spectrum bands which will be allocated
  by NBTC in the future.

  The demand for mobile data in Thailand has continued to grow over
  recent years. AIS mobile data subscriptions have increased from 9
  million (27% of our subscriber base) in 2011 to 12.2 million (34% of
  our subscriber base) in 2012, while the booming popularity and falling
  prices of Smartphones have also resulted in the percentage of our
  subscriber base using these devices increasing from 12% to 17% over
  the same period. Responding to the growing demand for mobile data and
  the evolving digital lifestyles of customers with the aim of creating
  sustainable, long-term growth, our business direction over the next
  3-5 years will be to focus on 3G services while also preparing for the
  expiration of the BTO contracts. Our business goals for this period
  are to provide quality services and consolidate our position as leader
  in the Thai mobile telecommunications industry.

  Leading the way in providing quality 3G 2.1GHz services

  AIS aims to consolidate its position at the forefront of the industry
  by leading the way in the 3G era on the back of the allocation of the
  2.1GHz spectrum last year. Our working philosophy continues to be
  based on “Quality DNAs” (Device, Network, Application, Services), our
  concept of quality in all service dimensions. The high quality
  devices, networks, applications and services that our customers
  experience will serve to enhance our position as No.1 in the
  customers’ mind. In addition, we are committed to creating a variety
  of services that enhance the lifestyle of our customers and match the
  diversity of consumer behaviours to reflect our slogan: “Your World.
  Your Way”.

  Just as our existing nationwide 900MHz network is the most trusted on
  the market today, we aim to build on this reputation by establishing a
  new, high-quality 3G-2.1GHz network across Thailand with the same
  level of customer satisfaction. The new network will deliver a better
  customer experience with a faster mobile Internet speed from the new
  2.1GHz capacity. At an initial investment of Baht 70 billion, coverage
  of the new network will match that of the existing 900MHz network
  within 2 years following the release of the 2.1GHz license. As a
  complement to this quality network, we will introduce a variety of
  mobile phones to serve all customer segments, ranging from high-end
  Smartphones to 3G featured phones with mobile broadband capability.
  These gadgets will be bundled together with various packages tailored
  for each customer group. With our extensive experience of 22 years in
  this industry and the largest subscriber base in Thailand, many key
  players with expertise in strategic areas choose AIS as their partner
  of choice. Our strategic partnerships continue to create new value
  added services that enhance the daily life of our subscribers, such as
  through the AIS bookstore for mass consumers and through business
  solutions for our corporate users. However, the most important value
  that we look to deliver to our customers remains a better service
  experience. To this end, we continue to open new AIS Flagship Stores
  that create a total experience for customers and integrate the latest
  technologies such as AIS Smart Booking Appointment, which allows
  customers to schedule appointments in advance. We also have an online
  service kiosk, a 24-hour service which allows customers to make
  transactions by themselves such as changing their promotions and
  checking their usage. At our service points, we provide help and
  advice for smart device users from our dedicated staff who have passed
  the

  standard training courses of equipment manufacturers and application
  developers. In cooperation with our partners, we also continue to
  strengthen the long-term relationship with our customers by creating
  new privileges exclusive to AIS customers, such as the Serenade
  programme.

  The 3G services on 2.1GHz will drive the growth of non-voice revenue
  at a rate of 25-30% in 2013. Non-voice revenue drivers will come
  primarily from the rising number of Smartphone users as a result of
  lower equipment price and growing social network usage. The 3G service
  will also support Internet demand by increasing accessibility. With
  the faster data speed that comes from 3G technology, many new products
  and services will be introduced. Voice revenue will continue to
  increase, albeit at a slower rate . Overall, service revenue is
  predicted to grow at a rate of 6-8% in 2013.

  Being ready to capture the 4G opportunity

  The latest wireless technology is being developed to 4G standard with
  faster speed and higher efficiency. Many countries have already
  launched commercial 4G to enhance their existing 3G services.
  Committed to bringing the latest technology to the Thai market and
  continuing in our efforts to develop the Thai telecom infrastructure
  to a global standard, AIS is also involved in promoting 4G services.
  In 2012, AIS became the first operator to introduce 4G technology in
  Thailand when we cooperated with TOT to test 4G on 2300MHz and with
  CAT to test 4G on 1800MHz. In doing so, we helped create awareness of
  this new technology while also developing the technical capability of
  our engineers in preparation for the service becoming more widely
  available in the future.

  Within the next 3-5 years, we expect that 4G will become a
  supplemented data service and enhance the user experience of our 3G
  service customers, especially in terms of multimedia applications and
  data connection in high population areas such as Bangkok. 4G will also
  address the Internet connection inadequacies that currently exist in
  Thailand. With the high capability of our people, our extensive
  experience and our strong financial position, AIS is ready to provide
  4G service in Thailand. Whichever business model prevails, we will
  join the 4G spectrum auction once the policy is set by the NBTC.
  Alternately, we will collaborate with business partners to co-launch
  4G in the Thai market.

  Providing a service on 900MHz and 1800MHz for the long term

  Our 900MHz and 1800MHz BTO contracts will expire in the next 3-5
  years. The 1800MHz contract will end in 2013, while the 900MHz
  contract is due to conclude in 2015. We believe that a significant
  number of subscribers will still be using both networks when these
  contracts expire. Therefore, NBTC, as an industry regulator, will have
  to take the consumer benefits into consideration and allow us to
  continue providing these essential services to consumers.

  With our extensive experience of operating both 900MHz and 1800MHz
  networks and our in-depth understanding of the customer and market
  conditions, we are confident that we are the most capable service
  provider to operate services on these networks. As such, we intend to
  continue operating both 900MHz and 1800MHz networks and rendering
  quality services to the Thai market. With the aim of delivering
  maximum benefits to consumers and strengthening Thailand’s
  competitiveness through a reliable telecommunications infrastructure,
  we are ready to cooperate with NBTC, TOT, CAT and all relevant parties
  to continue our service on both 900MHz and 1800MHz while also
  developing and enhancing the networks with better technologies such as
  4G.

  Promoting an Eco-System in the Thai telecommunications industry

  AIS believes in the Eco-System concept, a cooperation with specialists
  in specific fields with the aim of sharing our expertise and growing
  together in the digital business. The accessibility to more than 36
  million subscribers that our network provides makes us the partner of
  choice for many key players. Supporting and collaborating with our
  business partners, we create innovative services for customers. The
  benefits from the cooperation are shared among the partners, while AIS
  also helps our partners by co-marketing our services. For example, we
  join with key handset manufacturers to introduce their

  latest models before our competitors, and we have also cooperated with
  one of the largest Wi-Fi operators, 3BB, to introduce WiFi to AIS
  customers nationwide. Our first e-Book store platform was developed by
  Ookbee, an application developer, while several other privileges
  exclusive for AIS customers are co-provided by our many famous
  partners.