3. Business Operations of ADVANC and its Subsidiaries

Services rendered in year 2007 can be divided into two major types as
follows:

(1) mobile phone services with AIS and DPC as the service providers,
    offering a range of services namely postpaid subscription, prepaid
    subscription, wireless/non-voice communication, enterprise business,
    and customer relation management. Revenue earned from these services
    accounted for 87.4% of the total revenue

(2) sales of handset, SIM card and other related products, accounted for
    12.6% of the total revenue

3.1 Products and services

AIS main services include both prepaid and postpaid service. Prepaid
subscribers make up 91% of the total subscriber base with postpaid
subscribers accounting for the remaining 9%. In revenue terms, prepaid
subscribers contributed 66.4% while postpaid revenue was 24.1%.

+--------------------------+-------------------------------------------+
| []                       | As of FY2007, AIS has a total of 24.1     |
|                          | million subscribers                       |
|                          |                                           |
|                          | +--------------+---------+------------+   |
|                          | |              | Sub     | ARPU       |   |
|                          | |              | scriber |            |   |
|                          | |              |         | (Baht)     |   |
|                          | |              | (m      |            |   |
|                          | |              | illion) |            |   |
|                          | +--------------+---------+------------+   |
|                          | | Prepaid      | 21.8    | 227        |   |
|                          | +--------------+---------+------------+   |
|                          | | Postpaid     | 2.3     | 744        |   |
|                          | +--------------+---------+------------+   |
|                          | | Total        | 24.1    | 279        |   |
|                          | +--------------+---------+------------+   |
|                          |                                           |
|                          | 66.4% of revenue is from prepaid services |
|                          |                                           |
|                          | +----------------------+--------------+   |
|                          | |                      | Breakdown of |   |
|                          | |                      | revenues     |   |
|                          | |                      |              |   |
|                          | |                      | %            |   |
|                          | +----------------------+--------------+   |
|                          | | Prepaid              | 66.4         |   |
|                          | +----------------------+--------------+   |
|                          | | Postpaid             | 24.1         |   |
|                          | +----------------------+--------------+   |
|                          | | Other                | 9.5          |   |
|                          | +----------------------+--------------+   |
|                          | | Total                | 100.0        |   |
|                          | +----------------------+--------------+   |
+--------------------------+-------------------------------------------+

Prepaid and postpaid services

  ------------- ---------------------------------------------------------
  GSM advance   Postpaid subscription service targeting young workers,
                businessmen, urbanites, tech-savvy, and quality-oriented
                customers

  GSM 1800      Postpaid subscription service focusing on simplicity and
                basic voice communication

  One-2-Call!   Prepaid service targeting teens and youngsters who thrive
                on having individual styles and expressing their
                creativity

  Sawasdee      Prepaid service targeting upcountry customers, first-time
                users, and those who need longer validity dates at
                affordable prices
  ------------- ---------------------------------------------------------

2007 promotions

For postpaid subscription service:

GSM 99 – monthly fee of Bt99 and charges apply only for the first five
minutes of a one hour call

Talueng – Give free minutes per day up to 40 minutes per day

Trong Trong – Bt300 for 600 minutes or Bt1,200 for 2,400 minutes

GSM Rang – “Buffet plan” for selected hours at a monthly charge of Bt159
or Bt299

For prepaid subscription service:

Aow Pai Leay – Bt0.50 or Bt0.25 per minute from second minute onward

SIM Fifty – cheapest rate at Bt0.25 per minute from second minute
onward, with Bt50 SIM price

Mae Yok SIM – Bt50 SIM cost with tariff of Bt2 per minute 24/7

Northeast SIM – localized tariff for northeast area; lower rates offered
for calls originating from the northeast area

Flexi – a combined two tariff plan: charge long-call rates for call
durations over 3 minutes and short-call rates for anything less than 3
minutes

North SIM – localized tariff for north area; lower rates offered for
calls originating from the north area

5 basic plans - for existing prepaid subscribers i.e. long call, short
call, day call, night call, SMS lover

T SIM – program targeting students and pre-teens with lowest rate at
Bt0.25 per minute from second minute onward

GSM Rang – “Buffet plan” for selected hours at a monthly charge of Bt159
or Bt299

Non-voice service

AIS non-voice revenue in 2007 grew 17% from the previous year and
accounted for 11% of service revenue (excluding IC). Non-voice services
are comprised of SMS, MMS, download, Calling Melody, data & portal. The
consistent double digit growth seen in 2007 was due to a nationwide
network upgrade to “EDGE” which significantly increased data speeds and
thus improved customer experience.

In 2007, AIS introduced AIS mobileINTERNET *900, an icon menu that gives
easy access to various mobile websites including mobile chat, news,
music, games, movies, and Google mobile. This increase in services
helped attract new users to mobile internet.

During the past year, AIS also continued to promote music content and
downloads through the launch of mobileLIFE music aimed at stimulating
usage and downloads of ringtones, M2G, and full songs. This resulted in
a higher number of subscribers using the mobileNET package.

To promote and stimulate usage of non-voice services, AIS used trial
service periods to attract customers. This strategy was successful
because it allowed subscribers to gain a better understanding of the
services they were using. This was particularly effective in promoting
conceptually new services such as “MMS Daily Free Time” which allows
subscribers to download and send free MMS messages for 15 minutes a day.

mPAY – mobile payment

mPAY is a mobile payment platform that was initiated two years ago. mPAY
services include prepaid refill, postpaid bill payment, utility bill
payment, and online shopping. Financial transactions through mPay are
facilitated through the six major banks in Thailand: Bank of Ayudhaya,
Siam Commercial Bank, UOB Bank, Bangkok Bank, Kasikorn Bank, and Krung
Thai Bank. In 2007, AIS also launched a new service platform called
mAGENT designed to support prepaid mobile refills.

International telephony service 005

In 2007, AIS launched its own international telephony service with a 005
prefix code. This service focuses on offering premium quality,
connectivity, and a network of 230 countries globally. During this
initial stage, brand awareness has been crucially important in helping
consumers recognize the new 005 prefix dial code. In 2007, revenue from
international calls represents around 0.91% of total revenue.

Enterprise business service

AIS Smart Solution is the business enterprise service arm serving both
corporate and SME markets and covering industries such as finance and
insurance, energy and manufacturing, ICT, trade and services, as well as
government agencies and educational institutions. In 2007, corporate
solutions development focused on promoting greater efficiency at work
through services such as Push Mail and SMS Solution.

Push Mail is an instant email solution compatible with security servers
and a variety of handsets. In 2007, AIS Smart Solution developed its
Push Mail service to work with clients’ mail servers across three
different platforms: BlackBerry, Microsoft and Nokia Intellisync.

SMS Solution was designed to cater to the unique usage requirements of
AIS’ customers. For example, AIS developed an SMS Solution for
Ramkamhang University which enabled the administration to distribute
class schedules and course grades to students via SMS. AIS also launched
SMS Broadcast for tradeshows, fairs and conferences to help traders
advertise their products and services to attract visitors.

Sales and distribution of mobile handsets

AIS is also engaged in the sale and distribution of mobile handsets
through its subsidiary, Wireless Devices Supply Co., Ltd. (WDS). In
2007, sales revenue from mobile handsets was 11.9% of total consolidated
revenue. Low-end, basic phones made up the majority of the handset
market as greater expansion into rural areas and increasing numbers of
multi-SIM users gave rise to stronger demand. WDS carries a variety of
lines from all the popular brands such as, Nokia, Motorola, LG, Sony
Ericsson, and Samsung. In July, WDS also launched its own brand of
mobile handsets under the name “Phone One”.

Customer Relationship Management

AIS has been strongly committed to CRM development for the past several
years to differentiate our service from our competitors and sustain
solid long term growth. In 2007, AIS developed a customer engagement
program aimed at building customer loyalty and advocacy. This approach
was also implemented throughout the organization, for example,
investment in data mining and customer insights, gathering voices of
customers from different touch points, customer surveys and research,
and mystery shoppers. Direct visits to customers from management were
another approach designed specifically to gain insights about AIS’
customers. Management travelled to various shops and dealers throughout
Thailand to interact with end consumers.

1)  Improvements in service standards were achieved by focusing on
    understanding customers’ core values, such as, convenience, quick
    service, accuracy, and friendly customer service representatives.
    Service time was reduced and adjusted to be more flexible. AIS shops
    were revamped to create a warm, friendly atmosphere in hopes of
    becoming “The most pleasant place to visit.” Customer service
    representatives were encouraged to be “The most pleasant people to
    interact with.”

2)  Activities to enhance the skills of call center employees and
    increase customer engagement included:

    -   Promotion consultancy to help customers decide the right tariff
        plans to best suit their usage pattern

    -   Face-to-Face Singing Call Center to support customers’ selection
        of songs for Calling Melody service

    -   SMS 1175, a service for the blind designed to have call center
        employees assist blind customer type and send SMS messages

    -   Multi-Language services to help non-Thai customers - English,
        Mandarin, Korean, Japanese, French, as well as regional Thai
        dialects, i.e. northern, north eastern, southern

3)  Privileges under the AIS Plus campaign included:

    -   Shopping discounts at Central department store, The Mall, The
        Emporium, Siam Paragon, as well as “shop to get free call”
        programs done in conjunction with Big C and Carrefour

    -   Dining discount at more than 3,000 restaurants nationwide, and
        free Bt1,000 dining coupons with AIS Plus

    -   Movies, karaoke, and bowling at one price of Bt60 with AIS Plus

3.2 Mobile industry and competition in 2007

[]

62% mobile market penetration 82% mobile market penetration

In 2007, the mobile industry had strong 32% growth with 13 million net
subscriber additions, growth similar to that experienced in 2006. At
year’s end, the number of total market subscribers was 53 million and
mobile penetration reached 82%. The strong growth was stimulated by the
competition exploiting a market-push approach mainly from free SIM
distribution and short-term low-price plans offered specifically to new
subscribers to encourage consumer trials. This resulted in changes in
consumer usage behavior as more subscribers opted to carry two or more
SIMs and/or mobile phones. With choices in hand, these multiple-SIM
users wisely took advantage of the different tariff plans to lower the
cost of their outgoing calls and make the best use of lower on-net
tariffs. The cheap short-term tariff plans also encouraged subscribers
to regularly replace their SIMs to take advantage of lower tariffs from
promotional SIM offers.

The impact of this market push was reflected in an increase in the
number of SIMs over the actual number of real users which resulted in a
continuous decline in the average revenue per user (ARPU) as well as a
rise in churn rate. Consequently, the market experienced much slower
revenue growth despite seeing strong subscriber growth. With overall
penetration at 82%, Bangkok and other major cities have started to reach
saturation at 100-120% penetration while areas upcountry such as the
north and northeastern provinces have around 30-40% penetration.
However, AIS has estimated that the overall organic subscriber
penetration (the actual number of real users) is in the range of 55-60%.
These figures suggest that potential for growth remains in the Thai
mobile market primarily due to lower organic subscriber penetration
rates upcountry where network expansion and competition will be a
continued focus going forward.

Overall price competition in 2007 improved continuously due in part to
the establishment of interconnection regulation. Low-price promotions,
most of which were offered as short-term plans, were limited only to new
subscriptions and focused mainly on lower “on-net” rates relative to
“off-net rates,” as well as being offered for only limited hours during
the day. Throughout the year, mobile operators continuously made upward
adjustments to tariffs for new subscriptions, focusing on: a) increasing
first and second minute rates, b) converting buffet plans and per-call
basis into per-minute pricing, c) limiting call duration for any
available buffet plans to better manage network utilization, d)
increasing off-net tariffs to reflect cost of interconnection. In the
second half of 2007, tariffs for existing subscribers were also raised.
This suggests an improving competitive landscape going forward and an
attempt to move away from aggressive price play.

AIS marketing strategy

[]

As of December 2007, AIS’ subscriber market share was 46%, a decline
from 49% in 2006. This was due to competitor’s aggressive free SIM
distribution and a different definition of reported subscribers. AIS’s
revenue market share, however, was maintained at 51%. During the year,
AIS focused on the following key marketing strategies to maintain
subscriber and revenue market share.

Innovative tariffs

In a competitive environment where pricing becomes the key strategy, the
development of innovative tariff plans are essential to lead the market
away from the purely aggressive low-price game. AIS, as a market leader,
has been exploiting different innovate tariff plans to capture the
unique behaviour of each target group particularly for sizable markets
such as the teen and upcountry markets.

The teen market has significant growth potential in both voice and data
services. Mobile users within this group stem from the increasing number
of college and high-school students and the high growth potential of the
pre-teen group. Tariff plans offered to this group focused on
value-for-money such as the U-SIM and T-SIM packages. The “Mao Mao”
package was designed as an on-top promotion to provide flexibility to
enable higher usage at a cheaper rate. With the Super IN, which
developed from the Intelligence network (IN), prepaid packages are
becoming more advanced such as “Flexi” plans, which basically combine
two types of pricing within one package. Subscribers gain benefit as
they are charged according to their actual usage based on real-time
recognition.

In low penetration rural areas, AIS has continued to expand and
strengthen network coverage as well as market specifically with a
distinctive brand called “Sawasdee”. Brand recognition at the district
and village level was also strengthened through rural caravan road shows
and various targeted marketing activities. In 2007, AIS launched
“Northeast SIM” and “North SIM” with special tariffs for calls that
originated from within designated local areas, targeting locals, whose
relatives and friends usually move away to work in other provinces, and
therefore keeping them connected through mobile communication despite
the distance. “Mae Yok SIM” is another localized campaign targeting
upcountry music fans, with around-the-country concert tours by popular
country singers and popular singer voting competitions via mobile
phones.

Variety of services differentiation

Continuous development of new services is also a key differentiation
strategy, with an objective to provide enhanced benefits to subscribers
other than price incentives. Service variety differentiates AIS from
other operators and has helped increase satisfaction from existing
subscribers while at the same time attracting new subscribers.

New services in 2007 included: “Balance & validity transfer” which
allows subscribers to transfer their available balance and/or validity
to another subscriber. This service launched under the “One-2-Call!”
brand with the “Freedom” concept which was developed further from the
previous “Pay for you” and “Refill for you” campaigns which were
successful last year. “Service as you wish version 2.0” under the “GSM
Advance” brand is another example that gives consumers more than voice
communication. For instance, the “Private number” service essentially
protects subscribers’ privacy when they want to hide their number
identity from the party they have called. “Call screening” empowers
subscribers to allow selected important calls to come in during their
busy or private times. “AIS Push M@il” is an instant mail service which
alerts subscribers once they receive new emails. Entertainment and news
are also fed daily to subscribers of TV on Mobile by ROK TV and MMS news
by The Nation Channel as well as cooperation with Google Earth for the
Google MAP service. Services also cover the latest developments for
international calls (005) through AIS’s subsidiary international gateway
and mobile payment through mPAY.

Strengthen brand positioning

AIS has been successfully developing three distinctive brands targeting
different customer profiles in the Thai market. In 2007, AIS continued
to strengthen the distinctive values and dimensions of each brand that
are essential to consumer perception and engagement. Brand
communications are done through various media outlets such as television
and radio commercial advertisements as well as targeted marketing
activities.

GSM advance The key to customer engagement for GSM advance subscribers
was developed under the theme “Your GSM Your ID”. The continued brand
commitment focused on service delivery in support of subscribers
personal lifestyles and businesses including targeted tariff plans,
value-added services that give functional benefits, and customized
privileges.

One-2-Call! The target group for One-2-Call! has been expanding from
college students to include high-school students. Key brand attractions
are reflected in value-for-money packages and the brand concept
“Freedom”. The emotional aspects of “Freedom” focused on encouraging
teens to search and follow their dreams through activities related to
sport, movies, and music. In 2007, AIS promoted the “One-2-Call! U Band
Battle’07” project which provided the opportunity for music band
competitions at the college level.

Sawasdee This reflects Thai local identity for the brand. AIS uses the
term “Sawasdee” which is a greeting in the Thai language to target the
rural market. In 2007, AIS focused on localized marketing activities at
the district and village level and promoted the theme “call nationwide,
we use Sawasdee” through local upcountry music.

Strengthen distribution channels

With over 24 million mobile subscribers, the key to communicating with
existing subscribers and attracting new subscribers is to have strong
distribution channels. In 2007, AIS restructured the distribution
channels to strengthen cooperation with exclusive dealers like Telewiz
and also took a step forward to improve relationships with sub-dealers.
The key objectives were to enhance closer relationships and synchronize
the whole distribution chain more effectively.

With more than 600 shops of exclusive dealers (Telewiz) nationwide, AIS
selected outperforming regional representatives to work more closely
with the AIS regional sales offices in order to improve sales and
distribution within the provinces. AIS also worked on building
relationships with more than twenty-thousand sub-dealers nationwide to
ensure closer cooperation as well as an appropriate commission structure
and higher satisfaction. AIS also introduced the new online service
through refills on mobile, allowing the sub-dealers to manage mobile
refills more efficiently than the physical refill card distribution
method.

Wholesale distribution was also revamped to avoid competition on price
cutting and in overlapping areas. AIS employed three basic strategies
for wholesale: 1) set up a reasonable competitive structure, 2) improve
relationships with channels, and 3) balance importance among different
channels to create a cooperative environment for better sales and
distribution.

Competitive outlook 2008

With Bangkok and other major cities reaching saturation, Thai mobile
market growth remains focused on the rural areas where penetration is
significantly lower. The strong subscriber growth will continue with
potential annual growth of 15-20% in 2008, while industry revenue will
only grow in the range of 5-7% per annum. The relatively lower revenue
growth comes from the continued expansion of multiple SIM use and the
lower ARPU from new subscribers in rural areas. Mobile operators will be
focusing on network expansion and marketing campaigns to attract higher
penetration from the rural population as well as exploiting the CRM
approach to retain existing subscribers.

The pricing environment will continue to move toward reflecting the cost
of interconnection as well as improving better utilization of networks
between peak and off-peak hours. As the rural market is the key growth
area with continued network expansion, operators will be developing more
localized tariff plans targeting these rural subscribers. Intra network
tariff plans will also be another key pricing strategy to target
multiple SIM users and SIM replacement users who are relatively price
sensitive.

In an environment where customers are becoming more price-sensitive and
have lower brand loyalty, mobile operators are facing challenges in
building customer relationships and retaining existing subscribers. The
National Telecommunication Commission (NTC) will also be enforcing
mobile number portability (MNP) within the next 1-2 years, essentially
allowing mobile subscribers to move to a different service provider
while retaining their existing mobile numbers. AIS has been driving the
company’s competitive advantage based on customer relationships and
experience management within the organization for more than 5 years.
This essentially provides the experience, expertise, and confidence for
the company in executing customer retention strategies in a dynamic
environment.

Expanding into new distribution channels will also be the key to access
new customer groups as well as increasing convenience to subscribers for
bill payment, prepaid refills, and various after-sales services. In
addition to the traditional telecom channels, mobile operators are
trying to gain more access to the non-telecom channels such as
retailers, superstores and over-the-air refills or refills on mobile.

AIS vision 2008

The long term vision for AIS is to become a Total Telecom Service
Provider, encompassing new technologies which could help enhance the
variety of services to consumers, including wireless services, internet
broadband, international telephony services, etc. In 2008, AIS will be
focusing on the following five key strategies explained below.

Network quality

Outstanding network coverage and better network quality over other
operators remain the key strength and differentiation of AIS. As a
long-term strategy, the company will continue its network expansion into
residential and rural areas. Today AIS’ network covers all 76 provinces
in Thailand with more than 12,500 base stations. In 2008, AIS targets
its network expansion to reach 14,500 base stations focused on
transportation routes such as new roads, expressways, the Bangkok
Transit System canals, , as well as new residential areas, business and
industrial areas, and tourist attractions.

Variety of products and services

Building key differentiation from a variety of services will also allow
AIS to compete away from pure pricing. The focus will be on the
advancement of products and services and segmentation to different
target groups. For instance, new services previously launched include
Call screening, Missed call alert, and Multi-SIM.

Service excellence

Service excellence is intended to create a better customer experience in
association with the AIS brand. In 2008, AIS will develop its customer
service beyond the usual problem solving toward consultancy. We aim to
provide suggestions about new services to suit customer needs and
recommend suitable tariff plans based on calling patterns. Developing a
lifetime relationship with subscribers will also be emphasized to ensure
that subscribers receive satisfactory care throughout their lifetime use
of AIS services.

Privilege

Providing privilege tends to create a positive customer experience,
brand loyalty as well as attracting new customers. Privilege campaigns
are specifically targeted to each group in order to cater to their
different lifestyles. For the coming year, AIS will focus on developing
campaigns that have more involvement with daily lifestyles e.g.
entertainment, restaurants, shopping, sport, health & beauty, and
education.

Corporate social responsibility

Besides playing an important role in bridging love, faith and smiles
between people during the past 17 years, AIS also has placed equal
importance on social responsibility and the surrounding environment.
Through Corporate Social Responsibility (CSR), AIS is a strong support
of family establishment, social role model and opportunity providers and
social contribution activities. With these three main guidelines, AIS
has been able to accommodate and respond to social needs through a range
of activities and projects.

1. Support of family establishment under Sarn Rak project:

-   Advertising series called “Point of View” proposing a concept of “If
    you see another side of thoughts, you will see understanding” to
    encourage greater care and love among family members. Various
    situations are used to reflect love and care among them who may see
    things from different perspectives, which in turn promote greater
    understanding within the family

-   AIS family Rally for Sai Jai Thai to promote relationship among
    family members. All proceeds were presented to Her Royal Highness
    Princess Maha Chakri Sirindhorn

-   AIS Family Walk Rally for the Anandamahidol Foundation all proceeds
    were presented to Her Royal Highness Princess Maha Chakri Sirindhorn

-   AIS Smiles on Children’s Day for physically and mentally disabled
    children to encourage expression like normal children

2. Social role model

-   Production of documentary television program called “Sarn Rak Kon
    Keng, Hua Jai Krang” (Strong Heart , Great Man) which features true
    stories of a Thai youths who face family problems and lack
    educational funding while making the effort to excel in their
    studies. AIS provides educational scholarship until Bachelor Degree
    level. Currently, there are more than 350 students accepted under
    this project

-   “Sarn Rak Kon Keng, Hua Jai Krang” on tour, bringing courageous
    children from different areas to visit and talk to those who may be
    in despair in the hope that they will be inspired by the ethical way
    of life

-   Over 180,000 “Sarn Rak Kon Keng, Hua Jai Krang” CDs were produced to
    further emphasize their courage and distributed to various
    establishments including educational institutions, Buddhist offices,
    youth homes and detention centers to further promote moral and code
    of conduct among Thai youth

-   “Sarn Rak Kon Keng, Hua Jai Krang” short stories were published
    featuring stories of those praiseworthy children

-   The 10,000 music CDs were produced featuring His Majesty the King’s
    royal composition in a form of medley chorus for the first time in
    Thailand. Piano solo and Big Band version of H.M. Compositions
    “Music for All Time” was also produced to celebrate His Majesty the
    King’s music talent

-   AIS organized briefings and activities for 4^(th) year university
    students from different institution graduate students to broaden
    their post-university life and prepare themselves for career
    opportunity

-   The company visit project was set up to welcome visitors from both
    private and public organizations to visit AIS operations and
    exchange knowledge for learning purposes

-   Internship for students during summer break

3. Social opportunity and contribution

-   The AIS Water Shortage Relief Project

  To celebrate His Majesty the King’s 80^(th) birthday anniversary on
  5^(th)

  December 2007, AIS and the Thai people throughout the nation have made
  it a life-long goal to be a good citizen following His Majesty’s
  wishes especially in the areas of water resources and drought
  problems. In respond to the royal wishes, AIS water shortage relief
  project was initiated in 2006 marking the 60^(th) Year of His Majesty
  the King’s Accession to the Throne. For two consecutive years, AIS
  presented 7,155 water tanks to communities throughout Thailand to
  alleviate problems from drought and the lack of proper drinking water

-   Disaster relief projects

  AIS organized a caravan to deliver blankets and survival sacks to
  those affected by floods and cold temperatures

-   The AIS Call Center to creating job opportunity for blind people

  AIS Call Center has been set up to give job opportunity to blind
  persons to become self-dependent. They receive similar treatment and
  benefits like other AIS employees.

-   AIS Fund for Senior Citizens under the care of Rajaprajanugroh
    Foundation was set up in recognition of His Majesty the King’s
    concern for the welfare of the Thai people especially the elderly
    who have been abandoned. AIS donates five million bath annually to
    the foundation, totaling to 35 million to assist those under its
    care

-   AIS Sarn Rak Children Development Centers at Baan Tah-ngam in
    Kalasin province, Baan Hat Yai in Pitsanulok province and Baan Mae
    Saow in Chiang Mai province were created to help ease burden from
    parents who need to raise young children while working at the same
    time. The center acts as a pre-learning school for children age
    between 3-6 years, which is later presented to the local authority.
    For five years since the launch of this project, AIS spent over four
    million bath on administration including lunch and training courses
    for teachers in order to ensure that the young generation becomes
    the force of the nation

-   AIS spent over 10 million Baht in buying new books and presented to
    libraries throughout Thailand to encourage Thai children to read

-   E-library was set up and presented to six schools in three southern
    province to promote learning and knowledge expansion

-   AIS sports ground has been built to promote strong physical and
    mental health through outdoor exercises and sports. This will in
    turn help reduce drug problems and encourage people to spend their
    time constructively. Six basketball and footsall grounds equipped
    with lighting system are available in Bangkok and provincial areas

-   AIS is working in cooperation with the National Police by providing
    traffic control booths at 96 junctions nationwide

-   Recognized the importance of the use of effective equipment to help
    enhance work efficiency. AIS is therefore working in cooperation
    with the National Police and build traffic control booth at 96
    junctions nationwide

-   AIS together with FM 91 radio channel promoted emergency service as
    well as traffic and safety information via Call Center 1164 in order
    to ensure prompt and on-time assistance are provided among the
    public as well as 24 million AIS customers

Internal projects

Every AIS employee recognizes the importance of environmental
conservation and above all the effect of global warming. Over 8,000
employees are encouraged to save energy both at home and the office as
well as to utilize the existing resources economically and wisely.
Energy substitution is also among the supporting activities along with
the use of recycle paper and environmentally friendly food containers.
All these are built from within the organization with the hope that they
will be extended and adopted by the people in the society. Especially
for the engineering work process, AIS selects appropriate energy saving
applications while maintaining service efficiencies. At present, the
measures have been implemented in network development consist of:

  Solar Energy: Using solar cell to transform solar energy to electrical
  current to power the communication device in Base Stations. So far, we
  have implemented such measure for 11 Base Stations with 4 more to come
  this year.

  Wind Energy: Installing horizontal air turbine to generate power
  connecting to the gridline of the Metropolitan Electricity Authority,
  starting in Samutsongkram with continual expansion.

  Biodiesel Energy: Initiating the use of biodiesel energy to fuel the
  Generator in Base Stations.

Saving Energy – Mobile Switching Center : Installing Insulated Wall to
keep constant temperature for longer period without the use of large air
conditioning. The air conditioning is replaced with high quality fan,
which can ventilate the heat and maintain the operations of network
device at equivalent quality.

3.3 Distribution and distribution channels

Registration and sales of mobile phone is usually done at the same time.
Between 80-90% of AIS sales of mobile phones registered in the GSM
Advance, One-2-Call! and Digital GSM1800 systems are conducted through
its agents, while the remaining is the direct sales via the following
channels:

(1) Agent

AIS has established clear regulations in appointing the Company’s agent
with special emphasis on location and financial status. It is important
for the Company to ensure that these agents are viable and able to take
care of AIS customers. AIS agents located in the provincial areas are
large and well recognized business operators of the area or those who
are familiar with the location. There are five types of AIS agents:

Franchise agents under the name “Telewiz”

AIS has over 100 franchise agents with over 350 Telewiz outlets and over
280 Telewiz Express nationwide. Agents have the rights under a one-year
franchise agreement to use AIS trademark for sales of products and
services as follows:

1)  the rights to sell products using AIS trademark

2)  the rights to provide registration service as well as other
    registering-related and payment services

Conditions of agreement and service quality and standard as well as
franchise agents’ operational guidelines will be determined by AIS,
including shop selection and development, advertising and sales
promotions and provision of services to work in line with the Company’s
standard.

Franchise agents are required to pay initial cost of exercising the
agreement and Company’s trademark at 100,000 Baht and 50,000 Baht per
location in case they need to expand their distribution channel to cover
more areas.

General dealer

AIS has over 600 authorized dealers nationwide to distribute products
such as starter kit, prepaid cards and other mobile phone accessories.

In addition to the revenue generated from sales of products and
services, these two types of agents are entitled to commission fees from
member registration for GSM Advance and GSM 1800 digital systems as well
as marketing support activities at the rate specified by AIS.

Key account and modern trade

AIS distributes products through chain stores, such as Jay Mart,
Blisstel, IEC, SAMART, i-Mobile and TG. In addition, the Company also
distributes products through modern trade such as Ek-chai Distribution
System (Tesco Lotus), Power Buy, and etc, which altogether have over
2,400 branches over the country.

One-2-Call! dealer

As the sales of One-2-Call! have expanded into the mass market
nationwide, AIS has restructured the distribution of One-2-Call!
products as follows;

1) Advanced Distribution Partnership (ADP) – the distributors selected
by Telewiz who have strong financial background to take care of
distribution and retail management in their areas as well as to support
AIS’s marketing and promotional activities. In helping AIS manage small
retailers in their areas, ADP will receive a special commission as a
benefit. At present, there are approximately 100 ADP nationwide.

2) Advanced Retail Shop (ARS) – the small retail shops that distribute
products to end users. In addition to margin on sale of SIM card and
refill card, ARS will also receive a special commission whenever they
reach a specific sales target. At present, there are approximately
19,000 ARS nationwide.

Besides sales of One-2-Call! products via the same agent appointed for
digital GSM Advance and GSM 1800 systems, AIS also sell prepaid cards
via new channels of distribution to offer greater convenience for
customers when buying the prepaid cards. AIS has expanded its
distribution channel to cover other areas of business other than mobile
phone shops such as book store, convenient store, gas station, CD and
cassette shop, department store and superstore as well as post office
and bank. There are also the electronic channels such as ATM, Phone
Banking, internet, and mPAY. In addition, AIS also develops the new
distribution channel called “Refill on Mobile – ROM” which enables the
Company better access to every consumer’s groups. The official launch of
ROM will be in 2008.

GSM1800 dealer

DPC has over 600 appointed dealers around Thailand for sale of GSM1800
products. These are the same dealers as mentioned above

(2) Direct sale

AIS does not compete with franchisee and general dealers but instead
focuses on improved services for corporate customers who may have extra
requirements of mobile phone usage. They purchase large numbers of
mobile phones under different conditions to serve specific business
needs where registration under enterprise business service agreement is
required. However, the major goal is to generate extra revenue from
sales of supplementary service under the AIS Smart Solution brand which
offers value added business operations of corporate customers.

3.4 Procurement of Products and Services

The ability to accommodate the number of customers registered under
mobile phone network depends on ability to procure and install necessary
tools and equipment at the Company and its subsidiaries. This helps
enhance the Company’s ability to expand its network coverage and
capacity to accommodate the growing number of mobile phone users and
expansion of mobile phone service area.

As an authorized company to operate network roaming service, AIS and DPC
has been working closely to develop and enhance network quality of both
companies to offer a joint network serviceable for GSM 900MHz and
GSM1800MHz (Dual band network) systems. Such cooperation offers
combination of the bests of both systems

Mobile user and network capacity

  (Unit: million)

  ------------------------ --------------- --------------- ---------------
                           December 2005   December 2006   December 2007

  GSM Advance user         1.863           2.144           2.203

  GSM 1800 user            0.136           0.098           0.082

  One-2-Call! user         14.409          17.279          21.819

  Total user               16.408          19.521          24.105

  Network capacity*        19.190          22.525          25.810

  No. of base station      10,445          11,745          12,500
  ------------------------ --------------- --------------- ---------------

  * Network capacity of GSM 900 and GSM 1800 MHz (forecasted by average
  customer usage rate of 2007)

3.5 Work under progress

-None-