4. Business Operation of ADVANC and its subsidiaries

In year 2012, the Company’s total revenues can be divided into two major
parts as follows:

(1) Service revenues with AIS and DPC as the service providers,
    comprising of various services namely postpaid subscription service,
    prepaid subscription service, non-voice service, corporate business
    service, customer relation management and interconnection revenue.
    Revenue earned from these services accounted for 87% of the total
    revenue.

(2) Sales revenues consist of revenues from sales of handsets, SIM card
    and other related products, accounted for 13% of the total revenue.

4.1 Products and services

AIS main services include both prepaid and postpaid service. Prepaid
subscribers make up 90% of the total subscriber base with postpaid
subscribers accounting for the remaining 10%. In revenue terms, prepaid
subscribers contributed 68% while postpaid revenue was 26%.

+----------------------------+-----------------------------------------+
|   Subscriber breakdown as  |   AIS has 35.7mn subscribers in 2012    |
|   of 2012                  |                                         |
|                            | +---------+----------+-------------+    |
|   []                       | |         | Sub      | ARPU (Baht) |    |
|                            | |         | scribers |             |    |
|                            | |         | (        | incl. net   |    |
|                            | |         | million) | IC *        |    |
|                            | +---------+----------+-------------+    |
|                            | | Prepaid | 32.0     | 225         |    |
|                            | +---------+----------+-------------+    |
|                            | | P       | 3.7      | 650         |    |
|                            | | ostpaid |          |             |    |
|                            | +---------+----------+-------------+    |
|                            | | Total   | 35.7     | 268         |    |
|                            | +---------+----------+-------------+    |
|                            |                                         |
|                            | * Average revenue per user per month as |
|                            | of 4Q12                                 |
|                            |                                         |
|                            | Prepaid service contributed 68% of      |
|                            | revenue                                 |
|                            |                                         |
|                            |   --------------- --------------------  |
|                            |                    Breakdown of         |
|                            |                   revenues (%)          |
|                            |                                         |
|                            |   Prepaid         68                    |
|                            |                                         |
|                            |   Postpaid        26                    |
|                            |                                         |
|                            |   Others          6                     |
|                            |                                         |
|                            |   Total           100.0                 |
|                            |   --------------- --------------------  |
+----------------------------+-----------------------------------------+

Products and Services

To satisfy a diverse need of customers, AIS offers a choice of products
with different characteristic. AIS main products are:

1) AIS GSM advance for office workers

2) AIS GSM 1800 for basic phone users

3) AIS One-2-Call! for teenagers

This coming year is the beginning of a new chapter for Thai
telecommunication industry as mobile operators are entering a business
transition from concession to license system after acquired the
long-awaited 2.1GHz spectrum in December 2012. This bring a shift in
technology capability to Thailand and a new level of competition through
a more favorable regulatory structure. AIS is committed to lead and
shape this change to ensure that our 3G services will be fully served to
Thai people nationwide and moved toward differentiated digital content
and innovated applications that will bring more efficiency, convenience
and enjoyment to customers lifestyles.

To strengthen our leadership, AIS deploys our core business strategy to
build the ecosystem of the Thai telecommunication space by pinning on
our core strength in network quality and combining with other five

core pillars including devices, content providers, solution partners,
business alliance, and customer assistance. Moving to the 3G era, this
collaboration to support the evolving customer lifestyle both personal
and professional aspects will allow AIS and strategic partners to
capture the potential growth while enhance and sustain our
competitiveness for the future

1. AIS GSM ADVANCE

AIS GSM Advance is a leading postpaid mobile service with more than 3.7
million registered subscribers. GSM Advance aims to serve the needs of
quality-conscious and technology-savvy customers ranging from young
graduates and first jobbers up to senior executives and business owners.

Understanding the needs of today’s fast-changing digital lifestyle, AIS
GSM Advance has created “GSM Smart Life” under the theme: “Smart Life:
Alternative Life”. As part of this concept, GSM Smart Mix & Match was
designed to complement the fast-paced lifestyles and fulfill the digital
desires of our main target groups by allowing customers to select
packages that are in tune with their unique needs. From as little as
200-1,500 Baht per month, the Smart Basics starting package allows
customers to call any network at a single rate, 24 hours a day. In
addition, customers can purchase GSM Smart Topping packages to create
unique packages that are tailor-made to match their different lifestyles
regarding calls, Internet usage, and other additional services such as
international roaming.

New services designed to serve growing social network demand

The last couple of years have seen a boom in the social networking
phenomenon. The rapid advancements in social networking have shaped the
way that people communicate, and their lifestyles have changed
accordingly. People from every corner of the world are now able to
connect instantly and share their thoughts and recent activities. As the
leader in the field of telecommunications services in Thailand, AIS has
evolved to keep up with these dramatic changes.

In response to the continually growing demand for Internet access, GSM
Advance has designed a number of new products and services that
increasingly focus on facilitating the customers’ online experience.
Customers can now conveniently make phone calls and access the Internet
across the country with 3G and EDGE⁺, a technology allowing customers to
connect to the Internet while making a phone call. Customers can choose
3G Smart Topping or a WiFi package to access the Internet from over
50,000 WiFi hotspots countrywide. There are also a variety of packages
designed to serves all device ranges-from feature phones to Smartphones
including smartphone packages for any smartphones and packages specially
designed for iPhone and Blackberry.

Truly understanding customers’ demands

Always aware of the ever-changing demands of our customers, GSM Advance
offers extra convenience for customers carrying more than 1
communication device, such as those who have a Smartphone and a notebook
or tablet. To meet the needs of this group of customers, GSM Advance
offers an additional unlimited 3G Multi SIM package. With only 1 number,
customers are able to connect to the Internet from up to 5 devices
without having to switch their SIM cards. This is just the latest
innovation from GSM Advance to accommodate the changing lifestyles of
our customers.

Get ready for the world of 3G

In 2012, GSM Advance offered 3G services on 900MHz in key strategic
areas to enable customers to enjoy 3G data speed. Customers can
experience the high-speed 3G through an additional 3G Smart Topping
package and various main packages specifically designed for Smartphone
users. In 2013, AIS will launch the full-stream nationwide 3G service on
2.1GHz to further enhance the customer experience.

2. AIS GSM 1800

GSM 1800 targets customers who use basic voice and SMS services. The
customers will have a quality experience and can use the services
nationwide through the GSM 1800 network plus roaming on the AIS 900 MHz
network.

GSM 1800 designs packages that are in tune with the usage of both new
and existing customers. For new subscribers, GSM 1800 offers the “30
minutes of call for 0.99 Baht” package, enabling customers to make 30
minutes of voice calls within the network at a rate of just 0.99 Baht.
In addition, customers who call mainly

during the daytime can apply for the “Save 125 Baht” package to make
unlimited voice calls to all AIS’ networks from 05:00 am to 05:00 pm.

For existing customers looking for convenience and simple call rates,
there are a variety of single rate packages to match customers’ usages,
starting from 150 Baht for 150 minutes of calls up to 800 Baht for 800
minutes of calls.

GSM 1800 also offers options for both new and existing customers to
enjoy high value service at low rates, including on-top package for
making voice calls and surfing the Internet on mobile phones starting
from 99 Baht.

3. AIS One-2-Call!

AIS One-2-Call! is the leading prepaid mobile service in Thailand with
32 million subscribers. One-2-Call! is designed for young and teenage
groups whose lifestyles reflect freedom, self-initiative and openness.
The market positioning of One-2-Call! is to be the leading telecom
service with the highest brand value and the aim to consistently create
a “freedom” experience for consumers. Underpinning this “freedom”
concept, the One-2-Call! service has been developed by incorporating the
latest innovations and in-depth consumer insights in order to create a
better customer experience, respond to customer needs and deliver the
highest level of satisfaction.

The social network era

The popularity of social networks increased globally in 2012. New
applications were developed and became popular platforms on which
everyone from teenagers to companies could grow networks and conduct
public relations activities for their services and products or present
themselves through such social media as Facebook, Twitter, Instagram and
Line. One-2-Call! has responded to this trend by creating chat services
since 2011. Various chat service packages have been designed and priced
to serve a variety of customers who prefer a “pay-per-use” lifestyle.
These chat services have stimulated mobile data usage and contributed to
the strong revenue growth. In early 2012, the Line application, one of
the chat platforms featuring a sticker exchange function, was popular
among teenagers and young workers using the data service. Responding to
this trend, One-2-Call! was the first provider in Thailand to integrate
the Line Application with the Mao Mao data package by introducing “Oon
Jai” stickers as well as catchy Thai phrases for the Line Application,
which AIS customers could download for free. Starting at just Baht 9 a
week, the Mao Mao 3G service has been well-received and gained in
popularity among Smartphone users.

Successfully understanding and responding to consumer needs

One-2-Call! products and services are developed with in-depth customer
insights and the latest innovations and delivered by helpful and
professional staff. With the goal of delivering a good customer
experience, we designed and launched our eService, which enables
customers to navigate a whole variety of menus, including the latest
promotions, call details, balance checks, transfer validity and credit
to others (Give2Gang). This is just one of the many fast and convenient
services available for all One-2-Call! customers.

Segmentation marketing

One-2-Call! utilises a segmentation marketing strategy which focuses
mainly on teen and preteen customers while also identifying and reaching
new markets including migrant workers from Myanmar and Cambodia. In
addition, One-2-Call! frequently creates activities which are primarily
designed to let our youth and teenager customers learn and experience
new things. For example, we have launched One-2-Call! BrandAge Award
Year 6, Click4U: A Gateway to Universities, and Tutor-To-Kids: ONET
Course for 6^(th) Graders with One-2-Call! and THAICOM.

Get ready for the world of 3G

One-2-Call! offers bundled 3G devices and data services as well as
free-call packages to attract customers to acquire 3G devices prior to
the official launch of full-scale 3G in 2013. In addition, we have
developed One Number for Self Service to provide customers with easy and
convenient access to useful services, including the latest promotions at
*777, all services of One-2-Call! at *700, and fee enquiries at *121.

4. AIS Business Solutions

Advanced Info Service (AIS) is the leading telecommunications solution
providers for corporate clients ranging from large conglomerates to
small and medium enterprises (SMEs). Our business solutions have helped
in developing the potential and enhancing the competiveness of corporate
clients, including large public and private organisations, as well as
clients from such key industries as finance, energy, and automotive. Our
dedicated service teams also ensure smooth and efficient operations at a
regional level.

With the intense competition in the business world of today,
entrepreneurs and corporate executives are increasingly focusing on
improving the efficiency and speed of their operations to enhance their
competitiveness. The application of effective telecommunications
solutions is seen as a key factor in supporting the management of
business operations to maximise existing resources and optimise outputs.

The marketing strategies of AIS have been devised with an emphasis on
trust, quality, and variety. The AIS Corporate Call Center 1149 is
available 24 hours a day to supply essential information for corporate
clients, while our sales teams support clients looking for more specific
expertise. As part of our commitment to quality, AIS strives to improve
and upgrade our software and applications as well as our nationwide
mobile network. In terms of variety, products and services are
continuously being developed to meet the business requirements and
satisfy the ever-changing needs of our customers.

Services for corporate clients

AIS Business Solution constantly develops products and services to match
the specific needs of our corporate clients. In close cooperation with
our strategic partners, AIS creates innovative solutions that maintain
and enhance the competitiveness of our clients’ businesses by offering
the following solutions:

1.  Solutions to improve communications systems

2.  Solutions to increase marketing opportunities

3.  Solutions to enhance information technology performance

4.  Solutions to improve tracking and checking systems

5.  Tailored solutions for specific businesses

With our corporate solutions, AIS responds to the demands of
fast-growing businesses, supports our clients’ business practices and
even helps generate greater business growth. The following are examples
of service from AIS Business Solutions:

-   AIS Mobile PBX (Private Bank Exchange) enhances communication by
    using a mobile number as the main line, customising automatic
    voicemail, and transferring incoming calls to assigned numbers. This
    solution ensures that, the continuity of communication is maintained
    even when no one is in the office or the company is relocating.

-   AIS Business Conference increases communications efficiency while
    saving time and costs. Customers can conduct online conferences over
    the Internet without having to take up office space or meet at a
    designated venue. Participants can see and hear each other
    simultaneously while also being able to share documents. AIS
    Business Conference can be accessed via entering
    www.ais.co.th/webconf or downloading the software and installing it
    on your computer.

-   AIS Smart Messaging helps clients sending information, in SMS or MMS
    format, to a large number of recipients with no constraints on the
    length of the messages. This solution helps in advertising, public
    relations, messaging alerts, or other marketing campaigns, and can
    be either a one-way or two-way communication, allowing the clients
    to send or receive messages, to vote, or to participate in contests
    via: http://ais.co.th/business/smartmessaging

-   AIS Smart Tracking Plus assists clients tracking and identifying the
    real time locations of vehicles. Through GPS and the AIS network,
    clients can instantly track a vehicle or evaluate a driver’s
    behaviour from the digital map displayed on their computer screen at
    their command centres.

-   AIS PushMail is an e-mail service system that connects to the
    company’s database. Uses can send and receive e-mails and open
    attachments in many formats, including Word, Excel, Power Point and
    PDF. A strict security system is installed to prevent the leakage of
    company information.

-   AIS Corporate Internet offers business clients to access the high
    speed Internet from 256 kbps to 100 mbps, through direct internet
    gateway connection.

-   Data Roaming Package for Corporate Client

Corporate clients can control cost while use unlimited data services in
21 popular countries by using the AIS Unlimited Data Roaming Package.
The customers will have more flexibility by using the AIS Hassle-Free
Data Roaming Package, enabling clients to use the data roaming services
of every network in the country they are visiting.

-   SME Selection Package SME clients can select a package that
    perfectly match to their specific usage regarding call costs, main
    and on-top packages, and additional solutions to ensure the
    effectiveness of their business operations and help save their
    costs. For example, customers can send/receive e-mails from their
    mobile phone with AIS BlackBerry Push Mail or send/receive SMS
    through the AIS Smart Messaging webpage.

-   Special Privileges for Corporate Clients

AIS Business Solutions always support corporate clients. In 2012,
several privileges are specifically designed for corporate clients, such
as the AIS eBusiness Portal online service, which enables corporate
clients, including their administrators and end-users, to check their
usage and conduct transactions online around the clock. In addition,
Serenade Gold privilege was automatically provided to every registered
corporate number which reached an agreed level of usage.

-   Inter-Organisation Activities

AIS organised activities for corporate clients in order to provide them
with extra benefits as AIS business partners. For example, AIS held a
seminar entitled “DPIM Backhauling 2012” to equip Thai entrepreneurs
with e-Logistics capability. Our clients also joined in a “Business
Solution Trend and Competitiveness Enhancement for the Transportation
Industry” seminar, as well as an academic discussion on the “CIO 16^(th)
Annual Conference 2012: ICT Sustainability for SMART Thailand” in order
to facilitate cooperation among business operators and provide guidance
for industry regarding the changes in the Thai economy and society as
the country heads towards joining the ASEAN Economic Community in 2015.

5. Customer Relationship and Customer Experience Management

Throughout 2012 under the concept of "Your World. Your Way,” AIS
continued to strengthen our differentiation in terms of customer
relations and the overall customer experience by delivering innovative,
new products and service experiences, ranging from networks and
applications to services and special privileges, each of which has been
designed to match the specific lifestyles of different customer
segments. Each AIS product or service appeals to and connects with the
customer through a brand identity that is insightful, helpful,
innovative, and professional thus optimising the customer experience and
strengthening brand engagement among AIS customers.

Interactive CRM, Right to the Customer’s Heart

Our long-established CRM has been taken to another level with the
development of the new interactive CRM with its increased capability of
really “knowing” the customers, by thorough and integrated analysis of
important customer data including devices and usage behaviour. These
enable AIS to proactively provide more targeted consultation or better
solutions right at the time of the customers’ needs. The performance of
the interactive CRM system has proved highly effective, with the
response rate of the campaign 15% higher than traditional CRM methods.
As an intelligent tool designed to grow revenues and enhance customer
satisfaction and engagement in the long run, both the system and the
methodology will be continuously enhanced and refined.

In addition, to prepare for the rapid growth of mobile data usage,
especially with the arrival of 3G 2.1GHz in the near future, AIS is
currently establishing a Network Usage Analysis System. Enabling us to
understand every angle of customer data usage through in-depth insights,
this new intelligent system will help AIS staff solve

customer problems more quickly and proactively by offering effective,
customised consultation on network usage, devices, applications, and
packages. The first phase of the new system’s deployment is planned for
2013.

A Complete Assistance for Roaming Smartphone Users

As Smartphones have rapidly gained in popularity, more International
Roaming customers have been impacted by unintentionally high bills as
many new users were not aware that Smartphones occasionally connect
automatically to the internet. In 2011, AIS began our efforts to take
care of our customers with end-to-end solutions by sending an
informative SMS at the first time of the connection, launching
self-service number for turning the Internet on or off from the device,
sending usage notifications at certain thresholds during roaming, and
much more. In 2012, AIS added new technology to enhance the way we take
care of our customers while they are roaming. AIS Roaming Usage Control
is a new system which intelligently monitors customer usage and sends a
near-real-time SMS notification to alert customers when the usage
exceeds the package quota, when usage is high for customer without a
package, when the usage has nearly reached the package quota, or when
the selected operator is not included in the package conditions. In
addition, a data roaming credit quota has been set in order to protect
customers from unintentional usage. After the launch of Roaming Usage
Control, in 2012, complaints about unintentionally high bills from data
roaming were reduced by 54% compared to the previous year while the
number of outbound calls to solve customers’ problems relating to high
bills was reduced by 72%. Meanwhile, the number of customers applying
for data roaming packages increased by 61%, and customers are generally
more satisfied and more comfortable using their Smartphones abroad.

In the fourth quarter of 2012, AIS also responded to the changing
lifestyle of our customers by being the first operator to launch a new
application especially for iPad customers. The “AIS Roaming App” allows
iPad users to subscribe to data roaming package, check packages, and
check their real-time usage balance conveniently right from their
device.

AIS Touch Points - A New Dimension for Service Solutions

As part of our vision to prepare the AIS Shops for the future growth
that the arrival of 3G 2100 MHz will bring, AIS has created a new
chapter in our service solutions. Our existing shops have been
renovated, while new shops have been opened. New technology has been
adopted and applied to create a variety of quick and convenient
automated services. The AIS Shop will be a center where customers can
drop by to try out new and trendy mobile devices before making a
decision to buy, while our knowledgeable staff will take the role of
professional consultants to advise on the best wireless communication
solutions for our customers.

-   AIS Flagship Store: To mark a new chapter and strengthen our
    leadership image, AIS opened the AIS Flagship Store in November 2012
    at Central World. The Flagship Store fully serves the needs of all
    AIS and AIS Serenade customers with a variety of service
    innovations. The store is also designed to showcase new
    technological advancements, especially those featuring Interactive
    Augmented Reality technology, which projects interactive 3D virtual
    experiences that people in the area can participate in and enjoy.
    Featuring a modern and trendy design, the store is equipped with
    modern facilities and a variety of latest devices.

-   AIS Shop Expansion: AIS has continued to renovate our shops and open
    new branches over the last year. In 2012, 3 new shops were opened at
    Seacon Square, Mega Bangna, and Central Pattaya. In addition, 4
    shops in Chaeng Wattana, Chamchuri Square, Fashion Island, and
    Nakorn Pathom were renovated and re-opened, while 4 of our shops in
    the provinces of Pitsanulok, Surat Thani, Phuket, and Khon Kean were
    relocated into department stores. More shops are in the pipeline to
    be renovated and new branches opened over the year ahead.

-   Service Innovation: The full launch of Payment Kiosks at AIS Shops
    in 2012 provided a quick and convenient way for customers to make
    payments without having to queue at the counters, an innovation
    which dramatically decreased transaction times from 3 minutes to
    just 1. The kiosks are also set up to accept credit cards in
    addition to cash. Since the launch, 60% of our customers have
    shifted to making payments at the kiosks. Improvements have also
    been made to the eService Kiosks at AIS Shops in the form of a new
    touch screen design and user-friendly icon menu. Additionally, the
    installation of new equipment to read the smart card version of the
    National Identification Card has resulted in quicker and more
    accurate transactions.

-   Staff Knowledge and Competency: AIS has taken many steps to be
    well-prepared for the road ahead. This includes the creation of a
    solid staff competency roadmap with a special focus on technology
    and Smartphones for staff both at our AIS Shops and at the AIS Call
    Center. During 2012, 155 staffs successfully completed training to
    become “Device Gurus” at AIS Shops. Moreover, 2012 was the first

  year that AIS took a step further in this direction by establishing
  the “Guru by OS” initiative, which involves our staff being trained
  and awarded certification directly by key principals that include iOS
  (by Apple), Andriod (by Samsung), Windows 7 and 8 (by Nokia), and
  BlackBerry (by BlackBerry). By the end of 2012, AIS had a total of 155
  Gurus by OS ready to serve at AIS Shops, with many more to follow over
  the coming year.

  Enhancements were also evident at our Telewiz Shops in 2012. For a
  start, a total of 40 Telewiz Shops were upgraded to “Telewiz Plus”
  with capabilities equivalent to those at our AIS Shops, both in terms
  of services and facilities. In a bid to upgrade their expertise on
  Internet usage, applications and device settings, Telewiz staff
  members were challenged by AIS to pass a test and be certified as a
  “Telewiz Guru” by AIS. There is currently 1 Telewiz Guru at each shop,
  with a plan to increase this to 2 Telewiz Gurus per shop by the end of
  2013. In addition, the number of “Device Experts” at Telewiz increased
  from 452 staff in 2010 and 830 staff in 2011 to 900 staff by the end
  of 2012. Telewiz also enhanced its image by renovating its shops in a
  style consistent with the modern lifestyle of its customers. Telewiz
  shop will equip with latest equipment, using in AIS shop, for example,
  Express Data Transfer tools, automatic payment kiosks, handsets for
  customer to try before they buy, and LCD system to offer promotions,
  privileges and campaigns to customers.

AIS Call Center Service Expansion and Automation

AIS expanded the service to include an automated voice response system
(IVR) channel, which allows customers to make basic transactions
conveniently by themselves over the phone. Five popular menus were
launched in 2012, and the system currently handles 57% of the total
number of calls to the Call Center. This automated system helps AIS
manage the cost of our services more effectively while also allowing us
to serve a higher number of customers at the same time. In third quarter
of 2012, the AIS Call Center has been enhanced through the incorporation
of Speech Recognition features in selected menus, allowing customers to
simply say the menu name and jump right to their desired menu this
reducing their waiting time.

365 Days of Exclusive Life with AIS. Your World. Your Way.

With a strong market position in terms of customer privileges, AIS
continued its momentum in 2012 under the concept of “365 Days of
Exclusive Life with AIS. Your World. Your Way." The focus was on
delivering privileges in 4 key areas: shopping, dining, entertainment,
and transportation. The number of strategic partnerships was expanded
from 6,000 participating stores nationwide in 2011 to 8,000 stores in
2012, with a 20% increase in the number of customers participating in
the privilege programme compared to 2011.

In 2012, the privileges were further expanded to reach more AIS
customers in more regions. In addition to the 19 provinces already
included, the coverage was expanded to include the north-eastern,
southern, central, and improved the total privilege coverage to 28
provinces in 4 regions nationwide.

In addition, following on from the good response to the Aunjai Daitam
Reward Programme over the previous 3 years, AIS continued the programme
into its fourth year in 2012 with even more rewards under the slogan of
“Winning Gold with AIS Nationwide Every Day, Every Month, Every
Province.” The program gives away rewards with a total value of more
than 25 million baht, including a golden Aunjai mascot worth 1 million
baht, as well as a golden necklace with an Aunjai locket, mobile phones,
air tickets, and many more rewards. Over 15 million customers
participated in 2012 and more than 116,000 customers have been rewarded
by AIS during the 4-year campaign.

Exclusive Privileges for AIS Serenade Customers

Following on from the success of the “Serenade Exclusive Trip” concept
of previous years, AIS Serenade arranged an additional 3 exclusive and
unforgettable trips in 2012. Under the theme of “Discovering the Venue,”
the trips covered “Chaing Mai – Lampoon, The Civilization of Lanna;”
“The Maldives, a Heaven of Endless Love;” and “Siem Reap, the Metropolis
of Legend” with an additional “exclusive” element of historical

insights being provided by Ajarn Paothong Thongchua in the form of
enjoyable and informative lectures. AIS also hosted a special trip to
afford customers the chance to experience world class car racing under
the campaign “AIS World of Champion: the World Class Racing in
Singapore”. Lastly, AIS also invited AIS Serenade customers to
experience one of the most memorable events of Siam when "the Glorious
Memory of the Royal

Barge Grand Procession” travelled toward the Temple of Dawn in November
2012 for the first time since 2008, the event AIS also hosted in 2006
and 2007.

The reserved parking privilege now covers a total of 16 locations with
plans to extend it further to cover all areas in Bangkok and the
surrounding metropolitan, which match AIS Serenade customers’
lifestyles. In 2013, we plan to expand the privilege to cover further
various tourist attractions and places of interest, such as Santorini
Park, Hua Hin, Pai and Mae Hong Son.

4.2 Competition and Industry outlook

The industry and competition in 2012

At the end of 2012, the number of Thai mobile phone users reached 118%
of the population due to a number of new users living primarily in
provincial areas and an increase in the number of customers using data
communication devices such as Smartphones and tablets. The growth of the
mobile service business was largely due to non-voice services, which
grew by 33%. Competition in the mobile market was also focused on the
non-voice services due to the growing popularity of Smartphones and high
demand for 3G services. At the same time, voice services grew by 5% as a
result of the country’s improved economic performance which helped
increase the number of voice usage and new users, particularly in
provincial areas. AIS outperformed competitors in the voice market due
to superior customer services and the wider coverage and reliability of
the network. Also, a variety of AIS tariff packages was designed to
respond to the needs of each customer segment.

Non-voice service continued to grow as handset manufacturers introduced
a variety of mid- to low-end Smartphones, new tablets and data
connecting devices to the market. The rising popularity of social media
platforms, such as Facebook and Twitter, also supported the growth of
non-voice services in major cities and started in provincial areas.
Mobile operators adjusted their strategy by cooperating with mobile
handset manufacturers, including iPhone, Samsung, and HTC to be the
first operator to launch a new Smartphone model or an exclusive
Smartphone. A wide range of Smartphones was introduced to the market in
response to the demands of each segment and was supported by a variety
of marketing campaigns, including 0% interest instalment, discount
offers of free airtime, and various special price packages. In addition,
some packages were designed for particular Smartphones and data devices.
These can be used as main packages or on-top packages, and they can also
be bundled voice call and Internet usage packages, dedicated voice call
packages and dedicated mobile data packages. In 2012, small packages
such as Mao Mao (Baht 9 per day) were successful in the low-end segment
as they could meet the needs of customers who have limited spending
power or want only a low amount of mobile Internet usage. AIS
differentiated itself from its competitors by introducing several
innovative new applications and new content under the concept of My Best
Application from AIS 3G. The content and applications are intended to
complement customers’ daily lifestyles by responding to their business,
family and entertainment needs. For example, customers can buy books and
magazines online via the AIS Bookstore, watch movies from the AIS Galaxy
Movie Store, and navigate through maps on AIS Guide & Go.

Responding to these market trends, mobile operators competed to be the
leader in the mobile Internet broadband market and satisfy their
customers’ demands. While waiting for the auction of 2.1 GHz, which is
the standard frequency for 3G services, mobile operators invested in and
developed their 3G networks on their available spectrums with HSPA
technology. Using a variety of marketing campaigns that emphasised
service quality and data speed, mobile operators encouraged customers to
experience their 3G services. For example, operators offer special price
mobile phones combined with an 18-month price plan and introduce low-end
smart phones starting from just Baht 990 to attract customers. In
addition, mobile operators launched WiFi services in highly-populated
areas to supplement their limited 3G services, and offered customers
subscription options for Wi-Fi packages as main and on-top packages.

In 2012, 3G-HSPA services were limited and available only in major
cities with high mobile Internet demand. The quality of the service
deteriorated due to spectrum limitations. At AIS, we remained
pro-active, striving to improve the quality of our service with our
limited resources in order to deliver an optimal experience to our

customers, in accordance with our concept of Quality DNAs. While network
quality is our major priority in providing a mobile service, AIS also
focused on creating customer satisfaction and developing customer
relations through a variety of programmes and special privileges for
customers’ practical usage in their daily life. Service quality at touch
points was improved by increasing staff competency to catch up with the
latest technology. Compared to our competitors, we aim to provide our
customers with better services so that we will remain in the customers’
mind for the long term.

Outlook in 2013

Non-voice services are expected to continue being a key industry growth
driver in 2013, while competition in data services is predicted to be
more intense. Voice services are expected to grow at a slower rate as
the voice market reaches saturation point from increased subscribers and
usage.

With the auction late last year of 2.1GHz licenses, and the 3 major
incumbent operators acquiring 15MHz of bandwidth each, the mobile
industry is set to benefit from new network investment and additional
network capacity, especially for mobile data service. It is also
expected that the 3 operators will launch 3G-2.1GHz services in 2013,
generating greater revenue growth and heightening competition in the
data service market. The 3G service on 2.1GHz is expected to drive
growth of the smart device market as well as increasing the number of
social network users. In addition, the number of new mobile applications
aimed at providing entertainment and facilitating daily life activities
and business transactions via mobile phones is predicted to increase.
Mobile operators are expected to join hands with strategic partners to
offer customers comprehensive packages that combine both data service
packages and quality Smartphones.

The growth of data services, the increased variety of available content,
and the problem of quality networks in 2012 created great expectations
among consumers for 2013, especially in terms of better quality
high-speed mobile Internet services. In response to this anticipation,
mobile operators rushed to develop or expand their nationwide networks
to satisfy consumer needs. The 3G-2.1GHz service managed by each
operator is created to the same standard, yet the quality varies
depending on the design and construction strategies employed. Mobile
operators will differentiate themselves with the Total Customer
Experience concept, aiming to create an ultimate customer experience by
improving the quality of their mobile services and at every customer
touch point. This will include cooperating with content providers to
create new applications that can satisfy customers’ demands and offering
a variety of special privileges to suit customers’ various lifestyles to
deliver a positive customer experience.

With 3G technology enabling the fast transfer of data, mobile operators
will utilise this attribute to create additional revenues from
newly-created services and applications such as applications for
merchandising on the Internet, advertisements on mobile phones, and
machine-to-machine services (M2M). The year 2013 will represent a
significant challenge to mobile operators in terms of new business
models, new technology, new services, new marketing and new sources of
revenue. As the leading mobile service operator in the market, AIS is
committed to developing products and services that take data services to
another level under our concept of Quality DNAs, which aims to offer
customers the high value devices, network, applications and services
that will lead the Thai mobile phone industry into an exciting new era.

4.3 Distribution Channels

Because distribution channels are central to our long-term sustainable
growth, AIS has established an Ecosystem strategy which allows us to
work closely and productively with our channel partners. AIS sees this
as essential to our delivery of high quality services to our customers.
AIS continues to build long-term relationships with dealers to create
nationwide distribution channels to ensure complete market penetration
of all customer segments. Approximately 97% of all our transactions are
via dealers and electronic channels, while the remainders are through
direct sales.

1) Dealers

With our “Quality DNAS” (Device, Network, Application, Service)
philosophy in mind, AIS focuses on dealer quality and efficiency. Each
dealer must be qualified and experienced to serve our customers and gain
their long-term loyalty. As part of the selection process, AIS assesses
potential dealers in terms of their location, past performance and
financial status in order to ensure their capability. Our qualified
dealers must have local

expertise and a recognised business reputation if they are to position
and develop our brand and positively engage our customers through an
excellent standard of service. Dealers can be categorized into 5 groups.

1.1 Telewiz Dealers

AIS works with more than 100 Telewiz dealers operating more than 450
Telewiz shops nationwide. Telewiz dealers have exclusive rights to sell
products and services under the AIS brand and to provide registration
and payment services for GSM Advanced customers. Telewiz dealers will
receive a sales margin and commission from customer subscriptions as
well as a marketing event budget from AIS. AIS supervises and advises on
all

quality issues, starting from site selection and development to
advertising and sales promotion in order to guarantee that Telewiz meets
AIS quality standards.

1.2 General Dealers

AIS works nationwide with more than 300 general dealers who have their
own shops. The dealers are responsible for selling AIS products and
services such as mobile phones, data-cards, starter-kits, prepaid refill
cards and device accessories. In addition to sales margins, the dealers
receive commission from customer subscriptions and are given a marketing
budget from AIS.

1.3 Key Accounts and Modern Trades

AIS also channels our products and services through large nationwide
distributors, such as Jay Mart, Blisstel, IEC, SAMART i-Mobile, TG and
Bangkok Telecom. Modern trade outlets, such as Tesco Lotus, Power Buy
and 7-Eleven, as well as IT stores, such as iStudio, iBeat, Banana IT
and IT City also distribute our products and services. AIS has more than
50 key accounts with modern trade distributors, serving more than 10,000
locations throughout Thailand.

1.4 One-2-Call Dealers

Because more than 90% of AIS customers use prepaid (One-2-Call!), AIS
develops long-term relationships with One-2-Call! dealers, both
wholesalers and retailers, to ensure the comprehensive distribution of
prepaid SIM and refill cards, increase sales area coverage and maximise
market penetration. One-2-Call! dealers include:

1) Advanced Distribution Partnerships (ADP): Qualified Telewiz and
general dealers who have the potential to distribute AIS products in
specific areas and possess a strong financial background. Currently,
there are 90 ADPs. Each ADP is responsible for managing product
distribution to Advanced Retail Shops (ARS) and supporting marketing
events in each local area. ADPs receive performance-based payments from
AIS.

2) Advanced Retail Shops (ARS) is a key customer touch point. Currently,
there are more than 25,000 ARSs, increasing in line with population and
community growth. Each ARS receives a margin from SIM and prepaid top-up
revenue as well as a bonus from AIS after achieving sales targets.

AIS also has other prepaid top-up channels which are not directly
related to telecommunications, such as bookstores, convenience stores,
gas stations, retail CD and tape shops, shopping malls, superstores,
post offices and banks among others.

1.5 Distributors for GSM 1800

DPC, a subsidiary of AIS, distributes products and services for GSM 1800
through its distributors using the same model as postpaid GSM Advance.

2) Electronics Channels

AIS promotes the use of electronic money top-up channels for prepaid
customers in order to reduce scratch cards costs. Customers can top up
with as little as 10 Baht via electronic channels compared to a minimum
of 50 Baht with a scratch card. To support this, AIS continues to
develop a variety of electronic payment channels, such as automatic
top-up machines, ATMs, Phone Banking, the Internet and mPAY. AIS already
has more than 400,000 electronic top-up channels but is constantly
looking to add more in a bid to increase on the 80% of top-up money
currently paid through electronic channels.

3) Direct Sales

To enhance distribution channels and access customers more effectively,
AIS implements a direct sales approach by selecting potential dealers
with expertise in each area. AIS direct sales teams provide key support
for future market growth.

4.4 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 equipments 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 900MHz and 1800MHz
(Dual band network) systems. Such cooperation offers combination of the
bests of both systems and increased operation effectiveness and
efficiency, resulted in a better customer service quality.

Mobile user and network capacity

  ------------------- ------------ ------------ ------------ ------------
                      December     December     December     December
                      2009         2010         2011         2012

  GSM Advance         2.84         2.98         3.19         3.59
  subscriber                                                 

  GSM 1800 subscriber 0.08         0.08         0.10         0.09

  One-2-Call!         25.86        28.15        30.17        32.06
  subscriber                                                 

  Total user          28.77        31.20        33.46        35.74

  Network capacity*   29.93        30.84        37.79        44.27

  No. of base station 15,388       15,832       17,082       18,944
  ------------------- ------------ ------------ ------------ ------------

  Unit of subscribers in million

  * Network capacity of 900 and 1800 MHz forecasted by average customer
  usage rate of 2012

In 2012, Advanced Wireless Network company limited, a 99.99% subsidiary
of the Company, was granted the license to operate 2.1GHz spectrum from
the National Broadcasting and Telecommunications Commission (NBTC). The
new 2.1GHz spectrum will be used to develop product and services on 3G
technology platform. The new 3G service on the 2.1GHz, expected to
launch in 2013, will deliver quality experience to customers and
response to current market situation which has high demand for mobile
data usage.

With high quality of services, the Company increased its network
capacity in 2012 to support customer demand. The Company installed more
than 3,500 3G 900MHz base stations and upgrade network speed nationwide.
The Company also invested in network infrastructure to increase data
capacity. The company selected network equipment mainly from well-known
manufacturers such as Nokia-Siemens, Ericsson, Huawei and ZTE.
Technologies and equipment were chosen and optimized to achieve the
highest quality of services.

The company has agreements with 698 foreign operators from 214 countries
to provide international roaming services to customers of both sides at
settled fees. Therefore, the customers can use mobile service in foreign
countries while inbound foreigners can roam on the Company’s network.
The company, by a subsidiary, provides international direct dialing
(IDD) services for international call from Thailand to foreign countries
by having contracts with international carriers to transmit the
communication signal from Thailand to designated countries.

In 2011, the Company entered into a roaming agreement with TOT to allow
customers of the Company to use 3G network of TOT. The current roaming
capacity is limited at 1 million subscribers.

The company provides contents through the cellular network. Such
contents were sourced from professional content developers. As well,
content developers may use the Company’s network as a channel to
customers. The revenue from the contents will be subjected to revenue
sharing agreement between AIS and the content developers.

Handset and terminal equipment sales are distributed by subsidiary of
the Company. The equipments come from leading manufacturers such as
Nokia, Samsung, BlackBerry and Apple. The subsidiary will receive margin
from the sales of equipments. To manage inventory, model and units of
equipments are determined according to market condition. The subsidiary
has co-marketing campaign in some models with the Company.

4.5 Work under progress

-None-