Online Q&A

About TeleChoice International Limited (Regn No. 199802072R)

TeleChoice International Limited ("TeleChoice") is a regional diversified provider and enabler of innovative info-communications products and services. Incorporated in Singapore on 28 April 1998 and listed on the Mainboard of the Singapore Exchange Securities Trading Limited ("SGX-ST") on 25 June 2004, TeleChoice is a subsidiary of leading info-communications group, Singapore Technologies Telemedia Pte Ltd, which operates in the Asia Pacific, the Americas and Europe.

TeleChoice's three business divisions collectively offer a comprehensive suite of services and solutions for the info-communications industry:

Consumer Business Group

Personal Communications Solutions Services ("PCS")

Personal Communications Solutions Services ("PCS") division is a regional provider of fulfilment and managed services. It is in the business of distribution and supply chain management services relating to mobile communication devices, wearables and accessories. In Singapore, it operates a retail chain through two of its subsidiaries, Planet Telecoms (S) Pte Ltd and Planet Managed Services Pte. Ltd. Besides being the only StarHub Ltd ("StarHub") Exclusive Partner to manage five StarHub Platinum shops, it also manages concept stores for major mobile device manufacturers. In addition, it is the appointed master distributor of StarHub's prepaid business. Through its Malaysian subsidiary, it provides retail management, fulfilment and supply chain services to U Mobile Sdn Bhd, Malaysia's fastest growing full-fledged mobile operator that offers data, voice and messaging services. PCS also operates an e-commerce site, www.eplanetworld.com, which boasts of the latest mobile phones and tablets as well as accessories for online shoppers.

Enterprise Business Group

Info-Communications Technology Services ("ICT")

Info-Communications Technology Services ("ICT") division is a leading regional integrated info-communications solutions provider. Its extensive offerings include enterprise IT infrastructure, business solutions and integration services, managed and hosted services, fixed and wireless networking solutions, as well as contact centre and unified communications solutions. It also provides consultancy and managed services to help companies adopt cloud, big data, analytics, IoT (Internet of Things) and smart learning solutions to transform their businesses. ICT also has a unit that offers distribution services for networking and security products. In addition, under the SunPage brand, ICT has a Service Based Operator (SBO) licence that offers IDD, SMS broadcast as well as mobility solutions and services for the consumer and enterprise markets.

Enterprise Business Group

Network Engineering Services ("Engineering")

Network Engineering Services ("Engineering") division is a regional provider of network engineering services and supplier of specialised telecommunications products. It designs, builds and manages telecommunications networks and provides a comprehensive suite of specialised products and cost-effective solutions to address the network infrastructure needs of fixed and mobile operators in the Asia-Pacific. Its services encompass radio network planning and optimisation, transmission network planning, network implementation, maintenance and project management. It also offers an extensive range of innovative and cost-effective products for telecommunications access and coverage needs, as well as for power supply and power backup requirements.

Some of TeleChoice's major customers and partners include StarHub, U Mobile, Indosat, Telkomsel, Maxis, DiGi, IBM, Oracle, HP, SUN, SAP, Avaya, Aruba, Ericsson, L.G, Motorola, Nokia, Samsung, Sony Ericsson, Huawei and NSN.

For more information, please visit our website at www.telechoice.com.sg

Dear Yeo K.H., you wrote:

Q1.1) May I know what is the current order book for the Mobile Network & Engineering Services segment?

The current outstanding order book for Network Engineering Services stands at approximately $20M (FY05: $44.2M).

Q1.2) Will there be any further write-offs for the Australian and Indonesia handset distribution business?

Based on the current information available, we do not foresee further write-offs on account of Distribution Services operations for Australia and Indonesia.

Dear Yap Wai Meng, you wrote:

Q2.1) There is an exchange loss of $174,000 in FY05 compared to an exchange gain of $145,000 in FY04. What is the company doing to hedge potential losses as a result of exchange fluctuations, given that currency instability is increasing in frequency?

The exchange gain and loss are from translation of inter company loans (these are mainly unrealized).

Q2.2) Could you explain why interest income from related corporations is zero for FY05 as compared to $23,000 in FY04?

In FY04, interest income was derived from placing fixed deposits with ST Treasury Pte Ltd, a subsidiary of Singapore Technologies Pte Ltd (STPL). With the cessation of ST Treasury Pte Ltd in as of end FY04, we no longer place fixed deposits with them.

Q2.3) Could you elaborate on some of the production gains and operating efficiencies the company is maximising currently?

In 3Q05, the Group consolidated all its Singapore operations under its the Clementi Loop premises. From 1Q06, NexWave Solutions Pte. Ltd. (which was previously managed under our Network Engineering Services division) was re-aligned under and is now managed under Telecommunications Services, To maximize productivity and operating efficiencies, we constantly cross-leverage on expertise and resources across our business divisions, and minimize the duplication of cost-centres and resources wherever possible.

Q2.4) I noticed selling and marketing expenses for FY05 have decreased while administrative expenses for FY05 have increased. For FY05, selling and marketing, and administrative expenses account for an increase of $4M, which can easily wipe out the gains in gross profits for the year. Is there an explanation for the increase in expenses when the percentage increases for revenue and cost of sales are the same?

Included in the administrative expenses is a one-time S$3.8 million of bad debts written off for Distribution Services operations in Indonesia, due to currency devaluation.

Q3.1) Earnings guidance for the current year 2006 and growth potential in the next 3 years for the company

For FY06, the business outlook for TeleChoice is expected to remain positive and we expect to maintain our operating performance for FY06.

We are confident of our longer-term growth opportunities, and will continue to seek to acquire synergistic businesses and to grow organically in the region, and to maximise productivity gains and operating efficiencies.

Q3.2) Other competitors in Singapore and Far East and how the company is placed to face the competition

It may be difficult to draw any direct comparison, as our businesses span different areas of the telecommunications sector, ranging from Distribution Services, Network Engineering Services and Telecommunications Services. We compete with players in all of these segments. Our competitors include both local and international communications products and services providers, covering different segments of the telecommunications industry. We are not aware of any similar competitor, in the markets we operate in, that provides the same range of products and services as we do.

We believe we have consistently performed well, and will continue to sharpen our competitive edge and maintain leading market positions in all our business areas. We will continue to leverage on the strength of our business model and the growth strategies for our three business segments in growing our business going forward.

Dear Ang Yee, Gary, you wrote:

Q4.1) Who are your competitors?

It may be difficult to draw any direct comparison, as our businesses span different areas of the telecommunications sector, ranging from Distribution Services, Network and Engineering Services and Telecommunications Services. We compete with players in all of these segments. Our competitors include both local and international communications products and services providers, covering different segments of the telecommunications industry. We are not aware of any similar competitor, in the markets we operate in, that provides the same range of products and services as we do.

Q4.2) What are your strengths compared to them?

[see response to Q.5.1]

Q4.3) What are the main challenges facing Telechoice?

TeleChoice has successfully transformed from a predominantly mobile handset distribution business into a leading provider of innovative telecommunications services and solutions.

Going forward, we plan to grow our higher margin Telecommunications Services and Network Engineering Services businesses, as well as strengthen and broaden our Distribution Services offerings. We will seek to expand our businesses regionally through acquisitions and strategic alliances.

Q5.1) I have been a small investor of your company and am extremely pleased with the generous dividend payout over the last two years, generating at 10 % p.a in returns with no loss of capital value. I am just curious as to what your thoughts are on why the share price does not follow your company's performance and your long term strategies to grow the company to create shareholder value.

Thank you for your support for TeleChoice.

Our track record on dividends is as follows:

1. For FY04, we paid an interim net dividend of 2 cents per share.
2. For FY05, we paid an interim net dividend of 2 cents per share. We have also announced a proposed final (one-tier, tax exempt) dividend of 0.5 cents per share, and special (one tier, tax-exempt) dividend of 2 cents per share for FY05.

The declaration of dividends is determined by our Directors, taking into account the Group's earnings, cash-flow, capital requirements.

We pride ourselves in focusing on sound business fundamentals & a consistent track record of execution, to achieve good performance & returns for our shareholders. TeleChoice has been profitable since inception. We have consistently achieved ROE of over 30%, and strong cash balances. The Group generated $24.2 M of net cash from operations in FY05. Our strong cash position of $44.6 M allows us to continue to take advantage of growth opportunities in all our three business segments, as well as deliver good returns to our shareholders.

We deeply appreciate investors' support for TeleChoice, and are firmly committed to ensuring TeleChoice's continued success and good performance, and to maximise value and returns for our shareholders. We believe that TeleChoice presents investors with an attractive long term investment opportunity, with good growth potential, backed by a track record of good dividend performance and sustainable returns.

Perhaps, one reason for the current share price is investors' perception that we remain predominantly a hand-set distribution company.

Today, TeleChoice has successfully transformed from a predominantly mobile handset distribution business into a leading provider of innovative telecommunications services and solutions.

TeleChoice offers a comprehensive suite of services and solutions for the telecommunications industry:

Distribution Services: distribution, retail and fulfilment services relating to mobile handsets, accessories and other telecommunications equipment.

Telecommunications Services: value-added voice and data services, such as SunPage iDD & Budget MobileCall, PushMail, Mobile Data Network Services.

Network Engineering Services: network engineering services, including network planning, project and resource management, network optimization & implementation, managed outsourcing services.

Going forward, we plan to grow our higher margin Telecommunications Services and Network Engineering Services businesses, as well as strengthen and broaden our Distribution Services offerings. We will seek to expand our businesses regionally through acquisitions and strategic alliances.

Dear ong soo yong, you wrote:

Q6.1) Company pays good dividend. How do you propose to maintain such dividend payment over long term? Would you like to announce dividend policy? Despite high dividend, share price still far below IPO price. Could this be attributed to the lack of a major CORE business?

[see response to Q.5.1]

Q6.2) Substantial part of revenue comes from StarHub.What arrangement does the company have with StarHub? What are the details of the arrangement? Can this be sustained over long term?

Since 2000, Distribution Services has provided StarHub Ltd with services such as customer order fulfillment and supply chain management services, including inventory planning, procurement and logistic support. Our subsidiary Planet Telecoms (S) Pte Ltd is presently a StarHub Preferred Partner for mobile line activations/upgrades. In addition, Network Engineering Services provides StarHub Ltd with various mobile network engineering services.

Our parent, Singapore Technologies Telemedia Pte Ltd (through its subsidiary STT Communications Ltd) is the single largest shareholder in both TeleChoice and StarHub. Our transactions with StarHub Ltd and its subsidiaries are conducted on an arms' length basis and on strictly commercial considerations, under the terms of our shareholders' mandate for interested person transactions.

We treasure our relationship with StarHub Ltd as our top-tier customer and business partner. As is the case for our other key customers and business partners, we firmly believe and are committed to further strengthen the relationship in our mutual best interests, by continually innovating and enhancing the value of our service offerings for StarHub Ltd.

Q6.3) Has company considered going into Store Value IDD and local cards and renting of Travel Phone; at airports?

We recently announced the strengthening & re-alignment of Telecommunications Services to better position for opportunities arising from the convergence of voice and data services. We have been aggressively expanding Telecommunications Services' suite of products and services which now includes value-added voice and data, pre-paid BMC, international roaming using callback services, PushMail and mobile data network.

Going forward, Telecommunications Services will continue its focus on innovative service offerings that meet the needs of our customers.

Q6.4) As regards to the recent acquisition of tiny Planet, any plan for development and future expansion of Planet? How can Planet value add to the group?

One of TeleChoice's acquisition criteria is to acquire complementary/synergistic businesses which we can grow over time. We acquired a strategic 40% stake in Planet on August 2005. After completing the further acquisition of a 30% stake in Planet on 10 March 2006, we now hold a 70% stake in Planet.

The acquisition of Planet enables us to strengthen our Distribution Services offerings. Planet's strong retail presence and network is a key strength we plan to leverage on, as we move into higher margin services-related opportunities, and strengthening relationships with leading mobile technology and equipment providers, and telecommunications services operators. With our track record and capabilities, we are well-positioned for emerging telecommunications services-related opportunities around the region, such as customer order fulfillment and supply chain management services for telecommunications services operators.

Dear sumardi, you wrote:

Q7.1) I would like to ask management about the future growth and direction of the company's earnings.

For FY06, the business outlook for TeleChoice is expected to remain positive and we expect to maintain our operating performance in FY06. We are confident of our longer-term growth prospects, and will continue to seek to acquire synergistic businesses and to grow organically in the region, and to maximise productivity gains and operating efficiencies.

Q7.2) Investors have been very grateful for the generous dividend for the past years. Can investors continue to look forward to this dividend of 2 cents for the years ahead? Thanks and I would like to congrats the management for their excellent work.

Thank you for your support for TeleChoice.

We deeply appreciate investors' support for TeleChoice, and are firmly committed to ensuring TeleChoice's continued success and good performance, and to maximise value and returns for our shareholders. We believe that TeleChoice presents investors with an attractive long term investment opportunity, with good growth potential, backed by a track record of good dividend performance and sustainable returns.

[see also response to Q.5.1]

Dear Investors,

Thank you for all your questions and your interest in TeleChoice International Limited. We have come to the end of this On-Line Q&A session.

We have enjoyed the session and have learnt form your questions. We hope that through the Online Q&A, you have gained better insights to our Company and our operations.

Regards,
The Management Team
TeleChoice International Limited