EQUITY RESEARCH

June 02, 2008 Singapore

Asia Telecom Services
SingTel (STEL.SI - SGD 3.81) 1-Overweight
Company Update Paul Wuh
852.2252.6182
Key takeaways from SingTel NDR paul.wuh@lehman.com
LBAL, Hong Kong

Investment Conclusion
‰ After our non deal roadshow with SingTel FY Mar 2008A 2009E 2010E 2011E
management, we are maintaining our 1-OW Currency SGD Actual Old New Old New Old New
investment opinion as well as our 12-month target Revenue 14839 15468 15468 15798 15798 16039 16039
price of $4.50/share based on a SOTP valuation. EBITDA 4530 4701 4701 4788 4788 4820 4820
EBITDA margin 30.5 30.4 30.4 30.3 30.3 30.1 30.1
Summary Recurring NP 3615 4403 4403 4825 4825 5172 5172
‰ We believe EBITDA margins in Singapore will Recurring EPS 0.23 0.28 0.28 0.30 0.30 0.33 0.33
remain under pressure during 1Q09 from higher P/E (Recurring) 16.4 13.6 13.6 12.4 12.4 11.6 11.6
mobile acquisition costs ahead of the introduction EV/EBITDA 7.9 N/A 7.4 N/A 7.0 N/A 6.9
of number portability in June. FCF Yield (%) 6.1 6.9 6.9 7.1 7.1 7.5 7.5
‰ Optus will focus on cap plans to encourage more
Market Data Financial Summary
fixed to mobile substitution. Capex and opex likely
to be high to build out 3G network to 96% pop Market Cap (mn) 60660 3-Yr EPS Growth(%) 12.7
coverage by Dec 08. Market Cap (US$ mn) 44387 3-Yr EBITDA Growth(%) 2.1
‰ Instead of one-time capital reductions, SingTel will
Shares Outstanding (mn) 15921.2 Current BVPS 1.3
focus on higher annual payout ratios.
‰ SingTel is still interested in acquisitions in 6mth Daily T/O (US$ mn) 76.14 Debt-to-Equity(%) 35.2
developing markets but thinks that the Free float (%) 34.00 Gearing 26.0
privatization of mobile companies in Vietnam Share per ADR N/A PEG Ratio 1.3
might continue to be delayed. SingTel is willing to Dividend Yield (%) 2.62
increase leverage for acquisitions but will maintain Stock Overview
its investment grade status. 4.20
30/5/08x10-4
14.50 Reuters STEL.SI
‰ Associate growth will be lower in FY09 due to 4.00 14.00 Bloomberg ST SP
competitive pressures in Indonesia and a full-year 13.50
3.80 ADR
consolidation of Warid in Pakistan. 3.60
13.00
12.50
3.40
12.00 Performance 1M 3M 12M
3.20
11.50 Absolute % -1.3 -1.0 7.6
Stock Rating Target Price 3.00
11.00
2.80 Rel. Market % -1.7 -5.2 17.2
10.50
New: 1-Overweight New: SGD 4.50 2.60 10.00 Rel. Sector % 0.0 0.0 0.0
Old: 1-Overweight Old: SGD 4.50 2.40 9.50
2.20 9.00
Sector View: M J J A S ON D J FM AM J J A S ON D J F MAM 52 Week Range 4.10 - 3.30
1-Positive SINGAPORE TELECOM
T:TELC/SNGPORI(R.H.SCALE)
Source: DATASTREA

We spent the past week with SingTel’s management on a non-deal roadshow (NDR) to meet with investors in North America. After this
NDR, we are maintaining our 1-OW investment opinion as well as our $4.50/share 12-month target price based on a sum-of-the parts
valuation.

In this note, we present answers provided by SingTel management for key questions asked by investors during the road
show:

Q: What are SingTel’s thoughts regarding returning capital to investors?

Lehman Brothers does and seeks to do business with companies covered in its research reports. As a result, investors
should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.

Customers of Lehman Brothers in the United States can receive independent, third-party research on the company or
companies covered in this report, at no cost to them, where such research is available. Customers can access this
independent research at www.lehmanlive.com or can call 1-800-2LEHMAN to request a copy of this research.

Investors should consider this report as only a single factor in making their investment decision.

This research report has been prepared in whole or in part by research analysts that are not registered/qualified as research
analysts with FINRA.

PLEASE SEE ANALYST(S) CERTIFICATION(S) ON PAGE 4 AND IMPORTANT DISCLOSURES

INCLUDING FOREIGN AFFILIATE DISCLOSURES BEGINNING ON PAGE 5
1
 EQUITY RESEARCH
A: SingTel has increased its dividend payout guidance to 45% to 60% for FY09 from 40% to 50% last year. The company would rather
increase its regular dividend payouts rather than having more one-time capital reductions—as more stable regular dividends tend to
have a more positive impact on the share price performance over an extended period, according to the company.

SingTel’s decision not to pay out a one-time capital reduction for 2H 08 was partially due to this thought process. In addition, SingTel
wants to maintain its cash position for potential acquisitions.

Q: What are SingTel’s thoughts on future acquisitions?

A: SingTel is focused on acquisitions where the company can take a meaningful equity position and where it can have an impact on the
operations of the company. The company does not want to take an interest in a company as a portfolio investment (as Vodafone has
done with its investment in China Mobile). Moreover, SingTel will remain disciplined in its approach to evaluating synergies and value
creation potential for any acquisition. SingTel is wiling to increase its debt level for the right acquisition at a compelling valuation level
but intends to maintain its investment grade rating.

SingTel’s management indicated that it has become much more difficult to find compelling investment opportunities in developing
market wireless companies at attractive valuation levels. In addition, there are many more investors looking for wireless investments
than when SingTel made its first investments in SE Asia and India. Although the level of interest from private equity investors for
wireless assets has declined recently (given the difficulty with these PE firms to secure funding), there remains a great deal of interest
from Middle Eastern and Russian companies. SingTel would not be willing to go on a bidding war with any of these potential investors.

Q: What about the opportunity for SingTel to invest in a mobile network in Vietnam?

A: SingTel (along with many other foreign telcos) remains interested making an investment in the Vietnamese mobile market. However,
the mobile assets are still state-owned and the potential privatization has been delayed numerous times. Currently, the Vietnamese
stock market has been very weak and this has further complicated the telecom privatization process.

Q: What are SingTel’s thoughts on MTN and its acquisition strategy?

A: MTN has had many discussions with a variety of international mobile companies over the past year including Bharti, China Mobile,
and other Indian wireless carriers. SingTel has mentioned publicly that it is interested in making investments in countries in
“neighboring markets” including SE Asia, the Middle East, and Africa. As with any potential acquisition, SingTel would take a disciplined
look at the economics of an investment in MTN by SingTel (or any of its associates). SingTel’s management did not make any specific
comments related to MTN’s recent discussions with Bharti or the withdrawal from negotiations.

Q: Any comments on the introduction of the iPhone into any SingTel market?

A: At this point, SingTel is bound to a confidentiality agreement with Apple and has not comments other than to say that it expects the
iPhone to be available to its affiliated companies in Singapore, Australia, and India before the end of this year. There was no
commentary on handset subsidies or revenue sharing agreements. However, SingTel believes that the iPhone will be popular in
Singapore market where data revenues represented 33% of SingTel’s mobile ARPUs during the quarter ending March 08. Moreover,
given that Singapore is a WCDMA market where 60% of SingTel’s postpaid subs are using 3G phones, a 3G WCDMA iPhone would be
particularly well received.

Q: What is the update with the KPPU and the court decision in Indonesia regarding SingTel and Temasek?

A: SingTel does not agree with the KPPU decision and has appealed the decision to the Indonesian Supreme Court. It is unclear how
long it will take for the court to make a decision—it could take from two months to two years for the Supreme Court to make a final
judgment in this matter.

Q: What about competition in the Indonesian wireless market?

A: Although Indosat has improved its coverage outside of Java, Telkomsel still has the best wireless network in Indonesia. SingTel
indicated that it remains difficult for the competitors to build out coverage to the many islands of Indonesia especially given the poor
telephone and electrical infrastructure in these areas. However, competitors have improved coverage and SingTel expects the wireless
pricing pressure in the Indonesian market to be worse during the next 12 month period. In fact, SingTel’s guidance for its associates’
earnings growth during FY09 is lower than for FY08—partially as a result of increased competition in the Indonesian market.

Q: What is SingTel’s mobile strategy ahead of the introduction of mobile number portability in June?

A: SingTel reported 244K net adds during 4Q 08 (ending March 08) due to the company’s focus on securing subscribers ahead of the
introduction of MNP in June. By the end of March, the company had signed over 80% of its contract subscribers up for new contracts
and will continue to focus on securing these existing customers ahead of MNP. As a result, the company expect mobile acquisition
costs to continue to be high during 1Q 09. The other two carriers are also spending more on acquisition costs to secure their sub bases
as well. SingTel currently has about a 45% postpaid market share (versus around 30% each for Starhub and M1) in Singapore and
hopes to maintain this level to keep competition from becoming too aggressive.

2
 EQUITY RESEARCH

Q: What is SingTel’s strategy regarding MioTV (IPTV) in Singapore?

A: SingTel currently has about 44K MioTV subs (2% of the market) after introducing the service in July 2007. SingTel’s management
believes that there is room in the market for more than one operator for the S$250 mn pay-TV market in Singapore. Most of the 44K
MioTV customers have both Starhub and SingTel’s pay-TV service. Given that there is still a significant amount of exclusive TV content
and it will take two to three years before some of that content is up for renewal, SingTel’s management recognizes the challenges it
faces to break into this market. However, given that SingTel has a 54% broadband market share, the company believes that it will be
able to attract some of these customers to its MioTV service as more compelling TV content becomes available over time. SingTel has
already secured exclusive rights to broadcast Champion League Soccer.

Q: Why will capex in Singapore increase to mid-teens percentage of revenues for FY09?

A: SingTel will spend more to improve its mobile network capacity given the stronger subscriber growth. The company also intends to
spend more on its 3G network to improve the data speed to 14 MB by the end of the year. Moreover, SingTel needs to spend more on
its fixed-line broadband network to improve transmission speeds for IPTV and broadband—to better compete against Starhub.

Q: What is the timing for the FTTH national broadband network in Singapore?

A: SingTel has a 30% equity-interest in a consortium that is bidding for the network build out for the national broadband network. The
winning consortium would be eligible to receive up to S$750 mn to help build out this network. A decision on which bidder would build
out the network is likely to be made by August/September. SingTel indicated that its Singapore capex might need to be increased
depending on if the SingTel consortium wins this bid.

Q: What is Optus’ strategy to compete against Telstra?

A: On the mobile side, the company has decided to increase capital expenditures to improve its 3G coverage to 98% population
coverage by December 09. Optus had 68% at the end of March 08 and plans to increase this to 96% by the end of December 08. The
final 2% incremental coverage will take an additional 12 months given that it would be in areas that Optus does not currently provide
mobile coverage in these areas. Optus’ management admits that Telstra has been able to take advantage of this coverage discrepancy
to gain more high-end subscribers who place a higher value on network coverage.

Optus is also continuing to focus on capped plans (which represented 36% of its postpaid subs by March 08). Optus believes that
these bucket plans will encourage more fixed-to-mobile substitution in Australia—which will help the company gain share in the overall
telephony market against Telstra. Most of these subs on cap plans are on two-year contracts.

Q: What is the update on fiber to the node (FTTN) contract in Australia?

A: The new government in Australia has indicated that potential bidders for the FTTN contract would be given 12 weeks from the time
that Telstra provides the detailed information required for the bidders to make an optimal bid decision. Optus views this decision as a
positive for its G9 consortium. However, it will still need to evaluate the economics of any bid to make sure that the government’s $4.7
bn support would make economic sense.

Figure 1: Sum of the Parts valuation for SingTel

Source: Lehman Brothers estimates

3
 EQUITY RESEARCH

Analyst Certification:
I, Paul Wuh, hereby certify (1) that the views expressed in this research Company Note accurately reflect my personal views about any
or all of the subject securities or issuers referred to in this Company Note and (2) no part of my compensation was, is or will be directly
or indirectly related to the specific recommendations or views expressed in this Company Note.

Company Description:
SingTel is the incumbent telco in Singapore, and holds a basket of stakes in leading regional cellular operators, plus it owns Optus,
Australia's number two cellular and fixed line operator.

4
 EQUITY RESEARCH
Important Disclosures:
SingTel (STEL.SI) SGD 3.81 (30-May-2008) 1-Overweight / 1-Positive
Rating and Price Target Chart:

Currency=SGD
Date Closing Price Rating Price Target Date Closing Price Rating Price Target
06-Oct-07 4.02 4.50 07-Dec-06 2.98 3.23
13-Sep-07 3.68 4.30 08-Nov-06 2.85 3.15
14-Aug-07 3.50 4.10 18-Oct-06 2.50 3.00
09-Jul-07 3.46 4.00 26-Sep-05 2.61 3.26
19-Jan-07 3.40 3.90 26-Sep-05 2.61 1 -Overweight
16-Jan-07 3.48 3.45 05-May-05 2.74 2.79
FOR EXPLANATIONS OF RATINGS REFER TO THE STOCK RATING KEYS LOCATED ON THE PAGE FOLLOWING THE LAST PRICE CHART.
Lehman Brothers Inc. and/or an affiliate trade regularly in the shares of SingTel.
Valuation Methodology: We value Singtel using a sum-of-the-parts and discounted-cash-flow methodology. We base its associate
stakes in Bharti, Telkomsel and AIS at our target price. We value its local business on DCF with 8% WACC and 0.5% TGR. We value
Optus on DCF with 8.0% WACC and 1% TGR.
Risks Which May Impede the Achievement of the Price Target: The Australian mobile phone business is getting increasingly
competitive, with Voda and Hutch keen for users. This could lead to Optus earnings not reaching our estimate of flatness over the next
few years.

5
 EQUITY RESEARCH
Important Disclosures Continued:
The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total
revenues, a portion of which is generated by investment banking activities.

With the exception of analysts who publish for either LBI or a branch of LBI, research analysts may not be associated persons of the
member and therefore may not be subject to Rule 2711 restrictions on communications with a subject company, public appearances
and trading securities held by a research analyst account.

Company Name Ticker Price (30-May-2008) Stock / Sector Rating

SingTel STEL.SI SGD 3.81 1-Overweight / 1-Positive

Guide to Lehman Brothers Equity Research Rating System:

Lehman Brothers coverage analysts in Asia (ex Japan) use a relative rating system in which they rate stocks as 1-Overweight, 2- Equal
weight or 3-Underweight (see definitions below) relative to the country index of the country in which a stock is listed.

In addition to the stock rating, we provide sector views which rate the outlook for the sector coverage universe as 1-Positive, 2-Neutral
or 3-Negative (see definitions below). A rating system using terms such as buy, hold and sell is not the equivalent of our rating system.
Investors should carefully read the entire research report including the definitions of all ratings and not infer its contents from ratings
alone.

Stock Rating
1-Overweight - The stock is expected to outperform the unweighted expected total return of the relevant country index over a 12-month
investment horizon.
2-Equal weight - The stock is expected to perform in line with the unweighted expected total return of the relevant country index over a
12- month investment horizon.
3-Underweight - The stock is expected to underperform the unweighted expected total return of the relevant country index over a 12-
month investment horizon.
RS-Rating Suspended - The rating and target price have been suspended temporarily to comply with applicable regulations and/or firm
policies in certain circumstances including when Lehman Brothers is acting in a n advisory capacity in a merger or strategic transaction
involving the company.

Sector View
1-Positive - sector coverage universe fundamentals/valuations are improving.
2-Neutral - sector coverage universe fundamentals/valuations are steady, neither improving nor deteriorating.
3-Negative - sector coverage universe fundamentals/valuations are deteriorating.

Distribution of Ratings:
Lehman Brothers Equity Research has 2127 companies under coverage.
46% have been assigned a 1-Overweight rating which, for purposes of mandatory regulatory disclosures, is classified as Buy rating,
34% of companies with this rating are investment banking clients of the Firm.
39% have been assigned a 2-Equal weight rating which, for purposes of mandatory regulatory disclosures, is classified as Hold rating,
30% of companies with this rating are investment banking clients of the Firm.
12% have been assigned a 3-Underweight rating which, for purposes of mandatory regulatory disclosures, is classified as Sell rating,
22% of companies with this rating are investment banking clients of the Firm.

Lehman Brothers Inc. and Its Foreign Affiliates Involved in the Production of Equity Research
New York London Tokyo
Lehman Brothers Inc. (LBI, New York) Lehman Brothers International (Europe) Lehman Brothers Japan Inc. (LBJ, Tokyo)
745 Seventh Avenue (LBIE, London) Roppongi Hills Mori Tower, 31st Floor
New York , NY 10019 25 Bank Street 6-10-1 Roppongi, Minato-ku, Tokyo 106-6131,
Member, FINRA London, E14 5LE, United Kingdom Japan
Regulated by FSA Regulated by FSA

Mumbai Seoul Hong Kong

Lehman Brothers Inc., India Branch Lehman Brothers International (Europe) Seoul Lehman Brothers Asia Limited - Hong Kong
(LBI, India) Branch (LBIE, Seoul) (LBAL, Hong Kong)
Winchester, Off High Street, 9th Floor Hanwha Building, 12th Floor Two International Finance Centre
Hiranandani Business Park, 110, Sokong-dong Chung-Ku 8 Finance Street, 26th Floor
Powai, Mumbai 400 076, India Seoul 100-755, Korea Central, Hong Kong
Regulated by FSC Regulated by SFC

6
 EQUITY RESEARCH
Mumbai Taipei Sydney
Lehman Brothers Securities Private Limited Lehman Brothers Securities Taiwan Limited Lehman Brothers Australia Securities Pty Limited
(LBSPL, India) (LBSTL, Taiwan) (LBAUL, Sydney)
Ceejay House, 11th Level, Plot F, Cathay Financial Center 12F Level 33, 264 George Street
Shivsagar Estate, Dr. Annie Besant Road, 7 Sungren Road - Shin-Yi District Sydney NSW 2000, Australia
Worli, Mumbai 400018 Taipei, Taiwan Regulated by ASIC
Regulated by SEBI Regulated by FSC

This material has been prepared and/or issued by Lehman Brothers Inc., member SIPC, and/or one of its affiliates (“Lehman Brothers”) and has been
approved by Lehman Brothers International (Europe), authorized and regulated by the Financial Services Authority, in connection with its distribution in
the European Economic Area. This material is distributed in Japan by Lehman Brothers Japan Inc., and in Hong Kong by Lehman Brothers Asia Limited.
This material is distributed in Australia by Lehman Brothers Australia Pty Limited, and in Singapore by Lehman Brothers Singapore Pte Ltd. Where this
material is distributed by Lehman Brothers Singapore Pte Ltd, please note that it is intended for general circulation only and the recommendations
contained herein does not take into account the specific investment objectives, financial situation or particular needs of any particular person. An investor
should consult his Lehman Brothers’ representative regarding the suitability of the product and take into account his specific investment objectives,
financial situation or particular needs before he makes a commitment to purchase the investment product. This material is distributed in Korea by
Lehman Brothers International (Europe) Seoul Branch. This document is for information purposes only and it should not be regarded as an offer to sell or
as a solicitation of an offer to buy the securities or other instruments mentioned in it. No part of this document may be reproduced in any manner without
the written permission of Lehman Brothers. With the exception of disclosures relating to Lehman Brothers, this research report is based on current public
information that Lehman Brothers considers reliable, but we make no representation that it is accurate or complete, and it should not be relied on as
such. In the case of any disclosure to the effect that Lehman Brothers Inc. or its affiliates beneficially own 1% or more of any class of common equity
securities of the subject company, the computation of beneficial ownership of securities is based upon the methodology used to compute ownership
under Section 13(d) of the United States' Securities Exchange Act of 1934. In the case of any disclosure to the effect that Lehman Brothers Inc. and/or
its affiliates hold a short position of at least 1% of the outstanding share capital of a particular company, such disclosure relates solely to the ordinary
share capital of the company. Accordingly, while such calculation represents Lehman Brothers’ holdings net of any long position in the ordinary share
capital of the company, such calculation excludes any rights or obligations that Lehman Brothers may otherwise have, or which may accrue in the future,
with respect to such ordinary share capital. Similarly such calculation does not include any shares held or owned by Lehman Brothers where such
shares are held under a wider agreement or arrangement (be it with a client or a counterparty) concerning the shares of such company (e.g. prime
broking and/or stock lending activity). Any such disclosure represents the position of Lehman Brothers as of the last business day of the calendar month
preceding the date of this report. This material is provided with the understanding that Lehman Brothers is not acting in a fiduciary capacity. Opinions
expressed herein reflect the opinion of Lehman Brothers and are subject to change without notice. The products mentioned in this document may not be
eligible for sale in some states or countries, and they may not be suitable for all types of investors. If an investor has any doubts about product suitability,
he should consult his Lehman Brothers representative. The value of and the income produced by products may fluctuate, so that an investor may get
back less than he invested. Value and income may be adversely affected by exchange rates, interest rates, or other factors. Past performance is not
necessarily indicative of future results. If a product is income producing, part of the capital invested may be used to pay that income. © 2008 Lehman
Brothers. All rights reserved. Additional information is available on request. Please contact a Lehman Brothers entity in your home jurisdiction.

Lehman Brothers policy for managing conflicts of interest in connection with investment research is available at
www.lehman.com/researchconflictspolicy. Ratings, earnings per share forecasts and price targets contained in the Firm's equity research reports
covering U.S. companies are available at www.lehman.com/disclosures.

Complete disclosure information on companies covered by Lehman Brothers Equity Research is available at www.lehman.com/disclosures.