Annual Report of the Board of Directors on the affairs of the Company

The Directors submit their report and the audited financial statements of the Company, Sri Lanka Telecom PLC and the Group, which includes its subsidiary undertakings, for the 2014 financial year.

1. Formation

Sri Lanka Telecom (SLT) was formed by an Incorporation Order made under Section 2 of the State Industrial Corporations Act No. 49 of 1957 and published in the Extraordinary Gazette No. 596/11 of 6 February 1990. Subsequently, in terms of an order made by the Minister of Posts and Telecommunications (‘the Minister’) on 24 July 1991, under Section 23 of the Sri Lanka Telecommunications Act No. 25 of 1991 and published in the Gazette No. 675 of 9 August 1991, all properties, rights and liabilities (other than those excluded by the agreement entered into between the Minister and SLT as per sub-section 2 of Section 23 of the Sri Lanka Telecommunication Act) to which the Department of Telecommunications (DOT) was entitled or subject to immediately before the transfer date of 1 September 1991, were vested with SLT.

On 25 September 1996, SLT was converted to a public limited company under the Conversion of Public Corporations of Government-Owned Business Undertakings into Public Limited Companies Act No. 23 of 1987, vide Extraordinary Gazette No. 942/7 dated 25 September 1996.

On 5 August 1997, the Government of Sri Lanka as the sole shareholder of SLT divested 35% (631,701,000 ordinary shares) of the issued ordinary share capital to Nippon Telegraph and Telephone Corporation (NTT) and entered into an agreement to transfer the management of SLT to NTT. On 2 July 1998, the Government of Sri Lanka divested a further 3.5% of the issued ordinary share capital by transfer of 63,170,010 ordinary shares to the employees of SLT. On 22 March 2000, NTT transferred the entire 35% of their holding in SLT to NTT Communications Corporation (NTT Com).

The Government of Sri Lanka divested a further 12% of its holding to the public through a listing on the Colombo Stock Exchange in November 2002, reducing its holding to 49.5%.

On 4 June 2007, SLT was re-registered under the Companies Act No. 07 of 2007 as Sri Lanka Telecom PLC (SLT PLC).

On 1 April 2008, NTT Com of Japan who held 635,076,318 ordinary shares, which constituted 35.2% of the total issued stated capital of SLT PLC, sold their entire holding to Global Telecommunications Holdings N.V. of Netherlands (GTH) at a price of Rs. 50.50 per share. Following the share trade by NTT Com, GTH, in terms of the Takeovers and Mergers Code, announced a mandatory offer to the remaining shareholders which was closed on 2 June 2008. At the close of the mandatory offer, GTH had acquired additional 9.78% of the stated capital of SLT PLC, making the total shareholding to 44.98% of the total issued stated capital of SLT PLC. Since the expiration of the management agreement with NTT, no management agreement had been entered into by SLT PLC.

2. Principal group activities and review of the business

The Group provides a broad portfolio of telecommunication services across Sri Lanka, the main activity being domestic and international fixed and mobile telephone services. In addition, the range of services provided by the Group include, interalia, internet services, IPTV, Wimax operations, data services, domestic and international-leased circuits, frame relay, satellite uplink and maritime transmission.

The Company’s interest in subsidiaries and the business activities of the respective subsidiaries are as follows:

Name of the subsidiary Business activity
Mobitel (Private) Limited Mobile telephone services
Sri Lanka Telecom (Services) Limited Total network solutions
SLT Publications (Private) Limited Directory information and publication services
SLT Human Capital Solutions (Private) Limited Workforce solutions
SLT VisionCom (Private) Limited IPTV suport services
Sky Network (Private) Limited Wireless broadband operations
SLT Property Management (Private) Limited Property management
SLT Campus (Private) Limited Higher education services of ICT and business management

A detailed review of the Company’s activities, the development of its businesses and an indication of likely future developments are given under Management Discussion and Analysis.

3. Board of Directors

The Directors who served during 2014 were:

Name of Director Position Date of appointment Date of re-election
Mr. Nimal Welgama Chairman 20.05.2010 28.03.2011
Mr. Chan Chee Beng Director 05.06.2008 09.04.2014
Mr. Jeffrey Jay Blatt Director 05.06.2008 29.03.2012
Mr. Jayantha Dharmadasa Director 26.05.2010 29.03.2012
Mr. Shameendra Rajapaksa Director 26.05.2010 24.04.2013
Mr. Kalinga Indatissa Director 26.05.2010 24.04.2013
Mr. Lawrence Michael Paratz Director 26.05.2010 09.04.2014
Ms. Pushpa Wellappilli Director 28.06.2012 24.04.2013
Ms. Lai Choon Foong Director 09.05.2014  

The following Directors resigned from the Directorate subsequent to the financial year:

Name of Director Position Date of resignation
Mr. Nimal Welgama Chairman 22.01.2015
Mr. Jayantha Dharmadasa Director 16.01.2015
Mr. Shameendra Rajapaksa Director 09.01.2015
Mr. Kalinga Indatissa Director 23.01.2015
Ms. Pushpa Wellappilli Director 21.01.2015

The following Directors were appointed to the Board to fill the casual vacancies that arose due to the above resignations:

Name of Director Position Date of appointment
Mr. P. G. Kumarasinghe Sirisena Chairman 23.01.2015
Mr. Krishantha Cooray Director 03.02.2015
Ms. Nilanthi Pieris Director 03.02.2015
Ms. G. D. Chandra Ekanayake Director 03.02.2015
Mr. Firdouse Farook Director 03.02.2015

4. Directors appointment and re-election

The Directors may from time-to-time appoint one or more Director(s). Any such Director shall hold office only until the next AGM and shall then offer themselves for election by the Company’s shareholders. The Company’s Articles of Association, require the Directors to retire and offer themselves for election by shareholders at the first AGM after their appointment. Notwithstanding that the Articles of Association provide that one-third of the Directors (or the number nearest to one third) are to retire by rotation at each AGM and offer themselves for re-election by the shareholders, in compliance with the Articles of Association of the Company.

All Directors appointed to fill casual vacancies arising from the resignation of the Directors abovementioned, will be proposed for re-election this year, at the forthcoming AGM in accordance with the Company’s Articles of Association. In addition, Mr. Jeffrey Jay Blatt who, being subject to retirement by rotation, has been longest in office since his last election, will offer himself for re-election.

5. Directors’ indemnities and insurance

The Company maintains Directors’ and officers’ liability insurance, which gives appropriate cover for any legal action brought against its Directors.

6. Directors’ interest in contracts with the Company

The Company carries out transactions in the ordinary course of business at commercial rates with entities in which a Director of the Company is the Chairman or a Director of such entities or holds substantial interest in such entities.

The entities in which the Directors of the Company hold directorships in other entities are disclosed below. The transactions of the Company with the Directors and with these entities (if any) are disclosed in Note 33.2.

7. Related party transactions

The details are given in Note 33 in the notes to the financial statements.

The audit committee has reviewed them in compliance with the Code of Best Practices on Related Party Transactions adopted by the Securities and Exchange Commission of Sri Lanka and made recommendation to the Board that transactions with related parties are recurrent, of revenue and trading nature, which is necessary for the day-to-day operations of the Company.

8. Remuneration and other benefits of Directors

The remuneration and other benefits of the Directors are given in Note 7 to the financial statements.

9. Share capital

Details of the Company’s share capital are set out in Note 29 to the financial statements. The issued share capital of the Company as at 31 December 2014 was 1,804,860,000 ordinary shares. The rights and obligations attached to these shares are governed by Common Law and the Company’s Articles of Association.

As per the share register, the following shareholders held more than 5% of the 1,804,860,000 ordinary shares in issue as at 31 December 2014:

Secretary to the Treasury (Government of Sri Lanka) 49.50%
Global Telecommunications Holdings N.V. of Netherlands 44.98%
Shares held by the public (12,205 shareholders) 5.52%

Voting rights

Ordinary shareholders are entitled to receive notice and to attend and speak at any general meetings of the Company. On a show of hands every shareholder present in person or by proxy (or being a corporation present by a duly authorised representative) shall have one vote and on a poll every shareholder who is present in person or by proxy or (in the case of a corporate member) by a duly-authorised representative shall have one vote for every share of which he is the holder. A shareholder entitled to attend and vote at a general meeting may appoint a proxy to attend and vote instead of him. A proxy need not be a shareholder of the Company.

10. Financial statements

A statement by the Directors of their responsibilities for preparing the financial statements is included in the Statement of Directors’ Responsibilities. Our significant accounting policies are set out on the financial statements and conform with IFRS as adopted in Sri Lanka as SLFRSs.

These policies and applicable estimation techniques, have been reviewed by the Directors who have confirmed them to be appropriate for the preparation of the 2014 financial statements.

So far as the Directors are aware, there is no relevant information that has not been disclosed to the auditors and each of the Directors believe that all steps have been taken that ought to have been taken to make them aware of any relevant audit information and to establish that the auditors have been made aware of that information.

All amounts are stated in Sri Lankan Rupees million, unless otherwise stated.

11. Financial results income

The total income for 2013 and 2014 were as follows:

  2014 2013
Rs. million
Rs. million
Rs. million
Rs. million
Operating revenue 65,040 38,950 60,144 36,781
Operating costs (46,268) (29,559) (41,218) (26,821)

Details are given in the income statement of the financial statements.

12. Profit

  2014 2013
Rs. million
Rs. million
Rs. million
Rs. million
Profit before tax 8,251 4,859 7,365 5,014
Profit after tax 6,001 3,324 5,419 3,635

13. Dividends

The Board of Directors of the company has declared a first and final dividend of Rs. 0.89 per share for the financial year ended 31 December 2014 at a meeting held on 27 February 2015. As required by Section 56 (2) of the Companies Act No. 07 of 2007, the Board of Directors have certified that the Company satisfies the Solvency Test in accordance with the Section 57 of the Companies Act No. 07 of 2007 and have obtained a certificate from the auditors, prior to approving the first and final dividend of Rs. 0.89 per share for this year. The first and final dividend will be paid on 22 May 2015 to those shareholders on the register as at 14 May 2015.

14. Reserves

Total Reserves of the Company stood at Rs. 58,577 million as at 31 December 2014, details of which are given in the Statement of Changes in Equity.

15. Respective responsibilities of Directors and auditors for the financial statements

The Directors are responsible for the preparation of the financial statements so that they present a true and fair view of the state of affairs of the Company. The Directors are of the view that these financial statements have been prepared in conformity with the requirements of the Companies Act No.7 of 2007, the Sri Lanka Accounting and Auditing Standards Act No.15 of 1995 and the Continuing Listing Rules of the Colombo Stock Exchange.

16. Independent auditors’ report

You can access the independent auditors’ report here.

17. Changes in accounting policies

The accounting policies adopted by the Company and its subsidiaries have been consistently applied from previous years.

18. Property, plant & equipment

The movements in property, plant & equipment during the year and current status of value of properties are set out in Note 13 to the financial statements.

Land is carried at cost within the financial statements. It is not practical to estimate the market value of land at each reporting date.

19. Amounts payable to the firm holding office as an auditor

The remuneration payable by the Company to the independent auditors is given in Note 7 to the financial statements.

20. Auditors’ relationship or any interest with the Company

The Directors are satisfied that, based on written representations made by the independent auditors to the Board, they did not have any relationship or any interest with the Company and its subsidiaries that would impair their independence.

21. Statutory payments

The Directors confirm that to the best of their knowledge all taxes, duties and levies payable by the Company and all contributions, levies and taxes payable on behalf of and in respect of the employees of the company and all other known statutory dues as were due and payable by the Company as at the reporting date have been paid or where relevant provided for in the financial statements on the statement of financial position covering contingent liabilities. The tax position of the company is disclosed on Note 11.

22. Environmental protection

After making adequate enquiries from management, the Directors are satisfied that the Company and its subsidiaries operate in a manner that minimises the detrimental effects on the environment and provides products and services that have a beneficial effect on the customers and the communities within which the Group operates.

23. Donations

During the year the Directors had approved donations amounting to Rs. 50,000/- for charitable purposes (2013 - Rs. 850,000/-). The amount includes contributions on account of Corporate Social Responsibility (CSR) initiatives as well.

24. Employment policies

SLT has a range of employment policies covering such issues as diversity, employee well-being and equal opportunities. The Company takes its responsibilities to the disabled seriously and seeks not to discriminate against current or prospective employees because of any disability. Employees who become disabled during their career at SLT, will be retained in employment wherever possible and given help with rehabilitation and training.

The average number of employees in the Group during the period is given in Note 7.1 to the Group financial statements. Group companies operate within a framework of HR policies, practices and regulations appropriate to their market sector and country of operation. Policies and procedures for recruitment, training and career development promote equality of opportunity regardless of gender, sexual orientation, age, marital status, disability, race, religion or other beliefs and ethnic or national origin. The aim is to encourage a culture in which all employees have the opportunity to develop fully according to their individual abilities and the needs of the Group.

The number of persons employed by SLT as at 31 December 2014 disclosed here.

25. Sustainability reporting

The Group is conscious of the impact, direct and indirect, on the environment due to its business activities. Every endeavour is made to minimise the adverse effects on the environment to ensure sustainable continuity of our natural resources. The activities undertaken by the Group in recognition of its responsibility as a corporate citizen are disclosed more fully under corporate citizenship.

26. Events after the reporting date

No event had occurred since the reporting date and the approval of these financial statements, which would require adjustments to, or disclosure in, these financial statements.

27. Appointment of auditors

The Company’s auditor, KPMG has indicated its willingness to continue in office and a resolution seeking to reappoint them as the Company’s auditors and to authorise the Directors to determine their remuneration will be proposed at the forthcoming AGM.

KPMG has been SLT’s auditors since 2009. The audit committee carried out the annual review of their performance by gathering feedback from Committee members and senior management prior to their recommendation for re-appointment of auditors.

The audit committee has recommended their re-appointment to the Board.

28. Going concern

The Performance Section includes information on our financial results, financial outlook, cash flow, loans and borrowings and financial position. Notes 4, 17, 21and 22 of the financial statements include information on the financial risk management objectives and exposures to interest, foreign exchange, credit, liquidity and market risks. Group’s investments, cash and cash equivalents, borrowings. The Directors are satisfied that the cash flow forecast, taking into account reasonably possible risk sensitivities associated with this forecast and SLT Group’s current funding and facilities, alongside SLT Group’s funding strategy, shows that the Group will continue to operate for the foreseeable future. The Directors therefore continue to have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future and continue to adopt a going concern basis.

29. Annual General Meeting

The Company’s AGM will be held at 10.00 am on Wednesday, 13 May 2015 at Kings’ Court, Cinnamon Lakeside Hotel Colombo, No. 115, Sir Chittampalam A. Gardiner Mawatha, Colombo 02. Details of the meeting and the resolutions to be proposed are set out in a separate Notice of Meeting which accompanies this annual report.

By order of the Board

P. G. Kumarasinghe Sirisena

G. D. Chandra Ekanayake

Mahesh Athukorale
Company Secretary

27 February 2015



SLT Group Directors and their directorships in other companies are as follows:

Director Company Relationship
Mr. Nimal Welgama Mobitel (Private) Limited Chairman/Director
  Sri Lanka Telecom (Services) Limited Director
  SLT Publications (Private) Limited Chairman/Director
  SLT Human Capital Solutions (Private) Limited Chairman/Director
  SLT VisionCom (Private) Limited Chairman/Director
  Sky Network (Private) Limited Chairman/Director
  SLT Property Management (Private) Limited Chairman/Director
  SLT Campus (Private) Limited Chairman/Director
  Upali Group of Companies CEO
  Monetary Board of the Central Bank of Sri Lanka Member
Mr. Chan Chee Beng Maxis Berhad, Malaysia Director/CEO
  Aircel Limited Director
  Aircel Cellular Limited Director
  Mobitel (Private) Limited Director
  SLT Property Management (Private) Limited Director
  SLT Campus (Private) Limited Director
  Usaha Tegas Sdn Bhd Director
  Global Telecommunication Holding NV Director
  Maxis Communications Berhad Director
  Maxis Mobille Sdn Bhd Director
  Maxis Mobile service Sdn Bhd Director
  Maxis International Sdn Bhd Director
  Binariang GSM Sdn Bhd Director
  Bumi Armuba Bhd Director
  Dishnet Wireless Limited Director
  South Asia Communications (Private) Limited Director
  PT Axis Telekom Indonesia Commissioner
  PT Maxis Communications Commissioner
  Maxis Broadband Sdn Bhd Director
Mr. Jeffrey Jay Blatt SLT VisionCom (Private) Limited Director
Mr. Shameendra Rajapaksa SLT Publications (Private) Limited Director
  SLT Property Management (Private) Limited Director
  SLT Human Capital Solutions (Private) Limited Director
  SLT Campus (Private) Limited Director
  SriLankan Airlines Limited Director
Mr. Jayantha Dharmadasa SLT VisionCom (Private) Limited Director
  SLT Human Capital Solutions (Private) Limited Director
  Nawaloka Hospitals PLC Chairman
  Nawaloka Holdings (Private) Limited Chairman
  New Ashford International (Private) Limited Chairman
  Sasiri Polysacks (Private) Limited Chairman
  Nawaloka Group of Companies (Private) Limited Chairman
  Concord Venture Export Lanka (Private) Limited Chairman
  Nawaloka Metropolis Chemicals Laboratories (Private) Limited Chairman
  Nawaloka Medical Centre (Private) Limited Chairman
  Nawaloka Polysacks Sharjah Ceyoka (Private) Limited Chairman
  Nawaloka Trading (Private) Ltd Chairman
  Koala (Private) Limited Chairman
  Sahas Ware (Private) Limited Chairman
  Nawaloka Petroleum (Private) Limited Chairman
  Nawaloka Aviation (Private) Limited Chairman
  Nation Lanka Finance PLC Chairman
  Nawaloka Construction Co. (Private) Limited Chairman
Mr. Kalinga Indatissa SLT Human Capital Solutions (Private) Limited Director
  SLT Campus (Private) Limited Director
  SLT Property Management (Private) Limited Director
Mrs. S. Pushpa Wellappili Ministry of Finance and Planning Deputy Secretary to the Treasury
Mr. Lawrence Paratz Mobitel (Private) Limited Director
  Sky Network (Private) Limited Director
  SLT Property Management (Private) Limited Director
  SLT Campus (Private) Limited Director
  Maxis Communication Berhad Director
  Vemet (Private) Limited Director
  Real Thing Entertainment (Pty) Ltd. Director
  Razorback (Pty) Ltd. Director
Ms. Lai Choon Foong Mobitel (Private) Limited Director