(All amounts in Sri Lankan Rupees million)
Sri Lanka Telecom PLC (the ‘Company’) is a company domiciled in Sri Lanka. The address of the Company’s registered office is Lotus Road, Colombo 1. The separate financial statements of the Company relates to Sri Lanka Telecom PLC. The consolidated financial statements of the Company as at and for the year ended 31 December 2014 comprise the Company and its subsidiaries (together referred to as the ‘Group’ and individually as ‘Group entities’). The Financial statements of all companies within the Group are prepared for a common financial year which ends on 31 December. The Group primarily is involved in providing broad portfolio of telecommunication services across Sri Lanka. In addition, the range of services provided by the Group include, interalia, internet services, data services, domestic and international leased circuits, broadband, satellite uplink, maritime transmission, IPTV service and directory publishing. The Company is a quoted public Company which has its listing on the Colombo Stock Exchange.
The financial statements of the Group and the Company which comprises the statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows have been prepared in accordance with Sri Lanka Accounting Standards (SLFRS & LKAS) as laid down by The Institute of Chartered Accountants of Sri Lanka (ICASL) and the requirements of the Companies Act No. 07 of 2007.
The consolidated and Company financial statements were authorised for issue by the Board of Directors in accordance with the resolution of the Directors on 27 February 2015.
The financial statements have been prepared on the historical cost basis and applied consistently with no adjustments being made for inflationary factors affecting the financial statements except for the following item:
‘The liability for defined benefit obligation is actuarially valued and recognised at the present value of the defined benefit obligation.’
The financial statements have been prepared on a going concern basis.
These financial statements are presented in Sri Lankan Rupees, which is the Company’s functional currency and the Group’s presentation currency. All financial information presented in Sri Lankan Rupees has been rounded to the nearest million, unless otherwise indicated.
The preparation of financial statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.
Information about significant areas of estimation uncertainty and judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:
No changes in accounting policies have taken place during the year ended 31 December 2014 other than those disclosed in Note 3 (ii-a).
The accounting policies set out below have been applied consistently to all periods presented in these financial statements, unless otherwise indicated. The accounting policies of the Company have been consistently applied by the Group entities where applicable and deviations, if any, have been disclosed in Note 34.
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.
Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not re-measured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
SLFRS 10 which is effective for financial periods beginning on or after 1 January 2014, replaces the guidance on control and consolidation in LKAS 27 - ‘Consolidated and Separate Financial Statements’ and in SIC 12 ‘Consideration - Special Purpose Entities’.
The Group has reviewed its investments in other entities to assess whether the conclusion to consolidate is different under SLFRS 10 than under LKAS 27. No differences were found for any of the investments.
The Directors have concluded that the Group controls all subsidiaries as it has majority control and voting rights over its subsidiaries as depicted in Note (ii-c), below:
Set out below are the Group’s principal subsidiaries as at 31 December 2014.
| Name of entity | Place of business/ country of incorporation |
Percentage of ownership interest held by the Group |
Principal activities |
| Mobitel (Private) Limited | Colombo/Sri Lanka | 100.00% | Mobile service provider |
| Sri Lanka Telecom (Services) Limited | Colombo/Sri Lanka | 99.99% | Providing network solutions for corporate customers and small businesses |
| SLT VisionCom (Private) Limited | Colombo/Sri Lanka | 100.00% | Providing IPTV support services |
| SLT Publications (Private) Limited | Colombo/Sri Lanka | 100.00% | Directory information and publication services |
| SLT Human Capital Solutions (Private) Limited | Colombo/Sri Lanka | 100.00% | Providing workforce solutions |
| Sky Network (Private) Limited | Colombo/Sri Lanka | 99.94% | Wireless broadband operations |
| SLT Property Management (Private) Limited | Colombo/Sri Lanka | 100.00% | Managing SLT’s real estate resources |
| SLT Campus (Private) Limited | Colombo/Sri Lanka | 100.00% | Higher education services of ICT and Business Management |
NCI are measured at their proportionate share of acquiree’s identifiable net assets at the date of acquisition. Changes in the Group interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.
When the Group loses control over a subsidiary, it derecognises the asset and liabilities of the subsidiary and any related NCI (if applicable) and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest in the former subsidiary is measured at fair value when control is lost.
Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated.
Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in statement of profit or loss and other comprehensive income. Non-monetary items that are measured based on historical cost in a foreign currency are not translated.
The Group classifies non-derivative financial assets into the following categories: financial assets at fair value through profit or loss, held-to-maturity financial assets, loans and receivables and available-for-sale financial assets.
The Group classifies non-derivative financial liabilities into the other financial liabilities category.
The Group initially recognises loans and receivables and debt securities issued on the date when they are originated. All other financial assets and financial liabilities are initially recognised on the trade date.
The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all risks and rewards of ownership of the financial asset are transferred or it neither transfers nor retains substantially all risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such derecognised financial assets that is created or retained by the Group is recognised as a separate asset or liability.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
Financial assets and financial liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.
| Financial assets at fair value through profit or loss | A financial asset is classified as fair value through profit or loss if it is classified as held-for-trading or is designated as such on initial recognition. Directly attributable transaction costs are recognised in the statement of profit or loss and other comprehensive income as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein, including any interest or dividend income, are recognised in the statement of profit or loss and other comprehensive income. |
| Held-to-maturity financial assets | These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. |
| Loans and receivables | These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at amortised cost using the effective interest method. Loans and receivables comprise cash and cash equivalents*, staff loans, and trade and other receivables**, including related party receivables. |
| Available-for-sale financial assets | These assets are initially recognised at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, are recognised in other comprehensive income and accumulated in the fair value reserve. When these assets are derecognised, the gain or loss accumulated in equity is reclassified to statement of profit or loss and other comprehensive income. |
* Cash and cash equivalents
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less. Bank overdrafts that are repayable on demand form an integral part of the Group’s cash management, are included as a component of cash and cash equivalents for the purpose of the statement of cash flow.
** Trade and other receivables
Trade and other receivables are stated at their estimated realisable amount.
Non-derivative financial liabilities are initially recognised at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortised cost using the effective interest method.
SLFRS 13 defines fair value as the price that would be received to sell and asset or paid to transfer a liability in an orderly transactions between market participants at the measurement date.
A Fair value measurement requires an entity to determine the following:
Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market information might be available. For other assets and liabilities, observable market transactions and market information might not be available. However, the objective of a fair value measurement in both cases is the same to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions (i.e. an exit price at the measurement date from the perspective of a market participant that holds the asset or owes the liability).
When a price for an identical asset or liability is not observable, an entity measures fair value using another valuation technique that maximises the use of relevant observable inputs and minimises the use of unobservable inputs. Because fair value is a market-based measurement, it is measured using the assumptions that market participants would use when pricing the asset or liability, including assumptions about risk. As a result, an entity’s intention to hold an asset or to settle or otherwise fulfill a liability is not relevant when measuring fair value.
When an asset is acquired or a liability is assumed in an exchange transaction for that asset or liability, the transaction price is the price paid to acquire the asset or received to assume the liability (an entry price). In contrast, the fair value of the asset or liability is the price that would be received to sell the asset or paid to transfer the liability (an exit price).
When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out.
The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective and requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumption and other risks affecting the specific instrument.
The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
Reclassifications of financial assets, other than as set out below or of financial liabilities between measurements categories are not permitted following initial recognition.
Held-for-trading non-derivative financial assets are transferred out of the held at fair value through profit or loss category in the following circumstances: to the available-for-sale category, where, in rare circumstances, they are no longer held for the purpose of selling or repurchasing in the near term; or to the loan and receivables category, where they are no longer held for the purpose of selling or repurchasing in the near term and they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity.
Financial assets are transferred out of the available-for-sale category to the loan and receivables category where they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity.
Held-to-maturity assets are reclassified to the available-for-sale category if the portfolio becomes tainted following the sale of other than an insignificant amount of held-to-maturity assets prior to their maturity.
Financial assets are reclassified at their fair value on the date of reclassification. For financial assets reclassified out of the available-for-sale category into loans and receivables, any gain or loss on those assets recognised in shareholders’ equity prior to the date of reclassification is amortised to the profit or loss over the remaining life of the financial asset, using the effective interest method.
The Group holds derivative financial instruments to hedge its interest rate risk exposure.
Derivatives are initially recognised at fair value; any directly attributable transaction costs are recognised in the statement of profit or loss and other comprehensive income as incurred. Subsequent to initial recognition, derivatives are measured at fair value and changes therein are generally recognised in profit or loss.
Financial assets not classified at fair value through profit or loss, are assessed at each reporting date to determine whether there is objective evidence of impairment.
Objective evidence that financial assets are impaired includes -
In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.
| Financial assets measured at amortised cost |
The Group considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics. In assessing collective impairment, the Group uses historical information on the timing of recoveries and the amount of loss incurred and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends. An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account. When the Group considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss is reversed through the statement of profit or loss and other comprehensive income |
| Available-for-sale financial assets |
Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve to the statement of profit or loss and other comprehensive income. The amount reclassified is the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in statement of profit or loss and other comprehensive income. If the fair value of an impaired available-for-sale debt security subsequently increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed through statement of profit or loss; otherwise, it is reversed through OCI. |
At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than, investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.
For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.
Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amounts of the other assets in the CGU on a pro-rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
Items of property, plant & equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the assets to a working condition for their intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that asset.
When parts of an item of property, plant & equipment have different useful lives, they are accounted for as separate items (major components) of property, plant & equipment.
The cost of replacing part of an item of property, plant & equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant & equipment are recognised in profit or loss.
Depreciation is calculated over the depreciable amount, which is the cost of an asset or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant & equipment. In the year of acquisition, depreciation is computed on proportionate basis from the month the asset is put into use and no depreciation will be charged to the month in which the particular asset was disposed. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.
Depreciation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
The estimated useful lives for the assets are as follows:
| Freehold buildings | 5 - 40 years |
| Ducts, cables and other outside plant | 5 - 12.5 years |
| Submarine cables | 19 - 25 years |
| Telephone exchanges and transmission equipment | 8 - 12.5 years |
| Transmission equipment and towers | 12.5 - 40 years |
| Motor vehicles | 5 years |
| CDMA handsets | 3 years |
| PABX system | 1 - 6 years |
| Other fixed assets | 4 - 10 years |
Capital work-in-progress is stated at cost. These are expenses of a capital nature directly incurred in the construction of buildings, major plant and machinery and system development, awaiting capitalisation.
Major spare parts and project-related inventory qualify as property, plant & equipment when the entity expects to use them during more than one period and are used in connection with specific items of property, plant & equipment.
The carrying amount of an item of property, plant & equipment is derecognised on disposal. Gains and losses on disposal of an item of property, plant & equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant & equipment and are recognised net within ‘other income’ in the statement of profit or loss and other comprehensive income.
When replacement costs are recognised in the carrying amount of an item of property, plant & equipment, the remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous cost of inspections is derecognised.
Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
Goodwill arises on the acquisition of subsidiaries.
Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For measurement of goodwill at initial recognition, see Note 3 (a) (i).
Subsequent measurement
Goodwill is measured at cost less accumulated impairment losses.
Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.
Separately acquired licences are shown at historical cost. Expenditures on license fees that is deemed to benefit or relate to more than one financial year is classified as license fee and is being amortised over the license period on a straight-line basis.
Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill is recognised in profit or loss as incurred.
Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative periods are as follows:
Software 3-5 years
Leases in terms of which the Group assumes substantially all risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.
For operating leases, the leased assets are not recognised on the Group’s Statement of Financial Position.
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost principle. Value of inventories includes expenditure incurred in acquiring, conversion costs and other costs incurred in bringing them to their existing location and condition.
Ordinary share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.
Government grants are recognised initially at fair value when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant. Grants that compensate the Group for expenses incurred are recognised in the statement of profit or loss and other comprehensive income as other income on a systematic basis in the same periods in which the expenses are recognised. Grants that compensate the Group for the cost of an asset are recognised in the statement of profit or loss and other comprehensive income on a systematic basis over the useful life of the asset.
A defined contribution plan is a post-employment benefit plan under which contributions are made into a separate fund and the entity will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plan are recognised as an employee benefit expense in profit or loss in the periods during services is rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
All employees of the Company are members of the Sri Lanka Telecom Provident Fund to which the Company contributes 15% of such employees’ basic salary and allowances.
All employees of subsidiaries of the Group are members of Employees’ Provident Fund (EPF), to which respective subsidiaries contribute 12% of such employees’ basic salary and allowances. Employees of SLT Services (Private) Limited are members of Employees’ Provident Fund (EPF), where the Company contribute 15% of such employees’ basic salary and allowances.
The Company and other subsidiaries contribute 3% of the salary of each employee to the Employees’ Trust Fund.
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The defined benefit is calculated by an independent actuary using Projected Unit Credit Method as recommended by LKAS 19 - ‘Employee Benefits’. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using the yield on Government Bonds at the reporting date and have maturity dates approximating to the terms of the Company’s obligations.
The Group recognises actuarial gains and losses that arise in calculating the Company’s obligation in respect of a plan in other comprehensive income.
The present value of the defined benefit obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the defined retirement benefit obligations are given in Note 26. Any changes in these assumptions will impact the carrying amount of defined benefit obligations.
Provision has been made for retirement gratuities from the first year of service for all employees, in conformity with LKAS 19 - ‘Employee Benefits’. However, under the Payment of Gratuity Act No. 12 of 1983, the liability to an employee arises only on completion of 5 years of continued service.
Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.
A liability is recognised for the amount expected to be paid under short-term cash bonus or leave encashment plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation.
Trade and other payables are stated at their cost.
All discernible risks are accounted for in determining the amount of all known liabilities. The Company’s share of any contingencies and capital commitments and of its Subsidiaries for which the Company is also liable severally or otherwise are also included with appropriate disclosures.
Revenue from services rendered in the course of ordinary activities is measured at fair value of the consideration received or receivable net of trade discounts, volume rebates and after eliminating the sales within the Group.
Revenue is recognised when persuasive evidence exist, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable and the amount of revenue can be measured reliably.
If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.
The revenue is recognised as follows:
Revenue for call time usage by customers is recognised as revenue as services are performed on accrual basis. Fixed rental is recognised as income on a monthly basis in relation to the period of services rendered.
The revenue received from other network operators, local and international, for the use of the Group’s telecommunication network are recognised, net of taxes, based on usage taking the traffic minutes/per second rates stipulated in the relevant agreements and regulations and based on the terms of the lease agreements for fixed rentals.
Revenue arising from the interconnection of voice and data traffic between other telecommunications operators is recognised at the time of transit across the Group’s network and presented on gross basis. The relevant revenue accrued is recognised under income and interconnection expenses recognised under operating costs in profit or loss.
Revenue from Data services and IPTV services is recognised on usage and the fixed rental on a monthly basis when it is earned net of taxes, rebates and discounts.
The revenue from other telephony services are recognised on an accrual basis based on fixed rental contracts entered between the Group and subscribers.
The connection fees relating to Code Divisional Multiple Access (CDMA) connections are recognised as revenue at the point the connection is activated.
Revenue from sale of equipment is recognised, net of taxes, once the equipment is delivered.
Revenue from publication sales relating to advertising revenue is recognised on publishing the advertisement on the telephone directory and a copy delivered to the subscriber on a percentage of completion method.
The expenses are recognised on an accrual basis. All expenses incurred in the ordinary course of business and in maintaining property, plant & equipment in a state of efficiency is charged against income in arriving at the profit for the year.
Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.
Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Determining whether an arrangement contains a lease.
At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specific asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset.
The Group’s finance income and finance cost include:
Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date on which the Group’s right to receive payment is established.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or other comprehensive income.
Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or other comprehensive income.
Provisions for taxation is based on the profit for the year adjusted for taxation purposes in accordance with the provisions of the Inland revenue Act No. 10 of 2006 and the amendments thereto at the rates specified in Note 11.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is not recognised for the undistributed profits of subsidiaries as the parent company has control over the dividend policy of its subsidiaries and distribution of those profits. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.
Economic Service Charge (ESC) is payable on the liable turnover at specified rates. As per the provision of the Economic Service Charge Act No. 13 of 2006 and subsequent amendments thereto, ESC is deductible from the income tax liability. Any unclaimed payment can be carried forward and set off against the income tax payable as per the relevant provision in the Act.
The Group presents basic Earnings Per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.
Diluted EPS is determinated by adjusting the profit or loss attributable to ordinary shareholders and the weighted-average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.
The Company transfers annually from the retained earnings an amount equal to 0.1% of additions to property, plant & equipment to an insurance reserve. An equal amount is invested in a sinking fund to meet any funding requirements for potential losses from uninsured property, plant & equipment. The insurance reserve is maintained to recover any losses arising from damage to property, plant & equipment, except for motor vehicles, that are not insured with a third-party insurer.
Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.
Provision for final dividends is recognised at the time the dividend recommended and declared by the Board of Directors, is approved by the shareholders.
Except when a standard permits or requires otherwise, comparative information is disclosed in respect of the previous period. Where the presentation or classification of items in the financial statements are amended, comparative amounts are reclassified unless it is impracticable.
The cash flow statement has been prepared using the ‘Indirect Method’ of preparing cash flows in accordance with the Sri Lanka Accounting Standard (LKAS 07) - ‘Statement of Cash Flows’. Cash and cash equivalents comprise short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. The cash and cash equivalent include cash in hand, balances with banks, placements with banks, money at call and short notice.
All material events after the reporting date have been considered and where appropriate, adjustments or disclosures have been made in respective notes to the financial statements.
The Board of Directors of the Company is responsible for the preparation and presentation of these financial statements.
The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards. However, these standards have not been applied in preparing these financial statements:
| New or amended standards | Summary of requirements | Possible impact on consolidated financial statements |
| SLFRS 9 - Financial Instruments | The objective of this SLFRS is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of financial statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. This standard will be effective for financial periods beginning on or after 1 January 2018. | The Group is assessing the potential impact on its consolidated financial statements resulting from the application of SLFRS 9. |
| SLFRS 15 - Revenue from Contract with Customers | Establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. This standard will be effective for financial periods beginning on or after 1 January 2017. | The Group is assessing the potential impact on its consolidated financial statements resulting from the application of SLFRS 15. |
| Agriculture: Bearer Plants
(Amendments to LKAS 16 and LKAS 41) |
These amendments require a bearer plant, defined as a living plant, to be accounted for as property, plant & equipment and included in the scope of LKAS 16 - ’Property, plant & equipment’, instead of LKAS 41 - ‘Agriculture’. The amendments are effective for annual reporting periods beginning on or after 1 January 2016. | None. The Group does not have any bearer plants. |
| SLFRS 14 - Regulatory Deferral Accounts | The Objective of this standard is to specify the financial reporting requirements
of regulatory deferral account balances that arise when an entity provides goods or services to customers at a price or rate that is subject to rate regulations.
The amendments are effective for annual reporting periods beginning on or after 1 January 2016. |
The Group is assessing the potential impact on its consolidated financial statements resulting from the application of SLFRS 14. |
The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.
The Group’s risk management processes are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed regularly to reflect changes in market conditions and the Group activities.
The audit committee oversees how management monitors compliance with the Group’s risk management processes/guidelines and procedures and reviews the adequacy of the risk management framework in relation to the risks. The audit committee is assisted in its oversight role by internal reviews of risk management controls and procedures. The results of which are reported to the audit committee.
The Group has exposure to the following risks from its use of financial instruments:
This Note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements.
Credit risk is the risk of financial loss to the Group if a customer or counter party to a financial instrument fails to meet its contractual obligation and arise principally from the Group’s receivables from customers.
Carrying amount of financial assets represents the maximum credit exposure.
The Group has a very well-established credit policy for both International Interconnect customers and Domestic customers to minimise the credit risk. A separate committee has been established to evaluate and recommend the credit worthiness for the International Interconnect customer. Further, prepaid sales are used as a means of mitigating credit risk.
Domestic service is offered to a new customer only after scrutinising through a internal blacklisted data base. The Group has a well-established credit control policy and process to minimise the credit risk. Customers are categorised according to the segments and credit limit has been fixed as per their average monthly bill value. Customer usage and bill payments are monitored as per the credit limit. Credit limit will be periodically revised as per the past monthly bill value. High risk voice customers are subject to auto disconnection when they reach the threshold limit. Credit control actions and recovery actions are taken for overdue customers and defaulted customers to minimise the credit risk. High revenue-generated customers including corporate customers are monitored individually.
As at 31 December 2014, the maximum exposure to credit risk for trade by geographic region was as follows:
| Group | Company | ||||
| Rs. million | 2014 | 2013 | 2014 | 2013 | |
| Sri Lanka | 13,900 | 12,359 | 10,602 | 9,610 | |
| Middle East | 405 | 265 | 382 | 258 | |
| Asia | 548 | 626 | 327 | 318 | |
| Europe | 1,427 | 1,017 | 1,097 | 897 | |
| Australia | 40 | 58 | 25 | 21 | |
| America | 134 | 273 | 134 | 273 | |
| Other | 62 | 48 | 3 | 5 | |
| Total Trade Receivables | 16,516 | 14,646 | 12,570 | 11,382 | |
As at 31 December 2014, the maximum exposure to credit risk for trade receivables by type of counterparty was as follows:
| Group | Company | ||||
| Rs. million | 2014 | 2013 | 2014 | 2013 | |
| Wholesale customers | 4,000 | 3,793 | 3,813 | 3,594 | |
| Retail customers | 10,252 | 9,073 | 7,486 | 6,692 | |
| Other network operators | 1,134 | 958 | 1,134 | 958 | |
| Other | 1,130 | 822 | 137 | 138 | |
| 16,516 | 14,646 | 12,570 | 11,382 | ||
As at 31 December the Group’s most significant customer was Saudi Arabia Telecom which accounted for Rs. 283 million of trade receivables (2013 - Rs. 84 million).
As at 31 December 2014, the aging of trade receivables that were not impaired was as follows:
| Group | Company | ||||
| Rs. million | 2014 | 2013 | 2014 | 2013 | |
| Past due 1 Year | 82 | 81 | 378 | 16 | |
| Past due 2 Years and above | 9 | 18 | 28 | 59 | |
| 91 | 99 | 406 | 75 | ||
Management believes that the unimpaired amounts that are past due more than 2 years are still collectible in full, based on historical payment behaviour and extensive analysis of customer credit risk.
Out of the above not impaired balance, Mobitel (Private) Limited value amounts to Rs. 365 million (2013 - Rs. Nil).
The Movement in the allowance for impairment in respect of trade receivables during the year is as follows:
| Rs. million | Group Impairment | Company Impairment |
| Balance as at 1 January 2013 | 4,863 | 3,946 |
| - Impairment loss recognised | 799 | 540 |
| - Amounts written-off | – | – |
| Balance as at December 2013 | 5,662 | 4,486 |
| - Impairment loss recognised | 898 | 591 |
| - Amounts written-off | – | – |
| Balance as at 31 December 2014 | 6,560 | 5,077 |
The Group limits its exposure to credit risk by investing only in government debt securities, repos and in short-term deposits with selected bankers with Board approval.
The Group held cash and cash equivalents of Rs. 4,695 million as at 31 December 2014 (2013 - Rs. 3,459 million).
The Group limits its exposure to credit risk by ensuring the loan balance are recovered from the employees’ monthly salary, or if the employee leaves such amounts are recovered from the employees’ EPF balance.
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.
The Group ensures its liquidity is maintained by investing in short, medium and long-term financial instruments to support operational and other funding requirements. The Group determines its liquidity requirements by the use of both short and long-term cash forecasts. These forecasts are supplemented by a financial headroom analysis, which is used to assess funding adequacy for at least a 12-month period and the same is reviewed on an annual basis.
Short and medium-term requirements are regularly reviewed and managed by the treasury division.
The following are the remaining contractual maturities of financial liabilities at the reporting date. The amounts are gross and undiscounted:
| Rs. million | Carrying
Value |
Up to 1
Years |
Up to 2
Years |
Up to 5
Years |
Over 5
Years |
| Group | |||||
| As at 31 December 2014 | |||||
| Bank overdrafts | 921 | 921 | – | – | – |
| Bank borrowings and others | 18,011 | 5,356 | 4,414 | 8,241 | – |
| Vendor financing | 7,874 | 2,777 | 2,899 | 2,198 | – |
| Lease liabilities | 316 | 82 | 91 | 143 | – |
| 27,122 | 9,136 | 7,404 | 10,582 | – | |
| As at 31 December 2013 | |||||
| Bank overdrafts | 1,265 | 1,265 | – | – | – |
| Bank borrowings and others | 9,025 | 4,385 | 4,640 | – | – |
| Vendor financing | 10,091 | 2,587 | 5,376 | 2,128 | – |
| Lease liabilities | 309 | 75 | 58 | 176 | – |
| 20,690 | 8,312 | 10,074 | 2,304 | – |
| Rs. million | Carrying Value |
Up to 1 Years |
Up to 2 Years |
Up to 5 Years |
Over 5 Years |
| Company | |||||
| As at 31 December 2014 | |||||
| Bank overdrafts | – | – | – | – | – |
| Bank borrowings and others | 15,837 | 4,299 | 3,297 | 8,241 | – |
| Vendor financing | – | – | – | – | – |
| Lease liabilities | 222 | 60 | 162 | – | – |
| 16,059 | 4,359 | 3,459 | 8,241 | – | |
| As at 31 December 2013 | |||||
| Bank overdrafts | 740 | 740 | – | – | – |
| Bank borrowings and others | 4,922 | 2,468 | 2,454 | – | – |
| Vendor financing | – | – | – | – | – |
| Lease liabilities | 268 | 60 | 52 | 156 | – |
| 5,930 | 3,268 | 2,506 | 156 | – |
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices, which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
The Group is exposed to currency risk on services provided, services received and borrowings that are denominated in a currency other than Sri Lankan Rupees (LKR).
The Group manages its currency risk by a natural hedging mechanism to a certain extent by matching currency outflows for repayments of foreign currency loans and services with currency inflows for services settled in foreign currencies.
The summary of quantitative data about the Group’s exposure to foreign currency was as follows:
| Group | |
| USD million | |
| As at December 2014 | |
| Foreign trade receivables | 21 |
| Secured bank loans | (15) |
| Unsecured loans | (120) |
| Trade payables | (2) |
| Net statement of financial position exposure | (116) |
| As at December 2013 | |
| Foreign Trade receivables | 18 |
| Secured Bank Loans | (23) |
| Unsecured Loans | (38) |
| Trade Payables | (3) |
| Net statement of financial position exposure | (46) |
| Company | |
| USD million | |
| As at December 2014 | |
| Foreign trade receivables | 16 |
| Secured bank loans | – |
| Unsecured loans | (120) |
| Trade payables | (1) |
| Net statement of financial position exposure | (105) |
| As at December 2013 | |
| Foreign Trade receivables | 14 |
| Secured Bank Loans | – |
| Unsecured Loans | (38) |
| Trade Payables | (1) |
| Net statement of financial position exposure | (25) |
The following significant exchange rates have been applied during the year:
| Average rate | Year end spot rate | |||
| 2014 | 2013 | 2014 | 2013 | |
| USD | 130.56 | 129.11 | 131.87 | 130.89 |
| EUR | 173.47 | 171.51 | 160.51 | 180.44 |
A reasonable possible strengthening (weakening) USD would have an impact on the Group’s borrowings. This analysis assumes that all other variables, in particular, interest rates remain constant.
| Profit or loss | Balance sheet | |||
| Rs. million | Strengthening | Weakening | Strengthening | Weakening |
| Group | ||||
| 2014 December USD (10%) |
(1,777) | 1,777 | (1,777) | 1,777 |
| 2013 December USD (10%) |
(788) | 788 | (788) | 788 |
| Company | ||||
| 2014 December USD (10%) |
(1,579) | 1,579 | (1,579) | 1,579 |
| 2013 December USD (10%) |
(492) | 492 | (492) | 492 |
Interest rate risk mainly arises as a result of Group having interest sensitive assets and liabilities, which are directly, impacted by changes in the interest rates. The Group’s borrowings and investments are maintained in a mix of fixed and variable interest rate instruments and periodical maturity gap analysis is carried out to take timely action and to mitigate possible adverse impact due to volatility of interest rates.
Foreign currency borrowing at variable interest rate with a cap minimises any adverse impact due to an upward movement of USD interest rate in the market. Further, the Company has obtained an interest rate SWAP to minimise the impact of variable interest rate borrowing.
Short-term interest rate management is delegated to the treasury operations while long-term interest rate management decisions require approval from the Board of Directors.
Interest rate sensitivity of the Company was computed using the floor interest rate (minimum) of 4.75% and cap interest rate (maximum) of 6.75% as stipulated in the loan agreement. The Group interest rate sensitivity was computed based on a 100 basis point increase or decrease. This analysis assumes that all other variables, in particular, foreign currency exchange rates, remain constant. The sensitivity of interest rate movement is shown below:
| Profit or loss | ||
| Rs. million | Increase | Decrease |
| Group | ||
| 2014 December | ||
| Variable rate instruments | (100) | 76 |
| 2013 December | ||
| Variable rate instruments | (137) | 116 |
| Company | ||
| 2014 December | ||
| Variable rate instruments | (38) | 14 |
| 2013 December | ||
| Variable rate instruments | (52) | 31 |
The fair value of financial assets and liabilities, together with carrying amounts shown in the statement of financial position are as follows:
| Type of the Financial Instrument (2014) | Note | Fair value through profit or loss Group/Company |
Available-for-sale Group/Company |
Loans and Receivables (Note 4.4.1) |
Held-to-maturity Group/Company |
||
| Group | Company | ||||||
| Trade and other receivables | 20 & 18 | – | – | 16,124 | 15,517 | – | |
| Other Investments | 17 | – | – | 6,750 | 6,397 | – | |
| Total | – | – | 22,874 | 21,914 | – | ||
| Type of the Financial Instrument (2013) | |||||||
| Trade and other receivables | 20 & 18 | – | – | 14,062 | 13,603 | – | |
| Other Investments | 17 | – | – | 3,393 | 3,203 | – | |
| Total | – | – | 17,455 | 16,806 | – | ||
| Type of the Financial Instrument (2014) | Note | Fair value through profit or loss | Other financial liabilities (Note 4.4.1) | ||
| Group/Company | Group | Company | |||
| Trade and other payables | 25 | – | 19,462 | 14,828 | |
| Borrowings | 22 | – | 27,122 | 16,059 | |
| Total | – | 46,584 | 30,887 | ||
| Type of the Financial Instrument (2013) | |||||
| Trade and other payables | 25 | – | 16,920 | 12,066 | |
| Borrowings | 22 | – | 20,690 | 5,930 | |
| Total | – | 37,610 | 17,996 | ||
The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of stated capital and reserves. The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.
The gearing ratios at 31 December 2014 and 2013 were as follows:
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Total borrowings | 27,122 | 20,690 | 16,059 | 5,930 | |
| Total equity | 63,900 | 59,789 | 58,577 | 57,103 | |
| Total capital | 91,022 | 80,479 | 74,636 | 63,033 | |
| Gearing ratio (%) | 29.8 | 25.7 | 21.5 | 9.4 | |
The Group has three reportable segments, as described below, which are the Group’s strategic divisions. The strategic divisions offer different products and services and are managed separately because they require different technology and marketing strategies. For each of the strategic divisions, the Board of Directors, (the Chief Operating Decision Maker - CODM) reviews internal management reports on at least quarterly basis. The following summary describes the operations in each of the Group’s reportable segments.
Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before tax. As included in the internal management reports that are reviewed by the Board of Directors (BOD). Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries.
(All amounts in Sri Lankan Rupees million)
| Fixed telephony operations | Mobile operations | Other segments operations | Total | |||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| External revenues | 35,708 | 33,804 | 28,325 | 26,105 | 1,007 | 235 | 65,040 | 60,144 |
| Inter-segment revenue | 3,242 | 2,977 | 2,275 | 1,377 | 1,706 | 1,588 | 7,223 | 5,942 |
| Reportable segment revenue | 38,950 | 36,781 | 30,600 | 27,482 | 2,713 | 1,823 | 72,263 | 66,086 |
| Reportable segment profit before tax | 4,859 | 5,014 | 3,500 | 3,040 | 322 | (170) | 8,681 | 7,884 |
| Interest revenue | 708 | 872 | 177 | 219 | 25 | 31 | 910 | 1,122 |
| Interest expenses | (49) | (371) | (140) | (352) | (9) | (13) | (198) | (736) |
| Depreciation and amortisation | (7,164) | (6,804) | (5,817) | (5,546) | (80) | (85) | (13,061) | (12,435) |
| Reportable segment assets | 99,017 | 83,090 | 41,591 | 41,714 | 1,684 | 1,472 | 142,292 | 126,276 |
| Capital expenditure | 16,440 | 10,666 | 3,800 | 10,037 | 13 | 11 | 20,253 | 20,714 |
| Reportable segment liabilities | 40,440 | 25,987 | 23,177 | 25,457 | 1,290 | 1,358 | 64,907 | 52,802 |
| 2014 | 2013 | |
| Revenues | ||
| Total revenue for reportable segments | 69,550 | 64,263 |
| Revenue for other segments | 2,713 | 1,823 |
| 72,263 | 66,086 | |
| Elimination of inter-segment revenue | (7,223) | (5,942) |
| Consolidated revenue | 65,040 | 60,144 |
| Profit or loss | ||
| Total Profit or loss for reportable segments | 8,359 | 8,054 |
| Profit or loss for other segments | 322 | (170) |
| 8,681 | 7,884 | |
| Elimination of inter-segment profits | (430) | (519) |
| Consolidated profit from continuing operations before tax | 8,251 | 7,365 |
| Assets | ||
| Total assets for reportable segments | 140,608 | 124,804 |
| Assets for other segments | 1,684 | 1,472 |
| 142,292 | 126,276 | |
| Elimination of inter-segment assets | (19,688) | (18,229) |
| Consolidated total assets | 122,604 | 108,047 |
| Liabilities | ||
| Total liabilities for reportable segments | 63,617 | 51,444 |
| Liabilities for other segments | 1,290 | 1,358 |
| 64,907 | 52,802 | |
| Elimination of inter-segment liabilities | (6,203) | (4,544) |
| Consolidated total liabilities | 58,704 | 48,258 |
| Reportable
segment totals |
Adjustments | Consolidated
totals |
|
| Other material items (2014) | |||
| Interest revenue | 910 | – | 910 |
| Interest expense | (198) | – | (198) |
| Capital expenditure | 20,253 | – | 20,253 |
| Depreciation and amortisation | (13,061) | – | (13,061) |
| Other material items (2013) | |||
| Interest revenue | 1,122 | – | 1,122 |
| Interest expense | (736) | – | (736) |
| Capital expenditure | 20,714 | – | 20,714 |
| Depreciation and amortisation | (12,435) | – | (12,435) |
The significant categories under which revenue is recognised are as follows:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Release of deferred connection charges (Note 24) | 586 | 679 | 586 | 679 |
| Rental income | 6,588 | 6,308 | 4,911 | 4,787 |
| Domestic call revenue | 22,314 | 21,047 | 5,098 | 5,245 |
| Receipts from other network operators - Domestic | 1,767 | 1,740 | 755 | 821 |
| International call revenue | 2,291 | 2,229 | 921 | 1,013 |
| Receipts from other network operators - International | 96 | 122 | 13 | 37 |
| International settlements | 10,826 | 9,372 | 6,864 | 6,476 |
| CDMA revenue | 1,481 | 1,742 | 1,481 | 1,742 |
| Broadband revenue | 8,232 | 7,233 | 6,199 | 5,441 |
| Data and other services | 10,859 | 9,672 | 12,122 | 10,540 |
| 65,040 | 60,144 | 38,950 | 36,781 | |
The following items have been included in arriving at operating profit before depreciation and amortisation:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Staff costs (Note 7.1) | 14,150 | 13,058 | 10,322 | 9,771 |
| Directors’ emoluments | 20 | 19 | 17 | 16 |
| Payments to international network operators | 1,499 | 1,607 | 1,499 | 1,607 |
| Payments to other network operators | ||||
| - International | 2,761 | 2,060 | 1,982 | 1,503 |
| - Domestic | 2,016 | 2,011 | 822 | 841 |
| Int’l Telecommunication Operators Levy (Note 8) | 2,186 | 2,329 | 1,297 | 1,588 |
| Auditors‘ remuneration | ||||
| Audit | ||||
| - KPMG | 11 | 9 | 9 | 8 |
| - Other auditors | 4 | 3 | – | – |
| Non-audit | ||||
| - KPMG | 8 | 7 | 8 | 7 |
| - Other auditors | 6 | 3 | 6 | 2 |
| Repairs and maintenance expenditure | 3,419 | 2,979 | 2,696 | 2,284 |
| Provision for impairment of debtors | 937 | 781 | 630 | 522 |
| Impairments/(reversals) of inventory | 13 | 88 | 13 | 77 |
| Impairment of property, plant & equipment (Note 13) | 518 | 149 | 518 | 149 |
| Other operating expenditure | 18,720 | 16,115 | 9,740 | 8,446 |
| 46,268 | 41,218 | 29,559 | 26,821 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Salaries, wages, allowances and other benefits | 12,545 | 11,569 | 9,059 | 8,595 |
| Post employment benefits | ||||
| - Defined contribution plans | 1,087 | 1,003 | 814 | 755 |
| - Defined benefit obligations (Note 26) | 518 | 486 | 449 | 421 |
| 14,150 | 13,058 | 10,322 | 9,771 | |
| Average number of persons employed | 9,985 | 9,767 | 5,786 | 5,950 |
In accordance with the Finance Act No. 11 of 2004, all Telecommunication Gateway Operators are required to pay a levy defined as the Telecommunication Development Charge (TDC) to the Government of Sri Lanka, based on international call minutes terminated in the country. This levy was made effective from 3 March 2003, where initially the levy was defined in such a way that operators were allowed to claim 2/3rd of the TDC against the costs of network development charges.
First revision to this regulation was introduced with effect from 15 July 2010 with a TDC rate change from US cents 3.80 to US cents 1.50. Through the same revision, the disbursement process was removed from the regulation. The revised rates prevailed until such time the rate was again revised to US cents 3.0 per minute with effect from January 2012, in accordance with the Budget Proposal for 2012.
Total TDC refunds claimed are as follows:
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| TDC refund | 1,259 | 607 | 937 | 367 | |
The refunds claimed during the year by the Company and the Group were for periods between April 2009 to July 2010. This will be the final refund the Company and Group will receive from the Telecommunication Regulatory Commission (TRC).
International Telecommunicaton Operators Levy (ITL) recognised as expense for the period is as follows:
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| ITL | 2,186 | 2,329 | 1,297 | 1,588 | |
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Rupee loans [see Note (a) below] | 53 | 198 | – | – | |
| Foreign currency loans [see Note (a) below] | 824 | 622 | 481 | 348 | |
| Other charges [see Note (b) below] | 68 | 38 | 49 | 23 | |
| Total Interest and finance cost | 945 | 858 | 530 | 371 | |
| Interest Capitalised | (747) | (122) | (481) | – | |
| Net total interest and finance cost | 198 | 736 | 49 | 371 | |
(a) Interest cost of the Company relates to the USD loans. Interest cost of the Group related to Rupee loans, USD loans and vendor financing.
(b) Other charges mainly include interest cost of finance leases and overdraft facilities.
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Net foreign exchange (loss)/gain | (13) | (441) | 14 | 18 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Interest income from: | ||||
| Treasury Bond | – | 5 | – | 5 |
| Repurchase agreement - Repos | 187 | 132 | 28 | 42 |
| Fixed Deposits | 271 | 549 | 228 | 389 |
| Staff Loan Interest | 452 | 436 | 452 | 436 |
| 910 | 1,122 | 708 | 872 | |
The interest income on bank deposits and Government Securities reflect the prevailing rates on the date of respective investments.
Tax recognised in statement of profit or loss
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Current tax expense | ||||
| Current year | 1,061 | 987 | 358 | 387 |
| Adjustment for prior years | – | 5 | – | 5 |
| 1,061 | 992 | 358 | 392 | |
| Deferred tax expense | ||||
| Origination and reversal of temporary differences (Note 23) | 1,189 | 954 | 1,177 | 987 |
| 1,189 | 954 | 1,177 | 987 | |
| Tax expense | 2,250 | 1,946 | 1,535 | 1,379 |
| 2014 | 2013 | |||||
| Before
tax |
Tax (expenses)
benefit |
Net of
tax |
Before
tax |
Tax (expenses)
benefit |
Net of
Tax |
|
| Defined benefit plan actuarial gains/(losses) | (478) | 122 | (356) | (103) | 21 | (82) |
| (478) | 122 | (356) | (103) | 21 | (82) | |
| 2014 | 2013 | |||||
| Before
tax |
Tax (expenses)
benefit |
Net of
tax |
Before
tax |
Tax (expenses)
benefit |
Net of
Tax |
|
| Defined benefit plan actuarial gains/(losses) | (438) | 122 | (316) | (76) | 21 | (55) |
| (438) | 122 | (316) | (76) | 21 | (55) | |
| Reconciliation of effective tax rate | Group/2014 | Group/2013 | |||
| % | % | ||||
| Profit before tax | – | 8,251 | – | 7,365 | |
| Tax using the Company’s domestic tax rate | 28.00 | 2,310 | 28.00 | 2,062 | |
| Effect of different Tax rates [Note (a) & (b) below] | (4.08) | (337) | (3.56) | (262) | |
| Non-deductible expenses | 6.47 | 534 | 6.57 | 484 | |
| Income not subject to tax | (3.10) | (257) | (4.59) | (338) | |
| 27.27 | 2,250 | 26.42 | 1,946 | ||
| Reconciliation of effective tax rate | Company/2014 | Company/2013 | |||
| % | % | ||||
| Profit before tax | – | 4,859 | – | 5,014 | |
| Tax using the company’s domestic tax rate | 28.00 | 1,361 | 28.00 | 1,404 | |
| Non-deductible expenses | 8.20 | 398 | 6.16 | 309 | |
| Income not subject to tax | (4.6) | (224) | (6.66) | (334) | |
| 31.60 | 1,535 | 27.50 | 1,379 | ||
Current income tax charge of the Group/Company is made up as follows:
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Sri Lanka Telecom PLC | 358 | 387 | 358 | 387 | |
| Mobitel (Private) Limited | 644 | 587 | – | – | |
| Sri Lanka Telecom (Services) Limited | 14 | 4 | – | – | |
| SLT Human Capital Solutions (Private) Limited | (1) | 1 | – | – | |
| SLT Publications (Private) Limited | 43 | 4 | – | – | |
| SLT VisionCom (Private) Limited | 3 | 2 | – | – | |
| Sky Network (Private) Limited | – | 2 | – | – | |
| SLT Property Management (Private) Limited | – | – | – | – | |
| SLT Campus (Private) Limited | – | – | – | – | |
| 1,061 | 987 | 358 | 387 | ||
The basic earnings per share is calculated by dividing the net profit attributable to equity holders by the weighted average number of ordinary shares in issue during the year.
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Net profit attributable to equity holders (Rs. million) | 6,001 | 5,419 | 3,324 | 3,635 | |
| Weighted average number of ordinary shares in issue (million) | 1,805 | 1,805 | 1,805 | 1,805 | |
| Basic earnings per share (Rs.) | 3.32 | 3.00 | 1.84 | 2.01 | |
Diluted EPS is the same as computed above, as the Company does not have any instrument that will potentially dilute the shareholdings.
| Group | Freehold
land |
Freehold
buildings |
Ducts, cables
and other outside plant |
Telephone
exchanges |
Transmission
equipment |
Other fixed
assets |
Capital work-
in-progress |
Total |
| Cost | ||||||||
| As at 1 January 2013 | 356 | 2,893 | 83,447 | 19,488 | 67,548 | 29,283 | 10,127 | 213,142 |
| Additions at cost | – | – | 177 | 62 | 2,645 | 1,166 | 14,913 | 18,963 |
| Transfers from capital work-in-progress | – | 114 | 2,910 | 1,286 | 6,696 | 1,391 | (12,397) | – |
| Disposals | – | – | (739) | (1,128) | – | (79) | – | (1,946) |
| Adjustments | – | – | (4) | (48) | (7) | (78) | – | (137) |
| As at 31 December 2013 | 356 | 3,007 | 85,791 | 19,660 | 76,882 | 31,683 | 12,643 | 230,022 |
| Accumulated depreciation | ||||||||
| As at 1 January 2013 | – | (1,663) | (67,413) | (14,880) | (32,496) | (23,088) | – | (139,540) |
| Disposals | – | – | 721 | 1,128 | – | 78 | – | 1,928 |
| Impairments loss | – | – | – | (149) | – | – | – | (149) |
| Depreciation charge | – | (71) | (2,483) | (949) | (5,864) | (2,388) | – | (11,755) |
| As at 31 December 2013 | – | (1,734) | (69,175) | (14,849) | (38,360) | (25,398) | – | (149,516) |
| Carrying value as at 31 December 2013 |
356 | 1,273 | 16,616 | 4,811 | 38,522 | 6,285 | 12,643 | 80,506 |
| Group | Freehold
land |
Freehold
buildings |
Ducts, cables
and other outside plant |
Telephone
exchanges |
Transmission
equipment |
Other fixed
assets |
Capital work-
in-progress |
Total |
| Cost | ||||||||
| As at 1 January 2014 | 356 | 3,007 | 85,791 | 19,660 | 76,882 | 31,683 | 12,643 | 230,022 |
| Additions at cost | 1 | – | 912 | 101 | 1,736 | 1,196 | 19,933 | 23,879 |
| Transfers from capital work-in-progress | – | 81 | 4,845 | 2,423 | 3,586 | 2,856 | (13,791) | – |
| Disposals | – | – | (24) | (164) | (9,833) | (379) | – | (10,400) |
| Adjustments | – | (9) | – | – | – | 9 | – | – |
| As at 31 December 2014 | 357 | 3,079 | 91,524 | 22,020 | 72,371 | 35,365 | 18,785 | 243,501 |
| Accumulated depreciation | ||||||||
| As at 1 January 2014 | – | (1,734) | (69,175) | (14,849) | (38,360) | (25,398) | – | (149,516) |
| Disposals | – | – | 24 | 164 | 9,231 | 374 | – | 9,793 |
| Impairments loss | – | – | – | (435) | – | (83) | – | (518) |
| Depreciation charge | – | (97) | (2,707) | (932) | (6,102) | (2,487) | – | (12,325) |
| As at 31 December 2014 | – | (1,831) | (71,858) | (16,052) | (35,231) | (27,594) | – | (152,566) |
| Carrying value as at 31 December 2014 |
357 | 1,248 | 19,666 | 5,968 | 37,140 | 7,771 | 18,785 | 90,935 |
| Company | Freehold
land |
Freehold
buildings |
Ducts, cables
and other outside plant |
Telephone
exchanges |
Transmission
equipment |
Other fixed
assets |
Capital work-
in-progress |
Total |
| Cost | ||||||||
| As at 1 January 2013 | 356 | 2,866 | 82,675 | 19,510 | 20,383 | 28,027 | 9,123 | 162,940 |
| Additions at cost | – | – | 177 | 46 | 92 | 668 | 9,459 | 10,442 |
| Transfers from capital work-in-progress | – | 114 | 2,910 | 1,286 | 715 | 1,391 | (6,416) | – |
| Disposals | – | – | (739) | (1,112) | – | (60) | – | (1,911) |
| Adjustments | – | – | (4) | (48) | (7) | (78) | – | (137) |
| As at 31 December 2013 | 356 | 2,980 | 85,019 | 19,682 | 21,183 | 29,948 | 12,166 | 171,334 |
| Accumulated depreciation | ||||||||
| As at 1 January 2013 | – | (1,663) | (66,962) | (14,901) | (13,256) | (22,243) | – | (119,025) |
| Disposals | – | – | 721 | 1,112 | – | 60 | – | 1,894 |
| Impairments loss | – | – | – | (149) | – | – | – | (149) |
| Depreciation charge | – | (71) | (2,420) | (936) | (912) | (2,166) | – | (6,505) |
| As at 31 December 2013 | – | (1,734) | (68,661) | (14,874) | (14,168) | (24,348) | – | (123,785) |
| Carrying value as at 31 December 2013 |
356 | 1,246 | 16,358 | 4,808 | 7,015 | 5,600 | 12,166 | 47,549 |
| Company | Freehold
land |
Freehold
buildings |
Ducts, cables
and other outside plant |
Telephone
exchanges |
Transmission
equipment |
Other fixed
assets |
Capital work-
in-progress |
Total |
| Cost | ||||||||
| As at 1 January 2014 | 356 | 2,980 | 85,019 | 19,682 | 21,183 | 29,948 | 12,166 | 171,334 |
| Additions at cost | 1 | – | 912 | 101 | 74 | 799 | 18,181 | 20,068 |
| Transfers from capital work-in-progress | – | 81 | 4,845 | 2,423 | 1,907 | 2,856 | (12,112) | – |
| Disposals | – | – | (24) | (164) | (106) | (330) | – | (624) |
| Adjustments | – | (9) | – | – | – | 9 | – | – |
| As at 31 December 2014 | 357 | 3,052 | 90,752 | 22,042 | 23,058 | 33,282 | 18,235 | 190,778 |
| Accumulated depreciation | ||||||||
| As at 1 January 2014 | – | (1,734) | (68,661) | (14,874) | (14,168) | (24,348) | – | (123,785) |
| Disposals | – | – | 24 | 164 | 106 | 327 | – | 621 |
| Impairments loss | – | – | – | (435) | – | (83) | – | (518) |
| Depreciation charge | – | (97) | (2,643) | (932) | (1,009) | (2,194) | – | (6,875) |
| As at 31 December 2014 | – | (1,831) | (71,280) | (16,077) | (15,071) | (26,298) | – | (130,557) |
| Carrying value as at 31 December 2014 |
357 | 1,221 | 19,472 | 5,965 | 7,987 | 6,984 | 18,235 | 60,221 |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Cost | 557 | 479 | 440 | 429 |
| Accumulated depreciation | (286) | (195) | (247) | (173) |
| Carrying value | 271 | 284 | 193 | 256 |
j Property, plant & equipment include submarine cables. The total cost and accumulated depreciation of all cables under this category are as follows:
| Group/Company | ||
| 2014 | 2013 | |
| Cost | 6,304 | 6,304 |
| Accumulated depreciation at 1 January | (4,711) | (4,550) |
| Depreciation charge for the year | (176) | (161) |
| Carrying amount | 1,417 | 1,593 |
| Goodwill | Licences | Software | Others | Total | |
| Cost | |||||
| Balance as at 1 January 2013 | 394 | 1,978 | 2,643 | 330 | 5,345 |
| - Acquisitions | – | 2,081 | 82 | – | 2,163 |
| - Adjustment | – | – | (23) | – | (23) |
| Balance as at 31 December 2013 | 394 | 4,059 | 2,702 | 330 | 7,485 |
| Balance as at 1 January 2014 | 394 | 4,059 | 2,702 | 330 | 7,485 |
| - Acquisitions | – | 2 | 73 | – | 75 |
| Balance as at 31 December 2014 | 394 | 4,061 | 2,775 | 330 | 7,560 |
| Accumulated amortisation | |||||
| Balance as at 1 January 2013 | 253 | 618 | 1,725 | 330 | 2,926 |
| - Amortisation | – | 275 | 308 | – | 583 |
| Balance as at 31 December 2013 | 253 | 893 | 2,033 | 330 | 3,509 |
| Balance as at 1 January 2014 | 253 | 893 | 2,033 | 330 | 3,509 |
| - Amortisation | – | 386 | 253 | – | 639 |
| Balance as at 31 December 2014 | 253 | 1,279 | 2,286 | 330 | 4,148 |
| Carrying Amounts | |||||
| 31 December 2014 | 141 | 2,782 | 489 | – | 3,412 |
| 31 December 2013 | 141 | 3,166 | 669 | – | 3,976 |
The goodwill of the Group consists of goodwill arising on acquisition of Mobitel (Private) Limited.
Goodwill is allocated to the Group’s Cash-Generating Units (CGUs). A summary of the goodwill allocation is presented below:
| 2014 | 2013 | |
| Mobitel (Private) Limited | 141 | 141 |
| Total | 141 | 141 |
The recoverable amount of a CGU is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections,
based on financial budgets approved by management covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.
The key assumptions used for value-in-use calculations are as follows:
| 2014
% |
2013
% |
|
| Growth rate | 8 - 12 | 10 - 12 |
| Discount rate | 10.22 | 10.50 |
Management determined budgeted gross margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments. No impairment charge has been recognised for the year ended 31 December 2014 for the above CGU (2013 - Rs. Nil).
| Licences | Software | Others | Total | ||
| Cost | |||||
| Balance as at 1 January 2013 | 816 | 1,724 | 330 | 2,870 | |
| Acquisitions | 612 | 12 | – | 624 | |
| Adjustment | – | (38) | – | (38) | |
| Balance as at 31 December 2013 | 1,428 | 1,698 | 330 | 3,456 | |
| Balance as at 1 January 2014 | 1,428 | 1,698 | 330 | 3,456 | |
| Acquisitions | 2 | – | – | 2 | |
| Balance as at 31 December 2014 | 1,430 | 1,698 | 330 | 3,458 | |
| Accumulated amortisation | |||||
| Balance as at 1 January 2013 | 75 | 1,139 | 330 | 1,544 | |
| Amortisation | 97 | 202 | – | 299 | |
| Balance as at 31 December 2013 | 172 | 1,341 | 330 | 1,843 | |
| Balance as at 1 January 2014 | 172 | 1,341 | 330 | 1,843 | |
| Amortisation | 146 | 143 | – | 289 | |
| Balance as at 31 December 2014 | 318 | 1,484 | 330 | 2,132 | |
| Carrying Amounts | |||||
| 31 December 2014 | 1,112 | 214 | – | 1,326 | |
| 31 December 2013 | 1,256 | 357 | – | 1,613 |
| Group | ||
| 2014 | 2013 | |
| As at 1 January | 1,097 | 1,097 |
| Acquired/Incurred during the period | – | – |
| As at 31 December | 1,097 | 1,097 |
| Amortisation | ||
| As at 1 January | 823 | 726 |
| Amortisation for the year | 97 | 97 |
| As at 31 December | 920 | 823 |
| Carrying amount – Current | 98 | 98 |
| Carrying amount – Non-current | 79 | 176 |
| As at 31 December | 177 | 274 |
| 2014 | 2013 | |
| Opening net book amount | 14,156 | 14,192 |
| Impairment of investment | – | – |
| Additions/(Disposals) | 33 | (36) |
| Closing net book amount | 14,189 | 14,156 |
Details of the subsidiary companies in which the Company had control as at 31 December are set out below:
| 2014 | 2013 | |||
| Investment
|
Company
holding % |
Investment
|
Company
holding % |
|
| Mobitel (Private) Limited [See Note (b) below] | 13,980 | 100 | 13,980 | 100 |
| SLT VisionCom (Private) Limited [See Note (e) below] | 100 | 100 | 100 | 100 |
| SLT Publications (Private) Limited [See Note (c) below] | 50 | 100 | 50 | 100 |
| Sri Lanka Telecom (Services) Limited [See Note (a) below] | 25 | 99.99 | 25 | 99.99 |
| SLT Human Capital Solutions (Private) Limited [See Note (d) below] | 1 | 100 | 1 | 100 |
| Sky Network (Private) Limited [See Note (f) below] | – | 99.94 | – | 99.94 |
| SLT Property Management (Private) Limited [See Note (g) below] | 8 | 100 | – | – |
| SLT Campus (Private) Limited [See Note (h) below] | 25 | 100 | – | – |
| 14,189 | 14,156 | |||
The Directors believe that the fair values of each of the companies listed above do not differ significantly from their book values.
All the subsidiaries except for Mobitel (Private) Limited are audited by KPMG.
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Current investments | ||||
| Fixed deposits | 6,750 | 3,393 | 6,397 | 3,203 |
| 6,750 | 3,393 | 6,397 | 3,203 | |
Fixed deposits are classified as loans and receivables and measured at amortised cost. Fixed deposits with a carrying value of Rs. 568 million (2013 - Rs. 515 million) are restricted at bank.
Interest rates of other investments are as follows:
| Group | Company | |||
| 2014
% |
2013
% |
2014
% |
2013
% |
|
| Fixed deposits – Restricted at bank | 8.96 | 15.28 | 8.96 | 15.28 |
| Fixed deposits – Rs. | 6.00 - 7.00 | 7.00 | Nil | Nil |
| Fixed deposits – USD | 3.65 | 5.28 | 3.65 | 5.28 |
| Repurchase agreement – Repo | 6.05 | 8.64 | 6.05 | 8.64 |
The Group’s exposure to credit and market risk and fair value information related to other investment are disclosed in Note 4.
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Non-current | 2,789 | 2,733 | 2,789 | 2,733 | |
| Current | 695 | 676 | 686 | 667 | |
| 3484 | 3,409 | 3,475 | 3,400 | ||
| Employee loans | 2,947 | 2,769 | 2,938 | 2,760 | |
| Prepaid staff cost | 537 | 640 | 537 | 640 | |
| 3,484 | 3,409 | 3,475 | 3,400 | ||
| Prepaid staff cost 1 January | 640 | 661 | 640 | 661 | |
| Additions | 180 | 255 | 180 | 255 | |
| Amortisation | (283) | (276) | (283) | (276) | |
| Prepaid staff cost at 31December | 537 | 640 | 537 | 640 | |
The Group provides loans to employees at concessionary rates. These employee loans are fair valued at initial recognition using level 2 inputs. The fair value of the employee loans are determined by discounting expected future cash flows using market related rates for similar loans.
The difference between the cost and fair value of employee loans is recognised as prepaid staff cost.
The employee loans are classified as loans and receivable and subsequently measured at amortised cost.
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| CDMA equipment | 370 | 937 | 370 | 937 |
| Cable and networks | 293 | 2,048 | 293 | 2,048 |
| Other consumables | 414 | 690 | 182 | 397 |
| 1,077 | 3,675 | 845 | 3,382 | |
| Provision for change in carrying value of inventories | (602) | (1,501) | (563) | (1,464) |
| 475 | 2,174 | 282 | 1,918 | |
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Domestic trade receivables | 13,900 | 12,359 | 10,602 | 9,610 | |
| Foreign trade receivables | 2,616 | 2,287 | 1,968 | 1,772 | |
| 16,516 | 14,646 | 12,570 | 11,382 | ||
| Less: Provision for bad and doubtful receivables | (6,560) | (5,662) | (5,077) | (4,486) | |
| Less: Interest/revenue in suspense | (19) | (19) | – | – | |
| Trade receivables - Net | 9,937 | 8,965 | 7,493 | 6,896 | |
| Amount due from subsidiaries [Note 33. 1 (j)] | – | – | 3,871 | 2,865 | |
| Amount due from related companies [Note 33.2 (f)] | 272 | 123 | 272 | 123 | |
| Advances and prepayments [See Note (a) below] | 1,908 | 927 | 260 | 167 | |
| Employee loans (Note 18) | 695 | 676 | 686 | 667 | |
| Other receivables [See Note (b) below] | 523 | 638 | 146 | 152 | |
| Amounts due within one year | 13,335 | 11,329 | 12,728 | 10,870 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Cash at bank and in hand | 1,123 | 852 | 369 | 471 |
| Call Deposits | 400 | 352 | 398 | 352 |
| Fixed deposits | 14 | 22 | – | – |
| Repurchase agreements - Repo | 3,158 | 2,233 | 235 | – |
| 4,695 | 3,459 | 1,002 | 823 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Cash and cash equivalents | 4,695 | 3,459 | 1,002 | 823 |
| Bank overdrafts | (921) | (1,265) | – | (740) |
| 3,774 | 2,194 | 1,002 | 83 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Current (due within one year) | ||||
| Bank overdrafts | 921 | 1,265 | – | 740 |
| Bank borrowings and others [See Note 22 (e) below] | 5,356 | 4,385 | 4,299 | 2,468 |
| Vendor financing | 2,777 | 2,587 | – | – |
| Lease liabilities | 82 | 75 | 60 | 60 |
| 9,136 | 8,312 | 4,359 | 3,268 | |
| Non-current (due after one year) | ||||
| Bank borrowings and others [See Note 22 (e) below] | 12,656 | 4,640 | 11,538 | 2,454 |
| Vendor financing | 5,096 | 7,504 | – | – |
| Lease liabilities | 234 | 234 | 162 | 208 |
| 17,986 | 12,378 | 11,700 | 2,662 | |
| Total borrowings | 27,122 | 20,690 | 16,059 | 5,930 |
(a) The interest rate exposure of the borrowings of the Group and Company were as follows:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Total borrowings | ||||
| - at fixed rates | 14,622 | 1,574 | 13,580 | 1,008 |
| - at floating rates | 12,500 | 19,116 | 2,479 | 4,922 |
| 27,122 | 20,690 | 16,059 | 5,930 | |
The currency exposure of the borrowings of the Group and the Company as at the reporting date were as follows:
| Group | Company | ||||
| 2014 | 2013 | 2014 | 2013 | ||
| Foreign currency | 25,807 | 19,116 | 15,837 | 4,922 | |
| Local currency | 1,315 | 1,574 | 222 | 1,008 | |
| 27,122 | 20,690 | 16,059 | 5,930 | ||
(b) Effective interest rates of the Group and Company are as follows:
| Group | Company | |||
| 2014
% |
2013
% |
2014
% |
2013
% |
|
| Average effective interest rates: | ||||
| - Bank overdrafts | 6.10 - 10.00 | 10.80 | 7.39 | 10.80 |
| - Foreign bank borrowings | 1.20 - 2.24 | 1.24 - 2.52 | – | – |
| - Bank borrowings (USD loan) | 4.98 | 5.29 | 4.98 | 5.29 |
| - Bank borrowings | 7.34 - 8.25 | 12 .1 - 15.2 | – | – |
| - Lease liabilities | 8.00 - 16.00 | 8.00 - 16.00 | 8.00 - 10.00 | 8.00 - 10.00 |
| - Vendor financing | 1.95 - 4.15 | 1.95 - 4.15 | – | – |
(c) Maturity analysis of the Group and Company is as follows:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Maturity of non-current borrowings: (excluding finance lease liabilities) | ||||
| - Between 1 and 2 years | 7,664 | 10,016 | 3,297 | 2,454 |
| - Between 3 and 5 years | 10,088 | 2,128 | 8,241 | – |
| - Over 5 years | – | – | – | – |
| 17,752 | 12,144 | 11,538 | 2,454 | |
(d) Analysis of the finance lease liabilities of the Group and Company are follows:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Finance lease liabilities - minimum lease payments | ||||
| - Not later than 1 year | 122 | 106 | 88 | 97 |
| - Later than 1 year and not later than 5 years | 289 | 309 | 198 | 268 |
| 411 | 415 | 286 | 365 | |
| Less: future finance charges on finance leases | (95) | (106) | (64) | (97) |
| Present value of finance lease liabilities | 316 | 309 | 222 | 268 |
| Representing lease liabilities: | ||||
| - Current | 82 | 75 | 60 | 60 |
| - Non-current | 234 | 234 | 162 | 208 |
(e) During the year the Company obtained a term loan of USD 100 million (equivalent to Rs. 13,092 million) which was drawn in 4 instalments. This loan was obtained on a floating rate and converted to a fixed rate term loan through an Interest Rate Swap (IRS).
(f) The loan covenants include submission of audited financial statements to the lenders within a specified period from the financial year end, maintenance of covenant ratios and to maintain adequate accounting records in accordance with Sri Lanka Accounting Standards.
(g) The Directors believe that the Company and the Group will have sufficient funds available to meet its present loan commitments.
(h) Lease liabilities of the Company and the Group are effectively secured by the lessor against the rights to the title of the asset.
(i) Bank borrowings and supplier credits of Mobitel (Private) Limited, a subsidiary of the Company, are secured, interalia, by corporate guarantees given by the Company.
(j) Mobitel (Private) Limited has borrowed Rs. 296 million during the year for the purpose of Capital Expansion Projects.
(k) Guarantee facilities amounting to Rs. 26 million (2013 - Rs. 26 million) were provided to Sri Lanka Telecom (Services) Limited to obtain facilities for working capital requirements.
Deferred tax (assets) and liabilities are calculated on all taxable and deductible temporary differences arising from differences between accounting bases and tax bases of assets and liabilities. Deferred tax is provided under the liability method using a principal tax rate of 28% (for the year 2013 - 28%).
The amount shown in the statement of financial position represents the following:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Deferred tax liabilities | 2,805 | 1,750 | 2,801 | 1,746 |
| Deferred tax assets | (46) | (58) | – | – |
| 2,759 | 1,692 | 2,801 | 1,746 | |
The movement in the deferred tax account is as follows:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| At beginning of year | 1,692 | 759 | 1,746 | 780 |
| Release to comprehensive income (Note 11) | 1,189 | 954 | 1,177 | 987 |
| Release to other comprehensive income (Note 11) | (122) | (21) | (122) | (21) |
| At end of year | 2,759 | 1,692 | 2,801 | 1,746 |
The taxable and deductible temporary differences mainly arise from property, plant & equipment, deferred income, provision for defined benefit obligations and other provisions.
The movement in deferred tax assets and liabilities of the Group during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
| Assets | Liabilities | Net | ||||
| 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | |
| Property, plant & equipment | – | – | 6,453 | 4,934 | 6,453 | 4,934 |
| Defined benefit obligations | (987) | (765) | – | – | (987) | (765) |
| Provisions | (1,841) | (1,508) | – | – | (1,841) | (1,508) |
| Deferred income | (856) | (937) | – | – | (856) | (937) |
| Tax losses | (10) | (32) | – | – | (10) | (32) |
| Tax (assets) liabilities before set off | (3,694) | (3,242) | 6,453 | 4,934 | 2,759 | 1,692 |
| Set off of tax | 3,694 | 3,242 | (3,694) | (3,242) | – | – |
| Net tax (assets) liabilities | – | – | 2,759 | 1,692 | 2,759 | 1,692 |
| Balance
1 January 2013 |
Recognised in
profit or Loss |
Recognised
in other comprehensive income |
Balance
31 December 2013 |
Recognised in
profit or Loss |
Recognised
in other comprehensive income |
Balance
31 December 2014 |
|
| Property, plant & equipment | 3,770 | 1,164 | – | 4,934 | 1519 | – | 6,453 |
| Defined benefit obligations | (646) | (98) | (21) | (765) | (100) | (122) | (987) |
| Provisions | (1,312) | (196) | – | (1,508) | (333) | – | (1,841) |
| Deferred income | (1,053) | 116 | – | (937) | 81 | – | (856) |
| Tax losses | – | (32) | – | (32) | 22 | – | (10) |
| 759 | 954 | (21) | 1,692 | 1,189 | (122) | 2,759 |
| Assets | Liabilities | Net | ||||
| In Rs. million | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Property, plant & equipment | – | – | 6,450 | 4,932 | 6,450 | 4,932 |
| Defined benefit obligations | (983) | (763) | – | – | (983) | (763) |
| Provisions | (1,810) | (1,486) | – | – | (1,810) | (1,486) |
| Deferred income | (856) | (937) | – | – | (856) | (937) |
| Tax (assets) liabilities before set off | (3,649) | (3,186) | 6,450 | 4,932 | 2,801 | 1,746 |
| Set off of tax | 3,649 | 3,186 | (3,649) | (3,186) | – | – |
| Net tax (assets) liabilities | – | – | 2,801 | 1,746 | 2,801 | 1,746 |
| Balance
1 January 2013 |
Recognised in
profit or Loss |
Recognised
in other comprehensive income |
Balance
31 December 2013 |
Recognised in
profit or Loss |
Recognised
in other comprehensive income |
Balance
31 December 2014 |
|
| Property, plant & equipment | 3,771 | 1,161 | – | 4,932 | 1518 | – | 6,450 |
| Defined benefit obligations | (644) | (98) | (21) | (763) | (98) | (122) | (983) |
| Provisions | (1,294) | (192) | – | (1,486) | (324) | – | (1,810) |
| Deferred income | (1,053) | 116 | – | (937) | 81 | – | (856) |
| 780 | 987 | (21) | 1,746 | 1,177 | (122) | 2,801 |
Deferred tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the group can utilise the benefit therefrom. The Group did not recognise deferred tax assets in respect of tax losses of subsidiaries amounting to Rs. 195 million (2013 - Rs. 200 million) that can be carried forward against future taxable income.
| Adjusted tax losses available for
carry forward as at 31 December |
||
| 2014 | 2013 | |
| SKY Network (Private) Limited | 52 | 52 |
| SLT VisionCom (Private) Limited | 143 | 148 |
| 195 | 200 | |
The connection fees relating to Public Switch Telephone Network (PSTN) are deferred over a period of 15 years. Revenue is recognised on an annual basis irrespective of the date of connection.
Revenue from the sale of prepaid credit on CDMA, Internet is deferred until such time as the customer uses the call time, downloadable quota or the credit expires.
Backhauling revenue which is leasing of SEA-ME-WE 3 cable capacity is recognised on a straight line basis over the period of the contract. Amounts received in advance for any services are recorded as deferred revenue.
Directory income includes amounts collected for directories not yet printed. Such income will be recognised as income depending on the percentage of directories distributed to the end customer as described in accounting policy (n) (viii).
IRU revenue relating to leasing of SEA-ME-WE 4 cable capacity is recognised on a straight line basis over the period of the contracts. Amounts received in advance for any services are recorded as deferred revenue. In the event that a customer terminates an IRU prior to the expiry of the contract and releases the Company from the obligation to provide future services, the remaining unamortised deferred revenue is recognised in the period the contract is terminated.
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| At beginning of year | 5,508 | 5,664 | 3,492 | 3,926 |
| Additions | ||||
| Connection fees for the year | 315 | 283 | 315 | 283 |
| Pre-paid card revenue | 25,706 | 19,882 | 271 | 240 |
| Backhauling charges | 69 | 86 | 69 | 86 |
| Deferred directory income | 64 | 280 | – | – |
| Total Additions | 26,154 | 20,531 | 655 | 609 |
| Release | ||||
| Connection charges (Note 6) | (586) | (679) | (586) | (679) |
| Pre-paid card revenue | (25,800) | (19,777) | (268) | (246) |
| Backhauling charges | (55) | (97) | (55) | (97) |
| Directory income | (214) | (101) | – | – |
| IRU Sales | (20) | (21) | (20) | (21) |
| Network equipment cost | (11) | (12) | – | – |
| Total Release | (26,686) | (20,687) | (929) | (1,043) |
| At end of year | 4,976 | 5,508 | 3,218 | 3,492 |
| Representing deferred income | ||||
| Current | 2,398 | 2,683 | 706 | 745 |
| Non-current | 2,578 | 2,825 | 2,512 | 2,747 |
| 4,976 | 5,508 | 3,218 | 3,492 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Amounts due within one year | ||||
| Domestic trade payables | 1,524 | 1,808 | 499 | 566 |
| Foreign trade payables | 214 | 323 | 95 | 84 |
| Amount due to subsidiaries [Note 33.1 (j)] | – | – | 2,028 | 1,376 |
| Amount due to related companies [Note 33.2 (f)] | 47 | 51 | 47 | 51 |
| Capital expenditure payables [See Note (a) below] | 7,693 | 6,347 | 7,245 | 5,760 |
| Social security and other taxes [See Note (b) below] | 796 | 1,209 | 763 | 666 |
| Interest payable | 489 | 184 | – | – |
| Other payables [See Note (c) below] | 6,292 | 5,250 | 3,901 | 3,293 |
| 17,055 | 15,172 | 14,578 | 11,796 | |
| Amounts due after one year | ||||
| International direct dialling deposits | 232 | 232 | 232 | 232 |
| PSTN guarantee deposits | 18 | 38 | 18 | 38 |
| Domestic trade payables | 614 | 566 | – | – |
| Capital expenditure payables | 1,543 | 912 | – | – |
| 2,407 | 1,748 | 250 | 270 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Total employee benefit liability at 1 January | 3,003 | 2,495 | 2,725 | 2,300 |
| Movement in present value of employee benefit liabilities | ||||
| Current service cost | 205 | 181 | 162 | 145 |
| Interest cost | 313 | 299 | 287 | 276 |
| Actuarial losses/(gains) | 478 | 103 | 438 | 76 |
| Transitional assets recognised | – | 6 | – | – |
| Gratuity paid during the year | (124) | (81) | (100) | (72) |
| Balance as at 31 December | 3,875 | 3,003 | 3,512 | 2,725 |
| The expenses recognised in the income statement | ||||
| Current service cost | 205 | 181 | 162 | 145 |
| Interest cost | 313 | 299 | 287 | 276 |
| Transitional assets recognised | – | 6 | – | – |
| 518 | 486 | 449 | 421 | |
| Recognised in other comprehensive income | ||||
| Actuarial (Gain)/Loss | 478 | 103 | 438 | 76 |
| 478 | 103 | 438 | 76 | |
The principal actuarial assumptions used were as follows:
| Group | Company | |||
| 2014
% |
2013
% |
2014
% |
2013
% |
|
| Discount rate (long-term) | 9.5 - 10.0 | 10.5 | 10.0 | 10.5 |
| Future salary increases | 8.5 | 8.5 - 9.0 | 8.5 | 8.5 |
In addition to above, demographic assumptions such as mortality, withdrawal, retirement age were considered for the actuarial valuation. In 2014, 1967/70 Mortality Table issued by the Institute of Actuaries London (2012 - 1967/70 Mortality Table) was taken as the base for the valuation.
The provisions for defined obligations of Sri Lanka Telecom PLC, SLT Human Capital Solution Limited, SLT Publications (Private) Limited and Mobitel (Private) Limited are actuarially valued by Messrs Actuarial and Management Consultants (Private) Limited and Messrs Piyal S. Goonetilake and Associates respectively. The employee benefit liability of all other companies in the Group are based on gratuity formula.
The provision for defined benefit obligations is not externally funded.
The Following demonstrates the sensitivity of the material subsidiaries to a reasonable possible change in the key assumptions employed with all other variables held constant in the employee benefit liability measurement.
The sensitivity of the statement of profit or loss and other comprehensive income and the statement of financial position, is the effect of the assumed changes in discount rate and salary increment rate as depicted below:
| 2014 | Effect on charge to the statement of
profit or loss and other comprehensive income |
Effect on Net defined benefit liability | ||
| Increase | Decrease | Increase | Decrease | |
| Discount rate (Change by 1%) |
(172) | 193 | (172) | 193 |
| Salary increment rate (Change by 1%) |
211 | (191) | 211 | (191) |
| 2013 | Effect on charge to the statement of profit or loss and other comprehensive income | Effect on Net defined benefit liability | |||
| Increase | Decrease | Increase | Decrease | ||
| Discount rate (Change by 1%) |
(147) | 164 | (147) | 164 | |
| Salary increment rate (Change by 1%) |
180 | (163) | 180 | (163) | |
| 2014 | Effect on charge to the statement of profit or loss and other comprehensive income | Effect on Net defined benefit liability | |||
| Increase | Decrease | Increase | Decrease | ||
| Discount rate (Change by 1%) |
(19) | 22 | (19) | 22 | |
| Salary increment rate (Change by 1%) |
21 | (19) | 21 | (19) | |
| 2013 | Effect on charge to the statement of profit or loss and other comprehensive income | Effect on Net defined benefit liability | |||
| Increase | Decrease | Increase | Decrease | ||
| Discount rate (Change by 1%) |
(9) | 10 | (9) | 10 | |
| Salary increment rate (Change by 1%) |
12 | (11) | 12 | (11) | |
| Group/Company | ||
| 2014 | 2013 | |
| As at 1 January | 500 | 435 |
| Transferred from retained earnings | 60 | 65 |
| As at 31 December | 560 | 500 |
As stated in Accounting Policy 3(t) the Company transfers annually from the retained earnings an amount equal to 0.1% of additions to property, plant & equipment to an insurance reserve. An equal amount is invested in a sinking fund to meet any funding requirements for potential losses from uninsured property, plant & equipment.
Management regularly monitors the charges made against the insurance reserve and the adequacy of the provision made.
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Balance at 1 January | 28 | 35 | 28 | 35 |
| Grant credited to profit or loss | (6) | (7) | (6) | (7) |
| Balance at 31 December | 22 | 28 | 22 | 28 |
Grant in Company and Group consists of Exchange equipment received from Alcatel CIT France in 2005.
| Company | ||
| 2014 | 2013 | |
| 1,804,860,000 ordinary shares | 18,049 | 18,049 |
The stated capital is made up as follows:
| 2014 | 2013 | |||
| Holding
% |
Number
of shares |
Holding
% |
Number
of shares |
|
| Government of Sri Lanka | 49.50 | 893,405,709 | 49.50 | 893,405,709 |
| Global Telecommunications Holdings N.V. | 44.98 | 811,757,869 | 44.98 | 811,757,869 |
| Public shareholding | 5.52 | 99,696,422 | 5.52 | 99,696,422 |
| 100.00 | 1,804,860,000 | 100.00 | 1,804,860,000 | |
Reconciliation of profit before tax to cash generated from operations:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Profit before tax | 8,251 | 7,365 | 4,859 | 5,014 |
| Adjustments for: | ||||
| Depreciation (Note 13) | 12,325 | 11,755 | 6,875 | 6,505 |
| Grant received less amortisation (Note 28) | (6) | (7) | (6) | (7) |
| Amortisation of intangible assets (Note 14) | 639 | 583 | 289 | 299 |
| Amortisation of financial prepayments (Note 15) | 97 | 97 | – | – |
| Provision/write off of bad and doubtful debts | 937 | 781 | 630 | 522 |
| Provision for fall in value of inventories | 13 | 88 | 13 | 77 |
| Interest expense and finance costs (Note 9) | 198 | 736 | 49 | 371 |
| Foreign exchange (loss)/Gain (Note 9.a) | 13 | 441 | (14) | (18) |
| Interest income (Note 10) | (910) | (1,122) | (708) | (872) |
| Connection fees less amortisation | (532) | (156) | (274) | (434) |
| Profit on sale of property, plant & equipment | 528 | (69) | (64) | (69) |
| Impairment of assets (Note 13) | 518 | 149 | 518 | 149 |
| Gain on SLT Hong Kong Investment | – | – | – | (15) |
| Provision for retirement benefit obligations (Note 26) | 518 | 486 | 449 | 421 |
| 22,589 | 21,127 | 12,616 | 11,943 | |
| Changes in working capital | ||||
| - Receivables and prepayments | (2,999) | (946) | (2,544) | 544 |
| - Inventories | (1,450) | 339 | (1,513) | 401 |
| - Payables | 2,215 | (4,730) | 2,763 | (3,264) |
| Cash generated from operations | 20,355 | 15,790 | 11,322 | 9,624 |
The Group and the Company have purchase commitments in the ordinary course of business as at 31 December is as follows:
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Property, plant & equipment | ||||
| - approved but not contracted | 33,829 | 29,125 | 33,829 | 29,125 |
| - approved and contracted | 15,069 | 8,344 | 12,371 | 5,944 |
| 48,898 | 37,469 | 46,200 | 35,069 | |
| Operating lease and other commitments | ||||
| The future minimum lease payments under operating leases are as follows: | ||||
| - Not later than 1 year | 141 | 88 | 118 | 88 |
| - Later than 1 year and not later than 5 years | 221 | 91 | 153 | 91 |
| 362 | 179 | 271 | 179 | |
Outstanding Letter of Credit commitments of the Company and the Group as at 31 December 2014 amounted to Rs. 409 million and Rs. 721 million respectively.
Except for any regular maintenance contracts entered into with third-parties in the normal course of business, there are no other material financial commitments that require separate disclosures.
(a) Global Electroteks Limited initiated legal action under High Court Case No. 20/2006 claiming damages of USD 12 million from SLT for alleged unlawful disconnection of interconnection services.
Further trial on 27 March 2015
(b) SC (CHC) 31/2010 - Directories Lanka (Private) Limited (DLPL)
Appeal Case filed by DLPL against SLT against the dismissal of CHC 2/2006(3) claimed damages of Rs.250 million, for alleged unfair competition with regard to artwork on the cover page of the Directory by SLT.
The appeal proceedings have still not commenced in the Supreme Court.
(c) 12/2008 CBCU - An Inquiry started by Sri Lanka Customs - A consignment of CDMA equipment was detained in October 2008 by the Customs Authority. Subsequently, the equipment were cleared pending inquiry, based on a cash deposit and bank guarantee submitted by SLT for the total value of Rs. 122,189,514/-. Order was delivered on 17 October 2014 imposing a mitigated forfeiture of Rs. 1,820,502,062/- on SLT.
SLT has filed case CA/writ/387/2014 against this order. Next date is on 6 May 2015 for support.
(d) Customs Case No. ADP/031/2009 - Goods valued at USD 996,785.65, which was imported under the last consignment of equipment for NGN Phase II expansion project, was detained by the Customs on or about 14 May 2009. Subsequently, the equipment was cleared on 18 July 2009. Pending inquiry, based on a Bank Guarantee placed by SLT to the value of Rs. 35,000,000/-. The customs inquiry against SLT is pending.
No date given. Awaiting the NC Committee decision which was re-sent for re-confirmation.
(e) Ahmedabad City Civil Court - 802/2014 - Bhuwal Industries have initiated legal action on 11 April 2014 against SLT in Ahmedabad City Civil Court, India claiming for damages of Indian Rs. 161,521,447.00 for malicious prosecution. The case is proceeding and SLT to file the written statement by 18 April 2015.
(f) Labour Tribunal Colombo Case Nos. 08/760/2014, 08/820/2014, 08/821/2014 and 08/819/2019 - Former employees of SLT Human Capital Solutions (Private) Limited (HCS) filed legal action against SLT and HCS at Labour Tribunal Colombo against termination of their employment by HCS, on 6 January 2014. Proceedings stayed until the determination of revision application in High Court Colombo.
In addition to the above referred cases there are other claims by employees and third parties for damages and other relief. In the opinion of the Directors none of these actions is likely to result in a material liability to the Company and its subsidiaries.
The Company has provided guarantees on behalf of its subsidiaries for following credit and trade finance facilities.
(i) Facilities amounting to Rs. Nil (2013 - Rs. 5,750 million) and US$ 194.2 million (2013 - US$ 191.2 million) for Mobitel (Private) Limited for the GSM roll-out stage, 4, 5, 6 and 7.
(ii) Facilities amounting to Rs. 26 million (2013 - Rs. 26 million) for Sri Lanka Telecom (Services) Limited to obtain facilities for working Capital requirement.
(iii)With regard to cases detailed above, pending the outcome of the appeals and hearings, no provisions have been recognised in the financial statements up to 31 December 2014.
| Company | ||
| 2014 | 2013 | |
| (a) Mobitel (Private) Limited | ||
| Sale of goods and services | ||
| Provision of E1 links | 1,747 | 1,462 |
| Leased line | 975 | 976 |
| Interconnection charges | 325 | 350 |
| TDM, VOIP Platform and Transit | 173 | 166 |
| 3,220 | 2,954 | |
| Purchase of goods and services | ||
| Call charges on official mobile phones | 47 | 39 |
| Interconnection charges | 1,658 | 881 |
| Antenna tower space | 565 | 449 |
| Building rent | 3 | 3 |
| E1 link | 1 | |
| 2,274 | 1,372 | |
As per the TRC approval dated 19 May 2014, Mobitel is entitled to receive discounts if the Company uses more than 3500 E 1 links. Further, Mobitel receives discounts on infrastructure services provided by Sri Lanka Telecom PLC.
The Company has provided guarantees on behalf of Mobitel for following loans and obligations:
Facilities amounting to Rs. Nil (2013 - Rs. 5,750 million) and US$ 194.2 million (2013 - US$ 191.2 million) for Mobitel (Private) Limited for the GSM roll-out stage 4, 5, 6 and 7.
| Company | ||
| 2014 | 2013 | |
| (b) Sky Network (Private) Limited | ||
| Sale of goods and services | ||
| Supply of services | – | – |
| Purchase of goods and services | ||
| Service provisioning | – | – |
| (c) SLT Publications (Private) Limited | ||
| Sale of goods and services | ||
| Supply of services | 4 | 4 |
| Purchase of goods and services | ||
| Directory distribution | – | – |
SLT Publications provides event management services to SLT PLC. As per the agreement SLT Publications is entitled to receive a retainer for the service provided.
Impairment of related party receivable amounting to Rs. 9.7 million was made during the year.
| Company | ||
| 2014 | 2013 | |
| (d) Sri Lanka Telecom (Services) Limited | ||
| Sale of goods and services | ||
| Supply of services | 4 | 4 |
| Purchase of goods and services | ||
| Project-related services | 112 | 179 |
The Company has provided guarantees on behalf of Sri Lanka Telecom (Services) Limited for following loans and obligations:
Facilities amounting to Rs. 26 million (2013 - Rs. 26 million) for Sri Lanka Telecom (Services) Limited to obtain facilities for working capital requirements.
Impairment of related party receivable amounting to Rs. 10.4 million was made during the year.
| Company | ||
| 2014 | 2013 | |
| (e) SLT Human Capital Solutions (Private) Limited | ||
| Sale of goods and services | ||
| Supply of services | 6 | 5 |
| Purchase of goods and services | ||
| Provision of manpower service | 1,181 | 1,247 |
| (f) SLT VisionCom (Private) Limited | ||
| Sale of goods and services | ||
| Supply of services | 8 | 10 |
| Purchase of goods and services | ||
| Service provisioning | 122 | 110 |
SLT received an ad-insertion revenue from SLT VisionCom (Private) Limited amounting to Rs. 3.3 million. SLT’s share of revenue is based on the following percentages.
Advertisement on PEO TV - EPG - 34%
Channel advertisement - 17%
SLT PLC pays SLT VisionCom (Private) Limited the total cost incurred plus a 5% margin which amounted to Rs. 122 million in 2014.
Impairment to related party receivable amounting to Rs. 12.2 million was made during the year.
| Company | ||
| 2014 | 2013 | |
| (g) SLT Property Management (Private) Limited | ||
| Sale of goods and services | ||
| Supply of services | – | – |
| Purchase of goods and services | ||
| Service provisioning | 5 | – |
| (h) SLT Campus (Private) Limited | ||
| Sale of goods and services | ||
| Supply of services | – | – |
| Purchase of goods and services | ||
| Service provisioning | – | – |
| (i) Fees for secondment of personnel and services provided to/by SLT PLC | ||
| SLT Publications (Private) Limited | 36 | 36 |
| SLT Human Capital Solutions (Private) Limited | 10 | 9 |
| 46 | 45 | |
| (j) Outstanding balances arising from sale/purchase of services | ||
| Receivable from subsidiaries | ||
| Mobitel (Private) Limited | 3,317 | 2,342 |
| SLT Publications (Private) Limited | 223 | 185 |
| SLT Human Capital Solutions (Private) Limited | 146 | 137 |
| SLT VisionCom (Private) Limited | 41 | 50 |
| Sri Lanka Telecom (Services) Limited | 19 | 31 |
| Sky Network (Private) Limited | 120 | 120 |
| SLT Property Management (Private) Limited | 5 | – |
| 3,871 | 2,865 | |
| Payable to subsidiaries | ||
| Mobitel (Private) Limited | 1,569 | 973 |
| SLT Publications (Private) Limited | 67 | 32 |
| SLT Human Capital Solutions (Private) Limited | 225 | 217 |
| Sri Lanka Telecom (Services) Limited | 166 | 153 |
| Sky Network (Private) Limited | 1 | 1 |
| 2,028 | 1,376 | |
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| (a) Maxis Communications Berhad and its subsidiaries | ||||
| Sale of goods and services | ||||
| Sale of SEA-ME-WE 3 cable capacity | 10 | 10 | 10 | 10 |
| International incoming traffic | 243 | 186 | 241 | 147 |
| 253 | 196 | 251 | 157 | |
| Purchase of goods and services | ||||
| International outgoing traffic | 85 | 75 | 85 | 73 |
| (b) Upali Group of Companies | ||||
| Sale of goods and services | ||||
| Providing Voice & Data services | 10 | 11 | 9 | 11 |
| (c) Nawaloka Group | ||||
| Sale of goods and services | ||||
| Providing Voice & Data services | 6 | 5 | 6 | 5 |
| Purchase of goods and services | ||||
| Medical services | 10 | 18 | 9 | 17 |
| (d) SriLankan Airlines Limited | ||||
| Sale of goods and services | ||||
| Providing Voice, Data & Infrastructure services | 221 | 81 | 220 | 81 |
| (e) Sri Lanka Cricket | ||||
| Sale of goods and services | ||||
| Providing Voice and Data services | 1 | 3 | 1 | 3 |
| Cricket Team and umpire sponsorship | 7 | 2 | – | – |
| (f) Outstanding balances arising from sale/purchase of services | ||||
| Receivable from related companies | ||||
| Upali Group of Companies | 2 | 5 | 2 | 5 |
| Nawaloka Group | 1 | 1 | 1 | 1 |
| SriLankan Airlines Limited | 144 | 57 | 144 | 57 |
| Sri Lanka Cricket | 3 | 5 | 3 | 5 | Maxis Communications Berhad and its subsidiaries | 122 | 55 | 122 | 55 |
| 272 | 123 | 272 | 123 | |
| Payable to related company | ||||
| Maxis Communications Berhad and its subsidiaries | 47 | 51 | 47 | 51 |
The Government of Sri Lanka holds 49.5% of the voting rights of the Company as at 31 December 2014 through the Secretary to the Treasury and those have significant influence over the financial and operating policies of the Company. Accordingly, the Company has considered the Government of Sri Lanka as a related party according to LKAS - 24 – Related Party Disclosures.
During the year ended 31 December 2014, the Company has carried out transactions with the Government of Sri Lanka and other Government related entities in the ordinary course of business.
The Company identified individually significant transactions with Key Government-Related entities as given below:
Key Management Personnel comprise the Directors and Chief Officers of the Company and the Group.
| Group | Company | |||
| 2014 | 2013 | 2014 | 2013 | |
| Short-term benefits | 238 | 212 | 189 | 174 |
| Post-employment benefits | 24 | 19 | 20 | 17 |
| Salaries and other benefits | 262 | 231 | 209 | 191 |
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. A related party transaction takes place with a transfer of resources or obligations between related parties, regardless of whether a price is charged.
All transactions during the year and balances as at the Reporting date between the following companies have been eliminated in preparing the consolidated financial statements:
Mobitel (Private) Limited
Sri Lanka Telecom (Services) Limited
SLT Publications (Private) Limited
SLT Human Capital Solutions (Private) Limited
SLT VisionCom (Private) Limited
Sky Network (Private) Limited
SLT Property Management (Private) Limited
SLT Campus (Private) Limited
Related party transactions disclosed above should be read in conjunction with Note 16 to the financial statements.
The impact of non-uniform accounting policies adopted by the subsidiary company has been adjusted in the consolidated financial statements as set out below:
Adjustment due to different accounting policies of the parent and the Group entity
Sri Lanka Telecom PLC accounts for refunds on Telecommunication Development Charge (TDC) on cash basis when the payment is received whereas Mobitel (Private) Limited recognises it in the statement of profit or loss and other comprehensive income on a straight-line basis.
Therefore, the recognition of the refund by Mobitel (Private) Limited was eliminated and is recognised on cash basis in the consolidated accounts.
| Group impact | ||
| 2014 | 2013 | |
Reversal of deferred revenue recognised in statement of profit or loss and other comprehensive income by Mobitel (Private) Limited |
(92) | (79) |
Other comprehensive income by Mobitel (Private) Limited |
||
Receipt of refund during the year from TDC recognised in the consolidated financial statements |
322 | 240 |
The Board of Directors of the Company has recommended a first and final dividend of Rs. 0.89 per share (2013 - Rs. 0.85 per share) on voting shares of the Company to be paid by way of cash dividend for the financial year ended 31 December 2014.
Further, this dividend is to be approved at the Annual General Meeting to be held on 13 May 2015. This proposed final dividend has not been recognised as a liability as at 31 December 2014. Under the Inland Revenue Act No. 10 of 2006, a WHT of 10% has been imposed on dividend declared. Final dividend proposed for the year amounts to Rs. 1,606,325,400/-, in compliance with Sections 56 and 57 of Companies Act No. 07 of 2007. As required by Section 56 of the Companies Act No. 07 of 2007, the Board of Directors of the Company satisfied the solvency test in accordance with the Section 57, prior to recommending the final dividend. A statement of solvency completed and duly signed by the Directors on 27 February 2015 has been audited by Messrs KPMG.
The 2015 interim budget was presented by the Government of Sri Lanka (GoSL) on 29 January 2015 and approved by the Parliament of Sri Lanka on 7 February 2015. The GoSL is working towards enacting legislation pertaining to the budget proposals which would in turn bring the said proposals into force and also provide clarity with respect to applicability and execution considerations. Therefore, pending legislation and lucidity at this point of time, the consolidated financial results for the year ended 31 December 2014 excludes any and all impacts from the interim budget pertaining to the super-gain tax, levy on license mobile telephone operators and the discontinuation from charging the 25% telecommunication levy from prepaid card subscribers.
Except as disclosed above, no other events have arisen since the statement of financial position date which require changes to, or disclosure in the financial statements.