ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR THE YEAR ENDED
31 DECEMBER 2008 |
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| 1. |
The Directors present herewith the audited consolidated financial statements of Sri Lanka Telecom PLC
('SLT PLC' or 'the Company') and its subsidiaries (collectively 'the Group') for the year ended 31 December 2008. |
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| 2. |
FORMATION
Sri Lanka Telecom (SLT) was formed by an Incorporation Order made under Section 2 of the State Industrial Corporations Act No. 49 of 1957 and published in the Extraordinary Gazette No. 596/11 of
6 February 1990. Subsequently, in terms of an Order made by the Minister of Posts and Telecommunications ('the Minister') on 24 July 1991 under Section 23 of the Sri Lanka Telecommunications Act No. 25 of 1991 and published in the Gazette No. 675 of 9 August 1991, all properties, rights and liabilities (other than those excluded by the agreement entered into between the Minister and SLT as per sub-section 2 of Section 23 of the Sri Lanka Telecommunications Act) to which the Department of Telecommunications (DOT) was entitled or subject to immediately before the transfer date of 1 September 1991 were vested with SLT.
On 25 September 1996, SLT was converted to a public limited company under the Conversion of Public Corporations of Government Owned Business Undertakings into Public Limited Companies Act No. 23 of 1987, vide Extraordinary Gazette No. 942/7 dated 25 September 1996.
On 5 August 1997, the Government of Sri Lanka as the sole shareholder of SLT divested 35% (631,701,000 ordinary shares) of the issued ordinary share capital to Nippon Telegraph and Telephone Corporation (NTT) and entered into an agreement to transfer the management of SLT to NTT. On 2 July 1998, the Government of Sri Lanka divested a further 3.5% of the issued ordinary share capital by transfer of 63,170,010 ordinary shares to the employees of SLT. On 22 March 2000, NTT transferred the entire 35% of their holding in SLT to NTT Communications Corporation (NTT Com).
The Government of Sri Lanka divested further 12% of its holding to the public through a listing on the Colombo Stock Exchange in November 2002, reducing its holding to 49.5%.
On 4 June 2007, SLT was re-registered under the Companies Act No. 07 of 2007 as Sri Lanka
Telecom PLC (SLT PLC).
On 1 April 2008, NTT Com of Japan who held 635,076,318 ordinary shares, which constituted 35.2% of the total issued stated capital of SLT PLC, sold their entire holding to Global Telecommunications Holdings N.V. of Netherlands (GTH) at a price of Rs. 50.50 per share. Following the share trade by NTT Com, GTH, in terms of the Takeovers and Mergers Code, announced a mandatory offer to the remaining shareholders which was closed on 2 June 2008. At the close of the mandatory offer, GTH had acquired additional 9.78% of the stated capital of SLT PLC, making the total shareholding to 44.98% of the total issued stated capital of SLT PLC. Since the expiration of the management agreement with NTT, no management agreement had been entered into by SLT PLC. |
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| 3. |
NATURE OF THE BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES
The nature of the business of the Company and its subsidiaries is given in Note 1 - General Information to the consolidated financial statements on page 77. |
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| 4. |
FINANCIAL STATEMENTS
The financial statements, which include the income statements, balance sheets, statements of changes in equity and the notes to the financial statements of the Group and the Company for the year ended
31 December 2008 are set out on pages 72 to 118 All amounts are stated in Sri Lanka Rupees million, unless otherwise stated. |
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| 5. |
AUDITORS' REPORT
The Auditors' Report is set out on page 71. |
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| 6. |
CHANGES IN ACCOUNTING POLICIES
The accounting policies adopted by the Company and its subsidiaries have been consistently applied from previous years except for Mobitel (Pvt) Limited, a subsidiary of the Company, has adopted SLAS 16, (Revised 2006) - Employee Benefits, during the year. |
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| 7. |
REVIEW OF BUSINESS
The state of affairs of the Group at 31 December 2008 is set out in the consolidated balance sheet on page 73. An assessment of the financial performance of the Group and other developments during the financial year is included in the Management Report in the published Annual Report. |
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| 8. |
PROPERTY, PLANT & EQUIPMENT
The movements in property, plant & equipment during the year are set out in Note 15 to the Consolidated financial statements |
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| 9. |
MARKET VALUE OF PROPERTIES
The Directors are of the opinion that the carrying amount of properties stated in Note 15 to the Consolidated financial statements reasonably reflects their fair value. |
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| 10. |
GROUP ACTIVITIES
The Group provides a broad portfolio of telecommunication services across Sri Lanka, the main activity being domestic and international fixed and mobile telephone services. In addition, the range of services provided by the Group include, interalia, Internet services, IPTV, data services, domestic and international leased circuits, frame relay, satellite uplink and maritime transmission. |
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| 11. |
SUBSIDIARIES
The Company’s interest in subsidiaries and the business activities of respective subsidiaries is as follows:
| Name of the subsidiary |
Business activity |
Shareholding (%) |
| Mobitel (Pvt) Limited |
Mobile telephone services |
100 |
| Sri Lanka Telecom (Services) Limited |
Total network solutions |
100 |
| SLT Hong Kong Limited |
IP transit services |
100 |
| SLT Publications (Pvt) Limited |
Directory publication services |
100 |
| SLT Manpower Solutions (Pvt) Limited |
Manpower solutions |
100 |
| SLT VisionCom (Pvt) Limited |
IPTV services |
100 |
| Sky Network (Pvt) Limited |
Wi-Max services |
75 |
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| 12. |
DIVIDEND
The Directors have recommended the payment of a first and final dividend for the financial year ended
31 December 2008 of Rs. 1/- per share (Rs. 1,804,860,000/-) on ordinary shares. In accordance with the Sri Lanka Accounting Standard No. 12 (Revised) - Events after Balance Sheet Date, this proposed first and final dividend has not been recognised as a liability as at 31 December 2008.
Taking into account the above distribution, the Board is satisfied that Company meets the solvency test requirement under Section 56 (2) of the Companies Act No. 7 of 2007. The Statutory Auditors have issued a Certificate of Solvency confirming this matter. |
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| 13. |
RESERVES
Total reserves and their composition are set out in the statements of changes in equity on pages 74 and 75 of the Consolidated financial statements. |
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| 14. |
SUBSTANTIAL SHAREHOLDINGS
As per the share register, the following shareholders held more than 5% of the 1,804,860,000 ordinary shares in issue as at 31 December 2008.
| Holding |
Holding %
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No. of shares |
| Government of Sri Lanka |
49.50 |
893,405,709 |
| Global Telecommunications Holdings N.V. of Netherlands |
44.98 |
811,757,869 |
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The balance 5.52% shares are held by the public. |
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| 15. |
INVESTOR RELATIONS
In addition to the Annual General Meetings at which the Directors have a dialogue with the shareholders, timely financial reports are presented to investors on quarterly and annual basis. The Investor Relations Officers together with the Chief Executive Officer (CEO) or Chairperson meet institutional shareholders, rating agencies and fund managers on a regular basis. Additionally, the shareholders and the rating agencies are kept up-to-date on the business endeavours and other activities undertaken by the Group to enhance stakeholder value, through its quarterly newsletter 'Investor'. |
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| 16. |
DIRECTORS
During the year, thirteen Directors held office. At 31 December 2008, the Board of the Company comprised the following Directors.
Mrs. Leisha De Silva Chandrasena - Chairperson
Mr. Sumith Wijesinghe
Mr. Sidath Fernando - Appointed on 4 March 2008
Mr. Sandip Das - Appointed on 5 June 2008
Mr. Chan Chee Beng - Appointed on 5 June 2008
Mr. Geoffrey William Shelley - Appointed on 5 June 2008 and resigned on 20 January 2009
Mr. Jeffrey Jay Blatt - Appointed on 5 June 2008
Mr. Yoga Perera - Appointed on 26 November 2008
During the year, the following Directors resigned from the Board:
Mr. P. Asoka Weerasinghe De Silva - Resigned on 22 February 2008
Mr. Shoji Takahashi - Resigned on 4 April 2008
Mr. Shuhei Anan - Resigned on 4 April 2008
Mr. S.N. Kumar - Resigned on 21 November 2008
Mr. P.A. Abeysekara - Resigned on 3 December 2008
The Board wishes to place on record their sincere appreciation of the services rendered by
Mr. P. Asoka Weerasinghe De Silva, Mr. Shoji Takahashi, Mr. Shuhei Anan, Mr. S.N. Kumar,
Mr. P.A. Abeysekara and Mr. Geoffrey William Shelley during their tenure on the Board.
Re-election of Directors
The Article 91 of the Articles of Association require that one-third of the Directors or a number nearest thereto retire at each Annual General Meeting and offer themselves for re-election.
However, no Director is subject to retirement during the year 2008, as per Article 91.
During the year Mr. Sandip Das, Mr. Chan Chee Beng, Mr. Jeffrey Jay Blatt and Mr. Yoga Perera were appointed to fill casual vacancies on the Board. In terms of Article 97 of the Articles of Association, they are required to retire at the end of the financial year. Being eligible, they offer themselves for re-election.
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| 17. |
DIRECTORS’ INTERESTS IN CONTRACTS AND PROPOSED CONTRACTS WITH THE COMPANY
The Directors’ interests in contracts and proposed contracts with the Company, both direct and indirect, are set out in Note 36 to the Consolidated financial statements. Where necessary, the Directors have disclosed the nature of their interests in contracts and proposed contracts. |
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| 18. |
REMUNERATION AND OTHER BENEFITS OF DIRECTORS
The remuneration and other benefits of the Directors are given in Note 6 to the Consolidated financial statements on page 90. |
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DIRECTORS’ INTERESTS IN SHARES OF THE COMPANY
As at 31 December 2008, none of the Directors held shares of the Company or its Subsidiaries. |
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| 20. |
AMOUNTS PAYABLE TO THE FIRM HOLDING OFFICE AS AN AUDITOR
The remuneration payable by the Company to the Independent Auditors is given in Note 6 to the Consolidated financial statements on page 90. |
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AUDITORS' RELATIONSHIP OR ANY INTEREST WITH THE COMPANY
The Directors are satisfied that, based on written representations made by the Independent Auditors to the Board, the auditors did not have any relationship or any interest with the Company and its subsidiaries that would impair their independence. |
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| 22. |
CORPORATE GOVERNANCE
The business and affairs of the Group are managed and directed with the objective of balancing the attainment of corporate objectives with the alignment of corporate behaviour within the legal and the good governance framework of the industry and Sri Lanka, the accountability to shareholders and responsibility to other stakeholders.
To achieve corporate governance objectives, the Board has set up Board Sub-Committees to exercise oversight in specific areas. During the year, the Audit Committee comprised of Mrs. Leisha De Silva Chandrasena
and Mr. S.N. Kumar up to 16 June 2008 and thereafter Mr. Sidath Fernando, Mr. Sumith Wijesinghe,
Mr. Chan Chee Beng and Mr. Sandip Das.
The Remuneration Committee comprised Mr. Sandip Das and Mr. Sidath Fernando. |
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| 23. |
STATUTORY PAYMENTS
All statutory payments due to the Government of Sri Lanka and on behalf of employees have been made or accrued for at the balance sheet date. |
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| 24. |
ENVIRONMENTAL PROTECTION
After making adequate enquiries from management, the Directors are satisfied that the Company and its Subsidiaries operate in a manner that minimises the detrimental effects on the environment and provides products and services that have a beneficial effect on the customers and the communities within which the Group operates. |
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| 25. |
DONATIONS
During the year the Directors had approved donations amounting to Rs. 1,520,856/- for charitable purposes (2007 - Rs. 575,000/-). |
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| 26. |
GOING CONCERN
The financial statements are prepared on going concern principles. After making adequate enquiries from management, the Directors are satisfied that the Group has adequate resources to continue its operations in the foreseeable future. |
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| 27. |
FUTURE DEVELOPMENTS
The Strategic Direction of the SLT Group for the next three years 2009-2011 would be ‘Conquer: From Networks to Markets’. To make this strategic direction a tangible reality, three major broad market segments were identified as Relate Market, Facilitate Market and the Stimulate Market. The Relate Market will focus on services relating to people. The Facilitate Market will strive to facilitate business operations of other organisations, institutions, individuals etc. The Stimulate Market will deliver services relating to entertainment, gaming and infortainment. For the next three years from 2009 to 2011 the purpose of SLT Group could be stated as “helping people to build relationships, to facilitate individuals, organisations and institutions to establish and maintain their business operations effectively and efficiently and to stimulate and satisfy the senses through quality entertainment”. |
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| 28. |
POST BALANCE SHEET EVENTS
No events had occurred since the balance sheet date and the approval of these Consolidated financial statements, which would require adjustments to, or disclosure in, these Consolidated financial statements. |
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| 29. |
APPOINTMENT OF AUDITORS
A resolution to re-appoint the Auditors, Messrs PricewaterhouseCoopers, Chartered Accountants, who have expressed their willingness to continue, will be proposed at the Annual General Meeting. |
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By Order of the Board |
