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Financial Reports

  Annual Report of the Board of directors for the year    ended 31 december 2008
  Statement of the Directors’ Responsibility for the    preparation of Financial Statements
  Audit Committee Report
  Independent Auditors' Report
  Income Statement
  Balance Sheet
  Consolidated Statement of Changes in Equity
  Cash Flow Statement
  Notes to the consolidated Financial Statements
  Ten Year Progress
 
 
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

5. Revenue

The significant categories under which revenue is recognised are as follows:  
Group Company
2008 2007 2008 2007
Release of deferred connection charges (Note 24) 921 927 921 927
Rental income 6,098 6,753 4,717 6,085
Domestic call revenue 16,511 13,846 9,542 9,469
Receipts from other network operators - domestic 92 419 336 563
International call revenue 2,086 2,068 1,541 1,760
Receipts from other network operators - international 567 287 140 259
International settlements (in payments) 7,124 7,146 7,124 7,146
CDMA revenue 5,133 6,188 5,133 6,188
Broadband, data and other services 8,512 5,600 6,659 4,671
47,044 43,234 36,113 37,068
 
As ordered by the Supreme Court on 27 August 2007 in respect of the judgement in the Case
No. 89/2005, SLT PLC revised its fixed telephony tariffs with a discount of 8.72% on the local call tariffs and rental charges implemented in September 2007 effective from 1 January 2007. Accordingly, a credit amounting to Rs. 1,394 million, which represents the excess charges made from 1 January 2007 to
31 October 2007, was refunded to customers with the November 2007 bills. This adjustment has been recognised as a reduction in revenue in 2007. In terms of the same settlement, the revised tariffs from 1 November 2007 has been agreed at a discount of 9.03% of the previous tariffs. The revised tariffs have been incorporated into the time-based billing (per second billing) structure adopted since 1 November 2007.

6. Operating Costs

The following items have been included in arriving at operating profit before depreciation, amortisation and ITL:
Group Company
2008 2007 2008 2007
Staff costs (Note 7) 6,780 6,090 5,867 5,479
Directors' emoluments 62 58 17 28
Payments to international network operators 1,311 1,454 1,311 1,454
Payments to other network operators - international 743 542 899 799
- domestic 459 511 369 393
Auditors’ remuneration
- Audit fees 6 5 4 4
- Non-audit fees 1 1 1 1
Repairs and maintenance expenditure 2,402 1,930 1,974 1,539
Provision for doubtful debts 1,783 1,191 1,580 1,036
Reversal of provision for inventories (75) (82) (75) (82)
Net foreign exchange losses/(gains) 6 (32) (9) (2)
Other operating expenditure 10,676 7,267 5,533 4,610
CDMA expenditure 941 1,813 1,164 1,972
25,095 20,748 18,635 17,231
 
7. Staff Costs

Group Company
2008 2007 2008 2007
Salaries, wages, allowances and other benefits 6,170 5,155 5,356 4,621
Retirement costs - defined contribution plans 609 509 527 453
- defined benefit obligations
(Note 26)
1 426 (16) 405
6,780 6,090 5,867 5,479
 Average number of persons employed by the
Group/Company during the year
 9,925  7,987  7,021  7,093
         
8. International Telecommunication Operators' Levy (ITL)

In terms of the Finance Act No. 11 of 2004, International Telecommunications Operators are required
to make a contribution to the Government of Sri Lanka at the rate of US$ 0.038 per international incoming traffic minute with effective from 3 March 2003. The total amount of the levy payable by the Group
and Company for the period from 1 January 2008 to 31 December 2008 was estimated at Rs. 2,987 million (2007 - Rs. 2,851 million) and Rs. 2,736 million (2007 - Rs. 2,727 million) respectively and has been recognised as expenses in the current financial year. The corresponding liability, net of payments has been recognised in the balance sheet.

The Gazette notification No. 1386/24 of 31 March 2005 states that the levy will be credited as Incoming Local Access Charge (ILAC) and Telecommunications Development Charge (TDC) as per the rates specified in the Table B and C to these regulations. These regulations also allow the domestic PSTN operators to claim two thirds of the TDC within three years against the cost of development of its telecommunications network in unserved and underserved areas of Sri Lanka as determined by the Telecommunications Regulatory Commission (TRC). As per the ‘Guidelines for disbursement of two-third of the TDC Fund for The Fixed Wire Line Operator’ issued by the TRC, the Company is entitled to claim Rs. 25,000 (Cost per line) for every connection provided in unserved and underserved areas specified by TRC.

TRC in its letter dated 30 December 2008 confirmed that SLT PLC has provided 87,301 PSTN connections in unserved and underserved areas specified by TRC during the period from 3 March 2003 to 31 December 2005 and acknowledged its agreement to setoff Rs. 2,182,525,000 in lieu of two-thirds of TDC, which was payable to TRC. Accordingly, the Company transferred this amount to the income statement from ITL payable account.

The documentation supporting the amount to be claimed from TDC against the cost of telecommunications network roll-out in unserved and underserved areas by the Company during the period after 1 January 2006 has been submitted to TRC. The estimated refund as at 31 December 2008 has not been recognised in the income statement pending approval by the TRC.

9. Voluntary Retirement Scheme (VRS) costs

A VRS was announced on 8 May 2008. Accordingly, based on the number of applications received from employees, a VRS cost of Rs. 390 million (2007 - Rs. 43 million) was incurred and recognised in the
income statement.

10. interest expense and Finance Costs

Group Company
2008 2007 2008 2007
Interest expense and finance costs
Rupee loans 1,231 1,232 324 313
Foreign currency loans 31 75 10 35
USD 100 million Notes 823 837 823 837
Other charges [See Note (a) below] 15 (17) 15 (17)
Total interest and finance costs 2,100 2,127 1,172 1,168
Interest capitalised (90)
Net total interest and finance costs 2,100 2,037 1,172 1,168
Foreign exchange losses recognised from
hedging reserve (Note 30)
30 195 30 195
Interest expenses and finance costs charged to
income statement
2,130 2,232 1,202 1,363
 
(a) Other charges mainly include unrealised exchange gain of Rs. 549 million (2007 - Rs. 117 million) arising from revaluation of the fixed deposits in USD and unrealised exchange loss of Rs. 553 million (2007 - Rs. 100 million) arising from revaluation of the USD 100 million Notes.
 
 
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