Annual Report 2014 Dialog Axiata PLC l Annual Report 2014

144 Pages·2015·2.04 MB·English

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www.dialog.lk Dialog Axiata PLC | Annual Report 2014
Corporate Information
Contents
Name of Company Nominating & Remuneration Committee
Message from the Chairman 2 - 5 Consolidated Statement of Changes in Equity 64 Dialog Axiata PLC Datuk Azzat Kamaludin - Chairman
Group Chief Executive’s Review of Operations 6 - 18 Company Statement of Changes in Equity 65 Mr. Mohamed Muhsin
Board of Directors 19 - 22 Statements of Cash Flows 66 Company Registration No. Deshamanya Mahesh Amalean
PQ 38
Corporate Management Team 23 - 25 Notes to the Financial Statements 67 - 130
Company Secretary
Business and Financial Review 26 - 38 US Dollar Financial Statements 131 - 132
Registered Address Ms. Viranthi Attygalle
Corporate Governance Report 39 - 45 Group Value Added Statement 133
475, Union Place
Report of the Board Audit Committee 46 - 48 Five Year Summary 134
Colombo 02 Contact for Shareholder Services
DIAL Share Information 49 - 52 Group Real Estate Portfolio 135 Sri Lanka Group Corporate Services
Notice of Annual General Meeting 136 Telephone : [phone] Telephone: [phone]
Financial information Administrative Details for the Website : www.dialog.lk Fax: [phone]
Annual Report of the Board of Directors 54 - 59 18th Annual General Meeting 137 E-mail: [email protected]
The Statement of Directors’ Responsibility 60 Notes 138 Legal Form
Independent Auditor’s Report 61 Form of Proxy 139 -140 A public quoted company with limited liability. Contact for Investor Relations
Statements of Financial Position 62 Corporate information Inner Back Cover Incorporated as a private limited liability company on 27th Group Investor Relations
August 1993 and subsequently converted to a public limited Telephone: [phone]
Statements of Comprehensive Income 63
liability company on 26th May 2005. Listed on the Colombo E-mail: [email protected]
Stock Exchange in July 2005.
Our Vision Contact for Media
Stock Exchange Listing Group Corporate Communications
To be the undisputed leader in the provision of multi-sensory connectivity resulting always, The Ordinary Shares of the Company are listed on the Telephone: [phone]
in the empowerment and enrichment of Sri Lankan lives and enterprises. Colombo Stock Exchange of Sri Lanka. E-mail: [email protected]
Board of Directors Subsidiary Companies
Our Mission
Datuk Azzat Kamaludin - Chairman 1. Dialog Broadband Networks (Pvt) Ltd - 100%
Dr. Hans Wijayasuriya - Group Chief Executive • Telecard (Private) Limited - 100%
To lead in the provision of technology enabled connectivity touching multiple human sensors and
Mr. Moksevi Prelis 2. Dialog Television (Pvt) Ltd - 100%
faculties, through committed adherence to customer-driven, responsive and flexible business processes,
Mr. Mohamed Muhsin • Dialog Television Trading (Pvt) Ltd - 100%
and through the delivery of quality service and leading edge technology unparalleled by any other, Mr. James Maclaurin • Communiq Broadband Network (Pvt) Ltd - 100%
spurred by an empowered set of dedicated individuals who are driven by an irrepressible desire to work Mr. Darke Mohamed Sani 3. Digital Holdings Lanka (Private) Limited - 100%
as one towards a common goal in the truest sense of the team spirit. Deshamanya Mahesh Amalean
Mr. Chari TVT Associate Companies
1. Firstsource-Dialog Solutions (Pvt) Ltd - 26%
Dialog Values Board Audit Committee 2. Digital Commerce Lanka (Pvt) Ltd - 42.48%
Mr. Mohamed Muhsin - Chairman
• Service From the Heart Mr. Moksevi Prelis
• Create the Future Mr. Chari TVT
• Champions of Change
• Exceptional Performance
• Uncompromising Integrity
• Responsible Leadership Designed & produced by
• One Team
Digital Plates & Printing by
Softwave Printing and Publishing (Pvt) Ltd
Introduction to the Company
Dialog Axiata PLC, a subsidiary of Axiata Group having previously introduced 3G to the region in
Berhad (Axiata), operates Sri Lanka’s largest as far back as 2006. The Company also provides
and fastest growing mobile telecommunications a comprehensive suite of International Roaming
network. The Company is also one of the largest Services across a global footprint comprising of
listed companies on the Colombo Stock Exchange more than 200 countries, and operates a wide
in terms of market capitalization. Dialog is also Sri portfolio of international telecommunication
Lanka’s largest Foreign Direct Investor (FDI) with services, including but not limited to retail and
investments totalling over USD 1.7 billion. wholesale international voice and data services.
Dialog, a winner of two GSMA Mobile World Dialog Axiata supplements its market leading
Awards in 2015 has the distinction of being position in the Mobile Telecommunications sector
voted by Sri Lankan consumers as the Telecom with a robust footprint and market presence
Service Provider of the Year and Internet Service in Sri Lanka’s Fixed Telecommunications and
Provider of the Year for four successive years at Digital Television markets through its fully-owned
the SLIM-Nielsen People’s Choice Awards. Dialog subsidiaries Dialog Broadband Networks (Private)
has topped Sri Lanka’s Corporate Accountability Ltd (DBN) and Dialog Television (Private) Ltd.
rankings for the past 5 years in succession and is (DTV).
an ISO 9001 certified company. The Company has
received numerous local and international awards DBN is Sri Lanka’s second largest Fixed
including the National Quality Award and Sri Telecommunications service provider, serving
Lanka Business Excellence Award. residential and enterprise customers with
voice, broadband, lease lines and customised
Dialog has been at the forefront of innovation telecommunication services. DBN is also a
in the mobile industry in Sri Lanka since the late leading provider of Radio and Optical Fibre-
90’s, propelling the nation’s mobile telephony based transmission infrastructure facilities. DTV
infrastructure to a level of advancement on operates a Direct-to-Home (DTH) Digital Satellite
par with the developed world. The Company TV service and is the market leader in Sri Lanka’s
delivers advanced mobile telephony and high Pay TV sector. DTV supports a broad array of
speed mobile broadband services to a subscriber international and local content in both Standard
base in excess of 9.5 Million Sri Lankans, via 2.5G Definition (SD) and High Definition (HD)
and 3G/3.5G and 4G networks. In April 2013, formats alongside a wide portfolio of
Dialog secured the distinction of becoming the Sri Lankan television channels and delivers high
first service provider in South Asia to commence quality infotainment to a viewer base of 452,000
commercial operations of 4GFD-LTE services, Sri Lankan households.
Annual Report 2014 l Dialog Axiata PLC l 1
Message from
the Chairman
As in previous years, it is gratifying to note that
our Company continues to be a major contributor
to the revenues of the Government of Sri Lanka
(GoSL) and hence to national development and the
welfare of the country’s citizens. During the year
2014.... remittances to the GoSL accruing from the
operations of the Group totalled Rs. 24.4Bn.
2 l Dialog Axiata PLC l Annual Report 2014
My dear shareholders,
In 2015 our Company celebrates the completion of 20 “I firmly believe that our priority
years of commercial operations. I believe we can be at this stage should be to ensure
collectively proud of the fact that over these two decades,
that on going and planned
our Company has succeeded in leading a quantum
strategic investments supporting
transformation in Sri Lanka’s connectivity infrastructure
and the way in which Sri Lankan citizens connect and the future growth of our
communicate. Furthermore, I believe that our Company Company are not compromised,
has truly lived up to its vision of ensuring that the outcome and that the growth momentum
of its operations results always in the empowerment and
achieved in the previous years is
enrichment of Sri Lankan lives and enterprises.
sustained through investments
Leadership in infrastructure and customer
I am happy to inform you that during the Year 2014, experience enhancements.”
we further consolidated our position as the undisputed
leader in Sri Lanka’s mobile market. Today, Dialog’s
Mobile Telephony network serves in excess of 9.5 respect to its focus on Operational Excellence and
million Sri Lankan citizens and provides voice and high Cost Management. This duality in focus has enabled
speed mobile broadband services across all provinces our Company to grow market share and revenues in
of the country. We also succeeded in extending our tandem with increases in profitability and returns on
leadership in the country’s Digital Pay Television sector investment.
and we continued to make aggressive strides with
I am happy to report that during the year under
respect to market share and consumer preference in
review, the Dialog Group demonstrated strong growth
the fixed telephony and broadband sectors.
in revenue across Mobile, Digital Pay Television and
I am also happy to report that our Company continued Fixed Line businesses to record consolidated revenues
to lead the industry with respect to Innovation and of Rs. 67.3Bn representing an increase of 6% Year
thought leadership. In this respect, the Year 2014 on Year (YoY). On the backdrop of strong revenue
brought with it a milestone achievement which placed growth, Group EBITDA (Earnings Before Interest,
our Company on the world stage with respect to Tax, Depreciation and Amortisation) for FY 2014 was
leadership in innovation. Dialog Axiata was recently recorded at Rs. 20.9Bn, an increase of 5% YoY. The
honoured with two world awards at the Mobile World Group EBITDA margin for FY 2014 was recorded at
Congress, where our Company stood amongst world 31.1%. Leading on from robust EBITDA, Group Net
leaders in the global mobile industry as the winner Profit After Tax (NPAT) grew 17% YoY to be recorded
of world awards for the best mobile money service at Rs. 6.1Bn.
and best technology enabler respectively. We also
stand humbled by the fact that Dialog continues for Contribution to Government Revenues
several years in succession, to be voted by Sri Lankan As in previous years, it is gratifying to note that our
consumers as the Telecom Services Provider of the Year Company continues to be a major contributor to the
and Internet Services Provider of the Year. revenues of the Government of Sri Lanka (GoSL) and
hence to national development and the welfare of the
Financial Performance country’s citizens. During the year 2014, the Dialog
In tandem with competing aggressively across the Group contributed Rs. 11.1Bn in taxes, fees and levies
multiple industry sectors in which we operate, our to the GoSL inclusive of Income Tax. Furthermore,
Company has also been diligent and consistent with the Group through the provision of a wide range
Annual Report 2014 l Dialog Axiata PLC l 3
Message from the Chairman
of telecommunications and Internet services also I firmly believe that our priority at this stage should
collected consumption taxes, totalling to Rs. 13.3Bn be to ensure that on going and planned strategic
on behalf of the GoSL during FY 2014, comprising investments supporting the future growth of our
in the main of Telecommunication Levy collections Company are not compromised, and that the growth
amounting to Rs. 10.5Bn. Accordingly, remittances to momentum achieved in the previous years is sustained
the GoSL accruing from the operations of the Group through investments in infrastructure and customer
totalled Rs. 24.4Bn. experience enhancements. This will in turn position
us to deliver solid and sustainable returns to our
Notwithstanding, the very significant contribution stakeholders going forward, and further consolidate
made by our Company in terms of GoSL revenue, the trust our customers have placed in us as the leader
we also take note of the additional taxes the Dialog in the industry to provide them with the very best in
Group would be potentially required to remit to the advanced connectivity services.
GoSL pursuant to the interim budget presented on the
29th of January 2015 and passed by the Parliament In line with profit available for distribution and the
of Sri Lanka on the 7th of February 2015. Pursuant imperative of investing in the future growth of the
to the interim budget proposals, a draft Finance Bill Company, the Board of Directors has resolved to
and Telecommunication Levy (Amendment) Bill were recommend for the approval of shareholders, a total
published by way of a gazette notification on 30th dividend of Rs. 1.1Bn which translates to a dividend to
March 2015 and are currently placed before the shareholders of Rs. 0.13 per share.
Parliament of Sri Lanka for deliberation and debate.
The final formulation of the said legislation once Towards a Sustainable Future
enacted would provide definitive clarity with respect Our best practices and fine tuned competencies in
to the applicability and implementation parameters efficient and responsible operations have enabled us to
pertaining to the proposed taxes. In view of the deliver a widening portfolio of advanced ICT services
pending legislation and deficit in clarity as at the time in an inclusive formulation which brings them within
of finalisation of financial statements for the year reach of every Sri Lankan citizen.
2014, the consolidated financial results as reported
excludes any and all impacts from the Interim Budget. Our Company believes deeply in the business ethos
of the triple bottom line hinged on the simultaneous
Investments and Dividends achievement of Social, Economic and Environmental
While the financial statements for the year 2014 Development. It is this ethos which steers the Group’s
do not capture the impact of additional taxation medium and long term business objectives towards
arising from the interim budget, the Dialog Group cementing a sustainable future. I am delighted to
has to take cognizance of the potential impact of the report that our Company has retained its Number 1
interim budget on profit, in concluding on the Cash ranking on Sri Lanka’s Corporate Accountability Index
Flows available for the disbursement of Dividends for the fourth year in succession.
for the year 2014. In this respect, we are called
Our Company’s focus on delivering Affordability and
upon to take note of the prospective impact of the
Inclusive Digital Empowerment across all its business
Telecommunications Levy (Amendment) Bill, which if
lines, whilst continuing to make impactful community
enacted would place on the Company a tax burden
investments, provides a robust foundation for short
of up to 25% of Prepaid Voice and Value Added
and medium term business success in tandem with
Service Revenues. We also take specific cognizance of
long term sustainability.
the impact arising from one-off taxes to be legislated
through the (Draft) Finance Bill. The associated impact
on distributable profit is estimated to be Rs. 3Bn.
4 l Dialog Axiata PLC l Annual Report 2014
Changes to the Board
On behalf of the Group I warmly welcome Mr. Chari
TVT to the Board. Chari carries over 35 years of
experience in the fields of management, finance and
marketing. His insights will be invaluable in guiding the
Group in the future especially in the tentative times
that lay ahead of us. I also wish to extend my sincere
thanks Mr. Mohd Khairil Abdullah, who resigned
from the Board in September 2014, for his valued
contribution.
My Deep Gratitude
As always it gives me immense pleasure to extend
my profound thanks to the multiple stakeholders
of our business, principal amongst which are our
Customers, Shareholders and Employees. Year upon
year it is my privilege to recognise and appreciate the
efforts and achievements of the Dialog team lead
by our inspirational Group Chief Executive, Dr. Hans
Wijayasuriya. I also wish to place on record my sincere
appreciation for the guidance and support extended
to us by the GoSL and its agencies including but
not limited to the Telecommunications Regulatory
Commission of Sri Lanka, the Ministry of Media
and Information, the Board of Investment Sri Lanka,
the Central Bank of Sri Lanka, and the Ministry of
Telecommunications. I also wish to place on record my
gratitude to my fellow Board Directors for the advice,
guidance and support that has made 2014 an year we
can reflect upon with pride and satisfaction.
Datuk Azzat Kamaludin
Chairman of the Board of Directors
15 May 2015
Annual Report 2014 l Dialog Axiata PLC l 5
Group Chief Executive’s
Review of Operations
In tandem with embarking on an evolutionary
trajectory we recognised the near term imperatives
of continuing to deliver solid financial returns and
reinforcing the foundations of sustainable financial
stability, while concurrently consolidating consumer
trust through the delivery of world class services.
6 l Dialog Axiata PLC l Annual Report 2014
In closing my review of operations for the Year a nationwide preference survey conducted by AC
2013, I alluded to the overarching imperative Nielsen in association with the Sri Lanka Institute of
of instituting in our Company the strength and Marketing, selected Dialog as the Telecom Services
capability to successfully navigate the techno- Provider of the Year for the 4th Year in succession. Sri
economic transformation of the industry in which Lankan consumers also voted us the Internet Services
we operate. We entered the Year 2014 with Provider of the Year for the 3rd Year running.
sound acknowledgement of the fact that this
transformational journey which would traverse the The Year 2014 also saw your Company securing
deflation of voice revenues and the expansion of supremacy on the world stage in the arena of digital
demand for Data and Digital Services, would require innovation. Dialog secured the distinction of winning
us to re-examine our cost structures and execution two global awards at the Mobile World Congress
efficacy, refresh our views on competition and (MWC) held in Barcelona Spain in March 2015. Sri
collaboration, and build new product and revenue Lanka’s premier mobile payment network, eZ Cash
strategies to meet the rapidly transforming needs of beat out worldwide competition to win the Global
digital consumers. In tandem with embarking on an
evolutionary trajectory we recognised the near term “The sustainability, of
imperatives of continuing to deliver solid financial
delivering robust financial
returns and reinforcing the foundations of sustainable
returns alongside aggressive
financial stability, while concurrently consolidating
consumer trust through the delivery of world class performance gains in today’s
services. market place and proactive
capture of leadership in
Financial Returns & Leadership the emerging digital era, is
It gives me pride to report that your Company exited
embodied in the structurally
the Year 2014 having performed excellently in
delivering robust financial returns simultaneously with robust balance sheet.”
consolidating and growing its leadership position in
the emerging digital era. Group Net Profit After Tax
Award for the Best Mobile Money Service, whilst
(NPAT) was recorded at Rs. 6.1Bn – registering growth
Dialog’s cutting edge open development platform
of 17% relative to the previous year. Operational
ideamart won the Global Award for the Best
Performance during 2014 also featured growth in
Technology Enabler. ideamart is widely regarded as one
Group Earnings Before Interest Depreciation Taxes
of the most successful integrated mobile application
and Amortisation (EBITDA) of 5% to Rs. 20.9Bn,
development platforms in the world.
and expansion of Group Revenues by 6% Year on
Year (YoY) to be recorded at Rs. 67.3Bn at Year
Sri Lankan consumers further manifested their
end. Fundamental to the financial performance of
trust in your Company by rewarding our team with
the Group was a concerted focus on operational
growth in market share across multiple ICT sectors.
excellence and leadership with respect to customer
In addition to continuing market gains in the mobile
services, market performance and innovation. In this
telecommunications sector, Dialog also consolidated its
respect we stand humbled by the voice of Sri Lankan
leadership in the country’s Digital Pay Television, Fixed
consumers who have for the 4th year in succession
Telecommunications and Tele-Infrastructure sectors
named us the People’s Chosen Leader in the ICT sector.
with segment growth rates in excess of 7%.
Consumers of Telecommunications Services, through
Annual Report 2014 l Dialog Axiata PLC l 7
Group Chief Executive’s Review
of Operations
In tandem with achieving aggressive market Contribution to the Sri Lankan Economy
gains, your Company focused with keen intent We recognise with pride that the Dialog Group
on operational and people excellence. Our Service continues to deliver significant direct as well as
Delivery organisation reinforced its position as the indirect contributions to the Sri Lankan Economy.
country’s best, securing the distinction of becoming The Group contributed Rs. 11.1Bn in taxes, fees and
the only service organisation in Sri Lanka to achieve levies to the Government of Sri Lanka (GoSL) during
international certification at Level 5 on the People FY 2014 inclusive of Income Tax on the basis of 2%
Capability Maturity Model (People-CMM). Further, of Company revenue. Further, the Group additionally
the Dialog Group won an overall Gold Award for collected consumption taxes totaling to Rs. 13.3Bn
excellence in Human Resource Management at the on behalf of the GoSL during FY 2014, comprising
HRM Awards 2014 organised by the Associated in the main of Telecom Levy collections amounting
of Human Resource Professionals, underscoring to Rs. 10.5Bn. Accordingly, remittances to the GoSL
the future oriented people development initiatives accruing from the operations of the Group totaled to
embarked on by the Company. The Dialog Group Rs. 24.4Bn.
also secured re-certification of its Group-Wide quality
system in line with the ISO 9001:2008 standard. The The Dialog Group also continues to be recognised as
Dialog Group also continued to excel in terms of the largest Foreign Direct Investment (FDI) in Sri Lanka
instituting and operating best in class Information with investments reaching USD 1.74Bn (Rs. 176Bn) of
Systems management practices. During the course of
2014 our Information Technology (IT) and Information
Security Systems (ISS) functions secured ISO “We are confident that our
27001:2005 certification elevating quality assurance
direct and indirect contribution
to a level on par with best in class Telecommunications
Operators globally. Further, I am also happy to to the national economy, in
report that our Internet Data Centre (IDC) became combine with the inclusive
the first Data Center in Sri Lanka to be certified for
delivery of multi-faceted
conformance with the ISO 27001:2013 standard.
connectivity.... will continue to
While reflecting with pride on the achievements of catalyse an explosive economic
our Company we can draw further strength from
multiplier which in turn will
the fact that the sustainability, of delivering robust
accelerate the socio-economic
financial returns alongside aggressive performance
gains in today’s market place and proactive capture development of our nation.”
of leadership in the emerging digital era, is embodied
in the structurally robust balance sheet of the Group.
With leverage maintained at modest levels of 0.92x
Net Debt to EBITDA, we can be confident that the which USD 116.3Mn (Rs. 15.2Bn) was invested in FY
financial fire power of the Group will combine 2014. Dialog has also secured the distinction of being
synergistically with our armoury of operational and the first Company under the aegis of the Board of
strategic strengths, to deliver leadership and growth Investment of Sri Lanka (BoI) to surpass the
well in to the future not withstanding industry USD 1Bn milestone with respect to direct investment, a
transformation and external dynamics. testimony to our Company’s commitment to, and trust
in, Sri Lanka’s economy, Government and people.
8 l Dialog Axiata PLC l Annual Report 2014