Dialog Axiata PLC | Annual Report 2016 Dialog Axiata PLC l Annual Report 2016

156 Pages·2017·2.56 MB·English

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www.dialog.lk Dialog Axiata PLC | Annual Report 2016
Corporate Information
Contents
Introduction to the Company 1 Statements of Financial Position 74 NAME OF COMPANY AUDITORS
Message from the Chairman 2 Statements of Comprehensive Income 75 Dialog Axiata PLC Messrs. PricewaterhouseCoopers
Group Chief Executive’s Review of Operations 6 Consolidated Statement of Changes in Equity 76 Chartered Accountants
COMPANY REGISTRATION NO. 100, Braybrooke Place
Board of Directors 21 Company Statement of Changes in Equity 77
PQ 38 Colombo 02, Sri Lanka
Corporate Management Team 27 Statements of Cash Flows 78
Business and Financial Review 32 Notes to the Financial Statements 79 REGISTERED ADDRESS CONTACT FOR SHAREHOLDER SERVICES
Corporate Governance Report 48 US Dollar Financial Statements 141 475, Union Place Group Corporate Services
Report of the Board Audit Committee 55 US Dollar Financial Statements 142 Colombo 02 Telephone: [phone]
Report of the Related Party Transactions Group Value Added Statement 143 Sri Lanka Fax: [phone]
Review Committee 58 Five Year Summary 144 Telephone: [phone] E-mail: [email protected]
Website: www.dialog.lk
DIAL Share Information 59 Group Real Estate Portfolio 145
CONTACT FOR INVESTOR RELATIONS
Notice of Annual General Meeting 146
LEGAL FORM Group Investor Relations
FINANCIAL INFORMATION Administrative Details for the 20th
A public quoted company with limited liability. Telephone: [phone]
Annual Report of the Board of Directors Annual General Meeting 148 Incorporated as a private limited liability company on E-mail: [email protected]
for the year ended 31 December 2016 66 Form of Proxy 149 27th August 1993 and subsequently converted to a
The Statement of Directors’ Responsibility 72 Notes 151 public limited liability company on 26th May 2005. CONTACT FOR MEDIA
Independent Auditor’s Report 73 Corporate Information Inner Back Cover Listed on the Colombo Stock Exchange in July 2005. Group Corporate Communications
Telephone: [phone]
STOCK EXCHANGE LISTING E-mail: [email protected]
The Ordinary Shares of the Company are listed on the
Colombo Stock Exchange of Sri Lanka. SUBSIDIARY COMPANIES
Our Vision
1. Dialog Broadband Networks (Pvt) Ltd – 100%
To be the undisputed leader in the provision of multi-sensory connectivity resulting always, BOARD OF DIRECTORS • Telecard (Pvt) Ltd – 100%
Datuk Azzat Kamaludin – Chairman
in the empowerment and enrichment of Sri Lankan lives and enterprises. Dr. Hans Wijayasuriya 2. Dialog Television (Pvt) Ltd – 100%
Mr. Supun Weerasinghe – Group Chief Executive • Dialog Device Trading (Pvt) Ltd – 100%
Our Mission (with effect from 1 January 2017) • Communiq Broadband Network (Pvt) Ltd – 100%
Mr. Moksevi Prelis
3. Digital Holdings Lanka (Pvt) Ltd – 100%
To lead in the provision of technology enabled connectivity touching multiple human sensus and Mr. Mohamed Muhsin
faculties, through committed adherence to customer-driven, responsive and flexible business processes, Mr. James Maclaurin • Digital Commerce Lanka (Pvt) Ltd – 100%
Deshamanya Mahesh Amalean (together with Dialog’s direct shareholding)
and through the delivery of quality service and leading edge technology unparalleled by any other,
Mr. Chari TVT • Digital Health Lanka (Pvt) Ltd – 70%
spurred by an empowered set of dedicated individuals who are driven by an irrepressible desire to work Mr. Dominic Paul Arena • Headstart (Pvt) Ltd – 26%
as one towards a common goal in the truest sense of team spirit. Tan Sri Jamaludin Ibrahim – Alternate Director to
ASSOCIATE COMPANIES
Mr. Dominic Paul Arena
1. Firstsource-Dialog Solutions (Pvt) Ltd – 26%
Dialog Values
GROUP COMPANY SECRETARY
Ms. Viranthi Attygalle
• Service from the Heart
• Create the Future
• Champions of Change
• Exceptional Performance Designed & produced by
• Uncompromising Integrity
• Responsible Leadership
Digital Plates & Printing by
• One Team Softwave Printing and Publishing (Pvt) Ltd
Introduction to the
Company
Dialog Axiata PLC, a subsidiary of Axiata Group Dialog Axiata supplements its market leading position
Berhad (Axiata), operates Sri Lanka’s largest and in the Mobile Telecommunications sector with a
fastest growing mobile telecommunications network. robust footprint and market presence in Sri Lanka’s
The Company is also one of the largest listed Fixed Telecommunications and Digital Pay Television
companies on the Colombo Stock Exchange in terms markets through its fully-owned subsidiaries, Dialog
of market capitalisation. Dialog, is also Sri Lanka’s Broadband Networks (Private) Limited (DBN), Dialog
largest Foreign Direct Investor (FDI) with investments Television (Private) Limited (DTV) and Digital Holdings
totalling USD 2.1Bn. Dialog, a winner of six GSMA Lanka (Private) Limited. DBN is Sri Lanka’s second
Mobile World Awards has the distinction of being largest Fixed Telecommunications service provider,
voted by Sri Lankan consumers as the Telecom Service serving residential and enterprise customers with
Provider of the Year for six successive years and voice, broadband, lease lines and customised
Internet Service Provider of the Year at the SLIM- telecommunication services. DBN is also a leading
Nielsen People’s Choice Awards. Dialog has topped provider of Radio and Optical Fibre-based transmission
Sri Lanka’s Corporate Accountability rankings for infrastructure facilities. DTV operates a Direct-to-
the past seven years in succession and is an ISO: Home (DTH) Digital Satellite Pay TV service and is
9001 certified company. The Company has received the market leader in Sri Lanka’s Pay TV sector. DTV
numerous local and international awards including supports a broad array of international and local
the National Quality Award and Sri Lanka Business content in both Standard Definition (SD) and High
Excellence Award. Dialog has been at the forefront Definition (HD) formats together with a wide portfolio
of innovation in the mobile industry in Sri Lanka since of Sri Lankan television channels and delivers high
the late 90’s, propelling the nation’s mobile telephony quality infotainment to a viewer base of 838,000
infrastructure to a level of advancement on par with Sri Lankan households.
the developed world. The Company delivers advanced
mobile telephony and high speed mobile broadband
services to a subscriber base of 11.8Mn Sri Lankans,
via 2.5G and 3G/3.5G and 4G networks. In April
2013, Dialog secured the distinction of becoming
the first service provider in South Asia to commence
commercial operations of mobile 4G-LTE services,
having previously introduced 3G to the region in
as far back as 2006. The Company also provides
a comprehensive suite of International Roaming
Services across a global footprint comprising more
than 200 countries, and operates a wide portfolio of
international telecommunication services, including
but not limited to retail and wholesale international
voice and data services.
Annual Report 2016 1
Message from the
Chairman
“As Sri Lanka’s premier converged connectivity provider,
your Company continues to be at the forefront of Sri Lanka’s
Foreign Direct Investment (FDI) landscape. The Dialog Axiata
Group has as of December 31, 2016, cumulatively invested
2.1Bn US Dollars.”
2 Dialog Axiata PLC
“It gives me great pride, that our Company remitted
Rs. 10.7Bn to the Government of Sri Lanka in terms of
direct income tax, fees and levies.”
My dear shareholders, of Dialog Axiata PLC, is happy to propose for your
It is with distinct pleasure that I write to you at the consideration, a full year dividend of 39 cents per
close of the financial year 2016 and to report to share, representing 35% of FY 2016 net profit. Your
you, yet another year of stellar performance by our Company’s business performance is enumerated in
Company and its subsidiaries. During this period, the more detail in the business review section of this
proficient and motivated team at Dialog has moved Annual Report.
forward on numerous fronts while applying consistent
and undiluted focus on our customers, thereby SUSTAINED CONTRIBUTION TO
creating long-term value for all. Despite challenging THE ECONOMY
operating conditions, we are placed in a position of As Sri Lanka’s premier converged connectivity
strength to lead the transformation of Sri Lanka’s provider, your Company continues to be at the
connectivity landscape going forward. forefront of Sri Lanka’s Foreign Direct Investment
(FDI) landscape. The Dialog Axiata Group has as of
Business outcomes for the Year 2016 demonstrate
December 31, 2016, cumulatively invested USD 2.1Bn
the efficient execution of our business strategies,
underlining the confidence the Dialog Group and
which have by design been centered on aggressive
its principal shareholder Axiata Group BhD places in
but sustainable growth. Your Company delivered
the government and people of Sri Lanka. I am proud
strong revenue growth across Mobile, International,
to note that in addition to being recognised as the
Digital Pay Television, Tele-infrastructure and Fixed Line
largest FDI operating under the aegis of the Board of
business segments to record consolidated revenue
Investment of Sri Lanka, Dialog Axiata is also one of
of Rs. 86.7Bn for 2016 representing Year on Year
the largest corporate contributors to the Revenues of
(YoY) growth of 17%. Group Net Profit After Tax was
the Government of Sri Lanka having remitted a total
recorded at Rs. 9.0Bn.
of Rs. 31.7Bn in the form of direct and indirect taxes
during 2016, an increase of 15% from 2015.
It gives me great pride, that our Company remitted
Rs. 10.7Bn to the Government of Sri Lanka in terms
As in previous years, our company continued to be
of direct income tax, fees and levies. Our Company
recognised and receive accolades from the global
also collected a further Rs. 21.0Bn in indirect taxes on
telecommunications industry. Significantly,
behalf of the government.
Dr. Hans Wijayasuriya was named by the Global GSM
Association (GSMA) as the recipient of the inaugural
In line with the performance of the Group and taking
award for “Outstanding Contribution to the Mobile
into account forward investment requirements to serve
Industry in Asia”. This international recognition
the nation’s demand for Mobile, Fixed, Broadband
bestowed on our Chief Executive no doubt signifies
and Digital Television services, the Board of Directors
the indelible contribution your company and
Annual Report 2016 3
Message from the
Chairman
Sri Lanka’s mobile industry at large has made towards “Supun returns to Dialog
the advancement of Mobile Telecommunications
enriched with senior leadership
in the Asian region. I place on record my heartfelt
congratulations to Dr. Wijayasuriya. experience from across the
Asian region.”
Bringing to fruition a leadership succession plan
crafted and implemented over several years, it
gave the Board of Dialog Axiata PLC great pride to
announce the appointment of Mr. Supun Weerasinghe transformed from humble beginnings as the
as the Director/Group Chief Executive Officer with fourth entrant to Sri Lankan mobile sector in
effect from 01 January 2017. Supun functioned as 1995 to becoming Sri Lanka’s largest converged
Dialog’s Group Chief Operating Officer until 2013, telecommunications services provider. I am happy to
prior to taking up the role of Group Chief Strategy note that Dr. Wijayasuriya will continue to serve as a
Officer at Axiata’s Head Quarters in Kuala Lumpur and director on the Board of Dialog Axiata and be closely
thereafter being appointed as the Chief Executive at associated with the company in his capacity as the
Robi Axiata in Bangladesh. Supun returns to Dialog Regional Chief Executive for the South Asian region
enriched with senior leadership experience from across encompassing Bangladesh, Nepal, India, Pakistan and
the Asian region. Sri Lanka.
The Board also extends its sincere gratitude to
“The succession of leadership at Mr. Moskevi Prelis who served the Company in the
capacity of an Independent Director since 2004 and
Dialog follows the appointment
who will not be seeking re-election to the Board of
of Dr. Hans Wijayasuriya, Dialog Axiata PLC in 2017. Along with my colleagues
incumbent Director/Group Chief on the Board, I would like to take this opportunity to
extend our sincere appreciation to Mr Prelis for his
Executive of Dialog, to the post
invaluable counsel and his contribution to the Board
of Regional Chief Executive and Company.
Officer of the Axiata Group for
the South Asia Region.” “Sri Lanka’s mobile industry
at large has made towards
the advancement of Mobile
The succession of leadership at Dialog follows the
Telecommunications in the
appointment of Dr. Hans Wijayasuriya, incumbent
Director/Group Chief Executive of Dialog, to the post Asian region.”
of Regional Chief Executive Officer of the Axiata
Group for the South Asia Region. I would accordingly
like to congratulate Dr. Wijayasuriya on his new
I take this opportunity to place on record my sincere
appointment and to thank him for the outstanding
gratitude to the Government of Sri Lanka, the
contribution made to our Company as well as to
Telecommunications Regulatory Commission of
Sri Lanka’s Telecommunications sector at large.
Sri Lanka, the Ministry of Parliamentary Reforms
Under Dr. Wijayasuriya’s stewardship, our company
and Mass Media, the Central Bank of Sri Lanka, our
4 Dialog Axiata PLC
valued shareholders and other agencies who have
encouraged, enabled and facilitated the development
of our company and its operations.
In closing, I would like to thank our dedicated
management team and Board members for working
tirelessly to ensure Dialog Axiata’s sustained success.
I look forward to continuing this journey together
in 2017.
Datuk Azzat Kamaludin
Chairman of the Board of Directors
31 March 2017
Annual Report 2016 5
Group Chief Executive’s
Review of Operations
Dr. Hans Wijayasuriya
(Immediate Past)
Group Chief Executive - FY 2016
“The fast emerging era of multi-faceted digitisation... is one
wherein our Group’s Businesses and Core Competencies...
would play a pivotal and transformative role in shaping the
lives of our people.”
In my review of operations last year, I ventured to The fast emerging era of multi-faceted digitisation
conclude that your Company has demonstrated its and expansive connectivity of people and things,
capability to orchestrate a combination of financial is one wherein our Group’s Businesses and Core
returns and aggressive market leadership in the Competencies spanning Converged Connectivity,
short run, alongside the establishment of a robust Digital Media and an expansive portfolio of Digital
springboard for leadership in the transformative digital Services spanning Digitally empowered Commerce,
era ahead. Financial Services, Education and Health would play a
pivotal and transformative role in shaping the lives of
our people and future of our country.
6 Dialog Axiata PLC
The digital era going forward is abundant in THE SHORT RUN – 2016 PERFORMANCE
opportunity but equally fraught with challenges OUTCOMES
from disruption. In this respect your Company has It gives me great pride to report to you on behalf of
over the years developed a deep understanding of my team, that your Company exited the year 2016
the challenges arising from the techno-economic having delivered exemplary performance outcomes
transformation of the connectivity business alongside across multiple business segments and performance
the abundant opportunities for innovation which dimensions.
would catalyse the transformation of our business
as well as of the outcomes we deliver to consumers,
Financial Performance and Stakeholder
society and nation at large.
Dividends
On the backdrop of excellent market performance
“The company and its people
across all our business segments, Group Revenue
have honed strategies and grew 17% Year on Year (YoY) to be recorded at Rs.
86.7Bn for FY 2016. Downstream of revenue growth,
capabilities that are... a potent
Group Earnings before Interest, Tax, Depreciation and
mix of discipline, forward vision Amortisation (EBITDA) grew by 23% YoY to Rs. 29.2Bn,
and value adding innovation, underpinned by the successful implementation of a suite
of operational excellence initiatives. Group Net Profit
resulting in... exemplary short
After Tax (NPAT) was recorded at Rs. 9.0Bn, exhibiting a
term financial returns alongside... growth of 74% relative to the previous year.
Digital Leadership fundamentals Dividends to Shareholders
for the long term.” It gives me great pleasure to note that in line with
the excellent financial performance delivered by the
Group during FY 2016, the Board of Directors has
My review of operations for the Year 2016, reports resolved to recommend for your approval, a dividend
on the progress of the Company with respect to the to shareholders amounting to Rs. 3.2Bn translating to
dual imperatives of delivering financial returns while a dividend payout of 35% of net profit, and dividend
navigating a techno-economic paradigm shift that is per share of Thirty Nine (39) Cents.
underway in the industry.
Direct Contribution to the Government of
I am happy to report that the principle performance Sri Lanka
outcomes delivered by your Company in 2016 bear It gives me pride to report that the growth and
strong evidence of the fact that the Company and its acceleration of Dialog’s financial performance
people have honed strategies and capabilities that are translated directly to the growth in your Company’s
founded on a potent mix of discipline, forward vision direct contribution to the Government of Sri Lanka
and value adding innovation, resulting in the delivery (GoSL) and the National Economy. During the course
of exemplary short term financial returns alongside the of 2016, the Group contributed Rs. 10.7Bn in taxes,
establishment of Digital Leadership fundamentals for fees and levies to the GoSL inclusive of Income Tax
the long term. computed at 2% of Company revenue. Further,
the Group additionally collected consumption
Annual Report 2016 7
Group Chief Executive’s
Review of Operations
taxes totalling to Rs. 21Bn on behalf of the GoSL. its leadership in the country’s digital pay television and
Accordingly, remittances to the GoSL accruing from tele-infrastructure sectors while growing its market
the operations of the Group totalled to Rs. 31.7Bn share in the fixed telecommunications sector.
during FY 2016.
INVESTING IN LONG RUN LEADERSHIP
As in previous years, the Group pivoted on the
“We stand humbled by the strengths of its balance sheet and leverage headroom
voice of Sri Lankan consumers to execute on a calibrated strategy with respect
to short and long run investments. Emboldened
who have for the 6th year
by positive business outcomes across multiple
in succession named us the connectivity sectors in which it operates, the Dialog
Group continued to invest aggressively in Sri Lanka’s
People’s Chosen Leader in the
ICT infrastructure. Group capital expenditure for FY
ICT sector.” 2016 was recorded at Rs. 23.2Bn. Capital expenditure
was directed in the main towards investments in
High-Speed Broadband infrastructure aimed at
further strengthening the Group’s leadership in Sri
Market Performance and Sector Leadership
Lanka’s High-Speed Broadband sector encompassing
Consistent with previous years, the financial outcomes
the aggressive expansion of the Company’s Fibre
for the year 2016 were underpinned by a concerted
Optic Infrastructure and 3G HSPA+ and 4G Wireless
focus on operational excellence and the consolidation
Broadband Networks. Alongside core investments in
of leadership with respect to customer services, market
High-Speed Broadband infrastructure, the Group also
performance and innovation.
invested in an expansive portfolio of strategic initiatives
spanning Media and Television, Digital Services and
As in the previous year, we stand humbled by the voice
Information Technology (IT) Systems to enable and
of Sri Lankan consumers who have for the 6th year
support the multiple businesses of the Group.
in succession named us the People’s Chosen Leader
in the Information Communications Technology (ICT)
I am happy to report that our consistent focus on
sector. Consumers of telecommunications services
maintaining a Free Cash Flow generating operating
through a nationwide preference survey conducted by
structure and robust balance sheet enabled us to
AC Nielsen in association with the Sri Lanka Institute
continue to orchestrate a nexus of aggressive short
of Marketing, selected Dialog as the Telecom Services
run returns and forward looking strategic investments,
Provider of the year for the 6th year in succession.
while maintaining leverage (Net Debt to EBITDA) at a
Sri Lankan consumers also voted us the Internet
modest level of 0.90x.
Service Provider of the year for the 5th year running.
Dialog continues to be recognised as the single largest
I am also happy to report with gratitude and pride that
Foreign Direct Investor in Sri Lanka with investments
Sri Lankan consumers continued to endow the Group
reaching USD 2.1Bn since inception. Investments
with confidence and trust. The corresponding heart
recorded during the course of FY 2016, amounted to
and mind share of Sri Lankan citizens, justly earned by
USD 158Mn (Rs. 23.2Bn) an indelible testimony to our
Dialog’s customer centric workforce, is reflected in the
Company’s consistent and continuing commitment
growth in market share across multiple ICT sectors.
to, and trust in Sri Lanka’s economy, government and
In addition to recording market gains in the mobile
people.
telecommunications sector, Dialog also consolidated
8 Dialog Axiata PLC