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Financial Statements

Pakistan Telecommunication Company Limited

For the year ended June 30, 2009

Auditors Report to the Members


We have audited the annexed balance sheet of Pakistan Telecommunication Company Limited as at June 30, 2009 and the related profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our audit. It is the responsibility of the companys management to establish and maintain a system of internal control, and prepare and present the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit. We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due verification, we report that: (a) (b) In our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984; In our opinion: (i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with accounting policies consistently applied; the expenditure incurred during the year was for the purpose of the companys business; and the business conducted, investments made and the expenditure incurred during the year were in accordance with the objects of the company;

(ii) (iii)

(c)

in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and give the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the companys affairs as at June 30, 2009 and of the profit, its cash flows and changes in equity for the year then ended; and in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.

(d)

A. F. Ferguson & Co. Chartered Accountants Lahore. Name of engagement partner: Muhammad Masood Dated September 29, 2009

Ford Rhodes Sidat Hyder & Co. Chartered Accountants Islamabad. Name of engagement partner: Sajjad Hussain Gill

Annual Report 2009

35

Balance Sheet
as at June 30, 2009
Note 2009 2008
(Rupees in thousand)

Equity and liabilities Share capital and reserves Authorized capital 11,100,000,000 A class ordinary shares of Rs 10 each 3,900,000,000 B class ordinary shares of Rs 10 each 111,000,000 39,000,000 150,000,000 Issued, subscribed and paid up capital Revenue reserves Insurance reserve General reserve Unappropriated profit 6 1,683,074 30,500,000 16,206,485 99,389,559 Non current liabilities Payable to PTA against WLL license fee Long term security deposits from customers non interest bearing Deferred taxation Employees retirement benefits Deferred government grants 7 8 9 10 11 990,055 2,379,000 14,142,099 1,061,044 18,572,198 Current liabilities Trade and other payables Current portion of payable to PTA against WLL license fee Taxation Dividend payable 12 7 26,114,171 1,953,971 368,180 7,650,000 36,086,322 Contingencies and commitments 13 154,048,079 The annexed notes from 1 to 47 form an integral part of these financial statements. 137,447,852 21,731,667 182,292 21,913,959 1,768,839 951,618 590,000 14,240,062 95,000 17,645,519 1,683,074 30,500,000 14,705,300 97,888,374 5 51,000,000 111,000,000 39,000,000 150,000,000 51,000,000

Chairman

36

Pakistan Telecommunication Company Limited

Note

2009

2008

(Rupees in thousand)

Assets Non current assets Property, plant and equipment Capital workinprogress Intangible assets Long term investments Long term loans 14 15 16 17 18 77,730,763 9,836,588 3,320,670 5,607,439 3,332,378 99,827,838 Current assets Stores and spares Trade debts Loans and advances Accrued interest Recoverable from tax authorities Other receivables Receivable from Government of Pakistan Short term investments Cash and bank balances 19 20 21 22 23 24 25 26 27 5,201,991 10,760,974 590,061 821,027 1,059,608 698,270 2,164,072 21,017,790 11,906,448 54,220,241 4,954,085 13,366,216 888,309 315,817 1,383,766 1,641,617 2,164,072 10,344,379 4,545,145 39,603,406 82,800,178 7,892,823 3,149,063 3,607,439 394,943 97,844,446

154,048,079

137,447,852

President & CEO


Annual Report 2009

37

Profit and Loss Account


for the year ended June 30, 2009
Note 2009 2008
(Rupees in thousand)

Revenue Cost of services Gross profit Administrative and general expenses Selling and marketing expenses Operating profit Voluntary separation scheme Other operating income Finance cost Profit / (loss) before tax Taxation Profit / (loss) after tax

28 29

59,239,001 (37,732,282) 21,506,719

66,336,042 (37,346,869) 28,989,173 (10,823,555) (1,799,946) 16,365,672 (23,937,854) 3,957,539 (847,973) (4,462,616) 1,637,726 (2,824,890)
(Rupees)

30 31

(8,935,261) (1,817,071) 10,754,387

32 33 34

(92,118) 4,267,172 (908,524) 14,020,917

35

(4,869,732) 9,151,185

Earnings / (loss) per share basic and diluted

41

1.79

(0.55)

The annexed notes from 1 to 47 form an integral part of these financial statements.

Chairman

President & CEO


Pakistan Telecommunication Company Limited

38

Cash Flow Statement


for the year ended June 30, 2009
Note 2009 2008
(Rupees in thousand)

Cash flows from operating activities Cash generated from operations Long term security deposits Employees retirement benefits paid Payment of other VSS components Received from Government of Pakistan Finance cost paid Income tax paid Net cash inflow from operating activities Cash flows from investing activities Capital expenditure Intangible assets Proceeds from disposal of property, plant and equipment Short term investments other than cash equivalents Advance to the wholly owned subsidiary against issue of ordinary shares Long term loansnet Loan to the wholly owned subsidiary Return on bank placements / loan to subsidiary Government grants received Dividend income Net cash outflow from investing activities Cash flows from financing activities Repayment of suppliers credit Dividend paid Net cash outflow from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of the year Cash and cash equivalents at end of the year 39 (2,742) (2,742) 16,812,828 14,889,524 31,702,352 (172,961) (10,195,524) (10,368,485) (16,248,188) 31,137,712 14,889,524 (9,455,527) (397,979) 206,039 (1,221,886) (2,000,000) 62,565 (3,000,000) 2,751,824 966,044 (12,088,920) (11,411,216) (109,270) 19,651 1,214,991 2,860,719 95,000 350,000 (6,980,125) 38 34,337,391 38,437 (1,470,335) (840,927) (265,232) (2,894,844) 28,904,490 28,091,249 (244,166) (17,373,671) (21,444,052) 15,264,928 (360,407) (2,833,459) 1,100,422

26

The annexed notes from 1 to 47 form an integral part of these financial statements.

Chairman

President & CEO


Annual Report 2009

39

Statement of Changes in Equity


for the year ended June 30, 2009
Issued, subscribed and paidup capital Class A Class B Insurance reserve Revenue reserves General reserve Unappropriated profit Total

(Rupees in thousand)

Balance as at July 01, 2007 Net loss for the year Transfer from insurance reserve Final dividend for the year ended June 30, 2007 Rs. 2 per share Balance as at June 30, 2008 Net profit for the year Interim dividend for the year ended June 30, 2009 Rs. 1.5 per share Balance as at June 30, 2009

37,740,000 37,740,000 37,740,000

13,260,000 13,260,000 13,260,000

1,749,047 (65,973) 1,683,074 1,683,074

30,500,000 30,500,000 30,500,000

27,664,217 (2,824,890) 65,973 (10,200,000) 14,705,300 9,151,185 (7,650,000) 16,206,485

110,913,264 (2,824,890) (10,200,000) 97,888,374 9,151,185 (7,650,000) 99,389,559

The annexed notes from 1 to 47 form an integral part of these financial statements.

Chairman

President & CEO


Pakistan Telecommunication Company Limited

40

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
1. 1.1 Constitution and ownership Pakistan Telecommunication Company Limited (the Company) was incorporated in Pakistan on December 31, 1995 and commenced business on January 1, 1996. The Company is listed on Karachi, Lahore and Islamabad stock exchanges. The Company was established to undertake the telecommunication business formerly carried on by Pakistan Telecommunication Corporation (PTC). The business was transferred to the Company on January 1, 1996 under the Pakistan Telecommunication (Reorganization) Act, 1996 at which date the Company took over all the properties, rights, assets, obligations and liabilities of PTC except those transferred to National Telecommunication Corporation (NTC), Frequency Allocation Board (FAB), Pakistan Telecommunication Authority (PTA) and Pakistan Telecommunication Employees Trust (PTET). The registered office of the Company is situated at PTCL Headquarters, G8/4, Islamabad. 1.2 Activities The Company provides telecommunication services in Pakistan. It owns and operates telecommunication facilities and provides domestic and international telephone services and other communication facilities throughout Pakistan. The Company has also been licensed to provide such services to territories in Azad Jammu and Kashmir and Northern Areas. 2. 2.1 Basis of preparation Statement of compliance These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984 shall prevail. 2.2 Standards, interpretations and amendments to published approved accounting standards that are effective in current year During the year ended June 30, 2009, IFRS 7 Financial Instruments: Disclosures became effective. IFRS 7 has superseded IAS 30 and disclosure requirements of IAS 32. Adoption of this standard has only resulted in additional disclosures which have been set out in note 42 to these financial statements. Further, interpretations of accounting standards, namely IFRIC 12 Service Concession Arrangements, IFRIC 13 Customer Loyalty Programmes and IFRIC 14 IAS 19 The Limit on Defined Benefit Asset, Minimum Funding Requirements and their Interaction also become effective during the year. However, these interpretations do not affect the Companys financial statements. 2.3 Amendments and Interpretations to publish standards applicable to the Company not yet effective The following amendments and interpretations to existing standards have been published and are mandatory for the Companys accounting periods beginning on or after their respective effective dates: IAS 1 (Revised), Presentation of financial statements (effective for annual periods beginning on or after July 1, 2009), was issued in September 2007. The revised standard requires an entity to present, in a statement of changes in equity, all owner changes in equity. All nonowner changes in equity (i.e. comprehensive income) will be required to be presented separately from owner changes in equity, either in one statement of comprehensive income or in two statements (a separate income statement and a statement of comprehensive income). When the entity applies an accounting policy retrospectively or makes retrospective statement or reclassifies items in the financial statements, they will be required to present a restated financial position (balance sheet) as at beginning of comparative period in addition to the current requirement to present the balance sheet as at the end of the current and the comparative period. The adoption of this standard will only impact the presentation of the financial statements. IAS 39 (Amendment), Financial Instruments: Recognition and Measurement Reclassification of Financial Assets (effective from July 1, 2009). This amendment to the Standard permits an entity to reclassify nonderivative financial assets (other than those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value through profit or loss category in particular circumstances. The amendment also permits an entity to transfer from the availableforsale category to the loans and receivables category, a financial asset that would have met the definition of loans and receivables (if the financial asset had not been designated as availableforsale), if the entity has the intention and ability to hold that financial asset for the foreseeable future. The management is in the process of assessing the impact of its adoption on the Companys financial statements.
Annual Report 2009

Legal status and nature of business

41

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
IFRS 7 (Amendment), Financial Instruments: Disclosure. There are a number of minor amendments to IFRS 7 in respect of enhanced disclosures about liquidity risk and fair value measurements. These amendments are unlikely to have an impact on the Companys financial statements and have therefore not been analyzed in detail. IAS 38 (Amendment), Intangible Assets (effective from July 1, 2009). The amended standard states that a prepayment may only be recognized in the event that payment has been made in advance of obtaining right of access of goods or receipt of services. This amendment is not expected to have a significant effect on the Companys financial statements. 2.4 Standards and interpretations to existing standards that are not applicable to the Company and not yet effective Standards or Interpretation Effective date (accounting periods beginning on or after) January 01, 2009 January 01, 2009 January 01, 2009 July 01, 2009 July 01, 2009 January 01, 2009 January 01, 2009 January 01, 2009 January 01, 2009 July 01, 2009 July 01, 2009 January 01, 2009

IFRS 4 IFRS 8 IFRIC 15 IFRIC 16 IFRIC 17 IAS 23 IAS 27 IAS 32 IFRS 2 IFRS 3 IFRIC 18 IFAS 2 3.

Insurance Contracts Operating Segments Accounting for Agreements for the Construction of Real Estate Hedge of Net Investment in a Foreign Operation Distribution of Noncash Assets to Owners Borrowing Costs (Revised) Consolidated and Separate Financial Statements Financial Instruments: Presentation Amendments regarding puttable Financial Instruments Share Based Payments Amendments Regarding Vesting Conditions and Cancellation Business Combinations (Revised) Transfer of Assets of Customers IJARAH

Basis of measurement These financial statements have been prepared under the historical cost convention, except for revaluation of certain financial instruments at fair value and recognition of certain employee retirement benefits and license fee payable at present value. The Companys significant accounting policies are stated in note 4. Not all of these significant policies require the management to make difficult, subjective or complex judgments or estimates. The following is intended to provide an understanding of the policies the management considers critical because of their complexity, judgment of estimation involved in their application and their impact on these financial statements. Estimates and judgments are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. These judgments involve assumptions or estimates in respect of future events and the actual results may differ from these estimates. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial statements are as follows:

a)

Employees retirement benefits The Company uses the valuation performed by an independent actuary as a present value of its retirement benefits obligations. The valuation is based on assumptions as mentioned in note 4.4.

b)

Provision for taxation The Company takes into account the current income tax law and the decisions taken by appellate authorities. Instances where the Companys view differs from the view taken by the Income Tax department at the assessment stage and where the Company considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent liabilities.

c)

Useful life and residual values of property, plant and equipment The Company reviews the useful lives of property, plant and equipment on regular basis. Any change in estimates in future years might affect the carrying amounts of the respective items of property, plant and equipment with the corresponding effect on the depreciation charge and impairment.

42

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
d) Provision for doubtful receivables Provision against overdue receivable balances is recognized after considering the receipt pattern and the future outlook of the concerned receivable party. It is reviewed by the management on a regular basis. 4. Significant accounting policies The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented unless otherwise stated. 4.1 Insurance reserve The assets of the Company are self insured. The Company has created an insurance reserve. Appropriation out of profits are made on discretion of the Board of Directors. The reserve is to be utilized to meet any loss resulting from theft, fire or natural disasters. 4.2 Borrowings Borrowings are initially recorded at the proceeds received. Finance cost is accounted for on an accrual basis and is either added to the carrying amount of the instrument or disclosed as interest and markup accrued to the extent of amount remaining unpaid. 4.3 Taxation Current Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Deferred Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income statement, except in the case of items credited or charged to equity in which case it is included in equity. 4.4 (a) Employees retirement benefits and other obligations Pension obligations The Company operates an approved funded pension scheme through a separate trust called the Pakistan Telecommunication Employees Trust (PTET) for its employees recruited prior to January 1, 1996 when the Company took over the business from PTC. The Company also operates an unfunded pension scheme for employees recruited on regular basis after December 31, 1995. Provisions are made annually to cover the obligations under the schemes on the basis of actuarial valuations and are charged to profit. The most recent valuation was carried out as at June 30, 2009 using the Projected unit credit method. The amount recognized in the balance sheet represents the present value of the defined benefit obligations as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost and as reduced by the fair value of the plan assets.

Annual Report 2009

43

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
Cumulative net unrecognized actuarial gains and losses at the end of the previous year which exceed 10% of the greater of the present value of the Companys pension obligations and the fair value of plan assets are amortized over the expected average working lives of the participating employees. The principal actuarial assumptions used in the valuation as at June 30, 2009 were as follows: Expected rate of return per annum on plan assets Discount rate Indexation of pension Expected increase in salary Average expected remaining working lives of participating employees funded Average expected remaining working lives of participating employees unfunded Expected mortality rate 13% (2008: 10%) 12% (2008: 12%) 8% (2008: 8%) 9% for first five years and then 11% (2008: 11%) 13 years (2008: 13 years) 17 years (2008: 17 years) EFU 61 66 Mortality Table adjusted for Companys experience Based on experience

Expected withdrawal rate

The expected rate of return is based on complex mathematical model which takes into account the maturity of high yielding DSCs and other investments present at the beginning of the financial year. It considers the expected returns on the re investments of maturity proceedings in similar instruments up to the life of related obligations. The expected rate of return also considers the changes of plan assets during the year on account of contributions and benefit payments. The model results in expected rate of return of 13% (2008: 10%). The rounded expected rate of return used for the Fund Assets is 13% during 200809 (200708: 10%) (b) Medical benefits The Company provides post retirement medical benefits to pensionable employees and their families. Under the unfunded scheme all such employees, their spouses, children up to the age of 21 and parents residing with and dependent on the employee are entitled to the benefit. Unmarried daughters are not subject to 21 years age limit. The pensioner and the family are entitled to the facility up to the life of the pensioner and spouse. There are no annual limits to the cost of drugs, hospital in patient treatment and consultation fees. Provisions are made annually to cover the obligations under the scheme on the basis of actuarial valuation and are charged to profit. The most recent valuation was carried out as at June 30, 2009 using the Projected unit credit method. The amount recognized in the balance sheet represents the present value of the defined benefit obligations as adjusted for unrecognized actuarial gains and losses and unrecognized past service cost. Cumulative net unrecognized actuarial gains and losses at the end of the previous year which exceed 10% of the present value of the Companys obligations are amortized over a period of fourteen years. The principal assumptions used in the valuation as at June 30, 2009 were as follows: Discount rate Expected rate of increase in medical costs Expected mortality rate 12% (2008: 12%) 11% (2008: 11%) EFU 61 66 Mortality Table adjusted for Companys experience

(c)

Accumulating compensated absences The Company provides a facility to its employees for accumulating their annual earned leave. Under the unfunded scheme, regular employees are entitled to four days of earned leave per month. Unutilized leave can be accumulated without limit and can be used at any time subject to the Companys approval up to 120 days in a year without medical certificate, 180 days with medical certificate and 365 days during the entire service of the employee. Up to 180 days of accumulated leave can be encashed on retirement provided the employee has a minimum leave balance of 365 days. Leaves are encashed at emoluments applicable for monthly pension.

44

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
New Terms and Conditions (NTC) / contractual employees are entitled to 3 days earned leave per month. Unutilized leave can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed on departure at gross pay. New Compensation Pay Grade (NCPG) employees are entitled to 20 leaves after completion of one year of service. Leaves can be accumulated after completion of second year of service, to a maximum of 28 days. Current year was the first year in which, PTCL calculated the obligation for accumulated compensated absences for NTC/contractual and NCPG employees. Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial valuation and are charged to profit. The most recent valuation was carried out as at June 30, 2009 using the Projected unit credit method. The amount recognized in the balance sheet represents the present value of the defined benefit obligations. Actuarial gains and losses are charged to profit immediately in the period when these occur. The principal assumptions used in the valuation as at June 30, 2009 were as follows: Expected increase in salary Discount rate Expected mortality rate 9% in first five years and then 11% (2008: 11%) 12% (2008: 12%) EFU 61 66 Mortality Table adjusted for Companys experience

(d)

Provident fund The Company operates approved funded provident fund covering permanent employees. For the purposes of the scheme a separate trust titled as PTCL Employees GPF Trust has been established. Monthly contributions are deducted from the salaries of employees and are to be paid to the Trust by the Company. Interest is paid at the rate announced by the Federal Government. Such rate for the year was 15% (2008: 12.5%) per annum. The Company contributes to the fund the differential, if any, of the interest charge for the year and the income earned on the investments made by the Trust. The contributions deducted from the employees during the year and interest payable by the Company for the year, if any, appear as other liabilities.

(e)

Gratuity The Company operates an unfunded gratuity scheme for its NTC / contractual employees. Provisions are made annually to cover the obligation under the scheme on the basis of actuarial valuations and are charged to profit. The most recent valuation was carried out as at June 30, 2009 using the Projected unit credit method. The amount recognized in balance sheet represents the present value of the defined benefit obligation as on June 30, 2009 as adjusted for unrecognized actuarial gains and losses. Cumulative net unrecognized actuarial gains and losses at the end of the previous year which exceed 10% of the present value of the Companys obligations are amortized over the expected average working lives of the participating employees. The principal assumptions used in the valuation as at June 30, 2009 were as follows: Discount rate Expected increase in salaries Average expected remaining working lifetime of NTC / contractual employees 12% (2008: 12%) 9% for first five years and then 11% (2008: 11%) 6 years (2008: 5 years)

Retirement benefits are payable to staff on completion of prescribed qualifying period of service under these schemes. 4.5 Trade and other payables Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid in the future for the goods and / or services received, whether or not billed to the Company. Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate.

Annual Report 2009

45

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
4.6 Property, plant and equipment Property, plant and equipment, except freehold land are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost includes direct cost, related overheads, mark up and interest referred to in note 4.19. Depreciation on all property, plant and equipment is charged to profit on the straight line method so as to write off the depreciable amount of an asset over its estimated useful life at the annual rates mentioned in note 14 after taking into account their residual values. Depreciation on additions to property, plant and equipment is charged from the month in which an asset is acquired or capitalized while no depreciation is charged for the month in which the asset is disposed off. Impairment loss or its reversal, if any, is also charged to profit. Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount over their estimated useful life. The assets residual values and useful lives are reviewed at each financial year end, and adjusted if impact on depreciation is significant. The Company assesses at each balance sheet date whether there is any indication that property, plant and equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognized in income currently. The recoverable amount is the higher of an assets fair value less costs to sell and value in use. Where an impairment loss is recognized, the depreciation charge is adjusted in the future periods to allocate the assets revised carrying amount over its estimated useful life. Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to income during the period in which they are incurred. The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognized as an income or expense. 4.7 Intangible assets These are stated at cost less accumulated amortization and any identified impairment loss. Intangible assets are amortized using the straight line method over the period of the license or useful life of the software. Amortization on additions to intangible assets is charged from the month in which an asset is acquired or capitalized while no amortization is charged for the month in which the asset is disposed off. The Company assesses at each balance sheet date whether there is any indication that intangible asset may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognized in income currently. The recoverable amount is the higher of assets fair value less costs to sell and value in use. Where an impairment loss is recognized, the amortization is adjusted in the future periods to allocate the assets revised carrying amount over its estimated useful life. 4.8 Capital workinprogress Capital workinprogress is stated at cost less any identified impairment loss. 4.9 Investments Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating capital, are included in current assets, all other investments are classified as noncurrent. Management determines the appropriate classification of its investments at the time of the purchase and reevaluates such designation on a regular basis.

46

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
4.9.1 Investments in equity instruments of subsidiaries and associated companies Investments in subsidiaries and associates where the Company has significant influence are measured at cost in the Companys financial statements. Cost in relation to investments made in foreign currency is determined by translating the consideration paid in foreign currency into rupees at exchange rates prevailing on the date of transactions. The Company is required to issue consolidated financial statements along with its separate financial statements, in accordance with the requirements of IAS 27 Consolidated and Separate Financial Statements. Investments in associated undertakings, in the consolidated financial statements, are being accounted for using the equity method. 4.9.2 Other investments The other investments made by the Company are classified for the purpose of measurement into the following category: 4.9.2.1 Available for sale The financial assets including investments in associated undertakings where the Company does not have significant influence that are intended to be held for an indefinite period of time or may be sold in response to the need for liquidity are classified as available for sale. Investments classified as available for sale are initially measured at cost, being the fair value of consideration given. At subsequent reporting dates, these investments are remeasured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments for which a quoted market price is not available, are measured at cost as it is not possible to apply any other valuation methodology. Unrealized gains and losses arising from the changes in the fair value are included in fair value reserves in the period in which they arise. All purchases and sales of investments are recognized on the trade date which is the date that the Company commits to purchase or sell the investment. Cost of purchase includes transaction cost. At each balance sheet date, the Company reviews the carrying amounts of the investments to assess whether there is any indication that such investments have suffered an impairment loss. If any such indication exists, the recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognized as expense. In respect of available for sale financial assets, cumulative impairment loss less any impairment loss on that financial asset previously recognized in profit and loss account, is removed from equity and recognized in the profit and loss account. Impairment losses recognized in the profit and loss account on equity instruments are not reversed through the profit and loss account. 4.9.2.2 Heldtomaturity Heldtomaturity investments are financial assets with fixed or determinable payments and fixed maturities that management has the positive intention and ability to hold to maturity. These are recorded at amortized cost using the effective interest rate method, less any amounts written off to reflect impairment. 4.10 Stores and spares Usable stores and spares are valued principally at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon. 4.11 Trade debts Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified. 4.12 Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement cash and cash equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and short term borrowings. 4.13 Government grants Government grants are recognized at their fair value and included in noncurrent liabilities as deferred income when there is reasonable assurance that the grant will be received and the Company will comply with the conditions associated with the grant.
Annual Report 2009

47

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
Grants that compensate the Company for expenses incurred are recognized in profit and loss account on a systematic basis in the same period in which the expenses are recognized. Grants that compensate the Company for the cost of an asset are recognized in the profit and loss account on a systematic basis over the expected useful life of the related asset upon capitalization. 4.14 Financial instruments Financial assets and financial liabilities are recognized at the time when the Company becomes a party to the contractual provisions of the instrument and derecognized when the Company loses control of contractual rights that comprise the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of financial assets and financial liabilities is included in the profit and loss account for the year. Financial instruments carried on the balance sheet include long term investments, long term loans, trade debts, loans, advances, deposits and other receivables, cash and bank balances, long term security deposits from customers, trade and other payables and interest . All financial assets and liabilities are initially measured at cost, which is the fair value of consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value or cost as the case may be. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. 4.15 Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to set off the recognized amount and the Company intends either to settle on a net basis or to realize the assets and to settle the liabilities simultaneously. 4.16 Derivative financial instruments These are initially recorded at cost value on the date a derivative contract is entered into and are remeasured to fair value at subsequent reporting dates. 4.17 Foreign currencies All monetary assets and liabilities in foreign currencies are translated into Rupees at exchange rates prevailing at the balance sheet date. Transactions in foreign currencies are translated into Rupees at the spot rate. All nonmonetary items are translated into Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined. Exchange differences are included in income currently. Revenue from international calling services and foreign operating cost is translated into local currency at the month end rate. The financial statements are presented in Pak Rupees, which is the Companys functional and presentation currency. 4.18 Revenue recognition Revenue from telecommunication services is recognized when services have been rendered. Return on deposits is accrued on a time proportion basis with reference to the principal outstanding and the applicable rate of return. Dividend income and return from investments are recognized when the Companys right to receive payment has been established. 4.19 Borrowing costs Markup and other borrowing costs are capitalized up to the date of commissioning of the respective qualifying asset. All other markup, interest and other charges are charged to profit. 4.20 Dividend Dividend distribution to the Companys shareholders is recognized as a liability in the period in which the dividends are approved.

48

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
5. 2009 note 5.1 3,774,000 Issued, subscribed and paid up capital 2008 3,774,000 A class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash B class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash 2009 37,740,000 2008 37,740,000
(Numbers in thousand) (Rupees in thousand)

note 5.1

1,326,000

1,326,000

13,260,000

13,260,000

5,100,000

5,100,000

51,000,000

51,000,000

5.1

These shares were initially issued to the Government of Pakistan in consideration for the assets and liabilities transferred from Pakistan Telecommunication Corporation (PTC) to Pakistan Telecommunication Company Limited (PTCL) under the Pakistan Telecommunication (Reorganization) Act, 1996 as referred to in note 1.1. Except for voting rights the A and B class ordinary shares rank pari passu in all respects. A class ordinary shares carry one vote and B class ordinary shares carry four votes save for the purposes of election of directors. A class ordinary shares can not be converted into B class ordinary shares. However, B class ordinary shares may be converted into A class ordinary shares at the option exercisable in writing submitted to the Company by the holders of three fourths of the B class ordinary shares. In the event of termination of the license issued to the Company under the provisions of Pakistan Telecommunication (Reorganization) Act, 1996 or at any time within three years from April 12, 2006, if there is any change of control of any member holding B class ordinary shares without the prior written approval of Government of Pakistan, the B class ordinary shares shall be automatically converted into A class ordinary shares. The Government of Pakistan through an Offer for Sale document, dated July 30, 1994 issued to domestic investors a first tranche of vouchers exchangeable for A class ordinary shares of the Company and through an Information Memorandum dated September 16, 1994 issued a second tranche of vouchers to the international investors also exchangeable, at the option of voucher holder for A class ordinary shares or Global Depository Receipts ( GDRs ) representing A class ordinary shares of the Company. Out of 3,774,000 thousand A class ordinary shares, vouchers against 601,084 thousand A class ordinary shares were issued to general public. Till June 30, 2009, 599,500 thousand (2008: 599,476 thousand) A class ordinary shares had been exchanged for vouchers. In pursuance of the privatization of the Company, a bid was held by the Government of Pakistan on June 8, 2005 for sale of B class ordinary shares of Rs 10 each along with management control. Emirates Telecommunication Corporation(Etisalat) was the successful bidder. The shares along with management control were transferred with effect from April 12, 2006 to Etisalat International Pakistan (EIP), UAE which is a subsidiary of Etisalat. 2009
(Number of shares)

5.2

5.3

5.4

2008

5.5

Ordinary shares of the Company held by the related parties as at year end are as follows: Etisalat International Pakistan (LLC) SE Etisalat International Pakistan (LLC) (B class ordinary shares) (B class ordinary shares) 407,809,524 918,190,476 1,326,000,000 407,809,524 918,190,476 1,326,000,000

Annual Report 2009

49

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 6. Insurance reserve Balance as at July 01 Utilized during the year Balance as at June 30 7. Payable to PTA against WLL license fee Payable to PTA against WLL license fee Present value adjustment Present value of license fee payable Imputed interest charged to profit and loss account to date Current portion shown under current liabilities note 7.1 2,105,500 (631,756) 1,473,744 480,227 1,953,971 (1,953,971) 7.1 2,105,500 (631,756) 1,473,744 295,095 1,768,839 1,768,839 1,683,074 1,683,074 1,749,047 (65,973) 1,683,074 2008
(Rupees in thousand)

In previous years the Company had paid to PTA Rs 4,278,639 thousand in respect of license to provide Wireless Local Loop (WLL) services. Previously PTA allowed the Company to adjust Rs 2,105,500 thousand out of Rs. 4,278,639 thousand already paid against the amount payable to Universal Service Fund (USF). The balance amount of Rs 2,105,500 thousand in respect of license fee is payable to PTA in March 2010 and carries no interest. The license fee payable has been discounted to present value of future cash flows using effective interest rate of 10% per annum and the corresponding adjustment was made to the cost of license included in intangible assets. Difference between the amount payable and the present value of cash equivalents being recognized as imputed interest over the remaining credit period. 2009 2008

(Rupees in thousand)

8.

Long term security deposits from customers non interest bearing

note 8.1

990,055

951,618

8.1

During the current year, the Company adjusted security deposits amounting to Rs Nil (2008: Rs 40,711 thousand) against defaulter receivable balances. 2009 2008

(Rupees in thousand)

9.

Deferred taxation The liability for deferred taxation comprises of timing differences relating to: Accelerated tax depreciation / amortization Provision for doubtful trade debts Provision for doubtful advances and receivables Available tax losses Others

8,719,515 (6,284,901) (58,720) 3,106 2,379,000

8,322,099 (5,730,635) (8,439) (1,996,138) 3,113 590,000

The gross movement in deferred tax liability during the year is as follows: Balance as at July 01 Charge / (reversal) during the year Balance as at June 30

note 35

590,000 1,789,000 2,379,000

2,373,223 (1,783,223) 590,000

50

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 10. Employees retirement benefits Liabilities for pension obligations Funded Unfunded Gratuity Accumulating compensated absences Post retirement medical facility note 10.1 note 10.1 note 10.1 note 10.1 note 10.1 4,550,208 841,872 5,392,080 391,609 1,025,164 7,333,246 14,142,099 10.1 Employees retirement benefits
Pension Funded Unfunded Gratuity Accumulating compensated absences (Rupees in thousand) Post retirement medical facility Total 2009

2008

(Rupees in thousand)

5,389,026 630,417 6,019,443 267,106 833,006 7,120,507 14,240,062

Present value of defined benefit obligations Fair value of assets Unrecognized actuarial gains / (losses) Liability as at June 30 Liability as at July 01 Charge for the year

note 10.2 53,610,885 note 10.5 (50,096,598) 3,514,287 1,035,921 4,550,208 5,389,026 445,896 6,012,673 (6,297,387) 161,182 (1,000,000) 4,550,208 (669,566)

932,231 932,231 (90,359) 841,872 630,417 131,893 85,125 472 217,490 (6,035) 841,872 232,604

314,871 314,871 76,738 391,609 267,106 108,135 30,147 138,282 (13,779) 391,609 99,286

1,025,164 1,025,164 1,025,164 833,006 33,234 117,419 (27,825) 145,482 268,310 (76,152) 1,025,164 186,473

6,448,686 6,448,686 884,560 7,333,246 7,120,507 64,052 623,452 (100,395) 587,109 (374,370) 7,333,246 282,072

62,331,837 (50,096,598) 12,235,239 1,906,860 14,142,099 14,240,062 783,210 6,868,816 (6,297,387) (127,748) 145,482 1,372,373 (1,000,000) (470,336) 14,142,099 130,869

Current service cost Interest cost Expected return on plan assets Actuarial losses / (gains) recognized during the year Liability for NCPG / contractual employees Contributions Benefits paid during the year Liability as at June 30 10.1.1 Charge for the year 2008 was as follows

Annual Report 2009

51

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
10.2 Changes in the present value of the defined benefit obligations (Pension Funded) 2009 Balance as at July 01 Current service cost Interest cost Benefits paid Actuarial losses Curtailment / settlement losses Balance as at June 30 50,105,610 445,896 6,012,673 (3,906,371) 953,077 53,610,885 2008 36,529,541 1,035,152 3,232,783 (14,033,816) 778,679 22,563,271 50,105,610
(Rupees in thousand)

(Pension Unfunded) 2009 Balance as at July 01 Current service cost Interest cost Benefits paid Actuarial losses Curtailment / settlement (gains) Balance as at June 30 709,378 131,893 85,125 (6,035) 11,870 932,231 (Gratuity) 2009 Balance as at July 01 Current service cost Interest cost Benefits paid Actuarial (gains) / losses Balance as at June 30 251,226 108,135 30,147 (13,779) (60,858) 314,871 2008 111,444 97,290 11,164 (9,798) 41,126 251,226
(Rupees in thousand)

2008 1,180,770 127,477 102,687 1,764 (703,320) 709,378

(Rupees in thousand)

(Accumulating Compensated Absences) 2009 Balance as at July 01 Current service cost Interest cost Benefits paid Actuarial (gains) / losses Curtailment / settlement losses Recognition of NCPG / contractual liabilities Balance as at June 30 833,006 33,234 117,419 (76,152) (27,825) 145,482 1,025,164 2008 1,871,553 13,125 160,358 (1,382,160) 12,990 157,140 833,006
(Rupees in thousand)

52

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
(Post Retirement Medical Facility) 2009 Balance as at July 01 Current service cost Interest cost Benefits paid Actuarial losses / (gains) Curtailment / Settlement losses Balance as at June 30 10.3 Historical Information 2009 Defined benefit pension plan funded Present value of defined benefit obligations at year end Fair value of plan assets at year end Deficit / (Surplus) in the Plan Experience adjustment on plan liabilities losses Experience adjustment on plan assets gains / (losses) Defined benefit pension plan unfunded Present value of defined benefit obligations at year end Experience adjustment on pension liabilities (gains) / losses Defined benefit gratuity plan Present value of defined benefit obligations at year end Experience adjustment on gratuity liability (gains) / losses Accumulating compensated absences Present value of defined benefit obligations at year end Experience adjustment on accumulating compensated absences liability (gains) / losses Defined benefit post retirement medical facility Present value of defined benefit obligations at year end Experience adjustment on post retirement medical liability (gains) / losses 6,448,686 940,121 5,195,430 (51,761) 4,798,947 (274,176) 4,583,853 (673,407) 4,723,962 (890) 1,025,164 833,006 1,871,553 1,735,238 2,972,819 314,871 (51,220) 251,226 41,126 111,444 (77,172) 136,265 10,089 38,128 909 932,231 83,101 709,378 1,764 1,180,770 (96,454) 1,050,561 47,981 805,823 156,338 53,610,885 (50,096,598) 3,514,287 953,077 (1,735,854) 50,105,610 (48,441,436) 1,664,174 778,679 (522,664) 36,529,541 (45,158,318) (8,628,777) 2,581,597 3,776,675 31,413,488 (39,243,528) (7,830,040) 603,337 2,611,253 28,134,077 (34,241,407) (6,107,330) 2,538,991 2,339,398 2008 2007
(Rupees in thousand)

2008 4,798,947 126,931 423,508 (2,664,434) (51,761) 2,562,239 5,195,430

(Rupees in thousand)

5,195,430 64,052 623,452 (374,369) 940,121 6,448,686

2006

2005

39,239

12,990

21,748

(235,937)

(91,581)

Annual Report 2009

53

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
10.4 Major categories of plan assets of defined benefit pension planfunded as percentage of total plan assets are as follows: 2009
(Percentage)

2008 71 14 7 8 100 2008

Defence saving certificates Term finance and other certificates Pakistan investment bonds Fixed & other assets

43 47 6 4 100 2009

(Rupees in thousand)

10.5

Changes in the fair value of plan assets Balance as at July 01 Expected return on plan assets Contributions made by the Company during the year Contributions made by the employees deputationists Benefits paid Actuarial (losses) on plan assets Balance as at June 30 Actual return on plan assets 48,441,436 6,297,387 1,000,000 (3,906,371) (1,735,854) 50,096,598 4,561,533 45,158,318 4,515,832 1,569,879 6,487 (2,286,416) (522,664) 48,441,436 3,993,168

10.6

Effect of increase / decrease in medical cost trend rate Effect of 1 % increase in medical cost trend rate in current service cost and interest cost is Rs 18,181 thousand (2008: Rs 44,426 thousand) and effect of 1% decrease is Rs 15,063 thousand (2008: Rs 36,810 thousand). Effect of 1 % increase in medical cost trend rate in present value of defined benefit obligations for medical cost is Rs 1,892,189 thousand (2008: Rs 1,792,423 thousand) and effect of 1% decrease is Rs 1,563,113 thousand (2008: Rs 1,480,697 thousand).

10.7

In the next financial year expected contribution to be paid to the funded pension plan by the Company is Rs 463,242 thousand (2008: Rs 740,975 thousand). 2009 2008

(Rupees in thousand)

11.

Deferred government grants Balance as at July 01 Received during the year Balance as at June 30 note 11.1 95,000 966,044 1,061,044 95,000 95,000

11.1

These represent grants received from Universal Service Fund ( a government formed agency ) mainly relating to property, plant and equipment received as assistance towards development of the telecommunication infrastructure in rural areas and include telecom infrastructure project for (i) basic telecom access in Pishin, Mansehra, Dadu and Larkana; (ii) Optical fibre extension Baluchistan Package 2; (iii) Broadband projects in Faisalabad, Sargodha Civil Division, Multan, Bahawalpur, Dera Ghazi Khan Civil Division and Hyderabad Civil Division.

54

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 12. Trade and other payables Trade creditors Accrued liabilities Receipts against third party works Taxes payable Income tax collected from subscribers Income tax deducted at source Sales tax payable Advances from customers Technical services fee payable to related party Retention money payable to contractors / suppliers Payable to: Research and Development Fund Universal Service Fund related party Pakistan Telecommunication Authority Due to satellite companies Unclaimed dividend VSS benefits payable Other liabilities note 12.1 note 12.2 5,414,955 1,315,240 499,556 366,426 13,017 379,443 1,061,915 1,856,153 503,467 5,914,707 2,397,144 6,122,799 34,542 120,342 61,057 432,851 26,114,171 12.1 Included in trade creditors are amounts due to the following related parties : Telecom Foundation Pipes Limited Etisalat UAE Etisalat Afghanistan Thuraya 2,232 8,929 11,161 These relate to the normal business of the Company and are interest free. 12.2 This includes Rs. 573,155 thousand (2008: Rs 519,851 thousand) representing provision against EOBI contribution payable under EOBI Act 1976, for employees hired subsequent to PTCLs incorporation. The Company has withheld the payment of EOBI pending the settlement of court case as discussed in note 13.7. The amount of provision made during the year is Rs. 53,304 thousand (2008: Rs 59,830 thousand). This includes an amount of Rs 3,458,866 thousand (2008: Nil) payable to Universal Service Fund for the period from May 01, 2008 to December 31, 2008. As per agreement between the Company and the Pakistan Telecommunication Authority, this amount is payable in 15 equal monthly installments starting from May 2009. 2,344 170,990 81 28,021 201,436 5,964,893 1,875,019 617,706 498,389 24,466 522,855 731,611 973,204 563,187 6,540,698 1,980,131 719,263 20,216 51,703 123,084 729,563 318,534 21,731,667 2008
(Rupees in thousand)

note 30.2

note 30.4 note 12.3

12.3

Annual Report 2009

55

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
13. 13.1 Commitments Commitments in respect of contracts for capital expenditure amounting to Rs 12,352,378 thousand (2008: Rs 11,026,561 thousand). Contingencies 13.2 1,850 cases (2008: 1,666 cases) have been filed against the Company primarily by subscribers and employees. Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial effect at present. However, the management and the Companys legal advisor are of the view that the outcome of these cases is expected to be favorable and a liability, if any, arising on the settlement of these cases is not likely to be material. In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the repealed Income Tax Ordinance 1979 for the assessment years 199697 to 199899 on failure to withhold/deduct tax under section 50(3) while making payments to non resident satellite companies. The Company filed a writ petition before Honourable Lahore High Court against the said notices which was dismissed. An appeal was filed against the dismissal before Honourable Supreme Court of Pakistan which was also dismissed and the Company was advised by the Honourable Court to file an appeal before the Income Tax Appellate Authorities. Subsequently, the Company filed an appeal with the Commissioner Income Tax (CIT) Appeals who has annulled the order of the Taxation Officer. The department has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT (Appeals). Pending final outcome of the appeal, no provision has been made in these financial statements for the demands aggregating Rs 1,599,557 thousand (2008: Rs 1,599,557 thousand) . The management and the Companys tax advisor are of the view that the outcome of the appeal is expected to be favourable. 13.4 In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all messages, inter alia, through card phone services and mobile telephone services within and outside the city of Karachi. Telecard Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration of its services and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of Pakistan ordered for immediate restoration of Pay Card services including rebate relief and discount to all pay phone service providers. In view of relief and discount offered by the Government, Telecard Limited withheld payments on account of their monthly bills to the Company and obtained a stay order from the Honourable Sindh High Court for an amount of Rs 110,033 thousand against the Company. On the instructions of Honourable Court, external consultants calculated the rebate and discount amounting to Rs 349,953 thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In the suit, final arguments of the parties are to be reheard. The Company has also filed a claim against Telecard Limited for an amount of Rs 324,683 thousand receivable up to December 31, 2001 and Rs 9,416 thousand rebate refund claim. In another case, identical to the above matter M/s Telefon has claimed Rs 97,337 thousand from the Company. In the last hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing. The management and the Companys tax advisor are of the view that the outcome of the appeal is expected to be favourable. 13.5 M/s Televoice has filed a suit with Honourable Sindh High Court for arbitration claiming Rs 409,125 thousand for breach of interconnect agreement by the Company. A counter claim for Rs 120,000 thousand has been lodged by the Company in the same court. The arbitrator announced an award of Rs.115,000 thousand on April 25, 2006 in favour of PTCL for which execution has been filed by the Company with the court. However, pending the outcome of the execution application, no adjustment has been made in these financial statements for the above amounts. Consequent to an audit of central excise duty collected by the Company from subscribers for the years 199899 and 19992000 the Rawalpindi Collectorate of Central Excise Department raised a demand for excise duty along with additional duties and penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company with the Federal Board of Revenue (FBR), Government of Pakistan for resolution. A committee was formed comprising representatives from the Company and FBR. As a result of the negotiations, the Company deposited an amount of Rs 466,176 thousand on account of central excise duty. Contingencies and commitments

13.3

13.6

56

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate forums and in the event of favourable decision the amount would be refunded to the Company by Collectorate of Central Excise. The Company has filed an appeal to contest the additional duties and penalties levied by the Collectorate. During the year ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided by Custom, Central Excise and Sales Tax Appellate Tribunal in favour of PTCL subject to submission of proof. Pending the final outcome, no provision has been made in these financial statements for the above demand, since the management and the Companys lawyer are of the view that the outcome of the appeal is expected to be favourable. 13.7 The Employees OldAge Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of Employees Old Age Benefits (EOBI) Act, 1976 for payment of Companys and employees contribution amounting to Rs 1,496,829 thousand for the period January 1, 1996 to May 31, 2005. The management has filed a writ petition against the demand before Honourable High Court which is pending for hearing. However, the management and legal advisor are of the view that case would be decided in the favour of the Company. In respect of tax years 2006 and 2007, Additional Commissioner of Income Tax (ACIT) inter alia amended the assessment on the grounds that Companys claim of concessional rate of tax at 1% of revenues received from international customers, provided for through Clause 3 of Part II of Second Schedule to the Income Tax Ordinance, 2001 is not in accordance with such legal provisions, as underlying telecommunication services have not been rendered outside Pakistan. The overall impact of this amendment is approximately Rs 2,250,000 thousand. The Commissioner of Income Tax (CIT Appeals) and Income Tax Appellate Tribunal (ITAT) have endorsed the departmental view and presently Companys reference against the judgment of ITAT, in this respect, is pending before the Rawalpindi Bench of the Honourable Lahore High Court. Provision in connection with above amendment of assessment has not been incorporated in these financial statements owing to the fact that management and the Companys tax advisor consider that underlying legal and factual position favours the Companys stance and that the litigation would eventually settle in companys favour. 2009 13.9 Bank guarantees and bid bonds issued in favour of: Universal Service Fund (USF) against Government grants Others 2,030,337 5,000 2,035,337 190,000 190,000 2008

13.8

(Rupees in thousand)

Annual Report 2009

57

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
14. Property, plant and equipment 2009
Cost as at July 1, 2008 Additions/ (deletions) Cost as at June 30, 2009 Accumulated Depreciation depreciation for the year/ as at July 1, (on disposals) 2008 Accumulated depreciation as at June 30, 2009 Net book value as at June 30, 2009 Annual rate of depreciation %

(Rupees in thousand) Land Freehold Leasehold Buildings on Freehold land Leasehold land Lines and wires Apparatus, plant and equipment Office equipment Furniture and fittings Vehicles Submarine cables Total 1,643,226 74,151 9,838,254 1,009,184 102,895,985 118,024,486 1,008,318 444,310 1,566,821 5,715,407 242,220,142 555 1,643,781 3,267 77,418 210,065 10,048,319 1,009,184 1,677,423 104,573,408 5,240,150 123,264,636 183,575 1,189,925 (1,968) 15,801 455,345 (4,766) 180,926 1,359,277 (388,470) 5,715,407 21,821 2,701,091 351,389 71,323,741 80,785,132 518,677 296,127 1,335,671 2,086,315 1,178 22,999 247,328 2,948,419 25,230 376,619 4,630,990 75,954,731 6,995,979 87,781,111 103,480 620,971 (1,186) 24,642 316,003 (4,766) 114,854 1,076,706 (373,819) 422,063 2,508,378 12,565,744 171,605,937 (379,771) 1,643,781 54,419 7,099,900 632,565 28,618,677 35,483,525 568,954 139,342 282,571 3,207,029 77,730,763 1 3.3 2.5 2.5 7 10 10 10 20 6.67 8.33

7,511,762 249,336,700 159,419,964 (395,204) 2008

Cost as at July 1, 2008

Additions/ (deletions)

Cost as at June 30, 2009

Accumulated Depreciation depreciation for the year/ as at July 1, (on disposals) 2008

Accumulated depreciation as at June 30, 2009

Net book value as at June 30, 2009

Annual rate of depreciation %

(Rupees in thousand) Land Freehold Leasehold Buildings on Freehold land Leasehold land Lines and wires Apparatus, plant and equipment Office equipment Furniture and fittings Vehicles Submarine cables Total 1,641,805 74,114 9,568,729 1,009,184 98,704,981 108,244,220 883,871 394,832 1,590,906 5,464,910 227,577,552 1,421 1,643,226 37 74,151 286,079 9,838,254 (16,554) 1,009,184 4,191,004 102,895,985 10,188,181 118,024,486 (407,915) 130,410 1,008,318 (5,963) 52,965 444,310 (3,487) 21,270 1,566,821 (45,355) 250,497 5,715,407 20,868 2,463,469 326,159 66,291,133 74,849,887 430,402 273,243 1,265,600 1,664,252 953 21,821 242,575 2,701,091 (4,953) 25,230 351,389 5,032,608 71,323,741 6,294,774 80,785,132 (359,529) 91,553 518,677 (3,278) 26,009 296,127 (3,125) 108,241 1,335,671 (38,170) 422,063 2,086,315 12,244,006 159,419,964 (409,055) 1,643,226 52,330 7,137,163 657,795 31,572,244 37,239,354 489,641 148,183 231,150 3,629,092 82,800,178 1 3.3 2.5 2.5 7 10 10 10 20 6.67 8.33

15,121,864 242,220,142 147,585,013 (479,274)

58

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 14.1 The depreciation charge for the year has been allocated as follows: Cost of services Administrative and general expenses Selling and marketing expenses note 29 note 30 note 31 12,314,429 188,486 62,829 12,565,744 14.2 11,999,126 183,660 61,220 12,244,006 2008
(Rupees in thousand)

As explained in note 1.1 the property and rights in the above assets at January 1, 1996 were transferred to the Company from Pakistan Telecommunication Corporation under the Pakistan Telecommunication (Reorganization) Act, 1996. However, the title to such freehold land was not formally transferred in the name of the Company in the land revenue records. The Company initiated the process of transfer of title of land in its name in previous year which is still ongoing and shall be completed in due course of time.

14.3 Disposal of property, plant and equipment 2009


Particulars of assets Sold to Cost Accumulated depreciation Book value Sale proceeds Mode of disposal

(Rupees in thousand)

Office Equipment TV Computer Accessories Printers, CPUs ACs Photocopiers Miscellaneous items Miscellaneous parties Miscellaneous parties Miscellaneous parties Miscellaneous parties Miscellaneous parties Miscellaneous parties 120 151 847 178 648 24 1,968 Furniture & fittings Motor Vehicles Gul Muhammad M. Iqbal Waseem Syed Abid Hussain Zubair Assadullah Tunio Nafees Ahmed Siddique Bashir Hussain Nawazish Ali Anjum Rizwan Ahamd Bhutto Hussain Ahmad M. Amjad Ali M. Iqbal Siyal Atiq Nawaz Mazhar Amin Ehsan Ul Haq Rao Abdul Raqeeb Khan M. Roshan Awan Sana Ullah Shaikh Dr. Tahir Saeed Zakir Hussain Satti Anwer Jamil Mian Muhammad Bilal Fuad Enver 567 887 1,314 880 849 759 866 323 585 772 568 583 570 563 563 563 563 563 563 834 568 563 453 710 1,226 704 679 455 693 158 468 617 454 466 456 305 225 225 225 225 225 333 454 300 114 177 88 176 170 304 173 165 117 155 114 117 114 258 338 338 338 338 338 500 114 263 283 169 250 167 161 304 173 152 293 154 284 291 285 338 321 338 321 338 338 500 270 338 Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy 4,766 54 63 581 51 428 9 1,186 4,766 66 88 266 127 220 15 782 260 38 275 88 115 97 873 477 Auction Auction Auction Auction Auction Auction Auction

Annual Report 2009

59

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
Particulars of assets

2009
Sold to Cost Accumulated depreciation Book value Sale proceeds Mode of disposal

(Rupees in thousand)

Imran Ul Haq Mubashir Naseer Ch. Iftikhar Ahmed Cheema Kanwar Ghulam Mustafa Khan Shakeel Ahmed Aftab Ahmad Chishti Col (Retd) Zamir Hussain Bhatti Zomma Mohiuddin Sajjad Ahmad Shahid Ahmad Gohar Malik S. M. Imran Ali M. Amir Hussain Brig (R) Waqar Ahmed Malik Syed Ali Qadir Jillani Noor Ahmed Noor Javed Iqbal Tariq Qamar Sohail Anwar Zia Ud Din Barki Badar Ul Zaman Behram Shahrokh Aslam Shaukat Ali Muhammad Siddique Afridi Faheem Ul Hassan Abrar Ahmed Fazle Mabood Ghulam Shabbir Mehboob Iqbal Qadir Mudassar Hafeez Dar M. Aamir M. Afzal Kharal Muhammad Umar Wajeeh Anwar Muhammad Saleem Akhtar Mushtaq Ahmed Afridi Sardar Ali S. Mazhar Hussain Syed Shafqat Mehdi Zulfiqar Ali Shah Sher Bahader Khan Saleem Mudassar Hafeez Dar Muhammad Azam Mujeeb Ur Rehman Israr Ahmed Abro Muhammad Anwar Tariq Mehmood M. Hatam Shad Others Total

834 582 582 867 585 866 567 1,141 759 773 563 866 755 773 955 563 757 759 585 367 367 404 759 562 323 775 834 416 568 563 563 563 569 563 746 610 640 886 597 563 367 367 563 759 404 626 568 604 344 342,634 388,470 395,204

333 466 466 693 468 693 453 913 384 618 305 693 604 618 764 225 606 405 469 220 232 222 304 450 173 620 413 242 454 225 305 305 454 305 599 486 512 709 478 225 202 202 390 417 222 502 454 484 201 342,577 373,819 379,771

500 116 116 174 117 173 114 228 375 155 258 173 151 155 191 338 151 354 116 147 135 182 455 112 150 155 420 173 114 338 258 258 115 258 147 124 127 177 119 338 165 165 173 342 182 124 114 120 143 57 14,651 15,433

500 291 291 403 293 411 283 542 455 309 338 433 378 386 454 338 144 432 293 220 220 283 329 281 153 147 317 188 284 321 321 338 270 321 142 305 304 443 298 338 244 209 338 455 283 250 284 229 202 183,330 204,689 206,039

Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Auction Company Policy

Others represent vehicles disposed off during the year having a book value of less than Rs 50,000.

60

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
Particulars of assets

2008
Sold to Cost Accumulated depreciation Book value Sale proceeds Mode of disposal

(Rupees in thousand)

Apparatus, plant and equipment Exchanges DRS Links BTS Buildings Civil Work / Electrification Furniture and fittings Office furniture & fixture Office equipment Motor Vehicles Sher Bahadur Khan Javaid Akhtar Gul Ahmed Pervaiz Akhtar Naveed Iqbal S Ubaid Hussain Shah Naeem Ul Haq Pervaz Ahmed Mehtab Rehmat Ullah Nawab Khan Afridi M Hanif Khan Muhammad Iqbal Bangish 3,487 5,963 5,950 866 755 759 866 755 894 753 1,168 1,185 759 787 815 5,714 22,026 23,330 479,274 3,125 3,278 5,663 520 466 293 520 466 551 464 720 711 291 590 611 3,062 14,928 23,241 409,055 362 2,685 287 346 289 466 346 289 343 289 448 474 468 197 204 2,652 7,098 89 70,219 347 290 472 347 289 343 289 448 474 468 197 204 4,168 15,483 19,651 Write Off Write Off Write Off Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Company Policy Theft 16,554 4,953 11,601 Write Off 394,740 8,708 4,466 407,914 354,248 3,562 1,720 359,530 40,492 5,146 2,746 48,384 Write Off Write Off Write Off

Others Total

Others represent property, plant and equipment disposed off during the year having a book value of less than Rs 50,000. The amounts written off during the year represent the book value of assets that were partially or completely destroyed under the country wide riots that took place in December 2007.

Annual Report 2009

61

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 15. Capital workinprogress Buildings Lines and wires Apparatus, plant and equipment Intangibles Advances to suppliers 118,413 1,589,605 3,613,242 38,632 4,476,696 9,836,588 127,435 2,245,182 4,329,873 68,517 1,121,816 7,892,823 2008
(Rupees in thousand)

note 15.1 note 15.2

15.1

Advances to suppliers include an amount of Rs 1,685,532 thousand (2008: Rs 449,000 thousand) given to Emirates Telecommunication Corporation, a related party, in respect of a project called India Middle East Western Europe (IMEWE). Capital work in progress includes an amount of Rs 443,426 thousand (2008: Rs 704,271 thousand) in respect of overheads relating to the development regions capitalized during the year. 2009 2008

15.2

(Rupees in thousand)

16.

Intangible assets Cost Licenses Softwares note 16.1 Accumulated amortization Licenses Softwares note 16.2 4,015,397 397,979 4,413,376 (1,062,749) (29,957) (1,092,706) 3,320,670 4,015,397 4,015,397 (866,334) (866,334) 3,149,063

16.1

Cost Balance as at July 01 Additions during the year Bill printing software Billing and automation of broadband Enterprise Resource Planning (ERP)SAP system WLL and LDI License Balance as at June 30 4,015,397 8,201 46,065 343,713 397,979 4,413,376 3,906,127 109,270 109,270 4,015,397

note 16.6 note 16.5

16.2

Accumulated amortization Balance as at July 01 Amortization for the year Licenses Softwares note 29 Balance as at June 30 866,334 196,415 29,957 226,372 1,092,706 675,385 190,949 190,949 866,334

16.3

The Pakistan Telecommunication Authority (PTA) has issued a license to the Company to provide telecommunication services in Pakistan for a period of 25 years commencing January 1, 1996 for an agreed license fee of Rs 249,344 thousand. In the year ended June 30, 2005, PTA modified the previously issued license to provide telecommunication services to include spectrum license at an agreed license fee of Rs 4,278,639 thousand. This license allowed the Company to provide the Wireless Local Loop services in Pakistan over a period of 20 years commencing October 2004. The cost of the license is being amortized on straight line basis over the period of the license.
Pakistan Telecommunication Company Limited

62

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
16.4 PTCL acquired the IPTV license from PEMRA on October 1, 2006 for the agreed price of Rs. 9,900 thousand. The cost of license is being amortized on straight line basis over the period of 5 years. The Pakistan Telecommunication Authority (PTA) has issued a license under section 5 of the Azad Jammu and Kashmir Council Adaptation of Pakistan Telecommunication (Reorganization) Act, 1996, Northern Areas Telecommunication (Re organization) Act, 2005 and Northern Areas Telecommunication (Reorganization) (Adaptation and Enforcement) Order, 2006 to the Company to establish, maintain and operate a telecommunication system in Azad Jammu and Kashmir and Northern Areas for a period of 20 years commencing May 28, 2008 for an agreed license fee of Rs. 109,270 thousand. The cost of the license is being amortized on straight line basis over the period of the license. This represents Enterprise Resource Planning (ERP) SAP system with a useful life of 10 years. 2009 17. Long term investments at cost Subsidiaries unquoted Pak Telecom Mobile Limited 350,000,000 (2008: 350,000,000 ) ordinary shares of Rs 10 each Ordinary shares held 100% (2008: 100% ) Paknet Limited Nil (2008: 20,000,000) ordinary shares of Rs 10 each Ordinary shares held Nil (2008: 100% ) Provision for impairment Associate unquoted Telecom Foundation Pipes Limited 1,658,520 (2008: 1,658,520) ordinary shares of Rs 10 each Ordinary shares held 40% (2008: 40% ) (MD: Gul Bahadur Yousafzai) Other investments Available for sale Unquoted New ICO Global Communications (Holdings) Limited 218,207 (2008: 218,207) ordinary shares of US $ 0.01 per share (Acting Chief Executive: Mr. Michael P. Corkery) Alcatel Lucent Pakistan Limited 2,000,000 (2008: 2,000,000) ordinary shares of Rs 10 each (Chief Executive: Mr. Ben Verwaayen) Thuraya Satellite Company 3,670,000 (2008: 3,670,000) ordinary shares of 1 Dirham each (Chief Executive: Mr. Yousuf Al Syed) World Tel Assembly of Governors Participation Fund investment of US $ 100,000 (2008: US $ 100,000) Provision for impairment Advance against purchase of shares note 17.3 6,390 (6,390) 2,000,000 5,607,439 6,390 (6,390) 3,607,439 63,900 63,900 20,000 20,000 note 17.2 200,000 (200,000) 3,500,000 3,500,000 2008

16.5

16.6

(Rupees in thousand)

note 17.1

23,539 3,523,539

23,539 3,523,539

Annual Report 2009

63

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
17.1 17.2 The investment has been written off during the year upon dissolution of Paknet Limited. New ICO Global Communications (Holdings) Limited acquired the assets of ICO Global Communications (Holdings) Limited, established in January 1995 to provide global mobile personal communication services by satellite. ICO Global Communications (Holdings) Limited was suspended from trading when the Company filed for Chapter 11 protection on August 27, 1999. The business was renamed New ICO Global Communications (Holdings) Limited following its emergence from Chapter 11 protection on May 16, 2000. According to the reorganization plan, the shareholders of ICO Global Communications (Holdings) Limited received one class A ordinary shares of US $ 0.01 in New ICO Global Communications (Holdings) Limited for every 103.8 shares and an option to exchange one warrant of US $ 90 for exchange with 13.84 shares at any time on or after May 16, 2000 (the effective date) on which the reorganization plan becomes effective until 5 p.m. New York City time, on May 17, 2006, which was extended by the Company up to August 3, 2006. The Company did not exercise the option before expiry. This represents an advance given to Pakistan Telecom Mobile Limited, the wholly owned subsidiary, for issuance of ordinary shares. 2009 18. Long term loans considered good Loan to subsidiary: PTML unsecured Loans to employees secured Current portion shown under current assets Others note 18.1 note 18.2 note 21 3,000,000 455,599 (123,421) 332,178 200 3,332,378 18.1 524,556 (129,613) 394,943 394,943 2008

17.3

(Rupees in thousand)

This represents an unsecured loan given during the year to Pak Telecom Mobile Limited, a wholly owned subsidiary of the Company, under a subordinated debt agreement. The loan is recoverable in eight equal quarterly installments commencing after a grace period of four years and carries markup at the rate of three months KIBOR plus 82 basis points. These loans and advances are for house building and purchase of motor cars, motor cycles and cycles. Loans to gazetted employees of the Company carry interest at the rate of 12.5% per annum (2008: 12.5% per annum), whereas, loans to other employees are interest free. The loans are recoverable in monthly installments spread over a period of 5 to 10 years. These loans are secured against future pension payments of employees. This also includes Rs. 35,670 thousand (2008: Nil) receivables from employees against sale of vehicles, recoverable in monthly installments spread over a period of 1 to 2 years. 2009 2008

18.2

(Rupees in thousand)

19.

Stores and spares Stores and spares Provision for obsolescence note 19.2 5,851,582 (649,591) 5,201,991 5,505,540 (551,455) 4,954,085

19.1

Stores and spares include items which may result in property, plant and equipment but are not distinguishable.

64

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 19.2 Provision for obsolescence Balance as at July 01 Provision during the year Write off against provision Balance as at June 30 20. Trade debts Domestic Considered goodunsecured Considered doubtful International Considered goodunsecured Considered doubtful note 20.1 7,566,398 18,110,656 25,677,054 note 20.2 3,194,576 885,740 4,080,316 Provision for doubtful debts note 20.3 29,757,370 (18,996,396) 10,760,974 20.1 10,551,791 16,887,734 27,439,525 2,814,425 318,335 3,132,760 30,572,285 (17,206,069) 13,366,216 note 30 551,455 172,276 723,731 (74,140) 649,591 414,403 252,489 666,892 (115,437) 551,455 2008
(Rupees in thousand)

Included in trade debts domestic are amounts due from Pak Telecom Mobile Limited and National Telecommunication Corporation (NTC), related parties of the Company, amounting to Rs 412,309 thousand (2008: Rs 1,442,670 thousand) and Rs 354,744 thousand (2008: Rs 695,070 thousand) respectively. These amounts are interest free and accrued in the normal course of business. 2009 2008

(Rupees in thousand)

20.2

Included in trade debts international are amounts due from the following related parties: Etisalat Afghanistan Etisalat UAE Mobily Saudi Arabia 100,502 657,771 528,119 1,286,392 These amounts are interest free and accrued in the normal course of business. 655,645 655,645

20.3

Provision for doubtful debts Balance as at July 01 Provision for the year Trade debts written off against provision Balance as at June 30 note 30 17,206,069 2,907,395 20,113,464 (1,117,068) 18,996,396 13,652,636 4,993,257 18,645,893 (1,439,824) 17,206,069

21.

Loans and advances Current portion of loans to employees considered good Advances to suppliers and contractors considered good note 18 123,421 466,640 590,061 129,613 758,696 888,309

Annual Report 2009

65

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 22. Accrued interest Accrued profit on bank placements Interest receivable on loan to the subsidiary considered good note 22.1 766,674 54,353 821,027 22.1 315,817 315,817 2008
(Rupees in thousand)

This represents markup on loan to Pakistan Telecom Mobile Limited, the wholly owned subsidiary, as indicated in the note 18.1 2009 2008

(Rupees in thousand)

23.

Recoverable from tax authorities Central excise Sales tax 466,176 593,432 1,059,608 466,176 917,590 1,383,766

24.

Other receivables Due from Pakistan Telecommunication Employees Trust (PTET) related party Due from PTCL employees GPF Trust related party Due from Special Communication Organization (SCO) Other receivables: considered good considered doubtful 69,009 147,767 220,000 261,494 185,239 446,733 Provision for doubtful receivables note 24.1 883,509 (185,239) 698,270 38,978 906,746 221,013 474,880 26,559 501,439 1,668,176 (26,559) 1,641,617

24.1

Provision for doubtful receivables Balance as at July 01 Provision for the year Trade debts written off against provision Balance as at June 30 note 30 26,559 158,680 185,239 185,239 note 25.1 2,164,072 34,310 34,310 (7,751) 26,559 2,164,072

25.

Receivable from Government of Pakistan

25.1 This represents the amount receivable from Government of Pakistan (GOP) on account of its share in the Voluntary Separation Scheme (VSS) offered to the Companys employees during last year. 2009 26. Short term investments Maturity period upto three months Maturity period three to six months note 26.1 26.1 19,795,904 1,221,886 21,017,790 10,344,379 10,344,379 2008

(Rupees in thousand)

These represent Term Deposit Placements with different banks having maturity periods of three to six months. The effective interest rate ranges between 13% to 17% (2008: 10% to 14.25%) per annum.

66

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 27. Cash and bank balances At banks in: Deposit accounts Current accounts including US $ 10,751 thousand (2008: US $ 1,222 thousand) In hand note 27.1 10,304,147 1,602,273 11,906,420 28 11,906,448 27.1 3,816,168 717,415 4,533,583 11,562 4,545,145 2008
(Rupees in thousand)

The balances in deposit accounts bear mark up which ranges from 5 % to 19.5 % per annum (2008: 1.5 % to 14.25 % per annum). 2009 2008

(Rupees in thousand)

28.

Revenue Domestic International note 28.1 note 28.2 53,039,455 6,199,546 59,239,001 60,704,017 5,632,025 66,336,042

28.1 28.2

Revenue is exclusive of excise duty amounting to Rs 8,611,191 thousand (2008: Rs 7,631,695 thousand). International revenue represents revenue from foreign network operators for calls that originate outside Pakistan and it has been shown net of interconnect cost relating to the other operators and Access Promotion Charges aggregating to Rs. 10,886,794 thousand (2008: Rs 7,758,176 thousand). 2009 2008

(Rupees in thousand)

29.

Cost of services Salaries, allowances and other benefits Call centre charges Interconnect cost Foreign operators cost and satellite charges Fuel and power Communication Stores and spares consumed Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Depreciation of property, plant and equipment Amortization of intangible assets Annual license fee to PTA note 29.1 7,995,033 187,165 4,103,667 6,053,657 3,109,948 7,421 1,160,754 502,709 1,475,724 255,198 16,308 12,314,429 226,372 323,897 37,732,282 9,789,118 109,984 5,250,432 3,541,961 2,474,085 3,303 1,739,081 247,531 1,414,604 190,478 16,574 11,999,126 190,949 379,643 37,346,869

note 29.2

note 14.1 note 16.2

29.1 29.2

This includes Rs 1,097,079 thousand (2008: Rs 104,694 thousand) in respect of employees retirement benefits other than VSS. This includes colocation charges of Rs 78,305 thousand (2008: Rs 86,923 thousand) payable to National Telecommunication Corporation for the current year.

Annual Report 2009

67

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 30. Administrative and general expenses Salaries, allowances and other benefits Call centre charges Fuel and power Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Technical services fee Legal and professional services Depreciation of property, plant and equipment Research and development Provision for: Impairment of investment Obsolete stores Doubtful debts Doubtful receivables Donations Receivables written off Loss on settlement of Paknet Limited balances Other expenses note 30.1 814,614 28,075 234,074 322,651 8,634 3,940 130,467 1,886,885 486,434 188,486 471,239 172,276 2,907,395 158,680 37,069 142,195 942,147 8,935,261 30.1 30.2 886,147 16,498 165,167 160,681 30,618 4,252 132,588 2,186,398 75,796 183,660 648,898 3,679 252,489 4,934,064 2,509 1,652 1,138,459 10,823,555 2008
(Rupees in thousand)

note 30.2 note 30.3 note 14.1 note 30.4

note 19.2 note 20.3 note 24.1 note 30.6

This includes Rs 164,562 thousand (2008: Rs 15,705 thousand) in respect of employees retirement benefits other than VSS. This represents amount payable to Emirates Telecommunication Corporation (Etisalat), a related party, under a technical service agreement between the Company and Etisalat for a period of five years commencing October 1, 2006 at the rate of 3.5% of PTCL groups consolidated annual revenue. 2009 2008

(Rupees in thousand)

30. 3 Auditors remuneration The charges for legal and professional services include the following in respect of auditors services for: A F Ferguson & Co. Statutory audit including half yearly review Others Ford Rhodes Sidat Hyder & Co. Statutory audit including half yearly review Others KPMG Taseer Hadi & Co. Statutory audit including half yearly review Others 9,500 4,250 200 8,900 4,500 250 4,500 250 4,250 200

68

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
30.4 This represents Companys contribution to Information Communication Technology (ICT) Research and Development Fund at the rate of 1% of its gross revenue less inter operator payments and payments toward research and development activities in Pakistan in accordance with the terms and conditions of its license to provide telecommunication services. Provision against doubtful debts is net of security deposits written back amounting to Rs Nil (2008: Rs 40,711 thousand) against defaulter receivable balances. There were no donations during the year in which the directors or their spouses had interest. 2009 31. Selling and marketing expenses Salaries, allowances and other benefits Call centre charges Sales & Distribution Charges Fuel and power Printing and stationery Travelling and conveyance Advertisement and publicity Depreciation of property, plant and equipment note 31.1 799,503 18,717 357,486 69,110 2,631 16,308 490,487 62,829 1,817,071 31.1 32. 978,912 10,998 54,980 2,126 16,574 675,136 61,220 1,799,946 2008

30.5

30.6

(Rupees in thousand)

note 14.1

This includes Rs 109,708 thousand (2008: Rs 10,469 thousand) in respect of employees retirement benefits other than VSS. Voluntary separation scheme (VSS) Last year the Company offered a uniform nondiscriminatory Voluntary Separation Scheme (the Scheme) to its employees hired on government terms and conditions. The benefits offered over and above the accumulated post retirement benefit obligation as at March 31, 2008 have been treated as VSS cost. Out of 29,954 employees who opted for the scheme, 25,324 belong to funded pension scheme and 4,630 to unfunded pension scheme. 18,167 of these employees have become pensioners last year. The amount of actuarial gain/loss on curtailment / settlement and proportionate share of unrecognized actuarial gains/losses as at March 31, 2008 for employees who have opted for VSS have also been adjusted/charged against the VSS expense. The break up of the VSS expense is as follows:

Annual Report 2009

69

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009
Pension Funded Unfunded Gratuity Accumulating compensated absences Post retirement medical facility Total

(Rupees in thousand)

Commutation under VSS Pension paid Pension payable long term Accumulating compensated absences Post retirement medical facilities Lump sum medical compensation Cost of VSS retirement benefits Provision for retirement benefits Unrecognized actuarial gains / (losses) recognized on curtailment / settlement VSS expense relating to retirement benefits Other VSS expense VSS consultancy / implementation cost Total VSS cost Contribution from Government of Pakistan Net Cost of VSS

10,351 10,351 10,351

7,383 7,383 7,383

10,351 7,383 17,734 17,734 74,384 92,118 92,118

2008
Pension Funded Unfunded Gratuity Accumulating compensated absences Post retirement medical facility Total

(Rupees in thousand)

Commutation under VSS Pension paid Pension payable long term Accumulating compensated absences Post retirement medical facilities Lump sum medical compensation Cost of VSS retirement benefits Provision for retirement benefits Unrecognized actuarial gains / (losses) recognized on curtailment / settlement VSS expense relating to retirement benefits Other VSS expense VSS consultancy/implementation cost Total VSS cost Contribution from Government of Pakistan Net Cost of VSS

11,747,400 490,381 28,956,214 41,193,995 18,630,724 3,641,471 22,272,195 18,921,800

703,320 (82,360) 620,960 (620,960)

1,317,919 1,317,919 1,160,779 1,160,779 157,140

2,482,417 2,580,600 5,063,017 2,500,778 1,826,981 4,327,759 735,258

11,747,400 490,381 28,956,214 1,317,919 2,482,417 2,580,600 47,574,931 22,995,601 5,386,092 28,381,693 19,193,238 22,040,029 133,587 41,366,854 (17,429,000) 23,937,854

70

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 33. Other operating income Income from financial assets: Mark up on loans and advances Dividend Return on bank placements Late payment surcharge from subscribers on over due bills Income / (expense) from nonfinancial assets: Gain / (loss) on disposal of property, plant and equipment Others 190,606 606,264 4,267,172 33.1 (50,568) 437,184 3,957,539 note 33.1 note 33.2 270,436 2,986,598 213,268 35,794 350,000 2,599,908 585,221 2008
(Rupees in thousand)

Included in markup on loans and advances is an amount of Rs 263,333 thousand (2008: Rs 24,966 thousand) accrued on the loan given to Pak Telecom Mobile Limited, the wholly owned subsidiary, as shown in the note 18.1. This includes dividend from Pak Telecom Mobile Limited, the wholly owned subsidiary, amounting to Rs Nil (2008: Rs 350,000 thousand). 2009 2008

33.2

(Rupees in thousand)

34.

Finance cost Interest and other charges on Suppliers credit Bank and other charges Net exchange loss Imputed interest on payment to PTA against WLL license fee 265,232 458,160 185,132 908,524 1,644 358,764 319,948 167,617 847,973

note 7

35.

Taxation Current Deferred note 9 3,080,732 1,789,000 4,869,732 2009


(%)

145,497 (1,783,223) (1,637,726) 2008

35.1

Tax charge reconciliation Numerical reconciliation between the average effective tax rate and the applicable tax rate: Applicable tax rate Chargeable to tax at lower rates / effect of change in prior years tax Tax effect of amounts that are not deductible for tax purposes and others Average effective tax rate charged to profit and loss account

35.00 (0.76) 0.49 (0.27) 34.73

35.00 2.13 (0.43) 1.70 36.70

Annual Report 2009

71

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
36. 36.1 Remuneration of Directors and Executives The aggregate amount charged in the financial statements for remuneration, including all benefits, to the Chairman, Chief Executive and Executives of the Company is as follows: Chairman 2009 2008 Chief Executive 2009 2008
(Rupees in thousand)

Executives 2009 2008

Managerial remuneration Honorarium Bonus Retirement benefits Housing Utilities

300 300

325 325 1

56,763 1,774 591 59,128 1

45,590 1,517 455 47,562 1

548,632 7,113 45,700 181,272 40,189 822,906 430

423,605 1,615 35,300 154,183 35,220 649,923 471

Number of persons

The Company also provides free medical and limited residential telephone facility to all its Executives and the Chief Executive. The Chairman is entitled for free transport and limited residential telephone facility whereas the Directors are provided with limited telephone facility. Certain executives are also provided with Company maintained cars. Aggregate amount charged in the financial statements for the year as fee to 9 directors (2008: 9 directors) is Rs 3,736 thousand (2008: Rs 4,684 thousand), for attending Board of Directors and Subcommittee meetings. 37. Rates of exchange Assets in foreign currencies have been translated into Rupees at USD 1.2331 (2008: USD 1.4706) equal to Rs 100. While liabilities in foreign currencies have been translated into Rupees at USD 1.2300 (2008: USD 1.4663) equal to Rs 100.

72

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 38. Cash generated from operations Profit / (Loss) before tax Adjustments for noncash charges and other items: Depreciation and amortization Provision for impairment of investment Provision for doubtful trade debts VSS expense Provision for doubtful receivables Employees retirement benefits Receivables written off Imputed interest on payment to PTA against WLL license fee Markup on long term loans (Gain) / loss on disposal of property, plant and equipment Dividend Return on bank placements Provision for obsolete stores Finance cost Effect on cash flow due to working capital changes: (Increase) / decrease in current assets: Stores and spares Trade debts Loans and advances Recoverable from tax authorities Other receivables Increase / (decrease) in current liabilities: Trade and other payables 12,792,116 2,907,390 92,118 158,680 1,372,372 142,195 185,132 (270,436) (190,606) (2,986,598) 172,276 723,392 29,118,948 12,434,955 3,679 4,934,064 23,937,854 130,869 167,617 (35,794) 50,568 (350,000) (2,599,908) 252,489 680,355 35,144,133 14,020,917 (4,462,615) 2008
(Rupees in thousand)

(420,182) (302,153) 292,056 324,158 784,667 678,546 4,539,897 34,337,391

(1,327,368) (6,888,868) 45,497 138,284 (558,656) (8,591,111) 1,538,227 28,091,249

39.

Cash and cash equivalents Short term investments with maturity upto three months Cash and bank balances note 26 note 27 19,795,904 11,906,448 31,702,352 10,344,379 4,545,145 14,889,524

40.

Capacity Access lines installed (ALI) 2009 2008


(Number)

Access lines in service (ALIS) 2009 2008

Number of lines

9,240,431

9,225,720

4,796,299

5,315,668

ALI represents switching lines. ALI include 225,195 (2008: 214,784 ) and ALIS include 115,575 (2008: 134,845) Primary Rate Interface (PRI) and Basic Rate Interface (BRI) respectively. ALI and ALIS also include 2,656,000 (2008: 2,599,500) and 1,305,675 (2008 : 1,188,416) WLL connections respectively. The difference between ALI and ALIS is due to pending and potential future demand.

Annual Report 2009

73

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
2009 41. Earnings / (loss) per share basic and diluted Profit / (loss) for the year Weighted average number of ordinary shares Earnings / (loss) per share 42. 42.1 Financial risk management Financial risk factors The Companys activities expose it to a variety of financial risks: market risk (including currency risk, other price risk and interest rate risk), credit risk and liquidity risk. The Companys overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance. Risk management is carried out by the Board of Directors (the Board). The Board has provided Risk Management Policy covering specific areas such as foreign exchange risk, interest rate risk, credit risk and investment of excess liquidity. All treasury related transactions are carried out within the parameters of this policy. (a) (i) Market risk Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or receivables and payables that exist due to transactions in foreign currencies. The Company is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD), Australian Dollar (AUD) and Swiss Franc (CHF). Currently, the Companys foreign exchange risk exposure is restricted to the amounts receivable from / payable to the foreign entities. The Companys exposure to currency risk is as follows: 2009 Trade and other payables USD Trade Debts USD Cash and bank USD Net exposure USD Trade and other payables CHF Loans and advances AUD The following significant exchange rates were applied during the year: Rupees per USD Average rate Reporting date rate Rupees per CHF Average rate Reporting date rate Rupees per AUD Average rate Reporting date rate 53.97 65.98 56.20 65.60 64.98 75.26 56.67 66.91 79.92 81.30 62.55 68.20 85,490,571 49,143,314 10,751,921 25,595,336 71,550 25,352 2008 80,217,829 46,069,999 1,222,000 32,925,830 Rupees in thousand Numbers in thousand Rupees 9,151,185 5,100,000 1.79 (2,824,889) 5,100,000 (0.55) 2008

If the functional currency, at reporting date, had fluctuated by 5% against the USD, GBP and Euro with all other variables held constant, the impact on profit after taxation for the year would have been Rs 67,750 thousand (2008: Rs 72,980 thousand) respectively lower / higher, mainly as a result of exchange gains / losses on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange movements has been calculated on a symmetric basis.

74

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
(ii) Other price risk Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Company is not exposed to equity price risk since the investments held by the Company are unquoted and are not subject to fluctuations in market prices. (iii) Interest rate risk Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. At the balance sheet date, the interest rate profile of the Companys interest bearing financial instruments is: 2009 Financial assets Fixed rate instruments Staff loans Short term investments Floating rate instruments Long term loans loan to subsidiary Bank balances deposit accounts 3,000,000 10,304,147 34,777,536 Fair value sensitivity analysis for fixed rate instruments The Company does not account for any fixed rate financial assets and liabilities at fair value through profit or loss. Therefore, a change in interest rate at the balance sheet date would not affect profit or loss of the Company. Cash flow sensitivity analysis for variable rate instruments If interest rates on long term loans to subsidiaries and deposit bank balances, at the year end date, fluctuate by 1% higher / lower with all other variables held constant, profit after taxation for the year would have been Rs 11.250 million (2008: Nil) higher / lower, mainly as a result of higher / lower markup income on floating rate loans / investments. (b) Credit risk Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. Companys credit risk is primarily attributable to its trade debts and its balances at banks. The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk at the reporting date is as follows: 2009 Long term loans Trade debts Loans and advances Accrued interest Other receivables Receivable from GoP for VSS Short term investments Cash and bank balances 3,332,178 10,760,974 590,061 821,027 698,270 2,164,072 21,017,790 11,906,420 51,290,792 2008 394,943 13,366,216 888,309 315,817 1,641,617 2,164,072 10,344,379 4,533,583 33,648,936 3,816,168 14,685,103 455,599 21,017,790 524,556 10,344,379 2008

(Rupees in thousand)

(Rupees in thousand)

Annual Report 2009

75

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. The company believes that it is not exposed to major concentration of credit risk as its exposure is spread over a large number of counter parties and subscribers in the case of trade debts. The credit quality of cash and bank balances that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rate: Rating Short term National Bank of Pakistan Bank Al Falah Limited MCB Bank Soneri Bank Limited Habib Metropolitan Bank Bank of Punjab NIB Bank Faysal Bank Limited Habib Bank Limited Royal Bank of Scotland * Askari Bank Limited Allied Bank Limited United Bank Limited A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ Long term AAA AA AA+ AA AA+ AA AA AA AA+ AA AA AA AA+ Agency JCR PACRA PACRA PACRA PACRA PACRA PACRA PACRA JCR PACRA PACRA PACRA JCR 2009 15,636,639 4,000,593 11,281 1,000,000 3,937,071 1,500,192 1,476 1,754,080 2,000,000 2,558,243 26 32,399,601 2008 6,285,082 4,500,000 5,567 1,500,000 1,500,000 2,846,434 1,314 7 77 16,638,481
(Rupees in thousand)

Due to the Companys long standing business relationships with these counterparties and after giving due consideration to their strong financial standing, management does not expect nonperformance by these counter parties on their obligations to the Company. Accordingly, the credit risk is minimal. * Royal Bank of Scotland has been placed on watchlist by the State Bank of Pakistan and the most recent rating was carried out in September 2008. (c) Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Company follows an effective cash management and planning policy to ensure availability of funds and to take appropriate measures for new requirements. The following are the contractual maturities of financial liabilities as at June 30, 2009: Carrying amount Less than one year One to five years More than five years

( Rupees in thousand)

Payable to PTA against WLL license fee Long term security deposits from customers Trade and other payables Dividend payable

1,953,971 990,055 23,758,462 7,650,000 34,352,488

1,953,971 23,758,462 7,650,000 33,362,433

990,055 990,055

76

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
The following are the contractual maturities of financial liabilities as at June 30, 2008: Carrying amount Less than one year One to five years More than five years

( Rupees in thousand)

Payable to PTA against WLL license fee Long term security deposits from customers Trade and other payables

1,768,839 951,618 18,573,893 21,294,350

18,573,893 18,573,893

1,768,839 951,618 2,720,457

42.2

Fair values of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each reporting date. Available for sale 2009 2008 Loans and receivables 2009 2008
(Rupees in thousand)

Total 2009 2008

42.3

Financial instruments by categories Financial assets as per balance sheet Long term investments Long term loans Trade debts Loans and advances Accrued interest Other receivables Receivable from GoP for VSS Short term investments Cash and bank balances 83,900 83,900 83,900 3,332,378 10,760,974 590,061 821,027 883,509 2,164,072 21,017,790 11,906,448 83,900 51,476,259 394,943 13,366,216 888,309 315,817 1,582,403 2,164,072 10,344,379 4,545,145 33,601,284 83,900 3,332,378 10,760,974 590,061 821,027 883,509 2,164,072 21,017,790 11,906,448 51,560,159 83,900 394,943 13,366,216 888,309 315,817 1,582,403 2,164,072 10,344,379 4,545,145 33,685,184

Liabilities at fair value through profit and loss 2009 2008

Other financial liabilities 2009 2008


(Rupees in thousand)

Total 2009 2008

Financial liabilities as per balance sheet Payable to PTA against WLL license fee Long term security deposits from customers Trade and other payables Dividend payable 1,953,971 990,055 23,758,462 7,650,000 34,352,488 1,768,839 951,618 18,573,893 21,294,350 1,953,971 990,055 23,758,462 7,650,000 34,352,488 1,768,839 951,618 18,573,893 21,294,350

Annual Report 2009

77

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
42.4 Capital risk management The Boards policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence and to sustain the future development of its business. The Board of Directors monitors the return on capital employed, which the Company defines as operating income divided by total capital employed. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Companys objectives when managing capital are: (i) to safeguard the entitys ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and (ii) to provide an adequate return to shareholders. The Company manages the capital structure in the context of economic conditions and the risk characteristics of the underlying assets. In order to maintain or adjust the capital structure, the Company may, for example, adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt. For working capital requirements and capital expenditure, the Company primarily relies on internal cash generation and does not have any significant borrowings. 43. Transactions with related parties The related parties comprise associated undertakings, subsidiary, employee retirement benefit plans and key management personnel. Amounts due from / (to) related parties are shown under receivables and payables. Remuneration of key management personnel is disclosed in note 36. Enterprises where control exists Subsidiary Pak Telecom Mobile Limited Other related parties with whom the Company had transactions Associates Telecom Foundation Telecom Foundation Pipes Limited Etisalat International Pakistan (EIP) Etisalat UAE Etisalat Afghanistan Emirates Telecommunication Corporation Mobily Saudi Arabia Thuraya Satellite Company Universal Service Fund (USF) National Telecommunication Corporation (NTC) Employee benefit plans Pakistan Telecommunication Employee Trust (PTET) General Provident Fund Trust

78

Pakistan Telecommunication Company Limited

Notes to and forming part of the Financial Statements


for the year ended June 30, 2009
in these financial statements: 2009 2008 Disclosure of transactions between the Company and related parties other than those which have been disclosed elsewhere

(Rupees in thousand)

Subsidiary

Purchase of goods and services Sale of goods and services Markup on long term loans Advance against purchase of shares Disbursement of loan

5,196,808 263,333 2,000,000 3,000,000 2,365,226 8,358,427 966,044 1,685,532

5,133,854 2,312,152 24,966 1,193,166 2,545,243 95,000 449,000

Associates

Purchase of goods and services Sale of goods and services Government grant received Advances against capital expenditure

44.

Proposed dividends The Board of Directors of the Company has proposed a final dividend for the year ended June 30, 2009 of Rs Nil (2008: Nil) at their meeting held on September 29, 2009.

45.

Corresponding figures Corresponding figures have been rearranged and reclassified, wherever necessary, for better presentation and disclosure: Reclassification from component (i) (ii) (iii) (iv) (v) (vi) (vii) (viii) (ix) (x) (xi) (xii) (xiii) (xiv) (xv) Revenue Operating cost Operating cost Operating cost Long term investments Loans, advances, deposits, prepayments and other receivables Loans, advances, deposits, prepayments and other receivables Loans, advances, deposits, prepayments and other receivables Loans, advances, deposits, prepayments and other receivables Loans, advances, deposits, prepayments and other receivables Short term borrowings Cash and bank Accrued and other liabilities Accrued and other liabilities Trade creditors Other receivables Cash and bank Short term investments Accrued liabilities Other liabilities Accrued liabilities 1,641,617 2,536,710 10,344,379 1,371,760 401,452 519,851 Recoverable from tax authorities 1,383,766 Accrued interest 315,817 Loans and advances 888,309 Capital workinprogress 351,991 Reclassification to component Cost of services Cost of services Administrative expenses Selling and marketing expenses Property, plant and equipment (Rupees in thousand) 5,250,432 32,096,437 10,823,555 1,799,946 3,629,092

Annual Report 2009

79

46.

Date of authorization for issue These financial statements were authorized for issue on September 29, 2009 by the Board of Directors of the Company.

47.

General Figures have been rounded off to the nearest thousand rupees unless otherwise specified.

Chairman

President & CEO


Pakistan Telecommunication Company Limited

80