PTCL

Pakistan Telecommunication Company Limited
Annual Report 2012
Contents
Company Review
4-5 Corporate Vision, Mission & Core Values 6-7 Board of Directors 8 Corporate Information 9 Awards and Achievements 10-11 The Management 12-15 Operating Highlights - Graphs 16-17 Group CEO's Message 18-35 Directors' Report 36 Composition of Board's Sub-Committees 36 Attendance of PTCL Board Members 38 Statement of Compliance with CCG 39 Auditors' Review Report to the Members
Financial Statements
43 Auditors' Report to the Members 44-45 Statement of Financial Position 46 Statement of Comprehensive Income 47 Statement of Cash Flows 48 Statement of Changes in Equity 49-90 Notes to and Forming Part of the Financial Statements
Consolidated Financial Statements

93 Auditors' Report to the Members 94-95 Consolidated Statement of Financial Position 96 Consolidated Statement of Comprehensive Income 97 Consolidated Statement of Cash Flows 98 Consolidated Statement of Changes in Equity 99-153 Notes to and Forming Part of the Consolidated Financial Statements
Annexes
156-164 Pattern of Shareholding 165 Notice of 17th Annual General Meeting 167 Form of Proxy 3
Vision & Mission
Corporate Vision To be the leading ICT service provider in the region by achieving customers satisfaction and maximizing shareholders value.
Mission To achieve our vision by having: An organizational environment that fosters professionalism, motivation and quality. An environment that is cost effective and quality conscious. Services that are based on the most optimum technology. Quality and Time conscious customer services. Sustained growth in earnings and profitability.
Annual Report 2012
Core Values Professional Integrity Customer Satisfaction Teamwork Company Loyalty

5
Board of Directors
Chairman PTCL Board
AmIr TArIQ ZAmAn KhAn AmIr TArIQ ZAmAn KhAn
ABDULRAHIM A. AL NOORYANI
Member PTCL Board
Member PTCL Board
ABDUL WAjID RANA
Member PTCL Board
SerKAn OKAndAn SerKAn OKAndAn
Member PTCL Board
JAmIL Ahmed KhAn JAmIL Ahmed KhAn IL Ahmed KhA
Annual Report 2012
FADHIL AL ANSARI
Member PTCL Board
Member PTCL Board
KAmrAn ALI KAmrAn ALI
Member PTCL Board
dr. dAnIeL rITZ
Member PTCL Board
jAMAL SAIF AL jARWAN
President & Chief Executive Officer
WALID IRSHAID
Corporate Information
Management Walid Irshaid
Muhammad Nehmatullah Toor

SEVP (Finance) / Chief Financial Officer (CFO)
Syed Mazhar Hussain

SEVP (Admin & Procurement / Human Resource)
Sikandar naqi
SEVP (Corporate Development)
Naveed Saeed
SEVP (Commercial)
Muhammad Nasrullah
Chief Technical Officer (CTO)
Hamid Farooq
SEVP (Business Development)
Furqan habib Qureshi

SeVP (Business Zone South)
Bankers Allied Bank Limited Askari Bank Limited Bank Alfalah Limited Bank Al habib Limited Citibank. n.A dubai Islamic Bank Faysal Bank Limited habib Bank Limited habib metropolitan Bank Limited mCB Bank Limited meezan Bank Limited national Bank of Pakistan nIB Bank Limited Silkbank Limited Sme Bank Limited Standard Chartered Bank (Pakistan) Limited The Bank of Punjab United Bank Limited Auditors A. F. Ferguson & Co., Chartered Accountants Ernst & Young Ford Rhodes Sidat Hyder, Chartered Accountants Registered Office PTCL Headquarters Sector G-8/4, Islamabad-44000, Pakistan Tel: +92-51-2263732 & 34 Fax: +92-51-2263733 e-mail: [email protected] Web: www.ptcl.com.pk Share Registrar M/s FAMCO Associates (Pvt.) Limited Ground Floor, State Life Building No. 1-A, I. I. Chundrigar road, Karachi-74000 Tel: +92-21-32422344, 32467406 Fax: +92-21-32428310
jamal Abdalla Salim Hussain Al Suwaidi

SeVP (Business Zone Central)
Jamil Khwaja
SeVP (Special Projects)
Ahsan Aziz
Acting Chief Information Officer (CIO)
Company Secretary Farah Qamar Legal Affairs Zahida Awan
Annual Report 2012
Awards and Achievements 2011-2012

Highest Quality Broadband Internet Service to Consumers
by Pakistan Telecommunication Authority
ESRI Special Achievement in GIS Award

by U.S.-based Environment Systems Research Institute (ESRI)
Best Telecom Operator in South Asia

by International SAMENA Award
by Global media Links & Business milestones of Pakistan
2nd Global HR Excellence Award
Best Wireless Broadband

by Consumer Choice Award
10th Teradata National IT Excellence Award
for 3G eVO Wireless Broadband Internet Project
by National Forum for Environment & Health (NFEH)
National Environmental Excellence Award
Best Corporate Social Responsibility Initiative Award

by NFEH and United Nations Environment Program
Management
Walid Irshaid
Muhammad Nasrullah
Chief Technical Officer (CTO)
Muhammad Nehmatullah Toor

SEVP (Finance) / CFO
Hamid Farooq
SEVP (Business Development)
Syed Mazhar Hussain

SEVP (Admin & Procurement / Human Resource)
Furqan Habib Qureshi

SeVP (Business Zone South)
Sikandar Naqi
SEVP (Corporate Development)
Jamal Abdalla Salim Hussain Al Suwaidi

SeVP ( Business Zone Central)
Naveed Saeed
SEVP (Commercial)
Jamil Khwaja
SeVP ( Special Projects)
Ahsan Aziz
Acting Chief Information Officer (CIO)
10
Annual Report 2012
11
Operating Highlights
Year ended june 30
2012
2011
2010
2009
2008
2007
Key Indicators
Operating Pre tax margin (EBIT margin) Net margin Performance Fixed assets turnover Debtors' turnover Return on equity Return on capital employed Retention Leverage Debt:Equity Leverage Time interest earned Liquidity Current Quick Valuation Earnings per share Breakup value per share Dividend payout ratio Price earnings ratio market price to breakup value Dividend per share Dividend yield Dividend cover ratio market value per share (as on June 30) % % Times Times % % % Ratio % Times Times Times Rs. rs. % Times Times Rs. % Times rs. 19.13 12.01 0.80 6.69 7.08 6.11 100.00 18:82 33.53 23.85 2.30 2.16 1.41 20.69 9.68 0.66 13.69 21.03 13.44 0.75 5.71 7.50 6.40 (20.15) 18:82 35.38 56.00 1.39 1.27 1.46 19.27 120.15 9.76 0.74 1.75 12.31 0.83 14.22 25.68 16.26 0.75 5.46 9.33 7.40 3.97 15:85 33.87 36.42 1.51 1.37 1.82 19.56 96.03 9.77 0.91 1.75 9.83 1.04 17.80 25.20 15.45 0.74 4.91 9.28 7.20 16.40 14:86 35.66 16.43 1.50 1.36 1.79 19.49 83.60 9.61 0.88 1.50 8.70 1.20 17.24 (5.45) (4.26) 0.81 5.35 (2.71) (2.21) 100.00 14:86 27.48 (4.26) 1.81 1.58 (0.55) 19.19 (69.76) 2.01 38.64 34.13 22.01 0.89 4.86 14.45 11.89 34.78 12:88 27.92 47.54 2.19 2.03 3.07 21.75 65.22 18.59 2.62 2.00 3.51 1.53 57.00
Historical Trends
Operating Results Revenue Profit / (loss) before tax Profit / (loss) after tax Dividend Financial Position Share capital Reserves Shareholders' equity EBITDA Working capital Current assets Total assets Non current liabilities Operational ALIS as on june 30 * Average ALIS Per Employee
* Exclusive of Primary and Basic Rate interface
Rs. (m) Rs. (m) Rs. (m) Rs. (m) Rs. (m) Rs. (m) Rs. (m) Rs. (m) rs. (m) Rs. (m) Rs. (m) Rs. (m) No (000) No
60,038 11,006 7,212 51,000 54,474 105,537 17,032 26,811 47,359 156,949 30,863 4,144 153
55,254 11,414 7,428 8,925 51,000 47,262 98,292 15,656 10,991 39,012 152,520 26,207 4,393 153
57,175 14,281 9,294 8,925 51,000 48,759 99,759 22,006 15,257 45,450 150,768 20,816 4,370 155
59,239 14,021 9,151 7,650 51,000 48,390 99,390 23,454 18,134 54,220 154,048 18,572 4,681 168
66,336 (4,463) (2,825) 51,000 46,888 97,888 4,863 17,689 39,603 140,104 17,646 5,181 118
71,068 23,744 15,639 10,200 51,000 59,913 110,913 31,657 29,113 53,561 152,821 17,460 5,455 91
12
Annual Report 2012
13
Operating Highlights - Graphs

Profit / (Loss) Before and After Tax
(Rupees in billion)
Revenue and Trade Debts

(Rupees in billion)
23.74
71.07
66.34
59.24
57.18
15.64
14.02
14.28
11.41
9.15
9.29
7.43
7.21
11.01
11.41
13.37
10.76
10.17
9.17 2011 7.50 9.62
55.25
2007 2008
(4.46) (2.82)
2009
2010
2011
2012
2007
2008
2009
2010
2012
Profit / (Loss) Before Tax
Profit / (Loss) After Tax
Revenue
Trade Debts
Current Assets and Current Liabilities

(Rupees in billion)
Return on Operating Assets and Equity

(Percentage)
53.56
54.22
39.60
45.45
39.01
47.36
36.09
14.45
19.62
30.19
11.40 9.28
28.02
12.25
24.45
21.91
20.55
9.33
10.06
2007
2008
2009
2010
2011
2012
2007 2008
(3.47) (2.71)
2009
2010
2011
2012
Current Assets
Current Liabilities
Return on Operating Assets
Return on Equity
14
7.08
8.79
60.04
Annual Report 2012
Capacity: Installed Vs In Service

(Numbers in thousand)
Dividend Payout per Share

(Rupees)
9,358
9,953
9,011
9,015
8,807
8,743
5,455
2.00
3.07
5,181
1.79
1.82
4,681
4,370
4,393
4,144
1.75 1.46 2011 2012 14.22 2011 19.27 2012 13.69 20.69 0 1.41
2007
2008
2009
2010
2011
2012
2007 (0.55) 2008
2009
1.50 ALI excluding PRI/BRI ALIS excluding PRI/BRI Dividend per Share
2010
Total Assets Vs Shareholders Equity

(Rupees in billion)
Breakup Value Vs Market Value

(Rupees)
57.00
152.82
154.05
150.77
140.10
152.52
156.95
21.75
38.64
105.54
99.39
110.91
97.89
99.76
98.29
19.19
19.49 2008 2009 17.24
2007
2008
2009
2010
2011
2012
2007
2010
Breakup Value per Share Total Assets Shareholders Equity Market Value per Share
17.80
19.56
1.75
Earnings per Share
15
Group CEO's Message
PTCL Group has been working diligently with the focus to assert ourselves as the dominant ICT service provider of the country. To achieve this goal we embarked on a journey of major consolidation, diversification and continuous innovation. This year ended june 30, 2012 has seen the results of our journey over the last five years - from a basic telephony service provider to establishing the Group as the leading and dominant ICT service provider without dispute clearly reflected in the turnaround seen during this current year. The range of services and products that we introduced both for our wireline and wireless services provided PTCL the impetus to reestablish ourselves as the foremost service provider of the country. Through diverse bouquet of our services we are facilitating both enterprise and household consumers by offering them multiple solutions for their ICT needs while also extending vital services to other telecom service providers in the country. During the period we achieved phenomenal growth in DSL with the foot print expanded to over 1800 cities and towns, firmly establishing PTCL by far as the market leader in Broadband DSL services. Our flagship brand 3G EVO wireless broadband, has gained significantly in brand equity with the service now available in more than 250 cities. Offering customers a world class experience, our wireless broadband network now supports speeds up to 9.3 mbps making 3G eVO the fastest growing service in Pakistan. Despite the long prevailing challenging industry environment, we witnessed a steady revenue growth and a promising increase in customer acquisition and during the year celebrated the historic milestone of becoming the first Broadband service provider in the country by acquiring our first one million broadband customers.
Walid Irshaid
W
16
e are highly conscious of the fact that our success and growth is linked directly to satisfied customers. It remains a challenge to provide seamless and prompt customer friendly service.
Annual Report 2012
We are highly conscious of the fact that our success and growth is linked directly to satisfied customers. It remains a challenge to provide seamless and prompt customer friendly service. To ensure this we embarked on several projects that were specifically aimed at improving customer experience. This year we made vital progress to this end through the rollout of a new state-of-the-art Customer Relationship Management System. Over the past few years the Company has gone through a major transformation, re-engineering and process refinement that now forms the bedrock for the next five years which will see us achieving new heights as a futuristic and innovative ICT service provider. Our future plans are devised with the focus on strengthening our multi-play services using both wireline and wireless platforms with the specific focus on corporate solutions. We firmly intend to invest further and heavily in these areas ensuring that our customer experience is enhanced many fold and PTCL retains its position as the undisputed leader of corporate services solution provider. Being the largest ICT service provider we continued to remain conscious and committed to our Corporate Social Responsibility initiative through investing in the well being of the society at large, while supporting and sponsoring major events/projects encompassing education, health, environment and people with special needs. It is a sense of great pride for us that during the year our Company won several excellence awards. These included, the Leading Operator in Pakistan by PTAs 2011 Quality of Service survey for providing highest quality Broadband Internet service to consumers; the prestigious international SAmenA Award 2011 for being the Best Telecom Operator in South Asia; the 2012 Consumer Choice Award as the Best Wireless Broadband Internet service provider and
the 10th Teradata national IT excellence Award for 3G eVO Wireless Broadband Internet project. One of the foremost achievements for us was prestigious eSrI Special Achievement in Geographic Information System (GIS) Award 2012 by the US based environment Systems research Institute (ESRI) at the ESRI International User Conference held in USA. This award acknowledges vision, leadership, hard work and innovative use of GIS technology. We were also awarded the national environmental excellence Award 2011 by the National Forum for Environment & Health (NFEH) and the Best Corporate Social responsibility Initiative 2011-2012 Award by nFeh and United nations environment Program. During the year under review our subsidiary Ufone delivered a resilient performance as it continued with its customer focused strategy resulting in a substantial revenue growth. It also kept the operating cost under control resulting in an impressive bottom line. Focus remained firmly on data users through introduction of innovative data services including internet access and mobile TV for Android devices. It is the only cellular operator in the country to offer BlackBerry packages at extremely affordable prices facilitating the users to access BlackBerry messenger, Facebook, Twitter, internet browsing, emails and instant messaging. mobile interbank fund transfer service offered by Ufone is the first step towards introduction of full-fledged mobile Banking Services, which are currently under process. Ufone continued with its efforts to improve overall operational efficiency combined with network modernization projects. A major initiative was the successful implementation of a Quality management System (QmS) resulting in Ufone Technical Department being declared ISO 9001:2008 certified. Ufone became the first telecommunication company in Pakistan to join the globally acclaimed CImA Training partner program with The Chartered Institute of Management Accountants UK.
With its futuristic vision our Group is constantly exploring emerging products and technologies in line with customers needs and the fast evolving dynamics of the industry. New initiatives combined with our existing portfolio of diverse products, agile network and our focus on sustained long term growth will further consolidate the Groups position as the leading integrated telecom service provider in the region ensuring that Pakistan remains connected and at par with the world class telecommunication services. I would like to extend sincere word of thanks and appreciation to our shareholders, representing both the Government of Pakistan and emirates Telecom (etisalat), for their continued and unabated support throughout this period. I strongly believe it is the support of the Board of Directors that has helped the management perform and steer the Company forward through these difficult times and resiliently face the challenges leading to a successful financial turnaround. I would also like to thank all our customers whose patronage, support and confidence in our services has encouraged us to strive harder to not only match their aspirations and expectations but bring to them the experiences of the future today.
Walid Irshaid
17
Directors' Report
On behalf of the Board of Directors of Pakistan Telecommunication Company Limited, we are pleased to present the Annual Report of your Company and the audited financial statements for the year ended june 30, 2012 together with auditors report thereon and a brief overview of the Companys performance.
1. Industry Outlook
Despite the global and domestic challenges of recessionary trends in economies of Euro zone and elsewhere as well as increasing fuel and commodity prices and impact of heavy rains in southern part of the country, Pakistans economy showed resilience with estimated GDP growth of 3.7% in 2011-12 compared to 3% in the previous year. Competition in the telecom industry remained intense resulting in decreasing average revenue per subscriber (ArPU). Overall tele-density in Pakistan was 72.1% (end May 2012) with 4% annual growth. Broadband penetration, however, witnessed 35% growth up to April 2012 with wireless broadband increasing by 65% during this period.
Latest figures released by the Pakistan Telecommunication Authority (PTA) indicate that the Telecom sector had a good year in terms of market penetration and may attract significant Foreign Direct Investment through the auction of 3G licenses in Pakistan. Also, 3G can take broadband to every nook and
18
Annual Report 2012
corner of the country, becoming accessible to more than 90 percent population, with relatively small effort. Government of Pakistan is encouraging innovation by piloting the use of branchless banking. PTA and ministry of Information Technology are promoting and developing the emerging field of branchless and mobile banking in the country with the aim of having two-fold benefits. Besides providing banking facilities to a large section of population, it would help in generating new business opportunities and sustainable revenue for the banks and telecom operators. PTA is also playing an important role by encouraging its regulates to play their due part in provision of smooth and efficient branchless banking services. PTCL has acquired a microfinance bank which will help PTCL Group to roll out branchless banking throughout the country. Pakistans Broadband subscribers base has significantly increased and DSL remained the main technology used to access broadband services in the country, alternative wireless solutions WiMax and EV-DO are also catching up fast. The popularity of mobile broadband services is due to quality of experience and service with lucrative pricing plans bundled with low cost devices. Moreover, two-third of the population reside in rural areas where fixed line infrastructure remains low, therefore wireless broadband service becomes an attractive and relatively cheaper method to bring connectivity to the underserved regions.
revenues from Corporate Services and International Incoming calls also witnessed increase compared to last year.
a.
Profitability
For the year under review, PTCL Groups profit after tax was Rs. 11.5 billion, 36% higher compared to the profit achieved last year. PTCLs profit of Rs. 7.2 billion was 3% less than the previous years profit resulting in earnings per share (EPS) of Rs. 1.41. Keeping in view the imminent funds requirements to meet on-going VSS (Voluntary Separation Scheme) obligations as well as those on account of expansion and diversification in PTCLs network to keep abreast of post 3G scenario, the Board of Directors decided not to recommend dividend for the year under review.
general expenses grew by 5% to Rs. 7.8 billion during the year under review. The selling and marketing expenses at Rs. 2.5 billion for the year under review increased by 9% on account of diversification in sales and distribution channels.
3. Products & Services
During the year under review, your Company continued to provide various voice and data communication products and services based upon latest technology to a vast array of subscribers throughout the country meeting their diversified needs at competitive prices. An overview of the main products and services offered by PTCL and related performance is provided in succeeding paragraphs.
b.
PTCL Group revenue at Rs. 110.8 billion for the year 2011-12 was 8% higher as compared to the previous year. PTCLs revenue for the year was Rs. 60 billion showing an increase of 9% compared to last year revenue. Of this, revenue from Broadband segment showed a noteworthy growth of 58%. Revenue from Corporate Services and International Incoming calls also registered 12% and 8% increase respectively compared to previous year. Competition from cellular operators, however, kept the voice revenues slightly lower than last year.
Revenues
a.
Broadband
DSL Wireline During the year under review, DSL customer base increased by 32% to 0.8 million subscribers spread throughout the country maintaining your Companys dominance in the relevant market. The growth was primarily achieved by upgrade promotions, incentives for new subscribers, and improved bundled packages.
2. Financial Performance
During the year under review, Broadband, wireline as well as wireless, remained main contributor of growth for PTCL. With 43% increase in subscriber base of Broadband, corresponding revenues were higher by 58%. Besides,
c. Operating Costs
Inflation, devaluation of Pakistani currency, increased prices of fuel and power, and salary increments were main factors to increase the overall operating expenses by 7% compared to last year. The cost of services at Rs. 44.9 billion increased by 7%. The administrative and
Among various packages offered during the year, double-Impact package was an initiative that bundled capped voice minutes and data services with special focus on affordability. PTCL also improved its doubleup Unlimited packages facilitating subscribers with unlimited On-Net NWD/local calls, unlimited DSL downloads, free WI-FI modem, line rent waiver, mobile calls at fixed rate and waiver on IPTV service charges.
19
Another product introduced was Jadoo Box. This smart device offered unlimited voice, DSL and EVONitro bundled together. The device provides unlimited connectivity irrespective of power load shedding, coupled with affordable bundled offers on easy payment plans. A limited time offer for 1MB subscribers to upgrade to 2MB speed at same rate was successful as many such subscribers continued with 2mB package after the expiry of the promotion. Students were further facilitated through increase in voice minutes and waiver of line rent on Student Bundle Package with a nominal increase in the price. Further, Introduction of 4Mbps broadband speed with only 25% price increase as compared to 2 Mbps speed prompted a sizeable number of existing subscribers to upgrade to 4 Mbps.
lines at end of june 2012. Also, a centralized monitoring system was set-up for broadband services making visible any broadband node outage in the real-time along with the process of its restoration thus reducing down time considerably. EVO - 3G Wireless Broadband Core philosophy of your Companys 3G EVO brand is to empower people with affordable wireless broadband service that further enriches the internet experience for its users. In a short span of time since its introduction, EVO has achieved rapid growth that led to introduction of innovative and futuristic products and services. During the year, the subscriber base of 3G EVO witnessed a growth of 90% with relevant revenue increase of 55 % over last year. The year under review saw a range of new services and products introduced under the banner of 3G EVO. Launch of 3G eVO Tab, a 7 Wi-Fi tablet, powered by built in 3G EVO, for high speed internet-on-the-go connectivity, established PTCL as the pioneer in the country for 3G enabled Tablets. Another first by your Company was EVODROID, a smart phone with built in 3G EVO capability. Next new product to be launched was Tenda 3G Wi-Fi router that supports 3G connectivity through plug-in of any 3G EVO device. With the aim to make 3G eVO service available to lower income brackets also, 256Kbps packages were introduced during the year. 3G eVO prepaid packages were revised and consolidated and volume based prepaid packages were given five times more volume at same or nominal tariff increase, providing subscribers more value for their money.
during the year, regular promotions including kiosk activities and brand activations at various public areas supported by trade shows were conducted to expand 3G eVO to larger part of population. Customer win-back initiatives were introduced offering recharge incentives for inactive customers. As part of customer service initiatives, new bill payment mechanisms were introduced. These included bill payment through Easy Paisa and synergizing with Ufone to provide Easy recharge to PTCLs EVO customers at all Ufone U-load retailers besides various in-house recharge facilities. PTCL also partnered with Bank AlFalah offering special bundled discounted packages for 3G eVO to the banks credit card customers.
during the year, PTCL upgraded the Smart IPTV service through network expansions and content enrichment. Aggressive sales campaign and package development were also undertaken. As a result, customer base of IPTV service increased by 56% during the year. Smart IPTV is now also being offered on 3G EVO Tab with rewind feature. expansion and diversification of relevant network elements resulted in facilitating offering of dSL packages up to 50 Mbps widening the choice for Broadband customers to select the package as per their needs. Further, FTTH (Fiber to the Home) technology was introduced with the launch of GPON (Gigabit Passive Optic network) services in selected areas to be expanded to green field areas too. At the same time, DSL coverage to less developed and remote areas is provided under USF (Universal Service Fund) projects. As a result, the total installed DSL enabled lines reached 1.65 million
major network expansion made 3G eVO service available in all major areas nationwide, making it Pakistans largest wireless coverage network. PTCL not only enhanced its blanket coverage by expanding BTS infrastructure but it also introduced micro cells to fill the gap in the congested areas. With concerted efforts, coverage of PTCL wireless broadband service EVO has been extended to 254 cities and towns with the addition of 363 sites during the year. The EVO- enabled sites across the country now stand at 1,409. PTCL is the first operator in the world to offer CDMA wireless technology supporting 3.1 Mbps to 9.3 Mbps speed on commercial basis.
b.
Voice
Landline During the year under review, various initiatives were undertaken to encourage enhanced usage of landline with emphasis on new subscriber acquisition as well as
20
Annual Report 2012
retention of existing subscriber base. These initiatives entailed incentives in the form of customized call plans, value added services and a vast range of affordable packages. For international outgoing traffic, rates with 30 second billing to 20 destinations world-wide facilitated the subscribers to make international calls at most economical prices. Introduction of mobile call rates allowed the subscribers to call from fixed line to any mobile network in Pakistan on discounted rates. revision in the Pakistan-Plus Package offered free nWd minutes and conference call facility at a nominal fixed monthly charge.
22
Special promotions and offers were developed for ramadan, hajj, Christmas, eid and new Year including provision of free telephone sets for new connections in the holy month of Ramadan. V-fone During the year under review, Vfone subscribers at CdmA wireless network were offered various packages with flexible tariffs. These packages included non-Stop package with one of the lowest on-net calling rates along with very competitive off-net tariffs. PTCL Vfone Smart Package offered one simple rate for dialing nationwide. Special promotions announced during the year included Grand V-charge Offer, Special Islamic Portal, Vfone
Ramzan Offer, Vfone Azadi Offer, Vfone Double Balance Offer, line rent reduction on unlimited package, removal of call set-up charges, Vfone Summer Offer and Vfone double Balance reconnect keeping the subscribers constantly engaged. Uload service was introduced for PTCL wireless customers in collaboration with Ufone. As a result, PTCL Vfone and EVO customers can now reload their accounts from more than 120,000 Uload retailers nationwide.
c.
Carrier & Wholesale Services
PTCL Carrier & Wholesale plays a vibrant role in ICT (Information and Communication Technologies)
Annual Report 2012
landscape of Pakistan by providing interconnection, leased lines and traffic routing services using various technologies including VSAT based satellite communication to other telecom operators in the country. As part of diversification, interconnects are being transformed from TDM (Time Division Multiplexing) to IP (Internet Protocol) which helps to leverage PTCLs nGn (new Generation network) and IP infrastructure in providing the interconnect services. Further, newer avenues of distributed IP Bandwidth and white label WLL Services proved successful. Being cognizant of envisaged enhanced bandwidth requirements post 3G auction in the country and to reap the benefits of this opportunity, PTCL is boosting its backhauling capabilities through national Fiber BTS Backhaul project. Towards this end, your Company has already deployed a fiber backhaul solution for Ufone BTS sites in 10 major cities resolving the existing drS bandwidth choking issues thus resulting in increased revenues. Efforts are underway to emulate this solution for other cellular operators as well.
d.

Based upon its robust network capabilities, PTCL continued to maintain its dominant leadership position as being the preferred LDI (Long Distance International) carrier serving Pakistan as well as neighboring countries for international traffic and media provisioning. As a result, International inward traffic terminating in Pakistan witnessed record growth during the year under review resulting in 8% increase in respective revenues over last year despite declining settlement rates. Further,
International Business
international transit traffic to and from neighboring countries also increased significantly. Moreover, strategic optical fiber links enabled interfacing of high value data circuits commissioned with these neighboring countries. To cater for enhanced bandwidth requirements on account of increased volumes, additional IP bandwidth was procured through successful negotiation of leasing higher capacities at lower rates. The said procurement of additional IP bandwidth was spread over all three submarine cables viz. I-ME-WE, SEA-ME-WE 3 and SEAME-WE 4 in all of which PTCL holds equity investment. It is worth mentioning that your Company is the only telecom operator in Pakistan which has a network of three redundant and resilient submarine cable systems
thus offering unmatched quality of service to its diversified customer base ranging from retail consumers to corporate customers as well as other network operators.
e.
Corporate Services
During the year under review, your Company continued to offer state-of-the-art products and services at affordable prices to the enterprise segment to meet their diversified requirements. As a result, besides retaining the existing customer base, various new customers from private and public sectors were added to PTCLs corporate customer portfolio. The sustained efforts in this regard increased revenue from this segment by 12% over the previous year.
23
The services offered to the corporate segments mainly comprised of Managed Services, IP Surveillance, Data Center Hosting, Web Hosting and MPLS (Multi Protocol Label Switching). Leading carriers around the world also joined hands with PTCL in offering international mPLS to meet regional and international requirements of our valued enterprise customers. The year under review also witnessed enhanced focus on SME (Small and Medium Enterprise) sector offering sizeable growth potential. For this sector, customized Business in a Box is an attractive product which is a small gateway device that provides Broadband internet connection sharing, Firewall security, VPN connectivity, IP telephony, IP Camera Surveillance audio/video streaming and wireless LAN connectivity through a single line. To extend the reach of Corporate Broadband services to far-flung areas, 170 DVB-S2 based VSATs have been installed throughout Pakistan, out of which 100 such connections were installed during the period under review. PTCL also deployed an exclusive services monitoring platform for its Corporate customers with centralized fault monitoring capabilities which will help to serve corporate customers more efficiently.
and technical resources but their performance remain at optimum level through use of excellent business practices and procedures. The succeeding paragraphs summarize performance of various support functions during the year under review.
a.

Network Infrastructure
Besides augmenting the network elements specific to various product segments as detailed in preceding paragraphs, particular attention was placed during the year to overhaul and upgrade the Access network throughout the country by undertaking network rehabilitation Campaign. The sole objective of the campaign was to improve quality of delivered service to meet desired levels of customer satisfaction. As a result of the continued efforts in this regard, two million copper lines in existing network were successfully made Broadband Enabled under the initiative named rehabilitation of Copper network. With improved quality, these lines are now capable to deliver higher bandwidth over longer distances thus helping enhanced DSL broadband penetration. This project not only helped to reduce customer complaints but was also instrumental in clearing pending DSL broadband installation in rehabilitated areas.
4. Support Functions
In order to ensure that your Company continues to achieve sustained growth in its business of providing various voice and data products and services based upon latest technologies, it is imperative that support functions not only comprise of best available human
24
To ensure network availability in the country during long hours of commercial power load shedding, detailed inspection of power plants and air-conditioning systems at 6,000 sites across the PTCL network was carried out. Accordingly, preventive / corrective maintenance activities as and when needed were undertaken thus ensuring availability of fuel for DG sets, optimizing battery backup and streamlining manpower support. As a result, the availability time of network increased considerably.
Annual Report 2012
To support the growth in bandwidth requirements, country-wide Transmission network was continuously upgraded. With addition of 2,250 Km optical fiber during the year, the total fiber deployed in PTCL network including backbone, long-haul, subsidiary, metro and OFAn network, reached more than 31,300 Km. In geographically difficult areas, IP based Digital Radio Systems and VSAT networks were further augmented to meet increasing requirements of residential and corporate customers as well as other telecom operators.
b.
Information Technology
During the year, IP based solution for contact centers (IPCC) to manage customer complaints more efficiently was deployed in all the locations. Likewise, application of Customer Relationship Management (CRM) providing 360 view of relations with individual customers was also implemented across the country covering all operational regions with the focus of ensuring delivery of quality service to our esteemed customers across the board. The CRM is integrated with IPCC thus enabling instant recording and timely rectification of faults to the satisfaction of subscribers. Similarly, consolidation of various customers interaction points for Corporate and Wireless segments is also in progress. The strength of your Company in information technology (IT) was instrumental in speedier launch of various new packages, promotions and services in line with the commercial needs. Besides, applications like SmS updates for customers complaints; on-line real-time update of bill collection over banks counter; automated service provisioning and billing for corporate customers; workflow for changing faulty dSL ports; VmS (Voice
Messaging Services) platform facilitating launch of VMS services with automated solution and IPTV restoration services were successfully developed and implemented. Also, billing cycle process was further reduced to facilitate earlier delivery of bills to our customers. Moreover, functionalities of the ERP (Enterprise Resource Planning) system based upon SAP were further improved through development of in-house processes and reports to cater to the business needs. An example in this regard is the Transfer and Posting (TP) module providing visibility over all the staff postings in the organization. Disaster recovery site for ERP modules was developed and tested to ensure business continuity.
In order to safeguard the information technology infrastructure against security threats, various initiatives were taken during the year. Qualys security guard appliance was deployed to audit current security posture and to remove the gaps which may compromise access to business systems. Security Incident and Event management (SIem) system and network configuration auditing system were implemented to secure against external attacks. Your Company also established the Security Operations Center (SOC) utilizing SIem, Qualys and network Auditor systems to monitor security alerts and policy violations in real-time environment. Accordingly, PTCL is the first telecom organization in Pakistan to have dedicated IT security setup.
25
c.
During the year under review, performance based evaluation of employees was continued thus strengthening the culture of linking compensation with performance. Towards this end, extensive training was imparted to employees to evaluate the performance in objective manner. Online Job descriptions and KPIs (Key Performance Indicators) were made available to the management employees which helped them to perform better through increased understanding of their own responsibilities as well as those of their subordinates. Skill assessment of Corporate sales staff was carried out identifying the areas of improvement thus equipping the
Human Resource Development
concerned staff with latest available skill sets to carry out their responsibilities effectively. Similarly, training need analysis of OSS (One Stop Shop) staff was also undertaken to improve service delivery. An Annual Training Calendar for management staff was introduced which facilitated comprehensive training programs not only to enhance skill sets but also to create awareness of the challenges and opportunities in the business. For non-management staff, soft skills training programs were undertaken to improve the behavior thus enriching relationships with internal and external customers. Commercial function and allied responsibilities were thoroughly restructured with the objective to facilitate service delivery to the customers by regional management as their prime responsibility.
To further improve and streamline the processes as per todays business realities, the new HR Policies Manual was approved by the Board and is being implemented throughout the organization. A Succession Planning Exercise was completed to identify potential successors to key management positions. For the identified successors, development plans on individual basis are being undertaken. Also, PTCLs hajj Scheme continued to be received well by employees whereby top 10% performers were given the chance to be selected to perform hajj at Companys expenses through an objective balloting system. The sustained efforts to improve quality of its human

26
Annual Report 2012
resource resulted in PTCL being declared winner of the prestigious 2nd Global HR Excellence Award 2011 proffered by Global media Links and Business milestones of Pakistan. Recently, your Company announced the second VSS (Voluntary Separation Scheme) after the first one implemented in 2008. The current VSS is being offered to selected categories of mostly non-management employees.
easy access provided to customers at all touch points i.e. Web, Walk-in channels, Phone-in channels and Knock-in channels. As a result of concentrated efforts involving all the stakeholders, provisioning time was improved by 50% for PSTN and Broadband services. A performance evaluation and appreciation program viz. Region of the Month was introduced based upon a Customer Care Score Card taking into account related KPIs regularly published on monthly basis. Flagship One Stop Shops (OSS) are being upgraded as model Sales and Customer Care Centers in major cities across the country. This will result in better visibility, improved facilities, service quality benchmarks and standardized layouts. Initially nineteen (19) locations are selected nationwide. Pilot run was successfully completed in Islamabad. Extensive training is being imparted to all OSS staff, with access to KBS (Knowledge Based System), installed Q-matic machines and I-Sentry solutions (at selected locations) that has improved OSS customer experience many fold. CRM (Customer Relationship Management) solution was successfully launched in all regions countrywide, further enabling your Company to meet the customer demands more effectively. PTCL has developed customer feedback channels through which customers are contacted to capture their experience with PTCL on regular basis under Voice of Customer initiative. The activity helped to retain customers through effective win-back initiatives. during the year, various banks were engaged to provide
on-line real-time updates of bill collection over bank counters. The initiative will be instrumental in instant restoration of phones disconnected because of nonpayment. The arrangement is in addition to already available channels of OSS and PCPM (Public Cash Payment Machines) in this regard. Contact Centers PTCLs Contact Centers continued to provide a range of services to customers through inbound and outbound calls. During the year under review, Siebel-based CRM and IPCC technologies were introduced to play the pivotal role in enhancing customer facilitation and retention through a single technology platform. Customer communication focused initiatives included SMS Complaint Registration Service that empowered the customers to lodge complaints through SMS, intimation of monthly invoice/bills through E-Billing (Email) and SMS service. Dedicated team of outbound agents is updating the customer database while also adding new information such as email addresses and mobile numbers. Also important is Weekly Churn Survey of Broadband and IPTV services with focus on customer retention and churn management of opt out customers. Contact Center service provisioning teams aggressively followed up with regions to ensure timely provision of services to the customers. These efforts bore positive trend in service provisioning time. Telemarketing agents regularly reach out to potential customers inviting them to experience host of communication services offered by your Company. Constant training is imparted to contact center agents to ensure that customer experience at Contact Centers remains pleasant.
d.
Market Communication
During the year, PTCL maintained noteworthy presence in both electronic and print media promoting and creating awareness about the brands and its products and services at competitive rates. There was 30% increase of PTCLs presence in electronic media whereas brand activation initiatives increased by almost 100%. As a result, a dynamic corporate image of your Company is constantly portrayed. Efforts are underway to leverage popular social/digital media platforms for proactive engagement with target audiences and to enhance the content quality of your Companys public website (www.ptcl.com.pk) and internal web portal, InfoShip. For the third consecutive year, PTCL was rated among the top two companies in the print and electronic media by Aurora, a Dawn Media Group Publication on Ideas and marketing Approaches, based on data provided by Gallup, Pakistan.
e.
Customer Care
During the year, customer facilitation was further improved by simplifying customer related processes with
27
28
Annual Report 2012
Besides, various legal cases pertaining to title of lands owned by PTCL as well as PTAs determinations regarding quality of service, numbering charges and PTCLs packages were effectively pursued during the year.
g.
Quality Assurance
During the year, three more PTCL sites relating to customer care were ISO certified after detailed compliance audit by the certification body. Surveillance audit of certain sites which achieved ISO certification in prior years was also conducted by the certification body and, as a result, the ISO certification was allowed to be continued. Your Company strives to ensure continuous delivery of quality services to its customers. Towards this end, all the facets involved in provisioning of products and services are thoroughly checked for quality aspects. Key performance indicators (KPIs) relating to operations of all network elements, be it Access network, Switching network or Transmission network, are constantly reviewed and improved. As a result of the continuous vigilance, two million copper lines were made broadbandenabled during the year thus increasing the capacity using internal resources. Similarly, all the processes involved in implementation and operation of newly-introduced application of Customer Relationship Management (CRM) to further facilitate the provisioning and fault rectification in an efficient manner were thoroughly reviewed to comply with respective standards before its launch.
f.
Besides continuing to implement already-obtained contracts under Universal Service Fund (USF) scheme of Government of Pakistan (GoP), PTCL won two more such projects during the year. First relates to basic telephony provisioning in un-served and under-served areas of mastung, noshki and Ziarat districts of Baluchistan whereas the second encompasses broadband services in Sukkur Telecom region. Based upon presentations made by your Company, Government of Pakistan (GoP) reduced the rate of mandatory contribution to R&D (Research and
Regulatory Affairs
Development) Fund from 1% of applicable revenues to 0.5% - in line with the rate applicable to mobile operators. Accordingly, the required amendment in PTCLs license was signed with PTA (Pakistan Telecommunication Authority) with retrospective effect from june 2005, the license effective date. PTA carried out the second nationwide Broadband Quality of Service survey of all wireless and wire line service providers throughout the country and placed PTCL in category-A at Lahore, Rawalpindi, Islamabad, Peshawar and Quetta. PTCL also succeeded in resolving the issues with PTA for commencement of business in AJK & GB region by completing all the requirements including roll out obligations.
h.
Procurement
With the transition from voice-centric to data-oriented products and services as well as reducing prices in the wake of competition, PTCL successfully met the challenge in a cost-effective manner through timely diversification
29
in the network elements and making the products and services based upon latest technology readily available to its customers at affordable prices. For this purpose, your Company has developed an efficient structure encompassing all the operational areas throughout the country. major elements of this structure are stores located in all the regions, establishment of data-bases comprising of information relating to latest network and products and automated processes facilitating timely availability of required inputs in line with the commercial and operational requirements. Further, synergies have been developed with other group companies to keep abreast of the latest trends and accordingly making procurement at optimum costs.
achieve higher revenues, your Company has embarked on initiatives with its subsidiaries and other group companies. Through these initiatives, resources are combined where feasible, examples of which are colocations, joint contact centers, shared procurement policies, technological standardization and training and secondment of human resources. Once the envisaged 3G auction process is completed by the Government, PTCL intends to further strengthen synergy initiatives among group companies especially in the areas covering backhauling and transmission networks using PTCLs potency in this regard.
and special needs. In accordance with the CSR policy, numerous projects were undertaken during the year detailed in succeeding paragraphs. To provide help to victims of 2011 devastating floods, a donation of Rs. 50 million was made by PTCL Group in Prime Minister Flood Relief Fund. For this purpose, the cheques were presented to the President of Pakistan by CEOs of PTCL and Ufone. Further, medicines worth Rs. 3.1 million were provided to flood affectees in Sind through the medical camps established by PTCL. Your Companys Mobile Medical Units routinely visit the countrys rural areas where no proper medical facilities are available. The objective of these visits is to provide general OPD facilities and medical assistance not only to PTCL employees and their families but also to the local communities at large. Also, PTCL provided medical equipment worth Rs. 9.7 million to the Federal
5. Corporate Social Responsibility
i.
30
Synergy
With the aim to continuously reduce the costs and
To uphold the high standards of corporate ethics and values of social responsibility, the Corporate Social Responsibility (CSR) Policy of PTCL focuses on areas of education, health, environment, employee welfare
Annual Report 2012
General Hospital located in suburbs of Islamabad. A blood donation campaign in collaboration with Pakistan Red Crescent Society and jamila Sultana Foundation (affiliated with Thalassemia International Federation) was also conducted to support thalassemia patients. An assistance of rs. 2.3 million was extended to Pakistan Bait-ul-maals nationwide Pakistan Sweet homes project that provides quality housing and education to nearly 3,000 orphaned children across Pakistan. PTCL commemorated the international World Environment Day 2012, Green Economy: Does it include YOU? by creatively engaging its employees and their families with the message, every drop is precious. Treat water with respect. Your Company organized a grand nationwide energy Conservation Painting Competition and Exhibition for employees and their families. More than 500 paintings from all over the country were received from employees and their families, which were exhibited in the Company Headquarters through a series of colorful mega events and prize distribution ceremonies attended by national celebrities and the media. Your Company participated in the Government of Pakistans tree plantation campaign by planting more than 300 saplings in PTCL offices and residential colonies. Significant efforts have been made to reduce the Companys carbon footprints. By encouraging a paperless work environment, it is aimed to reduce the adverse effects of greenhouse gases on the planet. PTCL is one of the few companies in Pakistan to switch from using simple paint to Led-free paint, thus making its buildings environment-friendly. Your Company has installed solar panels at its Headquarters, which are powering its outdoor lighting through solar energy.
The Company recently launched a clean drinking water project, installing 41 filtration plants for community welfare. PTCL is now working on alignment, integration and compliance of its sustainability and social investment policy and agenda with the global sustainability reporting standards of UN Global Compact, Global Reporting Initiative, and ISO 26000 2012-2013.
Won the prestigious international SAmenA Award 2011 for being the Best Telecom Operator in South Asia. Won the 2012 Consumer Choice Award as the Best Wireless Broadband Internet service provider. Won the national environmental excellence Award 2011 by the national Forum for environment & health (NFEH). Won the Best Corporate Social responsibility Initiative 2011-2012 Award by nFeh and United nations Environment Program. Won the prestigious eSrI Special Achievement in GIS Award 2012 by U.S.-based environment Systems Research Institute (ESRI) for outstanding achievements and organizational performance in GIS and programs.
31
6. Awards and Achievements
During the year under review, your Company was bestowed with several national and international awards and honors, which are stated here:
declared the leading operator in Pakistan by Pakistan Telecommunication Authoritys 2011 Quality of Service survey for providing the highest quality Broadband Internet service to consumers.
Won the 10th Teradata national IT excellence Award for 3G eVO Wireless Broadband Internet project. PTCL 3G eVO Wireless Broadband declared the highest rated project for 2012 mBA (executive) studies by the prestigious Lahore University of Management Sciences (LUMS). PTCL won the prestigious 2nd Global hr excellence Award 2011.
Ufone is the only operator in Pakistan to offer BlackBerry packages at most competitive prices to its valued customers in the form of BlackBerry Social and Complete which provides unlimited BBm, Face book, Twitter, internet browsing, integrated email address and instant messaging. Under VAS portfolio, BISP Phase 2 and mobile interbank fund transfer service Upayments were launched. This helped Ufone to prepare and get ready for full-fledged mobile Banking Services which are in the offing. major sales momentum was achieved through developing reseller segments by identifying lucrative and untapped pockets, strengthened by localized engagement plans resulting in substantial gross subscriber additions. Point of Sale extensions were also created in areas which attract high consumer traffic to serve the customer at his preferred location. Focusing on the device strategy, Ufone successfully launched both high and medium end handsets such as Galaxy SII, HTC Salsa, HTC One V and Horizon (Android). Along with the Android handsets, Ufone also launched BlackBerry Curve 9380 and for the first time in Pakistan BlackBerry Bold 9790. This has enabled Ufone to enhance customer loyalty and attract high value customers to the Ufone family. Ufone continued its efforts in improving overall operational efficiency combined with network modernization projects. These included complete modernization of BTS infrastructure, redesign and optimization of existing transmission network in major cities for improved reliability and performance and up-gradation of packet
core network, prepaid charging platforms, mSCs and hLrs. Ufone successfully implemented the Quality management System (QmS) which was duly audited against the ISO standard and resultantly, the Technical department was declared ISO certified. On cost efficiency front, initiative of tower sharing was continued and resulted in substantial savings of operational costs and capital expenditure. Taking a step further to develop its staff into strategic business managers, Ufone became the first telecommunication company in Pakistan to join the globally acclaimed CIMA Training partner program with The Chartered Institute of Management Accountants, UK. The Ufone Way drive was successfully completed during the year which articulated desired behaviors for all people interacting with external and internal customers, potential employees and stakeholders. Ufone has always been a socially responsible organization and during the year it participated in a
7. Subsidiaries

Pak Telecom Mobile Limited Ufone
Against the backdrop of uncertain business environment, acute shortage of commercial power, soaring fuel and energy prices and security situation in the country, performance of Ufone in terms of revenue enhancement and cost reduction resulting in improved margins remained above par. Continued focus on Voice, data and innovative VAS services contributed to revenue growth. Ufone, being one of the most proactive operators in the industry, offered the ShahCar promo which was replicated by the competition. The promo was a roaring success in terms of both subscriber acquisition as well as revenue enhancement. Existing VAS portfolio was expanded with the new and innovative offers like Umonitor through which customers/organizations can monitor calls of their official numbers and SmS Backup Service. In the wake of 3G, Ufone attracted data users via offering innovative products such as Special daily Internet Package, Ufone App Store and mobile TV for Android devices.
32
Annual Report 2012
number of initiatives for the betterment of people and the environment. Ufone partnered in setting up Thalassemia Centre at the District Headquarters Hospital in Vehari. helping in expansion of the Kidney Center in Karachi was yet another effort to benefit more than 500 patients resulting in 83,884 dialysis sessions annually. Ufone is helping to promote various green initiatives with reduced carbon footprints that contribute in making the planet more environmentally sustainable. Focusing mainly on educational institutes and hospitals, Ufone has conducted various plantation activities to promote the importance of a healthy green environment. Ufone recently hosted Iftar and Eid celebrations at SOS childrens villages in Islamabad and Quetta to help make the under-privileged children part of the celebrations associated with Ramadan and Eid ul Fitr. These activities are part of wide ranging CSR activities carried out by Ufone for the under-privileged segments of society.
Your Company finalized the arrangements including regulatory compliances to acquire 100% ownership of rozgar microfinance Bank Limited. The acquisition is in line with PTCL Groups initiative on Digital-Commerce. The initiative includes offering digital payments and banking solutions. Branchless banking brings a bouquet of financial services to consumers on the go. The services include P-P (person to person) Money transfer, mobile wallets, cash-in cashout, bill payments, G-P (government to person) payments, merchant/retail payments, loan disbursement, loan repayment and more.
Rozgar Microfinance Bank
Branchless banking is used to substantially increase the financial services outreach to the mass unbanked communities. It represents a significantly cheaper alternative to conventional branch-based banking that allows financial institutions and other commercial sectors to offer financial services outside traditional bank premises by using delivery channels like retail agents, mobile phones etc. Acquisition of rozgar microfinance Bank is an economic and cost effective regulatory compliance for PTCL Group to realize the benefits of opportunities being offered by branchless banking.
Directors are pleased to confirm the following: The financial information prepared by the management of the Company present fairly its state of affairs, the results of its operations, its cash flows and its changes in equity. Proper books of accounts of the Company have been maintained. Appropriate accounting policies have been consistently applied in the preparation of financial information and accounting estimates are based on reasonable and prudent judgment. International Accounting Standards, as applicable in Pakistan, have been followed in the preparation of
8 . Financial Reporting Frame Work
The Company has complied with all the material requirements of the Code of Corporate Governance and
34
Annual Report 2012
financial information and if any departure there from, the same has been adequately disclosed. The system of internal control is sound in design and has been effectively implemented and monitored. There are no significant doubts about the Companys ability to continue as a going concern. There has been no material departure from the best practices of corporate governance, as detailed in listed regulations. The Audit Committee has recommended the appointment of M/s A. F. Ferguson & Co., Chartered Accountants as auditors of the Company for the financial year ending june 30, 2013. Information regarding outstanding taxes and levies is given in notes to the accounts of the financial information. The audited value of Pension Assets as per audited accounts amounted to Rs. 60.2 billion at june 30th, 2012 (2011: 56.5 billion). during the year, a training program for certification of a Director has been arranged. historic business indicators, composition of Audit Committee, Human Resource & Remuneration (HR&R) Committee, number of Board Meetings, attendance of Directors and Shareholding Pattern are part of this report and appear in the following pages.
able to serve all the customer segments including consumers, small and medium enterprises, corporates, multinationals and other telcos with a comprehensive portfolio of products, with committed service levels and a seamless quality of experience for all the segments. PTCL understands the transformation of global telecom sector from Minutes to Bytes. PTAs plans to issue licenses for third-generation (3G) mobile telecom services bring in a challenge and an opportunity for PTCL. To cater to the need of time, PTCL have invested heavily in infrastructure and technology sector and is in the process of transforming its microwave backhaul to IP technology to meet high bandwidth requirements of 3G/4G networks. PTCL is well positioned to provide highest quality of innovative services with a new customer services interface in more enthusiastic manner. PTCL has ambitious plans with full stream and strength of expanding and consolidating both the wireline and wireless Broadband services across Pakistan. Today, PTCL Broadband network is unmatched in its size, capacity and footprints. Pakistan is one of the fastest developing markets for branchless banking in the world. A variety of business models is emerging that involves a wide range of players, including mobile network operators (mnOs), technology partners and other associated businesses. Banks want to add mobile channel to their existing options for payment. PTCL and its subsidiary, Ufone are ready to grab this opportunity by providing communication infrastructure that integrates banking, telecom operators, consumers and agents in a cohesive network with the goal of
providing uniform banking services across the spectrum. Product Bundles offer a real opportunity for PTCL not only for retention but for customers acquisition by up selling and cross selling. PTCL is becoming more customer focused in developing and offering attractive bundles catering to various segments.
10. Acknowledgements

The Board of directors of the Company would like to thank all our customers, suppliers, contractors, service providers, stakeholders and shareholders for their continued support.
We would also like to appreciate the hard work, diligence and dedicated efforts of our employees across the country which enabled the Company to successfully face the challenges of a highly competitive operating environment. We would also like to express our special thanks to the Government of Pakistan and etisalat Group for their continued support and encouragement in striving to achieve the objective of enhancing shareholders value. On behalf of the Board of Directors
Amir Tariq Zaman Khan

Chairman PTCL Board
Walid Irshaid
9. Challenges and Way Forward

PTCL is the only unified service provider in Pakistan,
Islamabad: September 11, 2012

35
Composition of Audit Committee

Chairman Serkan Okandan Members Abdulrahim A. Al Nooryani Kamran Ali mohamed Zuhair Secretary Farah Qamar
Composition of Human Resource Committee

Chairman Abdulrahim A. Al Nooryani Members Fadhil Al-Ansari Kamran Ali Jamil A. Khan Serkan Okandan Dr. Daniel Ritz Secretary Farah Qamar
Attendance of PTCL Board Members

Total 06 Board meetings were held during the financial year.
S# Name of Board Member Chairman PTCL Board Meetings Attended
1.
Saeed Ahmad Khan Farooq Ahmed Khan
03 03
Chairman PTCL Board Appointed during the year
2. 3.
Abdulrahim A. Al Nooryani dr. Waqar masood Khan

Appointed during the year
06 03 03 04 06 06 05 01 06 06
Abdul Wajid rana
Attendance of PTCL Board Members Total 06 Meetings of the Audit Committee were held during the financial Year.
S# Name of Board Member Meetings Attended
Attendance of PTCL Board Members Total 04 Meetings of the HR&R Committee were held during the financial Year.
S# Name of Board Member Meetings Attended
4. 5. 6. 7. 8. 9.
Jamil Ahmed Khan Abdulaziz A. Al Sawaleh Fadhil Al Ansari Dr. Syed Ismail Shah
Appointed during the year
1. 2. 3.
Abdulaziz H. Taryam Abdulrahim A. Al Nooryani Dr. Syed Ismail Shah
06 06 05
1. 2. 3. 4. 5.
Abdulrahim A. Al Nooryani Abdulaziz A. Al Sawaleh Fadhil Al Ansari Abdulaziz H. Taryam Dr. Syed Ismail Shah
04 04 04 04 03
Kamran Ali
Abdulaziz H. Taryam Dr. Ahmed Al jarwan
Functions of Audit Committee Assist the Board of Directors in approving the Companys financial statements, appointment of External Auditor, reviews scope of internal control, monitors statutory compliances determines the appropriate measures to safeguard the Companys assets and recommends placement & borrowing of funds. It ensures the coordination between the internal and external auditors of the Company.
Functions of Human Resource Committee Reviews and recommends development and maintenance of long term HR Policies, an effective employee development programs, appropriate compensation and benefit plans and good governance model in line with statutory requirements and best practices of the Code of Corporate Governance. It ensures that the Governance and HR Policies & procedures are aligned with the strategic vision and core objectives of the Company. It provides leadership and guidance for the organizational transformation needed in achieving Companys corporate objectives.
36
Annual Report 2012
37
Statement of Compliance with the Code of Corporate Governance

This statement is being presented to comply with the Code of Corporate Governance contained in Regulation No. 35 of listing regulations of the Karachi & Lahore Stock exchange (Guarantee) Limited and Chapter XI of the Listing Regulations of the Islamabad Stock exchange (Guarantee) Limited, for the purpose of establishing a framework of good governance, whereby a listed company is managed in compliance with the best practices of corporate governance. The Company has applied the principles contained in the CCG in the following manner: 1. The Board of Directors (the Board) comprises of nine Members. Pursuant to the provisions of the Share Purchase Agreement between the Government of Pakistan and the Strategic Investor and also Articles of Association of the Company, the Government of Pakistan nominates four Members on the Board of the Company while etisalat International Pakistan (eIP) nominates five Members. All Members of the Board are non-executive Directors and were elected in the AGM held on October 31, 2009. The Directors have confirmed that none of them is serving as a director on more than seven listed companies, including this Company. All the resident Directors of the Company are registered as taxpayers and none of them has defaulted in payment of any loan to a banking company, a dFI or an nBFI or, being a member of a stock exchange, has been declared as a defaulter by that stock exchange. Casual vacancies occurring on the Board on 22-02-2012 and on 06-06-2012 were filled up by the Directors within 30 days thereof. policies along with the dates on which they were approved or amended has been maintained. 7. All the powers of the Board have been duly exercised and decisions on material transactions, including appointment and determination of remuneration and terms and conditions of employment of the CEO, other executives and non-executive directors, have been taken by the Board. The meetings of the Board were presided over by the Chairman and the Board met at least once in every quarter. Written notices of the Board meetings, along with agenda and working papers, were circulated at least seven days before the meetings. The minutes of the meetings were appropriately recorded and circulated. The Board arranged a certification training program for one of the Directors during the year. results of the Company and as required by the CCG. The terms of reference of the committee have been formed and advised to the committee for compliance. 17. The Board has formed an HR and Remuneration Committee. It comprises of six (06) members, all members are non-executive Directors and the chairman of the committee is a non-executive Director. 18. The Board has set up an effective internal audit function. 19. The statutory auditors of the Company have confirmed that they have been given a satisfactory rating under the quality control review program of the ICAP, that they or any of the partners of the firm, their spouses and minor children do not hold shares of the Company and that the firm and all its partners are in compliance with International Federation of Accountants (IFAC) guidelines on code of ethics as adopted by the ICAP. 20. The statutory auditors or the persons associated with them have not been appointed to provide other services except in accordance with the listing regulations and the auditors have confirmed that they have observed IFAC guidelines in this regard. 21. The Closed Period, prior to the announcement of interim / final results, and business decisions, which may materially affect the market price of the Company's securities, was determined and intimated to Directors, employees and stock exchange(s). 22. Material / price sensitive information has been disseminated among all market participants at once through stock exchange(s). 23. We confirm that all other material principles enshrined in the CCG have been complied with.
8.
9.
2.
10. The Board has approved appointment of CFO, Company Secretary and Head of Internal Audit, including their remuneration and terms and conditions of employment. However, there were no new appointments of CFO, Company Secretary and Head of Internal Audit during the financial year ended june 30, 2012. 11. The Directors report for this year has been prepared in compliance with the requirements of the CCG and fully describes the salient matters required to be disclosed. 12. The financial statements of the Company were duly endorsed by CEO and CFO before approval of the Board. 13. The Directors, CEO and executives do not hold any interest in the shares of the Company other than that disclosed in the pattern of shareholding. 14. The Company has complied with all the corporate and financial reporting requirements of the CCG. 15. The Board has formed an Audit Committee. It comprises of four members; all members are non-executive Directors including the chairman of the committee. 16. The meetings of the audit committee were held at least once every quarter prior to approval of interim and final
3.
4.
5. The Company has prepared a Code of Conduct and has ensured that appropriate steps have been taken to disseminate it throughout the Company along with its supporting policies and procedures. 6. The Board has developed a vision/mission statement, overall corporate strategy and significant policies of the Company. A complete record of particulars of significant
Islamabad: September 11, 2012
Walid Irshaid
38
Annual Report 2012
Review Report to the Members

On Statement of Compliance with Best practices of Code of Corporate Governance We have reviewed the Statement of Compliance with the Code of Corporate Governance (the Code) prepared by the Board of directors of Pakistan Telecommunication Company Limited (the Company) to comply with the Listing Regulations of the Stock exchange where the Company is listed. The responsibility for compliance with the Code is that of the Board of Directors (the Board) of the Company. Our responsibility is to review, to the extent where such compliance can be objectively verified, whether the Statement of Compliance reflects the status of the Companys compliance with the provisions of the Code and report if it does not. A review is limited primarily to inquiries of the Companys personnel and review of various documents prepared by the Company to comply with the Code. As part of our audit of financial statements we are required to obtain an understanding of the accounting and internal control systems sufficient to plan the audit and develop an effective audit approach. We are not required to consider whether the Boards statement on internal control covers all risks and controls, or to form an opinion on the effectiveness of such internal controls, the Companys corporate governance procedures and risks. Further, the Code requires the Company to place before the audit committee and upon recommendation of the audit committee, before the Board for their review and approval related party transactions distinguishing between transactions carried out on terms equivalent to those that prevail in arms length transactions and transactions which are not executed at arms length price recording proper justification for using such alternate pricing mechanism. We are only required and have ensured compliance of requirement to the extent of approval of related party transactions by the Board upon recommendation of the audit committee. We have not carried out any procedures to determine whether the related party transactions were undertaken at arms length price or not. Based on our review, nothing has come to our attention which causes us to believe that the Statement of Compliance does not appropriately reflect the Companys compliance, in all material respects, with the best practices contained in the Code as applicable to the Company for the year ended june 30, 2012.
A.F. Ferguson & Co. Chartered Accountants Islamabad Engagement Partner: M. Imtiaz Aslam Dated: September 11, 2012
Ernst & Young Ford Rhodes Sidat Hyder Chartered Accountants Islamabad Engagement Partner: Pervez Muslim
39
Annual Report 2012
For the year ended June 30, 2012
FINANCIAL STATEMENTS
41
42
Annual Report 2012
AudITorS rEporT To ThE MEMbErS
We have audited the annexed statement of financial position of Pakistan Telecommunication Company Limited (the Company) as at June 30, 2012 and the related statement of comprehensive income, statement of cash flows 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 accounts have been kept by the Company as required by the Companies Ordinance, 1984; in our opinion: (i) the statement of financial position and statement of comprehensive income together with the notes thereon have been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of accounts and are further in accordance with accounting policies consistently applied; (c)
(ii) (iii)
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;
in our opinion and to the best of our information and according to the explanations given to us, the statement of financial position, statement of comprehensive income, statement of cash flows 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, 2012 and of the comprehensive income, 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)
43
as at June 30, 2012
STATEMENT oF FINANCIAL poSITIoN
Note
2012 Rs 000
2011 Rs 000
Equity and liabilities
Equity Share capital and reserves Share capital Revenue reserves Insurance reserve General reserve Unappropriated profit Unrealized gain on available-for-sale investments Liabilities Non-current liabilities Long-term security deposits Deferred taxation Employees retirement benefits Deferred government grants 2,678,728 30,500,000 21,295,232 54,473,960 62,977 105,536,937 2,385,532 30,500,000 14,376,349 47,261,881 30,590 98,292,471 6 51,000,000 51,000,000
7 8 9 10
707,668 7,821,758 18,250,681 4,083,022 30,863,129
740,744 5,011,731 16,823,015 3,631,585 26,207,075
Current liabilities Trade and other payables Dividend payable Total equity and liabilities Contingencies and commitments The annexed notes from 1 to 45 form an integral part of these financial statements. 12 11 20,548,656 20,548,656 156,948,722 24,644,683 3,375,631 28,020,314 152,519,860
Chairman
44
Annual Report 2012
as at June 30, 2012
STATEMENT oF FINANCIAL poSITIoN
Note
2012 Rs 000
2011 Rs 000
Assets
Non-current assets Fixed assets Property, plant and equipment Intangible assets 13 14 85,870,337 2,799,659 88,669,996 Long-term investments Long-term loans and advances 15 16 6,607,439 14,311,954 109,589,389 Current assets Stores, spares and loose tools Trade debts Loans and advances Accrued interest Recoverable from tax authorities Receivable from Government of Pakistan Other receivables Short-term investments Cash and bank balances 89,743,517 3,036,127 92,779,644 6,607,439 14,121,134 113,508,217
17 18 19 20 21 22 23 24 25
2,972,824 8,785,812 1,368,215 426,527 17,784,694 2,164,072 666,466 9,929,401 3,261,322 47,359,333
3,369,488 9,171,851 586,124 508,863 12,572,963 2,164,072 366,997 2,642,378 7,628,907 39,011,643
Total assets
156,948,722
152,519,860
President & CEO

45
STATEMENT oF CoMprEhENSIVE INCoME
Note
2012 Rs 000
2011 Rs 000
Revenue Cost of services Gross profit Administrative and general expenses Selling and marketing expenses Other operating income
26 27
60,038,254 (44,898,012) 15,140,242
55,254,014 (41,814,765) 13,439,249 (7,375,956) (2,281,485) 7,839,617 (1,817,824) 11,621,425 (207,519) 11,413,906 (3,985,736) 7,428,170 30,590 7,458,760 1.46
28 29 30
(7,770,295) (2,478,537) 6,596,103 (3,652,729)
Operating profit Finance costs Profit before tax Taxation Profit for the year Other comprehensive income for the year Unrealized gain on available-for-sale investments - net of tax Total comprehensive income for the year Earnings per share - basic and diluted (Rupees) The annexed notes from 1 to 45 form an integral part of these financial statements. 33 32 31
11,487,513 (481,745) 11,005,768 (3,793,689) 7,212,079 32,387 7,244,466 1.41
Chairman
46
President & CEO
Annual Report 2012
STATEMENT oF CASh FLoWS
Note
2012 Rs 000
2011 Rs 000
Cash flows from operating activities
Cash generated from operations Long-term security deposits Employees retirement benefits paid Finance costs paid Income tax paid Net cash inflows from operating activities
35
20,546,924 (33,076) (2,490,851) (219,369) (4,206,300) 13,597,328 (11,589,283) (34,246) 58,669 (116,435) 2,615,920 353,597 1,400,000 (7,311,778) (3,366,112) (3,366,112) 2,919,438 10,271,285
21,489,835 27,134 (1,847,221) (200,895) (7,068,368) 12,400,485 (15,766,753) (200,405) 141,901 68,540 (4,098,014) (1,894,950) 3,363,326 2,077,688 3,180,000 (13,128,667) (8,916,542) (8,916,542) (9,644,724) 19,916,009 10,271,285
Cash flows from investing activities
Capital expenditure Acquisition of intangible assets Proceeds from disposal of property, plant and equipment Long-term investments Long-term loans and advances PTA WLL license fee paid Return on long-term loans and short-term investments Government grants received Dividend income on long-term investments Net cash outflows from investing activities
Cash flows from financing activities
Dividend paid Net cash outflows from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 36
13,190,723
The annexed notes from 1 to 45 form an integral part of these financial statements.
Chairman
President & CEO

47
STATEMENT oF ChANgES IN EquITy
Issued, subscribed and paidup capital Class A Rs 000 Class B Rs 000
Insurance reserve Rs 000
Revenue reserves General reserve Rs 000
Unappropriated profit Rs 000
Unrealized gain on available-for-sale investments Rs 000
Total Rs 000
Balance as at July 01, 2010 Total comprehensive income for the year Profit for the year Other comprehensive income Transfer to insurance reserve Transactions with owners: Interim dividend for the year ended June 30, 2011 @ Rs 1.75 per ordinary share of Rs 10 each Total transactions with owners Balance as at June 30, 2011 Total comprehensive income for the year Profit for the year Other comprehensive income Transfer to insurance reserve Balance as at June 30, 2012
37,740,000
13,260,000
2,113,704 271,828
30,500,000
16,145,007 7,428,170 7,428,170 (271,828)
30,590 30,590
99,758,711 7,428,170 30,590 7,458,760
37,740,000 37,740,000
13,260,000 13,260,000
2,385,532 293,196 2,678,728
30,500,000 30,500,000
(8,925,000) (8,925,000) 14,376,349 7,212,079 7,212,079 (293,196) 21,295,232
30,590 32,387 32,387 62,977
(8,925,000) (8,925,000) 98,292,471 7,212,079 32,387 7,244,466 105,536,937
The annexed notes from 1 to 45 form an integral part of these financial statements.
Chairman
48
President & CEO
Annual Report 2012
NoTES To ANd ForMINg pArT oF ThE FINANCIAL STATEMENTS
1.
The Company and its operations Pakistan Telecommunication Company Limited (the Company) was incorporated in Pakistan on December 31, 1995 and commenced business on January 01, 1996. The Company, which is listed on the Karachi, Lahore and Islamabad stock exchanges, was established to undertake the telecommunication business formerly carried on by the Pakistan Telecommunication Corporation (PTC). PTCs business was transferred to the Company on January 01, 1996 under the Pakistan Telecommunication (Reorganization) Act, 1996, on which date, the Company took over all the properties, rights, assets, obligations and liabilities of PTC, except those transferred to the National Telecommunication Corporation (NTC), the Frequency Allocation Board (FAB), the Pakistan Telecommunication Authority (PTA) and the Pakistan Telecommunication Employees Trust (PTET). The registered office of the Company is situated at PTCL Headquarters, G-8/4, Islamabad. 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 in territories of Azad Jammu and Kashmir and Gilgit-Baltistan.
Effective date (annual periods beginning on or after)
IAS 1 IAS 12 IAS 16 IAS 19 IAS 27 IAS 28 IAS 32
Presentation of Financial Statements (Amendments) Income Taxes (Amendments) Property, Plant and Equipment (Amendments) Employee Benefits (Amendments) Consolidated and Separate Financial Statements (Revised) Investments in Associates (Revised) Financial Instruments Presentation (Amendments)
July 01, 2012 & January 01, 2013 January 01, 2012 January 01, 2013 January 01, 2013 January 01, 2013 January 01, 2013 January 01, 2013 & January 01, 2014 January 01, 2013 January 01, 2013
IAS 34 Interim Financial Reporting (Amendments) IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
2.
Statement of compliance These financial statements have been prepared in accordance with the 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 (IASB) as are notified under the Companies Ordinance, 1984 and 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. These financial statements are the separate financial statements of the Holding Company (PTCL). In addition to these separate financial statements, the Company also prepares consolidated financial statements.
The management anticipates that, except for the effects on the financial statements of amendments to IAS 19 Employee Benefits, the adoption of the above standards, amendments and interpretations in future periods, will have no material impact on the Companys financial statements other than in presentation / disclosures. The application of the amendments to IAS 19 would result in the recognition of cumulative unrecognized actuarial gains / losses in other comprehensive income in the period of initial application, which cannot be presently quantified as on the date of the statement of financial position. b) The following new standards have been issued by the International Accounting Standards Board (IASB), which are yet to be notified by the Securities and Exchange Commission of Pakistan (SECP) for the purpose of their applicability in Pakistan:
2.1
Adoption of new and revised standards and interpretations: a) The following amendments, revisions and interpretations to published accounting standards were not effective during the year and have not been early adopted by the Company:
IFRS 1 IFRS 9 IFRS 10 IFRS 11 IFRS 12 IFRS 13
First-Time Adoption of International Financial Reporting Standards (Amendments) Financial Instruments Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement
July 01, 2009 January 01, 2015 January 01, 2013 January 01, 2013 January 01, 2013 January 01, 2013
IFRS 7
Financial instruments: Disclosures (Amendments)
January 01, 2013 & January 01, 2015
49
c)
The following interpretations issued by the IASB have been waived off by the SECP, effective January 16, 2012:
IFRIC 4 Determining Whether an Arrangement Contains a Lease IFRIC 12 Service Concession Arrangements
(d)
Provision for stores, spares and loose tools A provision against stores, spares and loose tools is recognized after considering their physical condition and expected future usage. It is reviewed by the management on a quarterly basis.
3.
Basis of preparation These financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments at fair value and the recognition of certain employees retirement benefits on the basis of actuarial assumptions. Critical accounting estimates and judgments The preparation of financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Companys accounting policies. Estimates and judgments are continually evaluated and are based on historic experience, including expectations of future events that are believed to be reasonable under the circumstances. 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) Provision for employees retirement benefits The actuarial valuation of pension, gratuity, medical and accumulating compensated absences plans (note 5.19) requires the use of certain assumptions related to future periods, including increase in remuneration / medical costs, expected long-term returns on plan assets and the discount rate used to discount future cash flows to present values. Provision for income taxes The Company recognizes income tax provisions using estimates based upon expert opinions of its tax and legal advisors. Differences, if any, between the recorded income tax provision and the Companys tax liability, are recorded on the final determination of such liability. Deferred income tax (note 5.18) is calculated at the rates that are expected to apply to the period when these temporary differences reverse, based on tax rates that have been enacted or substantively enacted, by the date of the statement of financial position. Useful life and residual value of fixed assets The Company reviews the useful lives and residual values of fixed assets (note 5.10) on a regular basis. Any change in estimates may affect the carrying amounts of the respective items of property, plant and equipment and intangible assets, with a corresponding effect on the related depreciation / amortization charge. 5.
(e)
Provision for doubtful receivables A provision against overdue receivable balances is recognized after considering the pattern of receipts from, and the future financial outlook of, the concerned receivable party. It is reviewed by the management on a regular basis.
4.
(f)
Provisions and contingent liabilities The management exercises judgment in measuring and recognizing provisions and the exposures to contingent liabilities related to pending litigations or other outstanding claims. Judgment is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual losses may be different from the originally estimated provision.
Summary of 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 for which financial information is presented in these financial statements, unless otherwise stated.
(b)
5.1
Functional and presentation currency Items included in the financial statements of the Company are measured using the currency of the primary economic environment in which the entity operates (the functional currency). These financial statements are presented in Pakistan Rupees (Rs), which is the Companys functional currency.
5.2
Foreign currency transactions and translations Foreign currency transactions are translated into the functional currency, using the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities, denominated in foreign currencies, are translated into the functional currency using the exchange rate prevailing on the date of the statement of financial position. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary items at year end exchange rates, are charged to income for the year.
(c)
50
Annual Report 2012
5.3
Insurance reserve The assets of the Company are self insured, as the Company has created an insurance reserve for this purpose. Appropriations out of profits to this reserve, are made at the discretion of the Board of Directors. The reserve may be utilized to meet any losses to the Companys assets resulting from theft, fire, natural or other disasters.
occurrence or non-occurrence, of one or more uncertain future events, not wholly within the control of the Company; or when the Company has a present legal or constructive obligation, that arises from past events, but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability. 5.9 Dividend distribution The distribution of the final dividend, to the Companys shareholders, is recognized as a liability in the financial statements in the period in which the dividend is approved by the Companys shareholders; the distribution of the interim dividend is recognized in the period in which it is declared by the Board of Directors. 5.10 Fixed assets (a) Property, plant and equipment Property, plant and equipment, except freehold land and capital work-inprogress, is stated at cost less accumulated depreciation and any identified impairment losses; freehold land is stated at cost less identified impairment losses, if any. Cost includes expenditure, related overheads, mark-up and borrowing costs referred to in note 5.5 that are directly attributable to the acquisition of the asset. Subsequent costs, if reliably measurable, 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 cost will flow to the Company. The carrying amount of any replaced parts as well as other repair and maintenance costs, are charged to income during the period in which they are incurred. Capital work-in-progress is stated at cost less impairment value, if any. It consists of expenditure incurred and advances made in respect of tangible and intangible fixed assets in the course of their construction and installation. Depreciation on assets is calculated, using the straight-line method, to allocate their cost over their estimated useful lives, at the rates mentioned in note 13.1. Depreciation on additions to property, plant and equipment, is charged from the month in which the relevant asset is acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Impairment loss, if any, or its reversal, is also charged to income for the year. Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less its residual value, over its estimated useful life.
5.4
Government grants Government grants are recognized at their fair values, as deferred income, when there is reasonable assurance that the grants will be received and the Company will be able to comply with the conditions associated with the grants. Grants that compensate the Company for expenses incurred, are recognized on a systematic basis in the income for the year in which the related expenses are recognized. Grants that compensate the Company for the cost of an asset are recognized in income on a systematic basis over the expected useful life of the related asset.
5.5
Borrowings and borrowing costs Borrowings are recognized equivalent to the value of the proceeds received by the Company. Any difference, between the proceeds (net of transaction costs) and the redemption value, is recognized in income, over the period of the borrowings, using the effective interest method. Borrowing costs, which are directly attributable to the acquisition and construction of a qualifying asset, are capitalized as part of the cost of that asset. All other borrowing costs are charged to income for the year.
5.6
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.
5.7
Provisions 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 a reliable estimate of the amount can be made. Provisions are reviewed at each statement of financial position date and are adjusted to reflect the current best estimate.
5.8
Contingent liabilities A contingent liability is disclosed when the Company has a possible obligation as a result of past events, the existence of which will be confirmed only by the
51
The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and the carrying amount of the asset, is recognized in income for the year. (b) Intangible assets (i) Licenses These are carried at cost less accumulated amortization and any identified impairment losses. Amortization is calculated using the straight-line method, to allocate the cost of the license over its estimated useful life specified in note 14, and is charged to income for the year. The amortization on licenses acquired during the year, is charged from the month in which a license is acquired / capitalized, while no amortization is charged in the month of expiry / disposal of the license. (ii) Computer software These are carried at cost less accumulated amortization, and any identified impairment losses. Amortization is calculated, using the straight-line method, to allocate the cost of software over their estimated useful lives, at the rates specified in note 14, and is charged to income for the year. Costs associated with maintaining computer software, are recognized as an expense as and when incurred. Amortization on additions to computer software, is charged from the month in which the software is acquired or capitalized, while no amortization is charged for the month in which the software is disposed off. 5.11 Investments in subsidiaries and associates Investments in subsidiaries and associates, where the Company has control or significant influence, are measured at cost in the Companys financial statements. The profits and losses of subsidiaries and associates are carried in the financial statements of the respective subsidiaries and associates, and are not dealt within the financial statements of the Company, except to the extent of dividends declared by these subsidiaries and associates. 5.12 Impairment of non-financial assets Assets that have an indefinite useful life, for example freehold land, are not subject to depreciation and are tested annually for impairment. Assets that are subject to depreciation are reviewed for impairment on the date of the statement of financial position, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized, equal to the amount by which the assets carrying amount exceeds its recoverable amount. An assets recoverable amount is the higher of its fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are
52
grouped at the lowest levels for which there are separately identifiable cash flows. Non-financial assets that suffered an impairment, are reviewed for possible reversal of the impairment at each statement of financial position date. Reversals of the impairment loss are restricted to the extent that assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss has been recognized . An impairment loss, or the reversal of an impairment loss, are both recognized in the income for the year. 5.13 Stores, spares and loose tools These are stated at the lower of cost and net realizable value. Cost is determined using the moving average method. Items in transit are valued at cost, comprising invoice values and other related charges incurred up to the date of the statement of financial position. 5.14 Trade debts Trade debts are carried at their original invoice amounts, less any estimates made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written-off when identified. 5.15 Financial instruments Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the instrument and derecognized when the Company loses control of the contractual rights that comprise the financial assets and in case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expires. All financial assets and liabilities are initially recognized at fair value plus transaction costs other than financial assets and liabilities carried at fair value through profit or loss. Financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are charged to income for the year. These are subsequently measured at fair value, amortized cost or cost, as the case may be. Any gain or loss on derecognition of financial assets and financial liabilities is included in income for the year. (a) Financial assets Classification and subsequent measurement The Company classifies its financial assets in the following categories: fair value through profit or loss, held-to-maturity investments, loans and receivables and available for sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Regular purchases and sales of financial assets are recognized on the trade date - the date on which the Company commits to purchase or sell the asset.
Annual Report 2012
(i)
Fair value through profit or loss Financial assets at fair value through profit or loss, include financial assets held for trading and financial assets, designated upon initial recognition, at fair value through profit or loss. Financial assets at fair value through profit or loss are carried in the statement of financial position at their fair value, with changes therein recognized in the income for the year. Assets in this category are classified as current assets.
is impaired as a result of one or more events that occurred after the initial recognition of the asset (a loss event), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. (b) Financial Liabilities Initial recognition and measurement The Company classifies its financial liabilities in the following categories: fair value through profit or loss and other financial liabilities. The Company determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and, in the case of other financial liabilities, also include directly attributable transaction costs. Subsequent measurement The measurement of financial liabilities depends on their classification as follows: (i) Fair value through profit or loss Financial liabilities at fair value through profit or loss, include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as being at fair value through profit or loss. Financial liabilities at fair value through profit or loss are carried in the statement of financial position at their fair value, with changes therein recognized in the income for the year. (ii) Other financial liabilities After initial recognition, other financial liabilities which are interest bearing are subsequently measured at amortized cost, using the effective interest rate method. (c) Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the statement of financial position, if the Company has a legally enforceable right to set off the recognized amounts, and the Company either intends to settle on a net basis, or realize the asset and settle the liability simultaneously. 5.16 Cash and cash equivalents Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash and cash equivalents comprise cash in hand and short-term highly liquid investments with original maturities of three months or less, and that are readily convertible to known amounts of cash, and subject to an insignificant risk of changes in value.
(ii) Held-to-maturity Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified as held-to-maturity when the Company has the positive intention and ability to hold these assets to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment, if any. (iii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments, that are not quoted in an active market. After initial measurement, these financial assets are measured at amortized cost, using the effective interest rate method, less impairment, if any. The Companys loans and receivables comprise Long-term loans and advances, Trade debts, Loans and advances, Accrued interest, Receivable from Government of Pakistan, Other receivables and Cash and bank balances. (iv) Available-for-sale Available-for-sale financial assets are non-derivatives, that are either designated in this category, or not classified in any of the other categories. These are included in non-current assets, unless management intends to dispose them off within twelve months of the date of the statement of financial position. After initial measurement, available-for-sale financial assets are measured at fair value, with unrealized gains or losses recognized as other comprehensive income, until the investment is derecognized, at which time the cumulative gain or loss is recognized in income for the year. Impairment The Company assesses at the end of each reporting period whether there is an objective evidence that a financial asset or group of financial assets
53
5.17
Revenue recognition Revenue comprises of the fair value of the consideration received or receivable, for the provision of telecommunication, broadband and related services in the ordinary course of the Companys activities and is recognized net of services tax, rebates and discounts. The Company principally obtains revenue from providing telecommunication services such as wireline and wireless services, interconnect, data services and equipment sales. Equipment and services may be sold separately or in a bundled package. Revenue is recognized, when it is probable that the economic benefits associated with the transaction will flow to the Company, and the amount of revenue and the associated cost incurred or to be incurred can be measured reliably, and when specific criteria have been met for each of the Companys activities as described below: (i) Rendering of telecommunication services Revenue from telecommunication services comprises of amounts charged to customers in respect of wireline and wireless services, equipment sales and interconnect, including data services. Revenue also includes the net income received or receivable from revenue sharing arrangements entered into with overseas and local telecommunication operators. (a) Wireline and wireless services Revenue from wireline services, mainly in respect of line rent, line usage and broadband, is invoiced and recorded as part of a periodic billing cycle. Revenue from wireless services is recognized on the basis of consumption of prepaid cards which allow the forward purchase of a specified amount of airtime by customers; revenue is recognized as the airtime is utilized. Unutilized airtime is carried as deferred revenue. (b) Data services Revenue from data services is recognized when the services are rendered. (c) Interconnect Revenue from interconnect services is recognized when the services are rendered. (d) Equipment sales Revenue from sale of equipment is recognized when the equipment is delivered to the end customer and the sale is considered complete. For
equipment sales made to intermediaries, revenue is recognized if the significant risks associated with the equipment are transferred to the intermediary and the intermediary has no right of return. If the significant risks are not transferred, revenue recognition is deferred until sale of the equipment to the end customer by the intermediary or the expiry of the right of return. (ii) Income on bank deposits Return on bank deposits is recognized using the effective interest method. (iii) Dividend income Dividend income is recognized when the right to receive payment is established. 5.18 Taxation The tax expense for the year comprises of current and deferred income tax, and is recognized in income for the year, except to the extent that it relates to items recognized directly in other comprehensive income, in which case the related tax is also recognized in other comprehensive income. (a) Current The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the statement of financial position. Management periodically evaluates positions taken in tax returns, with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. (b) Deferred Deferred income tax is accounted for using the balance sheet liability method in respect of all temporary differences arising between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred income tax liabilities are 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 income tax is calculated at the rates that are expected to apply to the period when the differences reverse, and the tax rates that have been enacted, or substantively enacted, at the date of the statement of financial position.
54
Annual Report 2012
5.19
Employees retirement benefits The Company operates various retirement / post retirement benefit schemes. The plans are generally funded through payments determined by periodic actuarial calculations or up to the limits allowed in the Income Tax Ordinance, 2001. The Company has constituted both defined contribution and defined benefit plans. (a) PTCL Employees GPF Trust The Company operates an approved funded provident plan covering its permanent employees. For the purposes of this plan, a separate trust, the PTCL Employees GPF Trust (the Trust), has been established. Monthly contributions are deducted from the salaries of employees and are paid to the Trust by the Company. Interest is paid at the rate announced by the Federal Government, and this rate for the year was 14% (2011: 14%) per annum. The Company contributes to the fund, the differential, if any, of the interest paid / credited for the year and the income earned on the investments made by the Trust. (b) Defined benefit plans The Company operates the following defined benefit plans: (i) Pension plans The Company operates an approved funded pension plan through a separate trust, the Pakistan Telecommunication Employees Trust (PTET), for its employees recruited prior to January 01, 1996 when the Company took over the business from PTC. The Company also operates an unfunded pension scheme for employees recruited on a regular basis, on or after January 01, 1996. (ii) Gratuity plan The Company operates an unfunded and unapproved gratuity plan for its New Terms and Conditions (NTCs) employees and contractual employees. (iii) Medical benefits plan The Company provides a post-retirement medical facility to pensioners and their families. Under this unfunded plan, all ex-employees, their spouses, their children up to the age of 21 years (except unmarried daughters who are not subject to the 21 years age limit) and their parents residing with them and any other dependents, are entitled to avail the benefits provided under the scheme. The facility remains valid during the lives of the pensioner and their spouse. Under this facility there are no annual limits to the cost of drugs, hospitalized treatment and consultation fees.
(iv) Accumulating compensated absences The Company provides a facility to its employees for accumulating their annual earned leaves. Under this plan, regular employees are entitled to four days of earned leaves per month. Unutilized leave balances can be accumulated without limit and can be used at any time, subject to the Companys approval, up to: (i) 120 days in a year without providing a medical certificate and (ii) 180 days with a medical certificate, but not exceeding 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 the rate of the latest emoluments applicable to employees, for calculating their monthly pension. 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 the second year of service, upto a maximum of 28 days. Unavailed annual leaves can be encashed at the time of leaving the Company upto a maximum of two years of unavailed leaves. NTCs / contractual employees are entitled to three days of earned leaves per month. Unutilized leave balances can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed at the end of the employees service, based on the latest drawn gross salary. The liability recognized in the statement of financial position in respect of defined benefit plans, is the present value of the defined benefit obligations at the date of the statement of financial position less the fair value of plan assets, if any, together with adjustments for unrecognized actuarial gains / losses, if any. The defined benefit obligations are calculated annually, by an independent actuary using the projected unit credit method. The most recent valuations were carried out as at June 30, 2012. The present value of a defined benefit obligation is determined, by discounting the estimated future cash outflows, using the interest rates of high quality corporate bonds that are nominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, in excess of the corridor (10% of the higher of the fair value of the plan assets or the present value of the defined benefit obligation) at the beginning of the current reporting year, are recognized in the statement of comprehensive income, over the expected average remaining working lives of employees participating in the defined benefit plan. Actuarial gains and losses arising on compensated absences are recognized immediately.
55
6.
Share capital
6.1
Authorized share capital

2012 2011 (Number of shares 000) 2012 Rs 000 2011 Rs 000
11,100,000 3,900,000 15,000,000 6.2
11,100,000 3,900,000 15,000,000
A class ordinary shares of Rs 10 each B class ordinary shares of Rs 10 each
111,000,000 39,000,000 150,000,000
111,000,000 39,000,000 150,000,000
Issued, subscribed and paid up capital

2012 (Number of shares 000) 2011 Rs 000 2012 Rs 000 2011
3,774,000
3,774,000
A class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash - note 6.3 and note 6.5 B class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash - note 6.3 and note 6.6
37,740,000
37,740,000
1,326,000
1,326,000
13,260,000
13,260,000
5,100,000 6.3
5,100,000
51,000,000
51,000,000
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 (Re-organization) Act, 1996, as referred to in note 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, for the purposes of election of directors. A class ordinary shares cannot 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 and 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 the Pakistan Telecommunication (Re-organization) Act, 1996, 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 its domestic investors, a first tranche of vouchers exchangeable for A class ordinary shares of the Company; subsequently, through an Information Memorandum dated September 16, 1994, a second tranche of vouchers was issued to international investors, also exchangeable, at the option of the voucher holders, 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 the general public. Till June 30, 2012, 599,523 thousand (2011: 599,514 thousand) A class ordinary shares had been exchanged for such vouchers.
6.4
6.5
56
Annual Report 2012
6.6
In pursuance of the privatization of the Company, a bid was held by the Government of Pakistan on June 08, 2005 for sale of B class ordinary shares of Rs 10 each, conferring management control. Emirates Telecommunication Corporation (Etisalat), UAE was the successful bidder. The 26% (1,326,000,000 shares) B class ordinary 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.
Note 2012 Rs 000 2011 Rs 000
7.
Long-term security deposits 7.1
Long-term security deposits
7.1
707,668
740,744
These represent non-interest bearing security deposits received from the customers of the Company, including security deposits of Rs 3,623 thousand (2011: Rs 3,623 thousand) from Pak Telecom Mobile Limited (PTML), a related party. The Company has adjusted / paid a sum of Rs 45,913 thousand (2011: Rs 79,187 thousand) to its customers during the current year against their balances.
Note 2012 Rs 000 2011 Rs 000
8.
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 The gross movement in the deferred tax liability during the year is as follows: Balance as at July 01 Charge for the year 32 5,011,731 2,810,027 7,821,758 2,949,770 2,061,961 5,011,731 5,618,854 1,350,323 6,969,177 628,804 957,642 8,267,392 16,823,015 11,315,598 (3,379,682) (114,158) 7,821,758 10,468,989 (5,343,100) (114,158) 5,011,731
9.
Employees retirement benefits
Liabilities for pension obligations Funded Unfunded
9.1 9.1
5,502,293 1,637,058 7,139,351
Gratuity - unfunded Accumulating compensated absences Post-retirement medical facility
9.1 9.1 9.1
764,006 1,052,037 9,295,287 18,250,681
57
9.1
The latest actuarial valuations of the Companys defined benefit plans, were conducted at June 30, 2012 using the projected unit credit method. Details of obligations for defined benefit plans are as follows:
Funded Pension 2011 Rs 000 Unfunded Gratuity - unfunded Accumulating compensated absences 2012 Rs 000 2011 Rs 000 Post-retirement medical facility Total
2012 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
a)
The amounts recognized in the statement of financial position: Present value of defined benefit obligations Fair value of plan assets note 9.3 Deficit Unrecognized actuarial gains / (losses) Liability as at June 30
66,448,037 (60,200,384) 6,247,653 (745,360) 5,502,293
65,980,987 (56,480,703) 9,500,284 (3,881,430) 5,618,854
1,572,484 1,572,484 64,574 1,637,058
1,313,614 1,313,614 36,709 1,350,323
638,099 638,099 125,907 764,006
515,026 515,026 113,778 628,804
1,052,037 1,052,037 1,052,037
957,642 957,642 957,642
10,356,829 10,356,829 (1,061,542) 9,295,287
9,326,900 9,326,900 (1,059,508) 8,267,392
80,067,486 (60,200,384) 19,867,102 (1,616,421) 18,250,681
78,094,169 (56,480,703) 21,613,466 (4,790,451) 16,823,015
b)
Changes in the present value of defined benefit obligations: Balance as at July 01 Current service cost Interest cost Actuarial (gains) / losses Benefits paid Charge for the year: Current service cost Interest cost Expected return on plan assets Actuarial (gains) / losses Contribution from deputationists Significant actuarial assumptions at the date of the statement of financial position: Expected rate of return on plan assets Discount rate Future salary / medical cost increase Future pension increase Average expected remaining working lives of members Expected mortality rate Expected withdrawal rate
65,980,987 553,399 9,237,338 (4,528,761) (4,794,926) 66,448,037 553,399 9,237,338 (7,907,298) (1,541) 1,881,898
62,752,225 515,736 7,530,269 (431,751) (4,385,492) 65,980,987 515,736 7,530,269 (6,422,600) (614) 1,622,791
1,313,614 110,723 183,906 (27,865) (7,894) 1,572,484 110,723 183,906 294,629
1,139,102 132,290 136,692 (89,698) (4,772) 1,313,614 132,290 136,692 268,982
515,026 105,348 72,104 (22,508) (31,871) 638,099 105,348 72,104 (10,379) 167,073
423,702 109,430 50,844 (44,588) (24,362) 515,026 109,430 50,844 (5,364) 154,910
957,642 27,973 134,070 (26,310) (41,338) 1,052,037 27,973 134,070 (26,310) 135,733
926,338 32,214 111,161 (71,038) (41,033) 957,642 32,214 111,161 (71,038) 72,337
9,326,900 123,663 1,305,766 11,789 (411,289) 10,356,829 123,663 1,305,766 9,755 1,439,184
7,807,167 101,554 936,860 970,988 (489,669) 9,326,900 101,554 936,860 1,038,414
78,094,169 921,106 10,933,184 (4,593,655) (5,287,318) 80,067,486 921,106 10,933,184 (7,907,298) (26,934) (1,541) 3,918,517
73,048,534 891,224 8,765,826 333,913 (4,945,328) 78,094,169 891,224 8,765,826 (6,422,600) (76,402) (614) 3,157,434
c)
d)
14% 13% 9-12% 8-20% 13 years
12% 14% 9-13% 8-20% 13 years
13% 9-12% 8% 15 years
14% 9-13% 8% 17 years
13% 9-12%
14% 9-13%
13% 9-12%
14% 9-13%
13% 12%
14% 13%
6 years
6 years EFU 6166* Based on experience
13 years
14 years
EFU 6166* Based on experience
* Mortality table adjusted for Companys experience
58
Annual Report 2012
9.2
Historical information
Rs 000
2012
Rs 000
2011
Rs 000
2010
Rs 000
2009
Rs 000
2008
Defined benefit pension plan - funded Present value of defined benefit obligations as at June 30 Fair value of plan assets as at June 30 Deficit in the plan Experience adjustments on plan liabilities (gains) / losses Experience adjustment on plan assets - (losses) / gains Defined benefit pension plan - unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities - (gains) / losses Defined benefit gratuity plan - unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities - (gains) / losses Defined benefit accumulating compensated absences Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities - (gains) / losses Defined benefit post-retirement medical facility Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities - (gains) / losses 10,356,829 11,789 9,326,900 970,988 7,807,167 955,960 6,448,686 940,121 5,195,430 (51,761) 1,052,037 (26,310) 957,642 (71,038) 926,338 (202,585) 1,025,164 39,239 833,006 12,990 638,099 (22,508) 515,026 (44,588) 423,702 (5,358) 314,871 (51,220) 251,226 41,126 1,572,484 (27,865) 1,313,614 (89,698) 1,139,102 (37,370) 932,231 83,101 709,378 1,764 66,448,037 (60,200,384) 6,247,653 (4,528,761) (1,392,691) 65,980,987 (56,480,703) 9,500,284 (431,751) (366,071) 62,752,225 (53,521,666) 9,230,559 6,098,147 1,115,117 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)
59
Note
2012 Rs 000
2011 Rs 000
9.3
Changes in the fair value of plan assets Defined benefit pension plan - funded Balance as at July 01 Expected return on plan assets Contributions made by the Company during the year Benefits paid Actuarial losses on plan assets Balance as at June 30 Actual return on plan assets 9.3.1 56,480,703 7,907,298 2,000,000 (4,794,926) (1,392,691) 60,200,384 6,514,607 53,521,666 6,422,600 1,288,000 (4,385,492) (366,071) 56,480,703 6,056,529
9.3.1 The expected return on plan assets is based on market expectations, and depends upon the asset portfolio of the funded defined benefit pension plan, held at the beginning of the year, for returns over the entire life of the related obligations. 9.4 Major categories of plan assets of the funded defined benefit pension plan, as a percentage of total plan assets, are as follows:
2012 (Percentage) 2011
Special Savings Certificates Pakistan Investment Bonds Term Deposits Defense Saving Certificates Fixed and other assets Total 9.5 9.6
74 1 11 2 12 100
87 1 12 100
During the next financial year, the expected contribution to be paid to the funded pension plan by the Company is Rs 1,401,219 thousand (2011: Rs 1,883,438 thousand). Effect of increase / decrease in total medical cost trend rate The effect of a 1% increase in the medical cost trend rate, on current service cost and interest cost, is Rs 30,174 thousand (2011: Rs 31,033 thousand) and the effect of a 1% decrease in the medical cost trend rate, on current service cost and interest cost, is Rs 24,984 thousand (2011: Rs 26,301 thousand). The effect of a 1% increase in the medical cost trend rate, on the present value of defined benefit obligations for medical cost, is Rs 3,070,800 thousand (2011: Rs 2,765,426 thousand) and the effect of a 1% decrease in the medical cost trend rate, on the present value of defined benefit obligations for medical cost, is Rs 2,566,422 thousand (2011: Rs 2,311,206 thousand).
60
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
10.
Deferred government grants
Balance as at July 01 Recognized during the year Amortization for the year
10.1 30
3,631,585 593,597 (142,160) 4,083,022
1,632,701 2,077,688 (78,804) 3,631,585
10.1
These represent grants received from the Universal Service Fund, as assistance towards the development of telecommunication infrastructure in rural areas, comprising telecom infrastructure projects for basic telecom access, transmission and broadband services spread across the country.
Note 2012 Rs 000 2011 Rs 000
11.
Trade and other payables
Trade creditors Accrued liabilities Receipts against third party works Income tax: Collected from subscribers Deducted at source Sales tax payable Advances from customers Technical services assistance fee Retention money / Payable to contractors and suppliers for fixed assets Unclaimed dividend Other liabilities
11.1
6,514,031 4,397,888 754,029 11,662 11,662 907,614 2,059,661 492,261 5,216,314 149,230 45,966 20,548,656
5,569,704 7,300,434 458,422 227,388 46,063 273,451 223,958 2,187,583 456,399 7,997,965 139,711 37,056 24,644,683
28.2 11.1
61
2012 Rs 000
2011 Rs 000
11.1
Trade and other payables include payable to the following related parties Trade creditors Pak Telecom Mobile Limited (PTML) Etisalat - UAE Etisalat - Afghanistan Thuraya Satellite Telecommunication Company Telecom Foundation The Government of Pakistan and its related entities Retention money / Payable to contractors and suppliers for fixed assets TF Pipes Limited These balances relate to the normal course of business of the Company and are interest free. 4,143 3,719 69,068 247,107 38,262 9,774 109,597 3,728,184 4,201,992 14,878 333,442 12,659 10,355 118,569 5,252,755 5,742,658
12.
Contingencies and commitments 12.1
Contingencies A total of 1,744 cases (2011: 1,684 cases) have been filed against the Company primarily involving subscribers and employees. Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial impact at present. However, the management and the Companys legal advisors, are of the view that the outcome of these cases is expected to be favourable and a liability, if any, arising on the settlement of these cases is not likely to be material. Accordingly no provision has been made in these financial statements in this regard. In 1995, the Government of Pakistan (GoP), 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 on the GoP, seeking a restoration of its services and claimed damages from the GoP, amounting to Rs 2,261,924 thousand. The GoP ordered the immediate restoration of Pay Card services, including rebate relief and discounts to all pay phone service providers. In view of the relief and discounts offered by the GoP, Telecard Limited withheld payments on account of their monthly bills to the Company, and obtained a stay order from the Honorable Sindh High Court, for an amount of Rs 110,033 thousand against the Company. On the instructions of the Honorable Court, external consultants calculated the total amount of 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 counter claim against Telecard Limited for aggregate receivables, amounting to Rs 334,099 thousand, up to December 31, 2001. The management and the Companys legal advisors, are of the view that the outcome of the case is expected to be favourable. Pending the decision of the court, no provision has been made in these financial statements. In a similar case, Telefon, lodged a claim of Rs 97,337 thousand against the Company. In the last hearing, held on May 09, 2006, issues were framed and a decision made to record evidence in subsequent hearings. The management and the Companys legal advisors, are of the view that the outcome of the appeal is expected to be favourable. Pending the decision of the court, no provision has been made in these financial statements. 12.3 An assessment order was passed by the Taxation Officer, on the basis of a revised return for the tax year 2007, filed by the
12.2
62
Annual Report 2012
Company on June 30, 2009, creating an additional demand of Rs 5,185,163 thousand, by disallowing certain expenses under section 122(5A) of the Income Tax Ordinance, 2001. The Company has filed an appeal against this order before the Commissioner Inland Revenue - Appeals (CIR - Appeals), who has granted relief of Rs 297,793 thousand. The Company has filed an appeal against the remaining demand before the Honorable Appellate Tribunal Inland Revenue (ATIR), which has given its judgment regarding satellite charges amounting to Rs 231,001 thousand out of total disallowed expenses and endorsed the departmental view and presently the Companys reference against the judgment of the ATIR, in this respect, is pending before the Honorable Islamabad High Court. No provision on this account has been made in these financial statements, as the management and the tax advisor of the Company are of the view, that the matter will eventually be settled in favour of the Company. 12.4 For the tax year 2008, the Taxation Officer raised a demand of Rs 4,559,208 thousand, on the plea that the Company has erroneously applied an average rate of tax, while deducting withholding tax from payments made to employees under the Voluntary Separation Scheme (VSS), as the required options before the concerned Commissioners of income tax, were not filed by such employees. The Commissioner of Income Tax - Appeals (CIT - Appeals) upheld the decision of the Taxation Officer and while disposing off the ensuing second appeal, the Honorable ATIR remanded the case back to the Taxation Officer, for verification of filing of options before the concerned Commissioners, in the light of the related law. The company has also filed a reference application with the Honorable Islamabad High Court, which is pending adjudication. No provision on this account has been made in these financial statements, as the management and the tax advisor of the Company are of the view, that the matter will eventually be settled in favour of the Company. 12.5 For the tax year 2009, the Taxation Officer has disallowed certain expenses and International Revenue, (under section 122(5A) of the Income Tax Ordinance, 2001), and created an additional demand of Rs 4,638,249 thousand, which was subsequently reduced to Rs 3,439,222 thousand, through rectification. The Company has filed an appeal against the order of the Taxation Officer, before the CIR-Appeals, who upheld the decision of the Taxation Officer and while disposing off the ensuing second appeal, the Honorable ATIR remanded the case back to the Taxation Officer except for the International Revenue. The Company has already deposited an amount of Rs 533,861 thousand on account of International Revenue during the year ended June 30, 2011 and is currently in the process of filing reference application, in this respect, in the High Court. No provision on this account has been made in these financial statements, as the management and the tax advisor of the Company are of the view, that the matter will eventually be settled in favour of the Company. 12.6 Based on an audit of the Federal Excise Duty (FED) returns submitted for the period from July 2004 to June 2009, the Deputy Commissioner of Inland Revenue (DCIR), raised a demand of Rs 976,537 thousand, on the premise that the Company has claimed total input tax, without apportioning the same between allowable and exempt supplies, and that the exempt supplies were also not declared in these returns. On the same grounds, the Deputy Commissioner Inland Revenue (DCIR) has raised an additional demand on August 02, 2011, amounting to Rs 313,420 thousand, for the period from July 2005 to June 2006 and July 2008 to June 2009. The Company is in appeal against the said orders, before the CIR - Appeals and the Honorable Islamabad High Court has granted a stay order in this regard. No provision on this account has been made in these financial statements, as the management and the tax advisor of the Company are of the view, that the matter will eventually be settled in favour of the Company. 12.7 On July 16, 2011, the DCIR raised a demand of Rs 298,008 thousand, on the premise that the Company has not paid FED on Technical Services Assistance fee, paid to the Etisalat Telecommunication Corporation of the United Arab Emirates, during the period from July 01, 2007 to June 30, 2009, on the grounds that the said fee has been paid under a Franchise agreement. On the same grounds, the DCIR has raised an additional demand on February 27, 2012, amounting to Rs 176,409 thousand, for
63
12.8
the period from July 01, 2010 to June 30, 2011. The case has been decided against the Company by the CIR - Appeals and the Company has filed an appeal before the ATIR. No provision on this account has been made in these financial statements, as the management and the tax advisor of the Company are of the view, that the matter will eventually be settled in favour of the Company. On October 17, 2011, the DCIR, raised a demand of Rs 2,782,660 thousand, on the premise that the Company has not paid FED on its local interconnect revenue for the years from 2006 to 2009, aggregating to Rs 16,522,290 thousand, billed to mobile / landline operators and Long Distance and International operators. The case has been decided against the Company by the Commissioner Inland Revenue - Appeals - II (CIR - Appeals) and the Company has filed an appeal before the ATIR which is pending for adjudication. In the month of June 2012, the Company has deposited the principal amount under the amnesty scheme offered by the Federal Board of Revenue. Further, the Company has not paid FED on local interconnect revenue for the period from 2010 to June 2012; however, no demand has been raised by the tax authorities for this period. The GoP issued a notification dated June 30, 2012 in pursuance of section 65 of the Sales Tax Act, 1990 read with SRO 550(I)/2006 dated June 05, 2006 whereby the telecom companies were given relief from payment of FED on interconnect services up to June 30, 2012 by treating it as an inadvertent practice, provided the telecom companies commence payments of FED on interconnect services with effect from July 01, 2012. This SRO has not yet been published as a gazette notification, as it was challenged as an illegal act by the National Accountability Bureau (NAB). Currently, the matter is under investigation by NAB and it is not possible to predict the outcome of this investigation. No provision on this account has been made in these financial statements as the management and the tax advisor of the Company are of the view, that the matter will eventually be settled in favour of the Company.
Note 2012 Rs 000 2011 Rs 000
12.9
Bank guarantees and bid bonds issued in favour of: Universal Service Fund (USF) against government grants Others Commitments Contracts for capital expenditure Investment in Rozgar Microfinance Bank Limited 12.10 12,282,162 1,000,000 15,106,081 4,841,517 298,770 5,140,287 3,082,697 293,242 3,375,939
12.10 To acquire Rozgar Microfinance Bank Limited, the Company has signed Share Purchase Agreements with existing shareholders of the bank. The Company intends to invest Rs 1,000,000 thousand in this respect.
Note 2012 Rs 000 2011 Rs 000
13.
Property, plant and equipment
Operating fixed assets Capital work-in-progress
13.1 13.6
76,089,050 9,781,287 85,870,337
73,788,459 15,955,058 89,743,517
64
Annual Report 2012
13.1
Operating fixed assets

Freehold - note 13.2 Rs 000
Land Leasehold Rs 000
Freehold land Rs 000
Buildings on
Leasehold land Rs 000
Lines and wires Rs 000
Apparatus, plant and equipment Rs 000
Office equipment Rs 000
Computer equipment Rs 000
Furniture and fittings Rs 000
Vehicles Rs 000
Submarine cables Rs 000
Total Rs 000
As at July 01, 2010 Cost Accumulated depreciation Net book value Year ended June 30, 2011 Opening net book value Additions Disposals Cost Accumulated depreciation Depreciation charge for the year Net book value As at July 01, 2011 Cost Accumulated depreciation Net book value Year ended June 30, 2012 Opening net book value Additions Disposals Cost Accumulated depreciation Depreciation charge for the year Impairment charge - note 13.4 Net book value As at June 30, 2012 Cost Accumulated depreciation and impairment Net book value Annual rate of depreciation (%)
1,631,856 1,631,856 1,631,856 233 1,632,089 1,632,089 1,632,089 1,632,089 1,471 1,633,560 1,633,560 1,633,560
90,026 (24,276) 65,750 65,750 (1,277) 64,473 90,026 (25,553) 64,473 64,473 (1,277) 63,196 90,026 (26,830) 63,196 1 to 3.3
10,223,340 (3,220,635) 7,002,705 7,002,705 339,793 (620) 252 (368) (261,294) 7,080,836 10,562,513 (3,481,677) 7,080,836 7,080,836 323,470 (269,185) 7,135,121 10,885,983 (3,750,862) 7,135,121 2.5
1,008,671 (380,959) 627,712 627,712 (25,213) 602,499 1,008,671 (406,172) 602,499 602,499 (25,212) 577,287 1,008,671 (431,384) 577,287 2.5
106,288,703 (80,166,213) 26,122,490 26,122,490 1,878,997 (18,791) 18,791 (4,177,150) 23,824,337 108,148,909 (84,324,572) 23,824,337 23,824,337 2,342,395 (4,095,419) 22,071,313
128,236,700 (93,415,295) 34,821,405 34,821,405 4,937,900 (95,649) 95,649 (6,341,977) 33,417,328 133,078,951 (99,661,623) 33,417,328 33,417,328 10,336,356 (6,415,103) (191,759) 37,146,822
748,863 (453,567) 295,296 295,296 14,451 (2,524) 2,524 (63,216) 246,531 760,790 (514,259) 246,531 246,531 42,650 (45,081) 244,100 803,440 (559,340) 244,100 10
502,878 (278,885) 223,993 223,993 45,959 (77) 77 (192,387) 77,565 548,760 (471,195) 77,565 77,565 79,922 (56,324) 101,163 628,682 (527,519) 101,163 33.33
456,788 (333,330) 123,458 123,458 6,478 (2,232) 2,231 (1) (23,272) 106,663 461,034 (354,371) 106,663 106,663 11,021 (22,780) 94,904 472,055 (377,151) 94,904 10
1,328,836 (1,131,843) 196,993 196,993 148,035 (52,236) 51,628 (608) (116,947) 227,473 1,424,635 (1,197,162) 227,473 227,473 282,129 (56,747) 56,703 (44) (88,548) 421,010 1,650,017 (1,229,007) 421,010 20
5,739,955 256,256,616 (2,890,924) (182,295,927) 2,849,031 2,849,031 4,087,738 (428,104) 6,508,665 73,960,689 73,960,689 11,459,584 (172,129) 171,152 (977) (11,630,837) 73,788,459
9,827,693 267,544,071 (3,319,028) (193,755,612) 6,508,665 6,508,665 751,295 (659,386) 6,600,574 73,788,459 73,788,459 14,170,709 (56,747) 56,703 (44) (11,678,315) (191,759) 76,089,050
110,491,304 143,415,307 (88,419,991) (106,268,485) 22,071,313 7 37,146,822 10
10,578,988 281,658,033 (3,978,414) (205,568,983) 6,600,574 6.67 to 8.33 76,089,050
65
13.2
As explained in note 1, the property and rights vesting in the operating assets, as at January 01, 1996, were transferred to the Company from Pakistan Telecommunication Corporation, under the Pakistan Telecommunication (Re-organization) Act, 1996. However, the title to certain freehold land properties, were not formally transferred in the name of the Company in the land revenue records. The Company initiated the process of transfer of title to freehold land, in its own name, in previous years, which is still ongoing and shall be completed in due course of time. Disposal of property, plant and equipment: During the year, the aggregate net book value of disposals of property, plant and equipment is below Rs 50,000. The carrying amount of certain items of apparatus, plant and equipment have been reduced to their recoverable amount through recognition of an impairment loss of Rs 191,759 thousand. This loss has been included in cost of services in the statement of comprehensive income. The impairment charge arose in apparatus, plant and equipment owing to malfunctioning of various asset items.
Note 2012 Rs 000 2011 Rs 000
13.3 13.4
13.5
The depreciation charge for the year has been allocated as follows: Cost of services Administrative and general expenses Selling and marketing expenses 27 28 29 11,444,749 175,174 58,392 11,678,315 11,398,220 174,462 58,155 11,630,837
13.6
Capital work-in-progress Buildings Lines and wires Apparatus, plant and equipment Advances to suppliers Others 708,890 5,259,593 3,099,674 337,790 375,340 9,781,287 990,060 5,356,202 8,015,151 1,436,450 157,195 15,955,058
66
Annual Report 2012
2012 Rs 000
2011 Rs 000
13.7
Movement during the year Balance as at July 01 Additions during the year Transfers during the year Balance as at June 30 15,955,058 7,996,938 (14,170,709) 9,781,287 14,258,596 13,156,046 (11,459,584) 15,955,058
13.8
Capital work-in-progress includes an amount of Rs 963,074 thousand (2011: Rs 322,580 thousand), in respect of direct overheads relating to development of assets.
Note Licenses Rs 000 Computer Software Rs 000 Total Rs 000
14.
Intangible assets
As at July 01, 2010 Cost Accumulated amortization Net book value Year ended June 30, 2011 Opening net book value Additions Amortization charge for the year Closing net book value As at July 01, 2011 Cost Accumulated amortization Net book value Year ended June 30, 2012 Opening net book value Additions Amortization charge for the year Closing net book value As at June 30, 2012 Cost Accumulated amortization Net book value 14.1
4,015,397 (1,259,165) 2,756,232 2,756,232 (196,415) 2,559,817 4,015,397 (1,455,580) 2,559,817 2,559,817 (194,931) 2,364,886 4,015,397 (1,650,511) 2,364,886
397,979 (75,180) 322,799 322,799 200,405 (46,894) 476,310 598,384 (122,074) 476,310 476,310 34,246 (75,783) 434,773 632,630 (197,857) 434,773
4,413,376 (1,334,345) 3,079,031 3,079,031 200,405 (243,309) 3,036,127 4,613,781 (1,577,654) 3,036,127 3,036,127 34,246 (270,714) 2,799,659 4,648,027 (1,848,368) 2,799,659
67
27
Note
2012 Rs 000
2011 Rs 000
14.1
Breakup of net book values as at June 30, is as follows: Licenses Telecom WLL spectrum WLL and LDI License IPTV 14.2 14.2 14.3 14.4 84,774 2,192,697 87,415 2,364,886 Computer software Bill printing software Billing and automation of broadband HP OSS SAP - Enterprise Resource Planning (ERP) system 14.5 14.5 14.5 14.6 2,733 17,659 31,964 382,417 434,773 2,799,659 94,747 2,371,695 92,880 495 2,559,817 4,374 26,873 445,063 476,310 3,036,127
14.2
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 01,1996, at an agreed license fee of Rs 249,344 thousand. During the year ended June 30, 2005, PTA modified the previously issued license to provide telecommunication services to include a spectrum license at an agreed license fee of Rs 3,646,884 thousand. This license allows the Company to provide Wireless Local Loop (WLL) services in Pakistan, over a period of 20 years, commencing October 2004. The cost of the license is being amortized on a straight-line basis over the period of the license. The Pakistan Telecommunication Authority (PTA) has issued a license under section 5 of the Azad Jammu and Kashmir Council Adaptation of Pakistan Telecommunication (Re-organization) Act, 1996, the Northern Areas Telecommunication (Reorganization) Act, 2005 and the Northern Areas Telecommunication (Re-organization) (Adaptation and Enforcement) Order 2006, to the Company to establish, maintain and operate a telecommunication system in Azad Jammu and Kashmir and GilgitBaltistan, for a period of 20 years, commencing May 28, 2008, at an agreed license fee of Rs 109,270 thousand. The cost of the license is being amortized, on a straight-line basis, over the period of the license. IPTV license expired on September 30, 2011 and the cost of the license is fully amortized during the year. The Company has applied for the renewal of the license. The cost of computer software is being amortized, on a straight-line basis, over a period of 5 years. This represents the cost of the SAP - Enterprise Resource Planning (ERP) system, with a useful life of 10 years, being amortized on a straight-line basis.
14.3
14.4 14.5 14.6
68
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
15.
Long-term investments
Investments in related parties Other investments 15.1 Investments in related parties - unquoted Wholly owned subsidiaries Pak Telecom Mobile Limited 650,000,000 (2011: 650,000,000) ordinary shares of Rs 10 each Ordinary shares held 100% (2011: 100%) Associate TF Pipes Limited 1,658,520 (2011: 1,658,520) ordinary shares of Rs 10 each Ordinary shares held 40% (2011: 40%) 15.2 Other investments Available-for-sale investments - unquoted Thuraya Satellite Telecommunication Company 3,670,000 (2011: 3,670,000) ordinary shares of 1 Dirham each Alcatel-Lucent Pakistan Limited 2,000,000 (2011: 2,000,000) ordinary shares of Rs 10 each New ICO Global Communications (Holdings) Limited 218,207 (2011: 218,207) ordinary shares of USD 0.01 per share Less: Provision for impairment World Tel Assembly of Governors Participation Fund investment of USD 100,000 (2011: USD 100,000) Less: Provision for impairment
15.1 15.2
6,523,539 83,900 6,607,439
6,523,539 83,900 6,607,439
6,500,000
6,500,000
23,539 6,523,539
23,539 6,523,539
63,900
63,900
20,000
20,000
15.2.1
104,708 (104,708)
15.2.1
83,900
6,390 (6,390) 83,900

69
15.2.1 These investments have been written-off during the year against provision for impairment.
Note 2012 Rs 000 2011 Rs 000
16.
Long-term loans and advances - considered good
Loans to PTML - unsecured Loans to employees - secured Advances to suppliers against turnkey contracts Others Less: Current portion shown under current assets Loans to PTML - unsecured Loans to employees - secured
16.1 16.2 16.3
11,000,000 723,703 3,444,453 12,852 15,181,008
11,000,000 607,268 2,633,759 5,576 14,246,603 (125,469) 14,121,134
19 19
(750,000) (119,054) 14,311,954
16.1
These represent various unsecured loans given to PTML under subordinated debt agreements, from 2008 to 2010, on the following terms:
First loan Second loan Third loan Fourth loan
Disbursement Date Loan (Rs 000) Mark-up Rate Grace Period Repayment method Due date of first installment
November 15, 2008 3,000,000 3 months Kibor plus 82 basis points 4 years Eight equal quarterly installments February 13, 2013
November 04, 2009 2,000,000 3 months Kibor plus 82 basis points 4 years Eight equal quarterly installments February 04, 2014
May 18, 2010 2,000,000 3 months Kibor plus 180 basis points 3 years Eight equal quarterly installments August 18, 2013
July 05, 2010 4,000,000 3 months Kibor plus 180 basis points 3 years Eight equal quarterly installments October 02, 2013
The maximum amount of the loan to PTML, outstanding at any time since the date of the previous statement of financial position, was Rs 11,000,000 thousand (2011: Rs 11,000,000 thousand). 16.2 These loans and advances are for house building and purchase of motor cars, motor cycles and bicycles. Loans to gazetted employees of the Company carry interest at the rate of 14% per annum (2011: 15% per annum), whereas, loans to employees other than gazetted employees are interest free. These loans are recoverable in equal monthly installments spread over a period of 5 to 10 years and are secured against future pension payments of the employees. This balance also includes a sum of Rs 2,449 thousand (2011: Rs 4,774 thousand), due from employees against purchase of vehicles from the Company, recoverable in monthly installments spread over a period of 1 to 2 years.
70
Annual Report 2012
16.2.1 Reconciliation of carrying amounts of loans to executives and other employees:

As at July 01, 2011 Rs 000 Disbursements Rs 000 Repayments Rs 000 As at June 30, 2012 Rs 000
Executives Other employees
11,752 595,516 607,268

As at July 01, 2010 Rs 000
853 245,615 246,468

Disbursements Rs 000
6,381 123,652 130,033

Repayments Rs 000
6,224 717,479 723,703

As at June 30, 2011 Rs 000
9,545 499,709 509,254
4,790 211,884 216,674
2,583 116,077 118,660
11,752 595,516 607,268
16.3
These represent various unsecured non-interest bearing advances issued to the Companys vendors under turnkey contracts. This includes an advance of Rs 61,961 thousand (2011: Rs 49,696 thousand) given to Telecom Foundation, a related party.
Note 2012 Rs 000 2011 Rs 000
17.
Stores, spares and loose tools
Stores, spares and loose tools Provision for obsolescence
17.1 17.2
3,595,530 (622,706) 2,972,824
3,896,680 (527,192) 3,369,488
17.1
Stores, spares and loose tools include items which may be capitalized as a part of property, plant and equipment but are not distinguishable.
Note 2012 Rs 000 2011 Rs 000
17.2
Provision for obsolescence Balance as at July 01 Provision during the year Written-off against provision 27 527,192 284,623 811,815 (189,109) 622,706 628,323 73,992 702,315 (175,123) 527,192
71
Note
2012 Rs 000
2011 Rs 000
18.
Trade debts - unsecured
Domestic Considered good Considered doubtful International Considered good Considered doubtful
18.1
7,769,178 9,490,723 17,259,901
7,517,948 13,594,288 21,112,236 1,653,903 840,327 2,494,230 23,606,466 (14,434,615) 9,171,851 924,074 1,102,252 2,026,326 105,006 73,109 178,115
18.2
1,016,634 165,512 1,182,146 18,442,047
Provision for doubtful debts
18.3
(9,656,235) 8,785,812
18.1
These include amounts due from the following related parties: Pak Telecom Mobile Limited The Government of Pakistan and its related entities 588,760 1,302,367 1,891,127
18.2
These include amounts due from the following related parties: Etisalat - UAE Eithad Etisalat Company - KSA These amounts are interest free and are accrued in the normal course of business. 107,199 107,199
18.3
Provision for doubtful debts Balance as at July 01 Provision for the year Provision transferred from MAXCOM Trade debts written-off against provision 28 14,434,615 1,853,559 16,288,174 (6,631,939) 9,656,235 18,566,724 1,614,876 5,744 20,187,344 (5,752,729) 14,434,615 125,469 460,655 586,124
19.
Loans and advances - considered good
Current portion of long-term loans to PTML Current portion of long-term loans to employees Advances to suppliers and contractors
16 16 19.1
750,000 119,054 499,161 1,368,215
72
Annual Report 2012
2012 Rs 000
2011 Rs 000
19.1
These include amounts due from the following related parties: TF Pipes Limited The Government of Pakistan and its related entities 6,841 6,715 13,556 11,887 11,887
These include an advance of Rs 6,841 thousand (2011: Rs 11,887 thousand) given to a related party accrued in the normal course of business.
Note 2012 Rs 000 2011 Rs 000
20.
Accrued interest
Return on bank deposits Mark-up on long-term loans Interest receivable on loans to employees - secured 20.1
20.1
110,724 251,418 64,385 426,527
167,158 279,082 62,623 508,863
This represents mark-up on loans to PTML, as indicated in note 16.1. Considered good Income tax Sales tax Federal Excise Duty Considered doubtful Federal Excise Duty Provision for doubtful amount 14,430,550 570,489 2,783,655 17,784,694 466,176 (466,176) 17,784,694 11,207,912 614,056 750,995 12,572,963 466,176 (466,176) 12,572,963
21.
Recoverable from tax authorities
21.1
21.1
Provision for doubtful recoverable from tax authorities Balance as at July 01 Provision for the year 466,176 466,176 466,176 466,176
22.
Receivable from The Government of Pakistan - considered good
This represents the balance amount receivable from the Government of Pakistan, on account of its agreed share in the Voluntary Separation Scheme (VSS), offered to the Companys employees during the year ended June 30, 2008.
73
Note
2012 Rs 000
2011 Rs 000
23.
Other receivables
Considered good Due from related parties: - PTML - against service charges for software maintenance - Etisalat - UAE against secondment of employees - Pakistan Telecommunication Employees Trust - PTCL employees GPF Trust - Universal Services Fund Others 2,798 57,625 104,801 86,606 240,000 174,636 666,466 Considered doubtful Provision for doubtful receivables 23.1 326,166 (326,166) 666,466 23.1 Provision for doubtful receivables Balance as at July 01 Provision for the year 28 326,166 326,166 185,239 140,927 326,166 2,356,872 285,506 2,642,378
2011 Rs 000
13,522 58,297 95,691 64,124 135,363 366,997 326,166 (326,166) 366,997
24.
Short-term investments
Term deposits - maturity upto 3 months Available-for-sale investments - units of mutual funds 24.1 Term deposits Askari Bank Limited Allied Bank Limited Askari Bank Limited Habib Bank Limited Bank Alfalah Limited Bank Alfalah Limited
24.1 24.2
9,611,508 317,893 9,929,401
Term months
Maturity Upto
Profit rate % per annum
2012 Rs 000
3 3 3 3 3 3
August 28, 2011 July 02, 2012 July 10, 2012 August 22, 2012 August 29, 2012 September 18, 2012
13.30 12.25 12.25 12.25 12.00 12.25
1,026,847 2,642,656 2,026,849 2,064,928 1,850,228 9,611,508
2,356,872 2,356,872
74
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
24.2
Available-for-sale investments 24.2.1 Units of mutual funds Units of open-end mutual funds: Pakistan Cash Management Fund 2,540,554 (2011: 2,236,062) units NAFA Government Securities Liquid Fund 6,384,990 (2011: 5,563,826) units BMA Empress Cash Fund 3,192,415 (2011: 2,733,117) units Faysal Saving Growth Fund 608,167 (2011: 546,288) units Askari Sovereign Cash Fund 313,124 (2011: 281,564) units 127,174 64,184 32,108 62,781 31,646 317,893 24.2.2 Movement in available-for-sale investments during the year: Balance as at July 01 Unrealised gain transferred to other comprehensive income - net of tax 285,506 32,387 317,893 254,916 30,590 285,506 226 5,893,448 1,453,073 282,160 1,735,233 7,628,907 114,411 57,638 28,844 56,262 28,351 285,506
25.
Cash and bank balances
Cash in hand Balances with banks: Deposit accounts Current accounts Local currency Foreign currency (USD 3,672 thousand (2011: USD 3,287 thousand)) 25.1
358,984 2,557,147 345,191 2,902,338 3,261,322
25.1 25.2
The balances in deposit accounts, carry mark-up ranging between 2% and 13.30% (2011: 5% to 13.30%) per annum. Deposit accounts include Rs 215,719 thousand (2011: Rs 3,691,898 thousand) under lien of bank, against letters of guarantees and letters of credits issued on behalf of the Company.
75
Note
2012 Rs 000
2011 Rs 000
26.
Revenue
Domestic International
26.1 26.2
54,290,471 5,747,783 60,038,254
49,951,388 5,302,626 55,254,014
26.1 26.2
Revenue is exclusive of Federal Excise Duty amounting to Rs 5,698,469 thousand (2011: Rs 5,957,830 thousand). International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and has been shown net of interconnect costs relating to other operators and Access Promotion Charges, aggregating to Rs 7,121,997 thousand (2011: Rs 11,241,321 thousand).
Note 2012 Rs 000 2011 Rs 000
27.
Cost of services
Salaries, allowances and other benefits Call centre charges Interconnect costs Foreign operators costs and satellite charges Fuel and power Communication Stores, spares and loose tools consumed Provision for obsolete stores, spares and loose tools Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Depreciation on property, plant and equipment Amortization of intangible assets Impairment on property, plant and equipment Annual license fee to Pakistan Telecommunication Authority (PTA)
27.1
17.2
13.5 14 13.4
11,771,474 426,658 2,585,923 8,789,817 4,089,691 8,490 1,758,446 284,623 899,518 1,935,720 215,732 10,536 11,444,749 270,714 191,759 214,162 44,898,012
11,008,434 303,815 2,742,012 7,820,618 3,398,492 7,980 1,432,599 73,992 826,553 2,006,296 320,109 9,828 11,398,220 243,309 222,508 41,814,765
27.1
This includes Rs 3,260,296 thousand (2011: Rs 2,626,984 thousand) in respect of employees retirement benefits.
76
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
28.
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 assistance fee Legal and professional charges Auditors remuneration Depreciation on property, plant and equipment Research and development fund Provisions: against doubtful debts against doubtful receivables Donations Loss on transfer of assets from MAXCOM Other expenses
28.1
28.2 28.3 13.5 28.4 18.3 23.1 28.5
1,199,396 63,999 307,816 148,841 11,325 3,331 84,287 1,912,281 206,213 14,654 175,174 239,281 1,853,559 40,162 1,509,976 7,770,295
1,121,649 45,572 255,790 258,780 11,739 4,942 78,623 1,764,098 195,342 12,425 174,462 220,230 1,614,876 140,927 46,575 6,144 1,423,782 7,375,956
28.1 28.2
This includes Rs 332,191 thousand (2011: Rs 268,383 thousand) in respect of employees retirement benefits. This represents the Companys share of the amount payable to Etisalat - UAE, a related party, under an agreement for technical services, at the rate of 3.5%, of the PTCL groups consolidated annual revenue.
2012 Rs 000 2011 Rs 000
28.3
Auditors remuneration A. F. Ferguson & Co. Statutory audit, including half yearly review Tax services Out of pocket expenses Ernst & Young Ford Rhodes Sidat Hyder Statutory audit, including half yearly review Tax services Out of pocket expenses 4,500 5,004 250 4,500 150 250 14,654 4,500 1,000 250 4,500 1,925 250 12,425
77
28.4
This represents the Companys contribution to the National Information Communication Technology, Research and Development Fund (National ICT R&D Fund), at the rate of 0.5% (2011: 0.5%) of its gross revenues less inter-operator payments and related PTA / FAB mandated payments, in accordance with the terms and conditions of its license to provide telecommunication services. There were no donations during the year in which the directors, or their spouses, had any interest.
Note 2012 Rs 000 2011 Rs 000
28.5
29.
Selling and marketing expenses
Salaries, allowances and other benefits Call centre charges Sales and distribution charges Fuel and power Printing and stationery Travelling and conveyance Advertisement and publicity Depreciation on property, plant and equipment
29.1
13.5
1,177,147 42,666 661,541 90,882 2,224 10,536 435,149 58,392 2,478,537
1,100,844 30,381 447,244 75,521 3,300 9,828 556,212 58,155 2,281,485
29.1
This includes Rs 326,030 thousand (2011: Rs 262,067 thousand) in respect of employees retirement benefits.
Note 2012 Rs 000 2011 Rs 000
30.
Other operating income
Income from financial assets: Return on bank deposits Mark-up on long-term loans Late payment surcharge from subscribers on overdue bills Dividend Exchange gain Income from non-financial assets: Dividend from a subsidiary - PTML Gain on disposal of items of property, plant and equipment Gain on sale of obsolete stores Liabilities no longer payable written back Secondment income from Etisalat, UAE - a related party Amortization of deferred government grants Others 1,400,000 58,625 180,980 1,800,660 58,852 142,160 221,280 6,596,103 30.1 3,144,000 140,924 63,264 527,760 75,545 78,804 273,163 7,839,617 30.1 1,000,905 1,532,679 199,962 1,734,105 1,575,318 181,749 36,000 8,985
30.2 10
This includes a sum of Rs 1,526,127 thousand (2011: Rs 1,566,957 thousand) accrued on the loans given to PTML, a related party.
78
Annual Report 2012
30.2
This includes Rs 1,340,114 thousand (2011: Rs Nil) related to reversal of liabilities on account of the National ICT R&D Fund, pursuant to an amendment in the Companys license by PTA.
Note 2012 Rs 000 2011 Rs 000
31.
Finance costs
Bank and other charges Exchange loss Imputed interest related to acquisition of MAXCOM
219,369 259,505 2,871 481,745
200,895 6,624 207,519 1,401,084 522,691 1,923,775 2,061,961 3,985,736
32.
Taxation
Current - for the year - for prior year Deferred 8
983,662 983,662 2,810,027 3,793,689
32.1
Tax charge reconciliation The numerical reconciliation between the average effective tax rate and the applicable tax rate is as follows:
2012 % 2011 %
Applicable tax rate Tax effect of amounts chargeable to tax at lower rates Effect of change in prior years tax
35.00 (0.53) (0.53)
35.00 (4.66) 4.58 (0.08) 34.92

2011
Average effective tax rate charged to the statement of comprehensive income
34.47
2012
33.
Earnings per share - basic and diluted
Profit for the year Weighted average number of ordinary shares Earnings per share
Rupees in thousand Numbers in thousand Rupees
7,212,079 5,100,000 1.41
7,428,170 5,100,000 1.46
79
34.
Non-funded finance facilities
The Company has non-funded financing facilities available with banks, which include facilities to avail letters of credit and letters of guarantee. The aggregate facility of Rs 16,625,000 thousand (2011: Rs 18,125,000 thousand) and Rs 5,500,000 thousand (2011: Rs 5,000,000 thousand) is available for letters of credit and letters of guarantee respectively, out of which the facility availed at the year end is Rs 5,133,626 thousand (2011: Rs 7,350,770 thousand). The letter of credit facility is secured by a hypothecation charge over certain assets of the Company, amounting to Rs 16,985,000 thousand (2011: Rs 11,650,333 thousand).
2012 Rs 000 2011 Rs 000
35.
Cash generated from operations
Profit before tax
11,005,768 11,949,029 191,759 1,853,559 3,918,517 2,871 (1,532,679) (58,625) 32,387 (1,400,000) (1,000,905) 284,623 (142,160) (1,800,660) 219,369 23,522,853
11,413,906 11,874,146 1,755,803 3,157,434 6,624 (1,566,957) (140,924) 30,590 (3,180,000) (1,734,105) 73,992 (78,804) 6,144 (527,760) 200,895 21,290,984
Adjustments for non-cash charges and other items: Depreciation and amortization Impairment Provision for doubtful trade debts and other receivables Employees retirement benefits Imputed interest on consideration payable on MAXCOM Interest on long-term loans Gain on disposal of property, plant and equipment Unrealized gain on available-for-sale investments - net of tax Dividend income Return on bank deposits Provision for obsolete stores, spares and loose tools Amortization of Government grants Loss on transfer of assets of MAXCOM Liabilities no longer payable written back Finance costs Effect on cash flows due to working capital changes: (Increase) / decrease in current assets: Stores, spares and loose tools Trade debts Loans and advances Recoverable from tax authorities Other receivables
112,041 (1,467,520) (38,506) (1,989,093) (66,745) (3,449,823)
632,383 (779,342) (33,868) (263,641) 415,260 (29,208)
Increase in current liabilities: Trade and other payables
473,894 20,546,924
228,059 21,489,835
80
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
36.
Cash and cash equivalents
Short-term investments Cash and bank balances
24 25
9,929,401 3,261,322 13,190,723
2,642,378 7,628,907 10,271,285
37.
Capacity
Access Lines Installed (ALI) 2012 2011 (Number)
Access Lines In Service (ALIS) 2012 2011
Number of lines
9,011,678
10,191,128
4,235,999
4,486,935
ALI represent switching lines. ALI include 268,565 (2011: 238,600) and ALIS include 92,156 (2011: 93,654) Primary Rate Interface (PRI) and Basic Rate Interface (BRI) respectively. ALI and ALIS also include 3,406,000 (2011: 3,764,600) and 1,424,248 (2011: 1,549,915) WLL connections, respectively. The difference between ALI and ALIS is due to pending and potential future demand. 38. Remuneration of Directors, Chief Executive 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 Chief Executive Executives
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
Managerial remuneration Honorarium Bonus Retirement benefits Housing Utilities
300 300
300 300 1
99,366 99,366 1
96,021 96,021 1
619,676 2,796 8,317 60,827 214,931 56,275 962,822 501
587,196 2,051 8,197 55,297 203,632 49,699 906,072 492
Number of persons
The Company also provides free medical and limited residential telephone facilities, to all its Executives, including the Chief Executive. The Chairman is entitled to free transport and a limited residential telephone facility, whereas, the Directors of the Company are provided only with limited telephone facilities; certain executives are also provided with the Company maintained cars.
81
The aggregate amount charged in the financial statements for the year as fee paid to 9 directors (2011: 9 directors), is Rs 32,765 thousand (2011: Rs 7,885 thousand) for attending the Board of Directors, and its sub-committee, meetings. 39. 40. Rates of exchange Financial risk management 40.1 Assets in foreign currencies have been translated into Rupees at USD 1.0638 (2011: USD 1.1648) equal to Rs 100, while liabilities in foreign currencies have been translated into Rupees at USD 1.0616 (2011: USD 1.1648) equal to Rs 100. 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 its financial performance. Risk management is carried out by the Board of Directors (the Board). The Board has prepared a 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) Market risk (i) 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), Swiss Franc (CHF), Arab Emirates Dirham (AED), EURO (EUR) and Australian Dollar (AUD). Currently, the Companys foreign exchange risk exposure is restricted to the amounts receivable from / payable to foreign entities. The Companys exposure to currency risk is as follows:
2012 Rs 000 2011 Rs 000
USD Trade and other payables Trade debts Cash and bank balances Net exposure AED Trade and other payables EUR Trade and other payables (5,151,602) 1,820,360 345,191 (2,986,051) (49,577) (3,006) (4,557,353) 2,494,230 282,160 (1,780,963) (45,094) (3,169)
82
Annual Report 2012
2012 Rs 000
2011 Rs 000
CHF Trade and other payables AUD Loans and advances The following significant exchange rates were applied during the year: Rupees per USD Average rate Reporting date rate Rupees per AED Average rate Reporting date rate Rupees per EUR Average rate Reporting date rate Rupees per CHF Average rate Reporting date rate Rupees per AUD Average rate Reporting date rate
3,028
(7,395) 2,337
2012
2011
94.55 94.20 25.53 25.65 117.99 118.50 99.02 98.62 96.17 95.55
85.46 85.85 23.40 23.40 124.54 124.44 90.41 103.35 84.95 92.19
If the functional currency, at the reporting date, had fluctuated by 5% against the USD, AED, EUR, CHF and AUD with all other variables held constant, the impact on profit after taxation for the year would have been Rs 98,657 thousand (2011: Rs 59,614 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. (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.
83
The Company is exposed to equity securities price risk, because of the investments held by the Company in money market mutual funds, and classified on the statement of financial position as available-for-sale. To manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio. The other financial assets include available-for-sale investments of Rs 317,893 thousand (2011: Rs 285,506 thousand) which were subject to price risk. If redemption price on mutual funds, at the year end date, fluctuate by 5% higher / lower with all other variables held constant, total comprehensive income for the year would have been Rs 15,895 thousand (2011: Rs 14,275 thousand) higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds. (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 date of the statement of financial position, the interest rate profile of the Companys interest bearing financial instruments is:
2012 Rs 000 2011 Rs 000
Financial assets Fixed rate instruments: Staff loans Short-term investments - term deposits Floating rate instruments: Long-term loans - loan to subsidiary Bank balances - deposit accounts 723,703 9,611,508 11,000,000 358,984 21,694,195 Fair value sensitivity analysis for fixed rate instruments The Company does not account for any fixed rate financial assets and liabilities at fair value. Therefore, a change in interest rates at the date of the statement of financial position would not affect the total comprehensive income of the Company. 607,268 2,356,872 11,000,000 5,893,448 19,857,588
84
Annual Report 2012
Cash flow sensitivity analysis for variable rate instruments If interest rates on long-term loans to subsidiary 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 73,833 thousand (2011: Rs 124,610 thousand) 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. The maximum exposure to credit risk at the reporting date is as follows:
2012 Rs 000 2011 Rs 000
Long-term investments Long-term loans and advances Trade debts Loans and advances Accrued interest Receivable from the Government of Pakistan Other receivables Short-term investments Bank balances
83,900 14,311,954 8,785,812 1,368,215 426,527 2,164,072 666,466 9,929,401 3,261,322 40,997,669
83,900 14,121,134 9,171,851 586,124 508,863 2,164,072 366,997 2,642,378 7,628,681 37,274,000
The credit risk on liquid funds is limited, because the counter parties are banks with reasonably high credit ratings. In case of trade debts the Company believes that it is not exposed to major concentrations of credit risk, as its exposure is spread over a large number of counter parties and subscribers. Long-term loans include a loan of Rs 11,000,000 thousand to the subsidiary PTML.
85
The credit quality of bank balances and short-term investments, 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:
Short term Rating Long term Rating Agency 2012 Rs 000 2011 Rs 000
National Bank of Pakistan Bank Alfalah Limited MCB Bank Limited Soneri Bank Limited Habib Metropolitan Bank Limited The Bank of Punjab NIB Bank Limited Habib Bank Limited Askari Bank Limited Allied Bank Limited United Bank Limited KASB Bank Limited Tameer Micro Finance Bank Bank AlHabib Limited Summit Bank Limited Dubai Islamic Bank (Pakistan) Limited Citibank, N.A HSBC Bank Middle East Limited Silkbank Limited SME Bank Limited Standard Chartered Bank (Pakistan) Limited Meezan Bank Limited Mutual Fund Arif Habib Mutual Fund NAFA Mutual Fund BMA Mutual Fund Faysal Mutual Fund Askari
A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A3 A1 A1+ A2 A1 A1 P1 A2 A3 A1+ A1+ AM 2 AM 2 AM 2 AM3+ AM3+
AAA AA AA+ AA AA+ AA AA AA+ AA AA AA+ BBB A AA+ A A A+ A1 A BBB AAA AA
JCRVIS PACRA PACRA PACRA PACRA PACRA PACRA PACRA PACRA PACRA JCRVIS PACRA JCRVIS PACRA JCRVIS JCRVIS S&Ps Moodys JCRVIS JCRVIS PACRA JCRVIS PACRA PACRA JCRVIS JCRVIS PACRA
2,149,008 3,906,379 12,485 23,095 4,921 6,197 3 1,987,647 2,599,634 1,129,868 403,263 1,758 590 161,774 3,721 251,446 131,582 939 212 715 61,021 36,572 127,174 64,184 32,108 62,781 31,646 13,190,723
3,960,627 1,641,487 29,020 22,554 4,966 177,474 79,872 3,432,092 159,985 4,924 228 141 167,569 3,537 59,252 148,889 1,416 5,857 645 33,574 51,444 114,411 57,638 28,844 56,262 28,351 10,271,059
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 non-performance by these counter parties on their obligations to the Company. Accordingly, the credit risk is minimal.
86
Annual Report 2012
(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, 2012:
Carrying amount Rs 000 Less than one year Rs 000 One to five years Rs 000 More than five years Rs 000
Long-term security deposits Employees retirement benefits Trade and other payables
707,668 18,250,681 16,815,690 35,774,039
16,815,690 16,815,690
707,668 707,668
18,250,681 18,250,681
The following are the contractual maturities of financial liabilities as at June 30, 2011:
Long-term security deposits Employees retirement benefits Trade and other payables Dividend payable
740,744 16,823,015 21,501,269 3,375,631 42,440,659
21,501,269 3,375,631 24,876,900
740,744 740,744
16,823,015 16,823,015
40.2
Fair value 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.
87
2012 Rs 000
Available-for-sale
2011 Rs 000
Loans and receivables 2012 Rs 000
2011 Rs 000
2012 Rs 000
Total
2011 Rs 000
40.3
Financial instruments by categories

Financial assets as per statement of financial position Long-term investments Long-term loans and advances Trade debts Loans and advances Accrued interest Receivable from the Government of Pakistan Other receivables Short-term investments Cash and bank balances 83,900 317,893 401,793 83,900 285,506 369,406 14,311,954 8,785,812 1,368,215 426,527 2,164,072 666,466 9,611,508 3,261,322 40,595,876 14,121,134 9,171,851 586,124 508,863 2,164,072 366,997 2,356,872 7,628,907 36,904,820 83,900 14,311,954 8,785,812 1,368,215 426,527 2,164,072 666,466 9,929,401 3,261,322 40,997,669 83,900 14,121,134 9,171,851 586,124 508,863 2,164,072 366,997 2,642,378 7,628,907 37,274,226
Total
Liabilities at fair value through profit or loss 2012 Rs 000
2011 Rs 000
Other financial liabilities 2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
Financial liabilities as per statement of financial position

Long-term security deposits Employees retirement benefits Trade and other payables Dividend payable 707,668 18,250,681 16,815,690 35,774,039 740,744 16,823,015 21,501,269 3,375,631 42,440,659 707,668 18,250,681 16,815,690 35,774,039 740,744 16,823,015 21,501,269 3,375,631 42,440,659
40.4
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 the Companys 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
88
Annual Report 2012
(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 and capital expenditure requirements, the Company primarily relies on internal cash generation and does not have any significant borrowings. 41. Transactions with related parties The Companys related parties comprise its subsidiary, associated undertakings, the Government of Pakistan and its related entities, employees retirement benefit plans, and key management personnel. Amounts due from / (to) related parties, are shown under respective receivable and payable balances. Remuneration of key management personnel is disclosed in note 38. Additionally, the Company had transactions with the following related parties during the year: Subsidiary Pak Telecom Mobile Limited Associated undertakings TF Pipes Limited Emirates Telecommunication Corporation Etisalat International Pakistan Etisalat - Afghanistan Etihad Etisalat Company - Kingdom of Saudi Arabia (KSA) Thuraya Satellite Telecommunication Company Employees retirement benefit plans Pakistan Telecommunication Employees Trust PTCL Employees GPF Trust Telecom Foundation The Government of Pakistan and its related entities
89
Transactions between the Company and its related parties, other than those which have been disclosed elsewhere in these financial statements, are:
2012 Rs 000
2011 Rs 000
Subsidiaries Sale of goods and services Purchase of goods and services Mark-up on long-term loans Disbursement of loan Associates Sale of goods and services Purchase of goods and services Dividend paid The Government of Pakistan and its related entities Sale of goods and services Purchase of goods and services National ICT R&D Fund Transfer under license agreements Dividend paid 42. 43. Events after the date of Statement of Financial Position Corresponding figures
5,220,732 2,627,487 1,526,127 1,062,547 1,105,115 2,088,450 2,199,865 8,470,233 239,281 350,763
5,410,401 1,973,658 1,567,735 4,000,000 3,598,964 1,294,902 2,088,450 1,784,686 7,228,382 220,230 623,080 5,549,369
The Company announced a Voluntary Separation Scheme (VSS). Pending acceptance by the employees the financial impact of VSS cannot be determined at present. Corresponding figures have been rearranged and reclassified, wherever necessary, for better presentation and disclosure:
Reclassification from Reclassification to Rs 000
Capital work-in-progress 44. 45. Date of authorization for issue General
Long-term loans and advances
2,633,759
These financial statements were authorized for issue on September 11, 2012 by the Board of Directors of the Company. Figures have been rounded off to the nearest thousand rupees, unless otherwise specified.
Chairman
90
President & CEO
Annual Report 2012
CONSOLIDATED FINANCIAL STATEMENTS
91
Pakistan Telecommunication Group
92
Annual Report 2012
AuDITOrS rEpOrT TO ThE MEMbErS ON CONSOLIDATED FINANCIAL STATEMENTS
We have audited the annexed consolidated financial statements comprising consolidated statement of financial position of Pakistan Telecommunication Company Limited (the Holding Company) and its subsidiary company, Pak Telecom Mobile Limited as at June 30, 2012 and the related consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity together with the notes forming part thereof, for the year then ended. We have also expressed separate opinion on the financial statements of Pakistan Telecommunication Company Limited. The financial statements of subsidiary company, Pak Telecom Mobile Limited, were audited by one of the joint auditors, A.F. Ferguson & Co., whose report has been furnished to us and our opinion, in so far as it relates to the amounts included for such company, is based solely on the report of the said joint auditor. These financial statements are the responsibility of the Holding Companys management. Our responsibility is to express an opinion on these financial statements based on our audit.
Our audit was conducted in accordance with the International Standards on Auditing and accordingly included such tests of accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the consolidated financial statements present fairly the financial position of Pakistan Telecommunication Company Limited and its subsidiary company as at June 30, 2012 and the results of its operations for the year then ended.
93
as at June 30, 2012
CONSOLIDATED STATEMENT OF FINANCIAL pOSITION
Note
2012 Rs 000
2011 Rs 000
Equity and liabilities
Equity Share capital and reserves Share capital Revenue reserves Insurance reserve General reserve Unappropriated profit Unrealized gain on available-for-sale investments Liabilities Non-current liabilities Long-term loans from banks Liability against assets subject to finance lease License fee payable Long-term security deposits Deferred taxation Employees retirement benefits Deferred government grants Long-term vendor liability Current liabilities Trade and other payables Interest accrued Short-term running finance Current portions of: Long-term loans from banks Liability against assets subject to finance lease License fee payable Long-term vendor liability Unearned income Dividend payable Total equity and liabilities
51,000,000 2,678,728 30,500,000 34,814,916 67,993,644 62,977 119,056,621
51,000,000 2,385,532 30,500,000 23,669,848 56,555,380 30,590 107,585,970
7 8 9 10 11 12 13 14
20,000,000 75,265 118,932 1,662,397 18,697,440 18,473,380 4,083,022 2,227,858 65,338,294 31,384,208 248,146 1,688,703 500,000 31,983 44,476 5,665,900 2,628,247 42,191,663 226,586,578
11,000,000 83,439 138,246 1,646,400 15,498,413 17,018,391 3,631,585 3,188,375 52,204,849 34,268,771 417,093 234,676 9,000,000 32,075 42,984 3,232,951 1,592,680 3,375,631 52,196,861 211,987,680
15 16 7 8 9 14
Contingencies and commitments The annexed notes from 1 to 52 form an integral part of these consolidated financial statements.
17
Chairman
94
Annual Report 2012
as at June 30, 2012
CONSOLIDATED STATEMENT OF FINANCIAL pOSITION
Note
2012 Rs 000
2011 Rs 000
Assets
Non-current assets Fixed assets Property, plant and equipment Intangible assets 18 19 149,893,160 3,547,121 153,440,281 Long-term investments Long-term loans and advances 20 21 110,870 4,133,080 157,684,231 Current assets Stores, spares and loose tools Stock-in-trade Trade debts Loans and advances Deposits and prepayments Accrued interest Recoverable from tax authorities Receivable from the Government of Pakistan Other receivables Short-term investments Cash and bank balances 153,539,989 3,906,996 157,446,985 107,553 3,186,519 160,741,057
22 23 24 25 26 27 28 29 30 31 32
2,972,824 436,067 10,164,030 2,538,023 1,116,452 175,661 18,811,420 2,164,072 798,362 25,853,301 3,872,135 68,902,347
3,369,488 569,742 9,434,885 773,746 1,295,348 377,822 13,317,194 2,164,072 504,042 2,642,378 16,797,906 51,246,623
Total assets
226,586,578
211,987,680
President & CEO

95
CONSOLIDATED STATEMENT OF COMprEhENSIVE INCOME
Note
2012 Rs 000
2011 Rs 000
Revenue Cost of services Gross profit Administrative and general expenses Selling and marketing expenses Other operating income Operating profit Finance costs Share of profit / (loss) from an associate Profit before tax Taxation Group Associate
33 34
110,793,288 (72,204,405) 38,588,883
102,551,197 (66,912,075) 35,639,122 (14,029,609) (7,510,628) 4,459,484 (17,080,753) 18,558,369 (2,774,014) 15,784,355 (1,357) 15,782,998 (7,377,376) (7,377,376) 8,405,622
35 36 37
(14,834,673) (8,163,769) 4,619,417 (18,379,025) 20,209,858 (3,305,222) 16,904,636 3,751 16,908,387 (5,469,689) (434)
38
39 Profit for the year Other comprehensive income for the year Unrealized gain on available-for-sale investments - net of tax Total comprehensive income for the year Earnings per share - basic and diluted (Rupees) The annexed notes from 1 to 52 form an integral part of these consolidated financial statements. 40
(5,470,123) 11,438,264
32,387 11,470,651 2.24
30,590 8,436,212 1.65
Chairman
96
President & CEO
Annual Report 2012
CONSOLIDATED STATEMENT OF CASh FLOWS
Note
2012 Rs 000
2011 Rs 000
Cash flows from operating activities
Cash generated from operations Long-term security deposits Employees retirement benefits paid Payment of other VSS components Finance costs paid Income tax paid Net cash inflows from operating activities
42
41,826,603 15,997 (2,574,670) (3,430,876) (5,274,254) 30,562,800 (21,941,261) (231,343) 101,880 (128,107) (26,350) 1,573,749 353,597 (20,297,835) 9,500,000 (9,000,000) 1,472,432 (40,160) (3,366,112) (1,433,840) 8,831,125 19,205,608
43,073,735 351,392 (1,924,391) (9,885) (2,491,915) (7,818,210) 31,180,726 (25,719,495) (514,795) 245,313 (187,012) (1,936,100) (31,912) 2,497,035 2,077,688 36,000 (23,533,278) 7,000,000 (10,018,112) (73,611) (8,916,542) (19,008,265) (11,360,817) 23,566,425 12,205,608
Cash flows from investing activities
Capital expenditure Acquisition of intangible assets Proceeds from disposal of property, plant and equipment Long-term loans and advances PTA WLL license fee paid Consideration paid related to acquisition of MAXCOM Return on long-term loans and short-term investments Government grants received Dividend income on long-term investments Net cash outflows from investing activities
Cash flows from financing activities
Long-term loan received Long-term loan paid Long-term vendor liability Liabilities against assets subject to finance lease Dividend paid Net cash outflows from financing activities Net increase / (decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year 43
28,036,733
The annexed notes from 1 to 52 form an integral part of these consolidated financial statements.
Chairman
President & CEO

97
CONSOLIDATED STATEMENT OF ChANgES IN EquITy
Issued, subscribed and paidup capital Class A Rs 000 Class B Rs 000
Insurance reserve Rs 000
Revenue reserves General reserve Rs 000
Unappropriated profit Rs 000
Unrealized gain on available-for-sale investments Rs 000
Total Rs 000
Balance as at July 01, 2010 Total comprehensive income for the year Profit for the year Other comprehensive income Transfer to insurance reserve Transactions with owners: Interim dividend for the year ended June 30, 2011 @ Rs 1.75 per ordinary share of Rs 10 each Total transactions with owners Balance as at June 30, 2011 Total comprehensive income for the year Profit for the year Other comprehensive income Transfer to insurance reserve Balance as at June 30, 2012
37,740,000
13,260,000
2,113,704 271,828
30,500,000
24,461,054 8,405,622 8,405,622 (271,828)
30,590 30,590
108,074,758 8,405,622 30,590 8,436,212
37,740,000 37,740,000
13,260,000 13,260,000
2,385,532 293,196 2,678,728
30,500,000 30,500,000
(8,925,000) (8,925,000) 23,669,848 11,438,264 11,438,264 (293,196) 34,814,916
30,590 32,387 32,387 62,977
(8,925,000) (8,925,000) 107,585,970 11,438,264 32,387 11,470,651 119,056,621
The annexed notes from 1 to 52 form an integral part of these consolidated financial statements.
Chairman
98
President & CEO
Annual Report 2012
NOTES TO AND FOrMINg pArT OF ThE CONSOLIDATED FINANCIAL STATEMENTS
1. 1.1
Legal status and nature of business Constitution and ownership The consolidated financial statements of the Pakistan Telecommunication Company limited and its subsidiaries (the Group) comprise of the financial statements of: Pakistan Telecommunication Company Limited (PTCL) Pakistan Telecommunication Company Limited (the holding Company) was incorporated in Pakistan on December 31, 1995 and commenced business on January 01, 1996. The holding Company, which is listed on Karachi, Lahore and Islamabad stock exchanges, was established to undertake the telecommunication business formerly carried on by Pakistan Telecommunication Corporation (PTC). PTCs business was transferred to the holding Company on January 01, 1996 under the Pakistan Telecommunication (Re-organization) Act, 1996, on which date, the holding Company took over all the properties, rights, assets, obligations and liabilities of PTC, except those transferred to the National Telecommunication Corporation (NTC), the Frequency Allocation Board (FAB), the Pakistan Telecommunication Authority (PTA) and the Pakistan Telecommunication Employees Trust (PTET). The registered office of the holding Company is situated at PTCL Headquarters, G-8/4, Islamabad. As a consequence of PTCLs privatization during 2006, 26 % of its shares were acquired by Eitisalat International Pakistan LLC, based in the UAE. Pak Telecom Mobile Limited (PTML) PTML was incorporated in Pakistan on July 18, 1998, as a public limited company to provide cellular mobile telephony services in Pakistan. PTML commenced its commercial operations on January 29, 2001, under the brand name of Ufone. It is a wholly owned subsidiary of PTCL. The registered office of PTML is situated at F-7 Markaz, Islamabad. 2.1
accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance, 1984 and 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. These financial statements are the consolidated financial statements of the Group. In addition to these consolidated financial statements, the holding Company and subsidiary company (PTML) also prepare separate financial statements. Adoption of new and revised standards and interpretations: a) The following amendments, revisions and interpretations to published accounting standards were not effective during the year and have not been early adopted by the group:
IFRS 7 IAS 1 IAS 12 IAS 16 IAS 19 IAS 27 IAS 28 IAS 32
Financial instruments: Disclosures (Amendments) Presentation of financial statements (Amendments) Income Taxes (Amendments) Property, Plant and Equipment (Amendments) Employee Benefits (Amendments) Consolidated and Separate Financial Statements (Revised) Investments in Associates (Revised) Financial Instruments Presentation (Amendments)
January 01, 2013 & January 01, 2015 July 01, 2012 & January 01, 2013 January 01, 2012 January 01, 2013 January 01, 2013 January 01, 2013 January 01, 2013 January 01, 2013 & January 01, 2014 January 01, 2013 January 01, 2013
1.2
Activities of the Group The Group provides telecommunication and broadband internet services in Pakistan. PTCL owns and operates telecommunication facilities and provides domestic and international telephone services throughout Pakistan. PTCL has also been licensed to provide such services to territories in Azad Jammu and Kashmir and Gilgit-Baltistan. PTML provides cellular mobile telephony services throughout Pakistan and Azad Jammu and Kashmir.
IAS 34 Interim Financial Reporting (Amendments) IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine
2.
Statement of compliance These consolidated financial statements have been prepared in accordance with the approved accounting standards as applicable in Pakistan. Approved
The management anticipates that, except for the effects on the consolidated financial statements of amendments to IAS 19 Employee Benefits, the adoption of the above standards, amendments and interpretations in future periods, will have no material impact on the Groups financial statements other than in presentation / disclosures. The application of the amendments to IAS 19 would result in the recognition of cumulative unrecognized actuarial gains /losses in other comprehensive income in the period of initial application, which cannot be presently quantified as on the date of the consolidated statement of financial position.
99
b)
The following new standards have been issued by the International Accounting Standards Board (IASB), which are yet to be notified by the Securities and Exchange Commission of Pakistan (SECP), for the purpose of their applicability in Pakistan:
(b)
IFRS 1 IFRS 9 IFRS 10 IFRS 11 IFRS 12 IFRS 13
First-Time Adoption of International Financial Reporting Standards (Amendments) Financial Instruments Consolidated Financial Statements Joint Arrangements Disclosure of Interests in Other Entities Fair Value Measurement
July 01, 2009 January 01, 2015 January 01, 2013 January 01, 2013 January 01, 2013 January 01, 2013
Provision for income taxes The Group recognizes income tax provisions using estimates based upon expert opinions of its tax and legal advisors. Differences, if any, between the recorded income tax provision and the Groups tax liability, are recorded on the final determination of such liability. Deferred income tax (note 5.20) is calculated at the rates that are expected to apply to the period when these temporary differences reverse, based on tax rates that have been enacted or substantively enacted, by the date of the consolidated statement of financial position. Useful life and residual value of fixed assets The Group reviews the useful lives and residual values of fixed assets (note 5.11) on a regular basis. Any change in estimates may affect the carrying amounts of the respective items of property, plant and equipment and intangible assets, with a corresponding effect on the related depreciation / amortization charge. Provision for stores, spares and loose tools A provision against stores, spares and loose tools is recognized after considering their physical condition and expected future usage. It is reviewed by the management on a quarterly basis.
(c)
c)
The following interpretations issued by the IASB have been waived off by the SECP, effective January 16, 2012:
IFRIC 4 Determining Whether an Arrangement Contains a Lease IFRIC 12 Service Concession Arrangements
(d)
3.
Basis of preparation These consolidated financial statements have been prepared under the historical cost convention, except for the revaluation of certain financial instruments at fair value and the recognition of certain employees retirement benefits on the basis of actuarial assumptions. Critical accounting estimates and judgments The preparation of consolidated financial statements in conformity with approved accounting standards requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Groups accounting policies. Estimates and judgments are continually evaluated and are based on historic experience, including expectations of future events that are believed to be reasonable under the circumstances. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are as follows: (a) Provision for employees retirement benefits The actuarial valuation of pension, gratuity, medical and accumulating compensated absences plans (note 5.21) requires the use of certain assumptions related to future periods, including increase in remuneration / medical costs, expected long-term returns on plan assets and the discount rate used to discount future cash flows to present values. 5.
(e)
Provision for doubtful receivables A provision against overdue receivable balances is recognized after considering the pattern of receipts from, and the future financial outlook of, the concerned receivable party. It is reviewed by the management on a regular basis.
4.
(f)
Provisions and contingent liabilities The management exercises judgment in measuring and recognizing provisions and the exposures to contingent liabilities related to pending litigation or other outstanding claims. Judgment is necessary in assessing the likelihood that a pending claim will succeed, or a liability will arise, and to quantify the possible range of the financial settlement. Because of the inherent uncertainty in this evaluation process, actual losses may be different from the originally estimated provision.
Summary of significant accounting policies The significant accounting policies adopted in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years for which financial information is presented in these consolidated financial statements, unless otherwise stated.
100
Annual Report 2012
5.1
Consolidation a) Subsidiary Subsidiaries are entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The consolidated financial statements include Pakistan Telecommunication Company Limited and all companies in which it directly or indirectly controls, beneficially owns or holds more than 50% of the voting securities or otherwise has power to elect and appoint more than 50% of its directors. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date control ceases to exist. The acquisition method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value and amount of any non controlling interest in the acquiree. For each business combination, the acquirer measures the non controlling interest in the acquiree either at fair value or at the proportionate share of the acquirees identifiable net assets. Acquisition costs incurred are expensed. If the business combination is achieved in stages, the acquisition date fair value of the acquirers previously held equity interest in the acquiree is remeasured to fair value as at the acquisition date through profit and loss. Any contingent consideration to be transferred by the acquirer is recognized at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration, which is deemed to be an asset or liability, will be recognized in accordance with IAS 39, either in profit or loss or charged to other comprehensive income. If the contingent consideration is classified as equity, it is remeasured until it is finally settled within equity. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date, irrespective of the extent of any non controlling interest. The excess of the cost of acquisition over the fair value of the Groups share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in income. Inter-company transactions, balances and unrealized gains on transactions between Group companies are eliminated. Unrealized losses on assets transferred are also eliminated and considered an impairment indicator b)
of such assets. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group. Associates Associates are entities over which the Group has significant influence, but not control, and generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting, and are initially recognized at cost. The Groups investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss. The Groups share of its associates post-acquisition profits or losses is recognized in the consolidated statement of comprehensive income, and its unrealized gains on transactions between the Group and its associates are eliminated to the extent of the Groups interest in the associates. Unrealized losses on the assets transferred are also eliminated to the extent of the Groups interest and considered an impairment indicator of such asset. Accounting policies of the associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognized in the consolidated statement of comprehensive income. 5.2 Functional and presentation currency Items included in the consolidated financial statements of the Group are measured using the currency of the primary economic environment in which the Group operates (the functional currency). These consolidated financial statements are presented in Pakistan Rupees (Rs), which is the Groups functional currency. 5.3 Foreign currency transactions and translations Foreign currency transactions are translated into the functional currency, using the exchange rates prevailing on the date of the transaction. Monetary assets and liabilities, denominated in foreign currencies, are translated into the functional currency using the exchange rate prevailing on the date of the consolidated statement of financial position. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary items at year end exchange rates, are charged to income for the year. 5.4 Insurance reserve The assets of the holding Company are self insured, as the holding Company has created an insurance reserve for this purpose. Appropriations out of profits to this
101
reserve, are made at the discretion of the Board of Directors. The reserve may be utilized to meet any losses to the holding Companys assets resulting from theft, fire, natural or other disasters. 5.5 Government grants Government grants are recognized at their fair values, as deferred income, when there is reasonable assurance that the grants will be received and the Group will be able to comply with the conditions associated with the grants. Grants that compensate the Group for expenses incurred, are recognized on a systematic basis in the income for the year in which the related expenses are recognized. Grants that compensate the Group for the cost of an asset are recognized in income on a systematic basis over the expected useful life of the related asset. 5.6 Borrowings and borrowing costs Borrowings are recognized equivalent to the value of the proceeds received by the Group. Any difference, between the proceeds (net of transaction costs) and the redemption value, is recognized in income, over the period of the borrowings, using the effective interest method. Borrowing costs, which are directly attributable to the acquisition and construction of a qualifying asset, are capitalized as part of the cost of that asset. All other borrowing costs are charged to income for the year. 5.7 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 Group. 5.8 Provisions Provisions are recognized when the Group 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 a reliable estimate of the amount can be made. Provisions are reviewed at each consolidated statement of financial position date and are adjusted to reflect the current best estimate. 5.9 Contingent liabilities A contingent liability is disclosed when the Group has a possible obligation as a result of past events, the existence of which will be confirmed only by the occurrence or non-occurrence, of one or more uncertain future events, not wholly within the control of the Group; or when the Group has a present legal or
102
constructive obligation, that arises from past events, but it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability. 5.10 Dividend distribution The distribution of the final dividend, to the Groups shareholders, is recognized as a liability in the consolidated financial statements in the period in which the dividend is approved by the Groups shareholders; the distribution of the interim dividend is recognized in the period in which it is declared by the Board of Directors. 5.11 Fixed assets (a) Property, plant and equipment Property, plant and equipment, except freehold land and capital work-inprogress, is stated at cost less accumulated depreciation and any identified impairment losses; freehold land is stated at cost less identified impairment losses, if any. Cost includes expenditure, related overheads, mark-up and borrowing costs referred to in note 5.6 that are directly attributable to the acquisition of the asset. Subsequent costs, if reliably measurable, 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 cost will flow to the Group. The carrying amount of any replaced parts as well as other repair and maintenance costs, are charged to income during the period in which they are incurred. Capital work-in-progress is stated at cost less impairment value, if any. It consists of expenditure incurred and advances made in respect of tangible and intangible fixed assets in the course of their construction and installation. Depreciation on assets is calculated, using the straight-line method, to allocate their cost over their estimated useful lives, at the rates mentioned in note 18.1. Depreciation on additions to property, plant and equipment, is charged from the month in which the relevant asset is acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Impairment loss, if any, or its reversal, is also charged to income for the year. Where an impairment loss is recognized, the depreciation charge is adjusted in future periods to allocate the assets revised carrying amount, less its residual value, over its estimated useful life.
Annual Report 2012
The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and the carrying amount of the asset, is recognized in income for the year. Assets subject to finance lease are stated at the lower of present value of minimum lease payments at inception of the lease period and their fair value less accumulated impairment losses and accumulated depreciation at the annual rates specified in note 18.1. The outstanding obligation under finance lease less finance charges allocated to future periods is shown as liability. Finance charges are calculated at interest rates implicit in the lease and are charged to the consolidated statement of comprehensive income in the year in which these are incurred. (b) Intangible assets (i) Goodwill Goodwill is initially measured at cost being the excess of the consideration transferred, over the fair value of subsidiarys identifiable assets acquired and liabilities assumed. After initial recognition, goodwill is measured at cost, less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Groups cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units. Where goodwill forms part of a cash generating unit and part of the operation within that unit is disposed off, the goodwill associated with the operation disposed off is included in the carrying amount of the operation, when determining the gain or loss on disposal of the operation. Goodwill disposed off, in this circumstances, is measured based on the relative values of the operation disposed off and the portion of the cash generating unit retained. (ii) Licenses These are carried at cost less accumulated amortization and any identified impairment losses. Amortization is calculated using the straight-line method, to allocate the cost of the license over its estimated useful life specified in note 19.1, and is charged to income for the year. The amortization on licenses acquired during the year, is charged from the month in which a license is acquired / capitalized, while no amortization is charged in the month of expiry / disposal of the license. 5.12
(iii) Computer software These are carried at cost less accumulated amortization, and any identified impairment losses. Amortization is calculated, using the straight-line method, to allocate the cost of software over their estimated useful life, at the rates specified in note 19.1, and is charged to income for the year. Costs associated with maintaining computer software, are recognized as an expense as and when incurred. Amortization on additions to computer software, is charged from the month in which the software is acquired or capitalized, while no amortization is charged for the month in which the software is disposed off. Impairment of non-financial assets Assets that have an indefinite useful life, for example freehold land, are not subject to depreciation and are tested annually for impairment. Assets that are subject to depreciation are reviewed for impairment on the date of consolidated statement of financial position, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized, equal to the amount by which the assets carrying amount exceeds its recoverable amount. An assets recoverable amount is the higher of its fair value less costs to sell and value-in-use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non-financial assets that suffered an impairment, are reviewed for possible reversal of the impairment at each consolidated statement of financial position date. Reversals of the impairment loss are restricted to the extent that assets carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss has been recognized. An impairment loss, or the reversal of an impairment loss, are both recognized in the income for the year. 5.13 Stores, spares and loose tools These are stated at the lower of cost and net realizable value. Cost is determined using the moving average method. Items in transit are valued at cost, comprising invoice values and other related charges incurred up to the date of the consolidated statement of financial position. 5.14 Stock in trade Stock in trade is valued at the lower of cost and net realizable value. Cost comprises the purchase price of items of stock, including import duties, purchase taxes and other related costs. Cost is determined on a weighted average basis.
103
Net realizable value is the estimated selling price in the ordinary course of business less estimated cost necessary to make the sale. 5.15 Trade debts Trade debts are carried at their original invoice amounts, less any estimates made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written-off when identified. 5.16 Financial instruments Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the instrument and derecognized when the Group loses control of the contractual rights that comprise the financial assets and in case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expires. All financial assets and liabilities are initially recognized at fair value plus transaction costs other than financial assets and liabilities carried at fair value through profit or loss. Financial assets and liabilities carried at fair value through profit or loss are initially recognized at fair value, and transaction costs are charged to income for the year. These are subsequently measured at fair value, amortized cost or cost, as the case may be. Any gain or loss on derecognition of financial assets and financial liabilities is included in income for the year. (a) Financial assets Classification and subsequent measurement The Group classifies its financial assets in the following categories: fair value through profit or loss, held-to-maturity investments, loans and receivables and available for sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Regular purchases and sales of financial assets are recognized on the trade date - the date on which the Group commits to purchase or sell the asset. (i) Fair value through profit or loss Financial assets at fair value through profit or loss, include financial assets held-for-trading and financial assets, designated upon initial recognition, at fair value through profit or loss. Financial assets at fair value through profit or loss are carried in the consolidated statement of financial position at their fair value, with changes therein recognized in the income for the year. Assets in this category are classified as current assets. (ii) Held-to-maturity Non-derivative financial assets with fixed or determinable payments
104
and fixed maturities are classified as held-to-maturity when the Group has the positive intention and ability to hold these assets to maturity. After initial measurement, held-to-maturity investments are measured at amortized cost using the effective interest method, less impairment, if any. (iii) Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments, that are not quoted in an active market. After initial measurement, these financial assets are measured at amortized cost, using the effective interest rate method, less impairment, if any. The Groups loans and receivables comprise Long-term loans and advances, Trade debts, Loans and advances, Accrued interest, Receivable from the Government of Pakistan, Other receivables and Cash and bank balances. (iv) Available-for-sale Available-for-sale financial assets are non-derivatives, that are either designated in this category, or not classified in any of the other categories. These are included in non-current assets, unless management intends to dispose them off within twelve months of the date of the consolidated statement of financial position. After initial measurement, available-for-sale financial investments are measured at fair value, with unrealized gains or losses recognized as other comprehensive income, until the investment is derecognized, at which time the cumulative gain or loss is recognized in income for the year. Impairment The Group assesses at the end of each reporting period whether there is an objective evidence that a financial asset or group of financial assets is impaired as a result of one or more events that occurred after the initial recognition of the asset (a loss event), and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. (b) Financial Liabilities Initial recognition and measurement The Group classifies its financial liabilities in the following categories: fair value through profit or loss and other financial liabilities. The Group determines the classification of its financial liabilities at initial recognition. All financial liabilities are recognized initially at fair value and, in the case of other financial liabilities, also include directly attributable transaction costs.
Annual Report 2012
Subsequent measurement The measurement of financial liabilities depends on their classification as follows: (i) Fair value through profit or loss Financial liabilities at fair value through profit or loss, include financial liabilities held-for-trading and financial liabilities designated upon initial recognition as being at fair value through profit or loss. Financial liabilities at fair value through profit or loss are carried in the consolidated statement of financial position at their fair value, with changes therein recognized in the income for the year. (ii) Other financial liabilities After initial recognition, other financial liabilities which are interest bearing are subsequently measured at amortized cost, using the effective interest rate method. (c) Offsetting of financial assets and liabilities Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position, if the Group has a legally enforceable right to set off the recognized amounts, and the Group either intends to settle on a net basis, or realize the asset and settle the liability simultaneously. 5.17 Cash and cash equivalents Cash and cash equivalents are carried at cost. For the purpose of the consolidated statement of cash flows, cash and cash equivalents comprise cash in hand, short-term finances under mark-up arrangements with banks and short-term highly liquid investments with original maturities of three months or less, and that are readily convertible to known amounts of cash, and subject to an insignificant risk of changes in value. 5.18 Revenue recognition Revenue comprises of the fair value of the consideration received or receivable, for the provision of telecommunication, broadband and related services in the ordinary course of the Groups activities and is recognized net of services tax, rebates and discounts. The Group principally obtains revenue from providing telecommunication services such as wireline and wireless services, interconnect, data services, equipment sales and cellular operations. Equipment and services may be sold separately or in bundled package. Revenue is recognized, when it is probable that the economic benefits associated with the transaction will flow to the Group, and the amount of revenue and the
associated cost incurred or to be incurred can be measured reliably, and when specific criteria have been met for each of the Groups activities as described below: (i) Rendering of telecommunication services Revenue from telecommunication services comprises of amounts charged to customers in respect of wireline and wireless services, equipment sales and interconnect, including data services. Revenue also includes the net income received and receivable from revenue sharing arrangements entered into with overseas and local telecommunication operators. Revenue from telecommunication services is recognized on an accrual basis, as the related services are rendered. Prepaid cards and electronic recharges allow the forward purchase of a specified amount of air time by customers; revenue therefrom is recognized as the airtime is utilized. Unutilized airtime is carried in the consolidated statement of financial position as unearned income. (a) Wireline and wireless services Revenue from wireline services, mainly in respect of line rent, line usage and broadband, is invoiced and recorded as part of a periodic billing cycle. Revenue from wireless services is recognized on the basis of consumption of prepaid cards which allow the forward purchase of a specified amount of airtime by customers; revenue is recognized as the airtime is utilized. Unutilized airtime is carried as deferred revenue. (b) Data services Revenue from data services is recognized when the services are rendered. (c) Interconnect Revenue from interconnect services is recognized when the services are rendered. (d) Equipment sales Revenue from sale of equipment is recognized when the equipment is delivered to the end customer and the sale is considered complete. For equipment sales made to intermediaries, revenue is recognized if the significant risks associated with the equipment are transferred to the intermediary and the intermediary has no right of return. If the significant risks are not transferred, revenue recognition is deferred until sale of the equipment to the end customer by the intermediary or the expiry of the right of return.
105
(ii) Income on bank deposits Return on bank deposits is recognized using the effective interest method. (iii) Dividend income Dividend income is recognized when the right to receive payment is established. 5.19 Operating lease Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases are charged to consolidated statement of comprehensive income on a straight line basis over the period of the lease. 5.20 Taxation The tax expense for the year comprises of current and deferred income tax, and is recognized in income for the year, except to the extent that it relates to items recognized directly in other comprehensive income, in which case the related tax is also recognized in other comprehensive income. (a) Current The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the date of the consolidated statement of financial position. Management periodically evaluates positions taken in tax returns, with respect to situations in which applicable tax regulation is subject to interpretation, and establishes provisions, where appropriate, on the basis of amounts expected to be paid to the tax authorities. (b) Deferred Deferred income tax is accounted for using the balance sheet liability method in respect of all temporary differences arising between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred income tax liabilities are 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 income tax is calculated at the rates that are expected to apply to the period when the differences reverse, and the tax rates that have been enacted, or substantively enacted, at the date of the consolidated statement of financial position.
5.21
Employees retirement benefits The Group operates various retirement / post retirement benefit schemes. The plans are generally funded through payments determined by periodic actuarial calculations or up to the limits allowed in the Income Tax Ordinance, 2001. The Group has constituted both defined contribution and defined benefit plans. The main features of the schemes operated by the Group in PTCL and its subsidiary - PTML are as follows: PTCL (a) PTCL Employees GPF Trust PTCL operates an approved funded provident plan covering its permanent employees. For the purposes of this plan, a separate trust, the PTCL Employees GPF Trust (the Trust), has been established. Monthly contributions are deducted from the salaries of employees and are paid to the Trust by the PTCL. Interest is paid at the rate announced by the Federal Government, and this rate for the year was 14% (2011: 14%) per annum. PTCL contributes to the fund, the differential, if any, of the interest paid / credited for the year and the income earned on the investments made by the Trust. (b) Defined benefit plans PTCL operates the following defined benefit plans: (i) Pension plans PTCL operates an approved funded pension plan through a separate trust, the Pakistan Telecommunication Employees Trust (PTET), for its employees recruited prior to January 01, 1996 when PTCL took over the business from PTC. The PTCL also operates an unfunded pension scheme for employees recruited on a regular basis, on or after January 01, 1996. (ii) Gratuity plan PTCL operates an unfunded and unapproved gratuity plan for its New Terms and Conditions (NTCs) employees and contractual employees. (iii) Medical benefits plan PTCL provides a post-retirement medical facility to pensioners and their families. Under this unfunded plan, all ex-employees, their spouses, their children up to the age of 21 years (except unmarried daughters who are not subject to the 21 years age limit) and their parents residing with them and any other dependents, are entitled to avail the benefits provided under the scheme. The facility remains valid during the lives of
106
Annual Report 2012
the pensioner and their spouse. Under this facility there are no annual limits to the cost of drugs, hospitalized treatment and consultation fees. (iv) Accumulating compensated absences PTCL provides a facility to its employees for accumulating their annual earned leaves. Under this plan, regular employees are entitled to four days of earned leaves per month. Unutilized leave balances can be accumulated without limit and can be used at any time, subject to the PTCLs approval, up to: (i) 120 days in a year without providing a medical certificate and (ii) 180 days with a medical certificate, but not exceeding 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 the rate of the latest emoluments applicable to employees, for calculating their monthly pension. 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 the second year of service, upto a maximum of 28 days. Unavailed annual leaves can be encashed at the time of leaving PTCL upto a maximum of two years of unavailed leaves. NTCs / contractual employees are entitled to three days of earned leaves per month. Unutilized leave balances can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed at the end of the employees service, based on the latest drawn gross salary. The liability recognized in the consolidated statement of financial position in respect of defined benefit plans, is the present value of the defined benefit obligations at the date of the statement of financial position less the fair value of plan assets, if any, together with adjustments for unrecognized actuarial gains / losses, if any. The defined benefit obligations are calculated annually, by an independent actuary using the projected unit credit method. The most recent valuations were carried out as at June 30, 2012. The present value of a defined benefit obligation is determined, by discounting the estimated future cash outflows, using the interest rates of high-quality corporate bonds that are nominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions, in excess of the corridor (10% of the higher of the fair value of the plan assets or the present value of the defined benefit obligation) at the beginning of the current reporting year, are recognized in the consolidated statement of comprehensive income, over the expected average remaining working lives of employees participating
in the defined benefit plan. Actuarial gains and losses arising on compensated absences are recognized immediately. PTML (a) PTML operates: (i) A funded gratuity scheme, a defined benefit plan, for all permanent employees. Annual contributions to the gratuity fund are based on actuarial valuation by independent actuary. The defined benefit obligation is calculated annually using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of government bonds that are denominated in Pakistan rupees and have terms to maturity approximating to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions in excess of the corridor limit as defined in IAS 19 are charged or credited in the consolidated statement of comprehensive income over the expected average remaining service life of employees. (ii) Approved contributory provident fund, a defined contribution plan, for all permanent employees, and for which, contributions are charged to the consolidated statement of comprehensive income.
(b) PTML provides a facility to its employees for accumulating their annual earned leaves. The liability is provided for on the basis of an actuarial valuation, carried out by independent actuary, using the projected unit credit method. The actuarial gains and losses are recognized in the consolidated statement of comprehensive income. 5.22 Operating segments Operating segments are reported in a manner consistent with the internal reporting of the Group in note 48 to the consolidated financial statements.
107
6.
Share capital
6.1
Authorized share capital

2012 2011 (Number of shares 000) 2012 Rs 000 2011 Rs 000
11,100,000 3,900,000 15,000,000 6.2
11,100,000 3,900,000 15,000,000
A class ordinary shares of Rs 10 each B class ordinary shares of Rs 10 each
111,000,000 39,000,000 150,000,000
111,000,000 39,000,000 150,000,000
Issued, subscribed and paid up capital

2012 (Number of shares 000) 2011 Rs 000 2012 Rs 000 2011
3,774,000
3,774,000
A class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash - note 6.3 and note 6.5 B class ordinary shares of Rs 10 each issued as fully paid for consideration other than cash - note 6.3 and note 6.6
37,740,000
37,740,000
1,326,000
1,326,000
13,260,000
13,260,000
5,100,000 6.3
5,100,000
51,000,000
51,000,000
These shares were initially issued to the Government of Pakistan, in consideration for the assets and liabilities transferred from Pakistan Telecommunication Corporation (PTC) to the holding Company, 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, for the purposes of election of directors. A class ordinary shares cannot 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 and submitted to the holding Company, by the holders of three fourths of the B class ordinary shares. In the event of termination of the license issued to the holding Company, under the provisions of Pakistan Telecommunication (Re-organization) Act, 1996, 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 its domestic investors, a first tranche of vouchers exchangeable for A class ordinary shares of the holding Company; subsequently, through an Information Memorandum dated September 16, 1994, a second tranche of vouchers was issued to international investors, also exchangeable, at the option of the voucher holders, for A class ordinary shares or Global Depository Receipts (GDRs) representing A class ordinary shares of the holding Company. Out of 3,774,000 thousand A class ordinary shares, vouchers against 601,084 thousand A class ordinary shares were issued to the general public. Till June 30, 2012, 599,523 thousand (2011: 599,514 thousand) A class ordinary shares had been exchanged for such vouchers.
6.4
6.5
108
Annual Report 2012
6.6
In pursuance of the privatization of the holding Company, a bid was held by the Government of Pakistan on June 08, 2005 for sale of B class ordinary shares of Rs 10 each, conferring management control. Emirates Telecommunication Corporation (Etisalat), UAE was the successful bidder. The 26% (1,326,000,000 shares) B class ordinary 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.
Note 2012 Rs 000 2011 Rs 000
7.
Long-term loans from banks
Secured From banks From consortia of banks Due within one year 7.1 7.2 16,500,000 4,000,000 20,500,000 (500,000) 20,000,000 9,000,000 11,000,000 20,000,000 (9,000,000) 11,000,000
7.1
From banks
Mark-up rate (3 month Kibor plus) Repayment commencement date Interest Principal Repayment installments Outstanding loan balance 2012 Rs 000 2011 Rs 000
Bank Al Habib Limited MCB Bank Limited MCB Bank Limited Faysal Bank Limited NIB Bank Limited Summit Bank Limited Meezan Bank Limited Meezan Bank Limited United Bank Limited Allied Bank Limited Al Baraka Bank Limited
1.80% 1.70% 1.15% 1.80% 1.75% 1.80% 1.65% 1.00% 1.15% 1.15% 1.15%
June, 2010 February, 2011 May, 2012 June, 2010 June, 2010 June, 2010 December, 2010 June, 2012 April, 2012 May, 2012 June, 2012
June, 2013 February, 2014 May, 2015 June, 2013 June, 2013 September, 2013 December, 2013 June, 2015 April, 2015 May, 2015 June, 2015
8 8 12 8 8 8 8 12 12 12 12
1,000,000 3,000,000 2,000,000 2,000,000 1,000,000 1,000,000 1,000,000 1,500,000 2,000,000 1,000,000 1,000,000 16,500,000
1,000,000 3,000,000 2,000,000 1,000,000 1,000,000 1,000,000 9,000,000
All loans, except for the loan balance of Rs 1,500,000 thousand from Meezan Bank, are secured by way of first charge ranking pari passu by way of hypothecation over all present and future moveable equipment and other assets (excluding land, building and license) of PTML. The above referred loan from Meezan Bank is secured by way of first charge ranking pari passu by way of hypothecation over all its present and future movable fixed assets described in the loan agreement with the bank. Principal and interest are repayable in quarterly installments.
109
7.2
This represents syndicated term finance loans obtained from consortia of banks as follows:
Mark-up rate (3 month Kibor plus) Principal Repayment Date Outstanding Loan Balance 2012 Rs 000 2011 Rs 000
Term financing - 1 Term financing - 2 Term financing - 3
0.69% 0.69% 1.35%
July, 2011 July, 2011 June, 2014
4,000,000 4,000,000
4,500,000 4,500,000 2,000,000 11,000,000
Syndicate term financing 1 and 2 were secured by first ranking pari passu charge by way of hypothecation over all present and future assets (excluding land and building) of PTML. Syndicated term financing 3 is secured by first ranking pari passu charge by way of hypothecation over all moveable fixed assets of PTML. Interest is payable quarterly. Principal for term finance 1 and 2 was payable in single installment and for term finance 3, it is payable in 8 quarterly installments. 8. Liability against assets subject to finance lease The minimum lease rental payments due under the lease agreements are payable in monthly installments up to December 2017. These have been discounted at the annual applicable implicit rate of interest. The amount of future lease payments and the period in which these will become due are as follows:
2012 Rs 000 2011 Rs 000
Gross obligation under finance lease Minimum lease payments due Not later than 1 year Later than 1 year and not later than 5 years Later than 5 year Finance charges allocated to future periods Net obligation under finance lease Current portion shown under current liabilities
36,538 146,150 16,136 198,824 (91,576) 107,248 (31,983) 75,265
36,630 146,150 52,674 235,454 (119,940) 115,514 (32,075) 83,439
8.1
The present value of finance lease liabilities is as follows: Not later than 1 year Later than 1 year and not later than 5 years Later than 5 year 31,983 71,093 4,172 107,248 32,075 71,093 12,346 115,514
110
Annual Report 2012
2012 Rs 000
2011 Rs 000
9.
License fee payable
License fee payable Imputed deferred interest Present value of license fee payable Current portion shown under current liabilities
188,400 (24,992) 163,408 (44,476) 118,932
214,750 (33,520) 181,230 (42,984) 138,246
9.1
This represents a license fee of USD 5,000 thousand, in respect of PTMLs operations in AJK, payable to PTA in ten equal annual installments without any interest commencing June 2007 to 2016, in USD or equivalent Pak Rupees. Accordingly, at initial recognition, the aggregate amount payable was discounted to the present value of future cash flows at the rate of 6% per annum.
2012 Rs 000 2011 Rs 000
10.
Long-term security deposits
1,662,397
1,646,400
These represent non-interest bearing security deposits received from distributors, franchisees and customers that are refundable on termination of the relationship with the Group. The holding Company has paid / adjusted a sum of Rs 45,913 thousand (2011: Rs 79,187 thousand) to its customers during the current year against their balances.
Note 2012 Rs 000 2011 Rs 000
11.
Deferred taxation
The liability for deferred taxation comprises of timing differences relating to: Accelerated tax depreciation / amortization Provision for doubtful trade debts / stocks Provision for doubtful advances and receivables Un-used tax losses Leased assets Others The gross movement in the deferred tax liability during the year is as follows: Balance as at July 01 Charge for the year Balance as at June 30 39 15,498,413 3,199,027 18,697,440 10,633,651 4,864,762 15,498,413
111
22,337,213 (3,531,886) (114,158) (8,136) 2,165 12,242 18,697,440
22,371,425 (5,455,302) (114,158) (1,576,553) 7,623 265,378 15,498,413
Note
2012 Rs 000
2011 Rs 000
12.
Employees retirement benefits
Liabilities for pension obligations Funded Unfunded 12.1 12.1 5,502,293 1,637,058 7,139,351 Gratuity Funded Unfunded Accumulating compensated absences Post-retirement medical facility 12.1 12.1 12.1 12.1 63,748 764,006 827,754 1,210,988 9,295,287 18,473,380 80,071 628,804 708,875 1,072,947 8,267,392 17,018,391 5,618,854 1,350,323 6,969,177
112
Annual Report 2012
12.1
The latest actuarial valuations of the Groups defined benefit plans, were conducted at June 30, 2012 using the projected unit credit method. Details of obligation for defined benefit plans are as follows:
Funded Pension 2011 Rs 000 Unfunded Funded Gratuity 2011 Rs 000 Unfunded Accumulating compensated absences Post-retirement medical facility Total
2012 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
a)
The amounts recognized in the consolidated statement of financial position: Present value of defined benefit obligations Fair value of plan assets note 12.3 Deficit Unrecognized actuarial gains / (losses) Liability as at June 30
66,448,037 (60,200,384) 6,247,653 (745,360) 5,502,293
65,980,987 (56,480,703) 9,500,284 (3,881,430) 5,618,854
1,572,484 1,572,484 64,574 1,637,058
1,313,614 1,313,614 36,709 1,350,323
328,484 (275,202) 53,282 10,466 63,748
281,751 (188,418) 93,333 (13,262) 80,071
638,099 638,099 125,907 764,006
515,026 515,026 113,778 628,804
1,210,988 1,210,988 1,210,988
1,072,947 1,072,947 1,072,947
10,356,829 10,356,829 (1,061,542) 9,295,287
9,326,900 9,326,900 (1,059,508) 8,267,392
80,554,921 (60,475,586) 20,079,335 (1,605,955) 18,473,380
78,491,225 (56,669,121) 21,822,104 (4,803,713) 17,018,391
b)
Changes in the present value of defined benefit obligations: Balance as at July 01 Current service cost Interest cost Actuarial (gains) / losses Benefits paid Charge for the year: Current service cost Interest cost Expected return on plan assets Actuarial (gains) / losses Contribution from deputationists Significant actuarial assumptions at the date of the consolidated statement of financial position: Expected rate of return on plan assets Discount rate Future salary / medical cost increase Future pension increase Average expected remaining working lives of members Expected mortality rate Expected withdrawal rate
65,980,987 553,399 9,237,338 (4,528,761) (4,794,926) 66,448,037
62,752,225 515,736 7,530,269 (431,751) (4,385,492) 65,980,987 515,736 7,530,269 (6,422,600) (614) 1,622,791
1,313,614 110,723 183,906 (27,865) (7,894) 1,572,484 110,723 183,906 294,629
1,139,102 132,290 136,692 (89,698) (4,772) 1,313,614 132,290 136,692 268,982
281,751 51,875 38,340 (27,692) (15,790) 328,484 51,875 38,340 (26,467) 63,748
209,446 68,722 25,133 (2,335) (19,215) 281,751 68,722 25,133 (13,898) 114 80,071
515,026 105,348 72,104 (22,508) (31,871) 638,099 105,348 72,104 (10,379) 167,073
423,702 109,430 50,844 (44,588) (24,362) 515,026 109,430 50,844 (5,364) 154,910
1,072,947 58,768 150,096 (25,737) (45,086) 1,210,988 58,768 150,096 (25,737) 183,127
1,019,098 54,874 122,292 (76,429) (46,888) 1,072,947 54,874 122,292 (76,429) 100,737
9,326,900 123,663 1,305,766 11,789 (411,289) 10,356,829 123,663 1,305,766 9,755 1,439,184
7,807,167 101,554 936,860 970,988 (489,669) 9,326,900 101,554 936,860 1,038,414
78,491,225 1,003,776 10,987,550 (4,620,774) (5,306,856) 80,554,921 1,003,776 10,987,550 (7,933,765) (26,361) (1,541) 4,029,659
73,350,740 982,606 8,802,090 326,187 (4,970,398) 78,491,225 982,606 8,802,090 (6,436,498) (81,679) (614) 3,265,905
c)
553,399 9,237,338 (7,907,298) (1,541) 1,881,898
d)
14% 13% 9-12% 8-20% 13 years
12% 14% 9-13% 8-20% 13 years
13% 9-12% 8% 15 years
14% 9-13% 8% 17 years
11.5% 12.5% 12.5%
12% 14% 14%
13% 9-12%
14% 9-13%
13% 9-12.5%
14% 9-14%
13% 12%
14% 13%
15 years
12 years
6 years
6 years EFU 6166* Based on experience
13 years
14 years
* Mortality table adjusted for Groups experience
113
12.2
Historical information
Rs 000
2012
Rs 000
2011
Rs 000
2010
Rs 000
2009
Rs 000
2008
Defined benefit pension plan - funded Present value of defined benefit obligations as at June 30 Fair value of plan assets as at June 30 Deficit in the plan Experience adjustments on plan liabilities (gains) / losses Experience adjustment on plan assets - (losses) / gains Defined benefit pension plan - unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities - (gains) / losses Defined benefit gratuity plan - funded Present value of defined benefit obligations as at June 30 Fair value plan assets at year end Deficit in the plan Experience adjustment on plan liabilities losses Experience adjustment on plan assets (losses) / gains Defined benefit gratuity plan unfunded Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Defined benefit accumulating compensated absences Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses Defined benefit postretirement medical facility Present value of defined benefit obligations as at June 30 Experience adjustment on plan liabilities (gains) / losses 10,356,829 11,789 9,326,900 970,988 7,807,167 955,960 6,448,686 940,121 5,195,430 (51,761) 1,210,988 (25,737) 1,072,947 (76,429) 1,019,098 (188,994) 1,084,390 45,308 880,970 18,328 638,099 (22,508) 515,026 (44,588) 423,702 (5,358) 314,871 (51,220) 251,226 41,126 328,484 (275,202) 53,282 (27,692) (3,964) 281,751 (188,418) 93,333 (2,335) 6,607 209,446 (115,814) 93,632 6,244 2,659 152,555 (82,072) 70,483 3,196 5,930 106,094 (64,002) 42,092 4,645 1,464 1,572,484 (27,865) 1,313,614 (89,698) 1,139,102 (37,370) 932,231 83,101 709,378 1,764 66,448,037 (60,200,384) 6,247,653 (4,528,761) (1,392,691) 65,980,987 (56,480,703) 9,500,284 (431,751) (366,071) 62,752,225 (53,521,666) 9,230,559 6,098,147 1,115,117 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)
114
Annual Report 2012
Note
2012 Rs 000
Defined benefit pension plan - funded
2011 Rs 000
2012 Rs 000
Defined benefit gratuity plan - funded
2011 Rs 000
12.3
Changes in the fair value of plan assets Balance as at July 01 Expected return on plan assets 12.3.1 Contributions made by the Group during the year Benefits paid Actuarial (losses) / gain on plan assets Balance as at June 30 Actual return on plan assets 56,480,703 7,907,298 2,000,000 (4,794,926) (1,392,691) 60,200,384 6,514,607 53,521,666 6,422,600 1,288,000 (4,385,492) (366,071) 56,480,703 6,056,529 188,418 26,467 80,071 (15,790) (3,964) 275,202 22,503 115,814 13,898 71,314 (19,215) 6,607 188,418 20,505
12.3.1 The expected return on plan assets is based on market expectations, and depends upon the asset portfolio of the funded defined benefit pension plan, held at the beginning of the year, for returns over the entire life of the related obligations. The expected rate of return on plan assets of funded defined benefit gratuity plan is based on current yield on investment in corporate bonds.
Defined benefit pension plan - funded Defined benefit gratuity plan - funded
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
12.4
Major categories of plan assets as a percentage of total plan assets, are as follows: Special Saving Certificates Defense Saving Certificates Pakistan Investment Bonds Term Deposits Fixed and other assets Debt instruments Cash Total
(Percentage)
(Percentage)
74 2 1 11 12 100
87 1 12 100
89 11 100
81 19 100
12.5
During the next financial year, the expected contribution to be paid to the funded pension plan and funded gratuity plan by the Group is Rs 1,401,219 thousand (2011: Rs 1,883,438 thousand) and Rs 63,748 thousand (2011: Rs 88,820 thousand) respectively.
115
12.6
Effect of increase / decrease in medical cost trend rate The effect of a 1% increase in the medical cost trend rate, on current service cost and interest cost, is Rs 30,174 thousand (2011: Rs 31,033 thousand) and the effect of a 1% decrease in the medical cost trend rate, on current service cost and interest cost, is Rs 24,984 thousand (2011: Rs 26,301 thousand). The effect of a 1% increase in the medical cost trend rate, on the present value of defined benefit obligations for medical cost, is Rs 3,070,800 thousand (2011: Rs 2,765,426 thousand) and the effect of a 1% decrease in the medical cost trend rate, on the present value of defined benefit obligations for medical cost, is Rs 2,566,422 thousand (2011: Rs 2,311,206 thousand).
Note 2012 Rs 000 2011 Rs 000
13.
Deferred government grants
Balance as at July 01 Recognized during the year Amortization for the year
13.1 37
3,631,585 593,597 (142,160) 4,083,022
1,632,701 2,077,688 (78,804) 3,631,585
13.1
These represent grants received / receivable from the Universal Service Fund, as assistance towards the development of telecommunication infrastructure in rural areas, comprising telecom infrastructure projects for basic telecom access, transmission and broadband services spread across the country. This represents an amount payable to a vendor in respect of procurement of network and allied assets, and comprises:
2012 Rs 000 2011 Rs 000
14.
Long-term vendor liability
Obligation under acceptance of bills of exchange Other accrued liabilities Current portion shown under current liabilities
7,100,647 793,111 7,893,758 (5,665,900) 2,227,858
5,798,800 622,526 6,421,326 (3,232,951) 3,188,375
116
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
15.
Trade and other payables
Trade creditors Accrued liabilities Receipts against third party works Income tax: collected from subscribers deducted at source
7,977,370 12,020,864 754,029 113,954 113,954
7,125,058 13,737,543 458,422 227,388 383,148 610,536 778,735 2,187,583 949,389 8,003,770 139,711 278,024 34,268,771
Sales tax payable Advances from customers Technical services assistance fee Retention money / Payable to contractors and suppliers related to fixed capital expenditure Unclaimed dividend Other liabilities
35.2
1,633,588 2,059,661 1,019,343 5,224,475 149,230 431,694 31,384,208
15.1
Trade and other payables include payable to the following related parties Trade creditors Etisalat - UAE Etisalat - Afghanistan Thuraya Satellite Telecommunication Company Telecom Foundation The Government of Pakistan and its related entities Technical services assistance fee Etisalat - UAE Retention money / Payable to contractors and suppliers related to fixed capital expenditure TF Pipes Limited Accrued liabilities Etisalat - UAE These balances relate to the normal course of business of the Group and are interest free.
117
247,107 38,262 9,774 109,597 3,728,184 4,132,924 1,019,343
333,442 12,659 10,355 118,569 5,252,755 5,727,780 949,389
4,143
3,719
580,335
547,036
Note
2012 Rs 000
2011 Rs 000
16.
Short-term running finance 16.1
16.1
1,688,703
234,676
Short term running finance facilities available under mark-up arrangements with banks amounting to Rs 2,000,000 thousand (2011: Rs 2,000,000 thousand), out of which the amount unavailed at the year end was Rs. 311,297 thousand (2011: Rs. 1,765,324 thousand). Contingencies PTCL
17.
Contingencies and commitments 17.1
A total of 1,744 cases (2011: 1,684 cases) have been filed against PTCL primarily involving subscribers and employees. Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial impact at present. However, the management and PTCLs legal advisors, are of the view that the outcome of these cases is expected to be favourable and a liability, if any, arising on the settlement of these cases is not likely to be material. Accordingly no provision has been made in these consolidated financial statements in this regard. In 1995, the Government of Pakistan (GoP), 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 on the GoP, seeking a restoration of its services and claimed damages from the GoP, amounting to Rs 2,261,924 thousand. The GoP ordered the immediate restoration of Pay Card services, including rebate relief and discounts to all pay phone service providers. In view of the relief and discounts offered by the GoP, Telecard Limited withheld payments on account of their monthly bills to PTCL, and obtained a stay order from the Honorable Sindh High Court, for an amount of Rs 110,033 thousand against PTCL. On the instructions of the Honorable Court, external consultants calculated the total amount of the rebate and discount, amounting to Rs 349,953 thousand, payable by PTCL to Telecard Limited for the period from January 1997 to August 2001. In the suit, final arguments of the parties are to be reheard. PTCL has also filed a counter claim against Telecard Limited for aggregate receivables, amounting to Rs 334,099 thousand, up to December 31, 2001. The management and PTCLs legal advisors, are of the view that the outcome of the case is expected to be favourable. Pending the decision of the court, no provision has been made in these consolidated financial statements. In a similar case, Telefon, lodged a claim of Rs 97,337 thousand against PTCL. In the last hearing, held on May 09, 2006, issues were framed and a decision made to record evidence in subsequent hearings. The management and PTCLs legal advisors, are of the view that the outcome of the appeal is expected to be favourable. Pending the decision of the court, no provision has been made in these consolidated financial statements.
17.2
17.3
An assessment order was passed by the Taxation Officer, on the basis of a revised return for the tax year 2007, filed by PTCL on June 30, 2009, creating an additional demand of Rs 5,185,163 thousand, by disallowing certain expenses under section 122(5A) of the Income Tax Ordinance, 2001. PTCL has filed an appeal against this order before the Commissioner Inland Revenue - Appeals (CIR - Appeals), who has
118
Annual Report 2012
granted relief of Rs 297,793 thousand. PTCL has filed an appeal against the remaining demand before the Honorable Appellate Tribunal Inland Revenue (ATIR), which has given its judgment regarding satellite charges amounting to Rs 231,001 thousand out of total disallowed expenses and endorsed the departmental view and presently PTCLs reference against the judgment of the ATIR, in this respect, is pending before the Honorable Islamabad High Court. No provision on this account has been made in these consolidated financial statements, as the management and the tax advisor of PTCL are of the view, that the matter will eventually be settled in favour of PTCL. 17.4 For the tax year 2008, the Taxation Officer raised a demand of Rs 4,559,208 thousand, on the plea that PTCL has erroneously applied an average rate of tax, while deducting withholding tax from payments made to employees under the Voluntary Separation Scheme (VSS), as the required options before the concerned Commissioners of income tax, were not filed by such employees. The Commissioner of Income Tax - Appeals (CIT - Appeals) upheld the decision of the Taxation Officer and while disposing off the ensuing second appeal, the Honorable ATIR remanded the case back to the Taxation Officer, for verification of filing of options before the concerned Commissioners, in the light of the related law. PTCL has also filed a reference application with the Honorable Islamabad High Court, which is pending adjudication. No provision on this account has been made in these consolidated financial statements, as the management and the tax advisor of PTCL are of the view, that the matter will eventually be settled in favour of PTCL. 17.5 For the tax year 2009, the Taxation Officer has disallowed certain expenses and International Revenue, (under section 122(5A) of the Income Tax Ordinance, 2001), and created an additional demand of Rs 4,638,249 thousand, which was subsequently reduced to Rs 3,439,222 thousand, through rectification. PTCL has filed an appeal against the order of the Taxation Officer, before the CIR - Appeals, who upheld the decision of the Taxation Officer and while disposing off the ensuing second appeal, the Honorable ATIR remanded the case back to the Taxation Officer except for the International Revenue. PTCL has already deposited an amount of Rs 533,861 thousand on account of International Revenue during the year ended June 30, 2011 and is currently in the process of filing reference application, in this respect, in the High Court. No provision on this account has been made in these consolidated financial statements, as the management and the tax advisor of PTCL are of the view, that the matter will eventually be settled in favour of PTCL. 17.6 Based on an audit of the Federal Excise Duty (FED) returns submitted for the period from July 2004 to June 2009, the Deputy Commissioner of Inland Revenue (DCIR), raised a demand of Rs 976,537 thousand, on the premise that PTCL has claimed total input tax, without apportioning the same between allowable and exempt supplies, and that the exempt supplies were also not declared in these returns. On the same grounds, the DCIR has raised an additional demand on August 02, 2011, amounting to Rs 313,420 thousand, for the period from July 2005 to June 2006 and July 2008 to June 2009. PTCL is in appeal against the said orders, before the CIR - Appeals and the Honorable Islamabad High Court has granted a stay order in this regard. No provision on this account has been made in these consolidated financial statements, as the management and the tax advisor of PTCL are of the view, that the matter will eventually be settled in favour of PTCL. 17.7 On July 16, 2011, the DCIR raised a demand of Rs 298,008 thousand, on the premise that PTCL has not paid FED on Technical Services Assistance fee, paid to the Etisalat Telecommunication Corporation of the United Arab Emirates, during the period from July 01, 2007 to June 30, 2009, on the grounds that the said fee has been paid under a Franchise agreement. On the
119
same grounds, the DCIR has raised an additional demand on February 27, 2012, amounting to Rs 176,409 thousand, for the period from July 01, 2010 to June 30, 2011. The case has been decided against PTCL by the CIR - Appeals and PTCL has filed an appeal before the ATIR. No provision on this account has been made in these consolidated financial statements, as the management and the tax advisor of PTCL are of the view, that the matter will eventually be settled in favour of PTCL. 17.8 On October 17, 2011, the Deputy Commissioner Inland Revenue (DCIR), raised a demand of Rs 2,782,660 thousand, on the premise that PTCL has not paid FED on its local interconnect revenue for the years from 2006 to 2009, aggregating to Rs 16,522,290 thousand, billed to mobile / landline operators and Long Distance and International operators. The case has been decided against PTCL by the Commissioner Inland Revenue (Appeals - II) and PTCL has filed an appeal before the ATIR which is pending for adjudication. In the month of June 2012, PTCL has deposited the principal amount under the amnesty scheme offered by the Federal Board of Revenue. Further, PTCL has not paid FED on local interconnect revenue for the period from 2010 to June 2012; however, no demand has been raised by the tax authorities for this period. The Government of Pakistan issued a notification dated June 30, 2012 in pursuance of section 65 of the Sales Tax Act, 1990 read with SRO 550(I)/2006 dated June 05, 2006 whereby the telecom companies were given relief from payment of FED on interconnect services up to June 30, 2012 by treating it as an inadvertent practice, provided the telecom companies commence payments of FED on interconnect services with effect from July 01, 2012. This SRO has not yet been published as a gazette notification, as it was challenged as an illegal act by the National Accountability Bureau (NAB). Currently, the matter is under investigation by NAB and it is not possible to predict the outcome of this investigation. No provision on this account has been made in these consolidated financial statements as the management and the tax advisor of PTCL are of the view, that the matter will eventually be settled in favour of PTCL.
2012 Rs 000 2011 Rs 000
17.9
Bank guarantees and bid bonds issued in favour of: Universal Service Fund (USF) against government grants Others 4,841,517 298,770 5,140,287 3,082,697 293,242 3,375,939
PTML 17.10 Letter of guarantee issued to PTA in compliance with license terms 12,293
17.11 Tax authorities have created Federal excise demands on payment of technical service fee to Etisalat by treating the same as fee for Franchise Service which contention has not been accepted by PTML and appeals are pending at various appellate fora. The management considers these demands frivolous as PTMLs services and brands have existed before employment of Etisalat as advisors. However, the management has paid Rs 501,541 thousand under protest which is recorded as receivable from taxation authorities as reflected in note 28.1 to the consolidated financial statements.
120
Annual Report 2012
17.12 PTML is contesting various claims made by the Income tax and Sales tax authorities before the CIT - Appeals, Income Tax Appellate Tribunal and Sales Tax Appellate Tribunal, Azad Jammu and Kashmir. These cases have either been decided in favour of PTML and now the Income tax department is in appeal before the High court or the case is pending but PTML is confident that this will result in a favourable outcome. No provision has been made there against in these consolidated financial statements since the management believes that PTML has a prima facie valid claim. Commitments - Group
Note 2012 Rs 000 2011 Rs 000
a) Letter of credit for purchase of stock b) Commitments for capital expenditure - for network assets - non network assets
170,881 18,851,375 498,956 19,350,331
256,867 17,523,567 197,987 17,721,554
c) Investment in Rozgar Microfinance Bank Limited
17.13
1,000,000
17.13 To acquire Rozgar Microfinance Bank Limited, the holding Company has signed Share Purchase Agreements with existing shareholders of the bank. The holding Company intends to invest Rs 1,000,000 thousand in this respect.
Note 2012 Rs 000 2011 Rs 000
18.
Property, plant and equipment
Operating fixed assets Capital work-in-progress
18.1 18.6
132,674,271 17,218,889 149,893,160
134,582,399 18,957,590 153,539,989
121
18.1
Operating fixed assets

Freehold - note 18.2 Rs 000
Land Leasehold Rs 000
Buildings on Freehold Leasehold land land Rs 000 Rs 000
Lines and wires Rs 000
Apparatus, plant and equipment Rs 000
Office equipment Rs 000
Computer and electrical equipment Rs 000
Furniture and fittings Rs 000
Vehicles Rs 000
Submarine cables Rs 000
Leased Network and allied systems
Rs 000
Total
As at July 01, 2010 Cost Accumulated depreciation Net book value Year ended June 30, 2011 Opening net book value Additions Disposals Cost Accumulated depreciation Depreciation charge for the year Net book value As at July 01, 2011 Cost Accumulated depreciation Net book value Year ended June 30, 2012 Opening net book value Additions Disposals Cost Accumulated depreciation Transfers / adjustments Depreciation charge for the year Impairment charge note 18.4 Net book value As at June 30, 2012 Cost Accumulated depreciation and impairment Net book value Annual rate of depreciation (%)
1,648,560 1,648,560 1,648,560 233 (900) (900) 1,647,893
921,678 (410,570) 511,108 511,108 66,978 (33,788) 20,457 (13,331) (155,357) 409,398
10,223,340 (3,220,635) 7,002,705 7,002,705 339,793 (620) 252 (368) (261,294) 7,080,836
1,008,671 106,288,703 204,081,778 (380,959) (80,166,213) (111,013,778) 627,712 26,122,490 93,068,000 627,712 (25,213) 602,499 26,122,490 1,878,997 (18,791) 18,791 (4,177,150) 23,824,337 93,068,000 14,354,411 (209,051) 148,098 (60,953) (15,143,817) 92,217,641
1,254,253 (733,125) 521,128 521,128 12,793 (2,524) 2,524 (66,055) 467,866
2,148,137 (1,109,502) 1,038,635 1,038,635 1,145,205 (11,724) 11,110 (614) (947,500) 1,235,726
487,000 (345,789) 141,211 141,211 6,943 (3,383) 2,855 (528) (23,490) 124,136
1,596,424 (1,303,749) 292,675 292,675 194,142 (53,398) 52,480 (918) (159,791) 326,108
5,739,955 (2,890,924) 2,849,031 2,849,031 4,087,738 (428,104) 6,508,665
335,398,499 (201,575,244) 133,823,255 157,637 133,823,255 22,244,870 (334,179) 256,567 (77,612)
(20,343) (21,408,114) 137,294 134,582,399
1,647,893 1,647,893
954,868 (545,470) 409,398
10,562,513 (3,481,677) 7,080,836
1,008,671 108,148,909 218,227,138 (406,172) (84,324,572) (126,009,497) 602,499 23,824,337 92,217,641
1,264,522 (796,656) 467,866
3,281,618 (2,045,892) 1,235,726
490,560 (366,424) 124,136
1,737,168 (1,411,060) 326,108
9,827,693 (3,319,028) 6,508,665
157,637 357,309,190 (20,343) (222,726,791) 137,294 134,582,399
1,647,893 1,471 1,649,364
409,398 3,641 (437) 353 (84) (487) (149,541) 262,927
7,080,836 323,470 (269,185) 7,135,121
602,499 (25,212) 577,287
23,824,337 2,342,395 (4,095,419) 22,071,313
92,217,641 15,000,980 (187,111) 150,408 (36,703) (284) (15,490,128) (191,759) 91,499,747
467,866 42,650 (45,081) 465,435
1,235,726 1,276,468 (44,456) 43,975 (481) 397 (856,298) 1,655,812
124,136 11,762 (264) 220 (44) 374 (25,494) 110,734
326,108 339,589 (61,911) 60,748 (1,163) (132,010) 532,524
6,508,665 751,295 (659,386) 6,600,574
137,294 (3,748)
134,582,399 20,093,721 (294,179) 255,704 (38,475) (3,748)
(20,113) (21,767,867) (191,759) 113,433 132,674,271
1,649,364 1,649,364
957,585 (694,658) 262,927 1 to 33
10,885,983 (3,750,862) 7,135,121 2.5
1,008,671 (431,384) 577,287 2.5
110,491,304
233,040,723
1,307,172 (841,737) 465,435 10
4,514,027 (2,858,215) 1,655,812 33.33
502,432 (391,698) 110,734 10
2,014,846 (1,482,322) 532,524 20
10,578,988 (3,978,414) 6,600,574 6.67 to 8.33
153,889
357,015,011
(88,419,991) (141,540,976) 22,071,313 7 91,499,747 10 to 33
(40,456) (244,238,954) 113,433 13.33 132,674,271
122
Annual Report 2012
18.2
As explained in note 1.1, the property and rights vesting in the operating assets, as at January 01, 1996, were transferred to PTCL from Pakistan Telecommunication Corporation, under the Pakistan Telecommunication (Re-organization) Act, 1996. However, the title to certain freehold land properties, were not formally transferred in the name of PTCL the land revenue records. PTCL initiated the process of transfer of title to freehold land, in its own name, in previous years, which is still ongoing and shall be completed in due course of time. Disposal of property, plant and equipment: The details of the disposals of property, plant and equipment, are as follows:
Cost Rs 000 Accumulated depreciation Rs 000 Net book value Rs 000 Sale proceeds Rs 000 Mode of disposal Particulars of purchaser
18.3
Appratus, plant and equipment
Motor vehicles Computer and accessories
21,646 18,884 19,479 5,164 787 299
6,339 13,658 5,967 4,045 185 115
15,307 5,226 13,512 1,119 602 184
15,307 518 13,512 1,291 602 184
Insurance claim Auction Insurance claim As per company policy Insurance claim As per company policy
EFU General Insurance Co. Karim Technologies EFU General Insurance Co. Mr Abdul Aziz Chief Executive Officer - PTML EFU General Insurance Co. Mr Sheikh Younas Iqbal Ex Chief Sales Officer - PTML
18.4
The carrying amount of certain items of apparatus, plant and equipment has been reduced to their recoverable amount through recognition of an impairment loss of Rs 191,759 thousand. This loss has been included in cost of services in the consolidated statement of comprehensive income. The impairment charge arose in apparatus, plant and equipment owing to malfunctioning of various asset items.
Note 2012 Rs 000 2011 Rs 000
18.5
The depreciation charge for the year has been allocated as follows: Cost of services Administrative and general expenses Selling and marketing expenses 34 35 36 20,539,887 1,169,588 58,392 21,767,867 20,221,074 1,128,848 58,192 21,408,114 990,060 5,356,202 10,543,252 1,436,450 631,626 18,957,590
123
18.6
Capital work-in-progress Buildings Lines and wires Apparatus, plant and equipment Advances to suppliers Others 708,890 5,259,593 9,742,803 337,790 1,169,813 17,218,889
2012 Rs 000
2011 Rs 000
18.7
Movement during the year Balance as at July 01 Additions during the year Transfers during the year Balance as at June 30 18,957,590 18,355,020 (20,093,721) 17,218,889 17,959,087 23,243,373 (22,244,870) 18,957,590
Capital work-in-progress includes an amount of Rs 963,074 thousand (2011: Rs 322,580 thousand), in respect of direct overheads relating to development of assets.
Licenses Rs 000 Computer Software Rs 000 Frequency vacation charges Rs 000 Total Rs 000
19.
Intangible assets
As at July 01, 2010 Cost Accumulated amortization Net book value Year ended June 30, 2011 Opening net book value Additions Amortization charge for the year Closing net book value As at July 01, 2011 Cost Accumulated amortization Net book value Year ended June 30, 2012 Opening net book value Additions Amortization charge for the year Closing net book value As at June 30, 2012 Cost Accumulated amortization Net book value
4,588,988 (1,437,003) 3,151,985 3,151,985 (234,654) 2,917,331 4,588,988 (1,671,657) 2,917,331 2,917,331 (233,170) 2,684,161 4,588,988 (1,904,827) 2,684,161
1,126,995 (375,259) 751,736 751,736 514,795 (341,396) 925,135 1,641,790 (716,655) 925,135 925,135 231,343 (335,248) 821,230 1,873,133 (1,051,903) 821,230
342,000 (254,670) 87,330 87,330 (22,800) 64,530 342,000 (277,470) 64,530 64,530 (22,800) 41,730 342,000 (300,270) 41,730
6,057,983 (2,066,932) 3,991,051 3,991,051 514,795 (598,850) 3,906,996 6,572,778 (2,665,782) 3,906,996 3,906,996 231,343 (591,218) 3,547,121 6,804,121 (3,257,000) 3,547,121
124
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
19.1
Breakup of net book values as at June 30, is as follows: Licenses - PTCL Telecom WLL spectrum WLL and LDI License IPTV Licenses - PTML 19.2 19.2 19.3 19.4 19.5 84,774 2,192,697 87,415 319,275 2,684,161 Computer software - PTCL Bill printing software Billing and automation of broadband HP OSS SAP - Enterprise Resource Planning (ERP) system Software - PTML Frequency vacation charges 19.6 19.6 19.6 19.7 19.8 19.9 2,733 17,659 31,964 382,417 386,457 821,230 41,730 3,547,121 94,747 2,371,695 92,880 495 357,514 2,917,331 4,374 26,873 445,063 448,825 925,135 64,530 3,906,996
19.2
The Pakistan Telecommunication Authority (PTA) has issued a license to the holding Company, to provide telecommunication services in Pakistan, for a period of 25 years, commencing January 01,1996, at an agreed license fee of Rs 249,344 thousand. During the year ended June 30, 2005, PTA modified the previously issued license to provide telecommunication services to include a spectrum license at an agreed license fee of Rs 3,646,884 thousand. This license allows the holding Company to provide Wireless Local Loop (WLL) services in Pakistan, over a period of 20 years, commencing October 2004. The cost of the license is being amortized on a straight-line basis over the period of the license. The Pakistan Telecommunication Authority (PTA) has issued a license under section 5 of the Azad Jammu and Kashmir Council Adaptation of Pakistan Telecommunication (Re-organization) Act, 1996, the Northern Areas Telecommunication (Reorganization) Act, 2005 and the Northern Areas Telecommunication (Re-organization) (Adaptation and Enforcement) Order 2006, to the holding Company to establish, maintain and operate a telecommunication system in Azad Jammu and Kashmir and Gilgit-Baltistan, for a period of 20 years, commencing May 28, 2008, at an agreed license fee of Rs 109,270 thousand. The cost of the license is being amortized, on a straight-line basis, over the period of the license.
19.3
19 .4 IPTV license expired on September 30, 2011 and the cost of the license is fully amortized during the year. The holding Company has applied for the renewal of the license.
125
19.5 19.6 19.7 19.8 19.9
PTA has issued two licenses to PTML to establish, maintain and operate cellular services in Pakistan and Azad Jammu and Kashmir for a period of 15 years commencing May 1999 and June 2006 respectively. The cost of computer software is being amortized, on a straight-line basis, over a period of 5 years. This represents the cost of the SAP - Enterprise Resource Planning (ERP) system, with a useful life of 10 years, being amortized on a straight-line basis. This represents machine independent IT software with a useful life of 3 years, being amortized on straight-line basis. Vacancy charges comprise the amount paid in year 2000 to Special Communication Organization, on initial vacation of their equipment and releasing the spectrum in favour of PTML. It has a useful life of 15 years.
19.10 The amortization charge for the year has been allocated as follows:
Note 2012 Rs 000 2011 Rs 000
Cost of services Administrative and general expenses
34 35
331,753 259,465 591,218
304,348 294,502 598,850 23,653 83,900 107,553
20.
Long-term investments
Investments in related party Other investments 20.1 Investments in related party - unquoted Associate TF Pipes Limited 1,658,520 (2011: 1,658,520) ordinary shares of Rs 10 each Ordinary shares held 40% (2011: 40%) Cost Post acquisition profit 20.1.1 The net assets of the associate - TF Pipes Limited are as follows: Total assets Total liabilities Revenue Expenses Profit / (loss) before tax
20.1 20.2
26,970 83,900 110,870
23,539 3,431 26,970 90,894 43,128 171,402 162,024 9,378
23,539 114 23,653 103,556 62,022 182,599 187,042 (3,393)
126
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
20.2
Other investments Available-for-sale investments - unquoted Thuraya Satellite Telecommunication Company 3,670,000 (2011: 3,670,000) ordinary shares of 1 Dirham each Alcatel-Lucent Pakistan Limited 2,000,000 (2011: 2,000,000) ordinary shares of Rs 10 each New ICO Global Communications (Holdings) Limited 218,207 (2011: 218,207) ordinary shares of USD 0.01 per share Less: Provision for impairment World Tel Assembly of Governors Participation Fund investment of USD 100,000 (2011: USD 100,000) Less: Provision for Impairment
63,900
63,900
20,000
20,000
20.2.1
104,708 (104,708)
20.2.1
83,900
6,390 (6,390) 83,900

2011 Rs 000
20.2.1 These investments have been written-off during the year against provision for impairment.
Note 2012 Rs 000
21.
Long-term loans and advances - considered good
Loans to employees - secured PTCL PTML
21.1 21.2
723,703 94,570 818,273
607,268 83,622 690,890 2,633,759 5,576 3,330,225 (143,706) 3,186,519
Advances to suppliers against turnkey contracts Others Less: Current portion shown under current assets Loans to employees - secured
21.4
3,444,453 12,852 4,275,578
25
(142,498) 4,133,080
127
21.1
These loans and advances are for house building and purchase of motor cars, motor cycles and bicycles. Loans to gazetted employees of the holding Company carry interest at the rate of 14% per annum (2011: 15% per annum), whereas, loans to employees other than gazetted employees are interest free. The loans are recoverable in equal monthly installments spread over a period of 5 to 10 years and are secured against future pension payments of the employees. This balance also includes a sum of Rs 2,449 thousand (2011: Rs 4,774 thousand), due from employees against purchase of vehicles from the holding Company, recoverable in monthly installments spread over a period of 1 to 2 years.
21.2
These represent interest free housing loans provided to eligible executive employees in accordance with the PTMLs policy. The loans are secured against property located within Pakistan and owned by the employee. The loans are recoverable over a period of seven and a half years in equal installments. Reconciliation of carrying amounts of loans to executives and other employees: PTCL
As at July 01, 2011 Rs 000 Disbursements Rs 000 Repayments Rs 000 As at June 30, 2012 Rs 000
21.3
11,752 595,516 607,268

As at July 01, 2010 Rs 000
853 245,615 246,468

Disbursements Rs 000
6,381 123,652 130,033

Repayments Rs 000
6,224 717,479 723,703

As at June 30, 2011 Rs 000
9,545 499,709 509,254
4,790 211,884 216,674
2,583 116,077 118,660
11,752 595,516 607,268
PTML
2012 Rs 000 Chief Executive Officer 2011 Rs 000 Key management personnel 2012 Rs 000 2011 Rs 000
Balance as at July 01 Disdursements during the year Repayments / transfers during the year Balance as at June 30
60,200 (8,400) 51,800
63,000 (2,800) 60,200
71,014 56,168 (30,445) 96,737
73,780 (2,766) 71,014
The maximum amount due from the Chief Executive Officer and key management personnel at the end of any month during the year was Rs 170,073 thousand (2011: Rs 131,214 thousand). 21.4
128
These represent various unsecured non-interest bearing advances issued to the Groups vendors under turnkey contracts. This includes an advance of Rs 61,961 thousand (2011: Rs 49,696 thousand) given to Telecom Foundation, a related party.
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
22.
Stores, spares and loose tools
Stores, spares and loose tools Provision for obsolescence
22.1 22.2
3,595,530 (622,706) 2,972,824
3,896,680 (527,192) 3,369,488
22.1
Stores, spares and loose tools include items which may be capitalized as a part of property, plant and equipment but are not distinguishable.
Note 2012 Rs 000 2011 Rs 000
22.2
Provision for obsolescence Balance as at July 01 Provision during the year Written-off against provision 34 527,192 284,623 811,815 (189,109) 622,706 628,323 73,992 702,315 (175,123) 527,192 160,002 20,155 446,307 626,464 (56,722) 569,742
23.
Stock-in-trade
SIM cards Scratch cards Mobile phones Provision for slow moving stock and warranty against mobile phones
239,893 39,982 296,295 576,170 (140,103) 436,067
129
Note
2012 Rs 000
2011 Rs 000
24.
Trade debts
PTCL - unsecured Domestic Considered good Considered doubtful
24.1
7,180,418 9,490,723 16,671,141
6,593,874 13,594,288 20,188,162
International Considered good Considered doubtful
24.2
1,016,634 165,512 1,182,146
1,653,903 840,327 2,494,230
PTML Considered good - secured Considered good - unsecured Considered doubtful - unsecured
24.3 24.2
709,998 1,256,980 284,802 2,251,780 20,105,067
639,564 547,544 263,855 1,450,963 24,133,355 (14,698,470) 9,434,885
Provision for doubtful debts
24.4
(9,941,037) 10,164,030
24.1
These include amounts of Rs 1,302,367 thousand (2011: Rs 1,102,252 thousand) due from the Government of Pakistan and its related entities, a related party.
2012 Rs 000 2011 Rs 000
24.2
These include amounts due from the following related parties: Etisalat - UAE Eithad Etisalat Company - KSA These amounts are interest free and are accrued in the normal course of business. 27,130 107,199 134,329 127,469 73,109 200,578
130
Annual Report 2012
24.3
These are secured against customer and dealer deposits having aggregate amount of Rs 958,351 thousand (2011: Rs 905,656 thousand). These also include unbilled revenue related to postpaid subscribers, aggregating to Rs 233,000 thousand (2011: Rs 200,000 thousand).
Note 2012 Rs 000 2011 Rs 000
24.4
Provision for doubtful debts Balance as at July 01 Provision for the year Trade debts written-off against provision 35 14,698,470 1,874,506 16,572,976 (6,631,939) 9,941,037 18,806,183 1,645,016 20,451,199 (5,752,729) 14,698,470
25.
Loans and advances
Loans Current portion of long-term loans to employees considered good Short-term loan - unsecured considered doubtful Provision for short-term loan Advances - considered good Current portion of long-term loans to subsidiaries Advances to employees Advances to suppliers and contractors Advances to taxation authorities
21 25.1
142,498 9,964 (9,964)
143,706 9,964 (9,964)
25.2 25.3 25.4
88,355 542,326 1,764,844 2,395,525 2,538,023
40,101 589,939 630,040 773,746
25.1
This represents a loan to Pakistan MNP Database (Guarantee) Limited, a related party, for working capital purposes, carrying interest at 17% (2011:17%) per annum. The loan was due for repayment on June 30, 2010. However, no repayment was received till June 30, 2012 and full provision has been made against this balance. These include advances to executives and key management personnel amounting to Rs 7,568 thousand (2011: Rs 6,026 thousand) and of Rs 2,719 thousand (2011: Rs 1,665 thousand) respectively.
25.2
131
2012 Rs 000
2011 Rs 000
25.3
These include amounts due from the following related parties: TF Pipes Limited The Government of Pakistan and its related entities 6,841 6,715 13,556 11,887 11,887
25.4
This represents amount deposited into the government treasury which will be adjusted against the future income tax collections by the Group from its customers.
2012 Rs 000 2011 Rs 000
26.
Deposits and prepayments
Deposits Security deposits Margin against letter of credit Prepayments Site rentals Maintenance Others
60,996 4,195 65,191 910,475 93,638 47,148 1,051,261 1,116,452
63,553 21,748 85,301 798,387 354,786 56,874 1,210,047 1,295,348 315,199 62,623 377,822
27.
Accrued interest
Return on bank deposits Interest receivable on loans to employees - secured
111,276 64,385 175,661
28.
Recoverable from tax authorities
Considered good Income tax Sales tax Federal Excise Duty Considered doubtful Federal Excise Duty Provision for doubtful amount
28.1
14,955,735 570,489 3,285,196 18,811,420 466,176 (466,176) 18,811,420
11,952,143 614,056 750,995 13,317,194 466,176 (466,176) 13,317,194
132
Annual Report 2012
28.1
As explained in note 17.11, this includes federal excise duty (on technical services fee) paid by PTML to the taxation authorities amounting to Rs 501,541 thousand (2011: Rs Nil).
2012 Rs 000 2011 Rs 000
28.2
Provision for doubtful recoverable from tax authorities Balance as at July 01 Provision for the year 466,176 466,176 466,176 466,176
29.
Receivable from The Government of Pakistan - considered good
This represents the balance amount receivable from the Government of Pakistan, on account of its agreed share in the Voluntary Separation Scheme (VSS), offered to the holding Companys employees during the year ended June 30, 2008.
Note 2012 Rs 000 2011 Rs 000
30.
Other receivables
Considered good Due from related parties: - Etisalat - UAE against secondment of employees - Pakistan Telecommunication Employees Trust - PTCL employees GPF Trust - Universal Services Fund Other receivables from: Vendors Forward foreign exchange contracts Others 57,625 104,801 86,606 240,000 39,202 20,932 249,196 798,362 Considered doubtful Provision for doubtful receivables 30.2 326,166 (326,166) 798,362 30.1 58,297 95,691 64,124 113,067 172,863 504,042 326,166 (326,166) 504,042
30.1
This represents fair value of forward foreign exchange contracts entered into by the Group to hedge its foreign currency exposure. As at June 30, 2012, the Group had forward exchange contracts to purchase USD 51,137 thousand (2011: USD Nil) at various maturity dates matching the anticipated payment dates for network liability.
133
Note
2012 Rs 000
2011 Rs 000
30.2
Provision for doubtful receivables Balance as at July 01 Provision for the year Balance as at June 30 35 326,166 326,166 31.1 31.2 31.3 15,923,900 9,611,508 317,893 25,853,301 185,239 140,927 326,166 2,356,872 285,506 2,642,378
31.
Short-term investments
At fair value through profit or loss Term deposits - maturity up to 3 months Available-for-sale investments - units of mutual funds
31.1
At fair value through profit or loss - Mutual funds - Treasury bills 31.1.1 31.1.2 304,620 15,619,280 15,923,900
31.1.1 This represents investment in 30,303,539 units (2011: Nil) of NAFA Government Securities Liquid Fund. Net asset value of these units as at June 30, 2012 was Rs 10.0523 (2011: Nil) per unit. 31.1.2 This represents treasury bills carrying markup ranging from 11.83% to 11.92% (2011: Nil) per annum with maturities up to 3 months. The fair value of these treasury bills is calculated using the market quoted yields. 31.2 Term deposits Askari Bank Limited Allied Bank Limited Askari Bank Limited Habib Bank Limited Bank Alfalah Limited Bank Alfalah Limited
Term months
Maturity Upto
Profit rate % per annum
2012 Rs 000
2011 Rs 000
3 3 3 3 3 3
August 28, 2011 July 02, 2012 July 10, 2012 August 22, 2012 August 29, 2012 September 18, 2012
13.30 12.25 12.25 12.25 12.00 12.25
1,026,847 2,642,656 2,026,849 2,064,928 1,850,228 9,611,508
2,356,872 2,356,872
134
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
31.3
Available-for-sale investments 31.3.1 Units of mutual funds Units of open-end mutual funds: Pakistan Cash Management Fund 2,540,554 (2011: 2,236,062) units NAFA Government Securities Liquid Fund 6,384,990 (2011: 5,563,826) units BMA Empress Cash Fund 3,192,415 (2011: 2,733,117) units Faysal Saving Growth Fund 608,167 (2011: 546,288) units Askari Sovereign Cash Fund 313,124 (2011: 281,564) units 31.3.2 Movement in available-for-sale investments during the year: Balance as at July 01 Unrealised gain transferred to other comprehensive income - net of tax 285,506 32,387 317,893 254,916 30,590 285,506 28,256 14,893,448 140,969 1,453,073 282,160 1,735,233 16,797,906 127,174 64,184 32,108 62,781 31,646 317,893 114,411 57,638 28,844 56,262 28,351 285,506
32.
Cash and bank balances
Cash in hand Balances with banks: Deposit accounts Saving accounts Current accounts Local currency Foreign currency (USD 3,672 thousand (2011: USD 3,287 thousand)) 32.1 32.3
84,301 358,984 518,868 2,564,791 345,191 2,909,982 3,872,135
32.1 32.2
The balances in deposit accounts, carry mark-up ranging between 2% and 13.65% (2011: 5% to 13.70%) per annum. Deposit accounts include Rs 215,719 thousand (2011: Rs 3,691,898 thousand) under lien of bank, against letters of guarantees and letters of credits issued on behalf of the holding Company.
135
32.3
This includes foreign currency balances of USD 978 thousand (2011: USD 638 thousand) and Euro 116 thousand (2011: Euro 10 thousand). The effective interest / mark-up rate, on saving accounts, ranged between 5% to 11% (2011: 5% to 11.5%) per annum.
Note 2012 Rs 000 2011 Rs 000
33.
Revenue
Domestic International
33.1 33.2
105,045,505 5,747,783 110,793,288
97,348,571 5,202,626 102,551,197
33.1 33.2
Revenue is exclusive of Federal Excise Duty amounting to Rs 15,148,469 thousand (2011: Rs 14,872,830 thousand). International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and has been shown net of interconnect cost relating to other operators and Access Promotion Charges, aggregating to Rs 7,121,997 thousand (2011: Rs 11,241,321 thousand).
Note 2012 Rs 000 2011 Rs 000
34.
Cost of services
Salaries, allowances and other benefits Call centre charges Interconnect cost Foreign operators cost and satellite charges Network operating cost Fuel and power Value Added Services Communication Cost of SIMs Cost of prepaid cards Stores, spares and loose tools consumed Provision for obsolete stores, spares and loose tools Rent, rates and taxes Repairs and maintenance Printing and stationery Travelling and conveyance Depreciation on property, plant and equipment Amortization of intangible assets Impairment on property, plant and equipment Annual license fee to Pakistan Telecommunication Authority (PTA) Others
34.1
22.2
18.5 19.10
12,329,487 426,658 7,918,461 9,088,111 9,274,046 4,089,691 765,715 8,490 858,776 142,328 1,758,446 284,623 899,518 1,935,720 215,732 10,536 20,539,887 331,753 191,759 1,010,686 123,982 72,204,405
11,489,102 303,815 10,691,717 8,292,626 5,079,425 3,399,180 564,632 7,980 703,702 129,917 1,432,652 73,992 829,815 2,006,511 320,692 9,834 20,221,074 304,348 959,338 91,723 66,912,075
34.1
136
This includes Rs 3,303,685 thousand (2011: 2,673,648 thousand) in respect of employees retirement benefits.
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
35.
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 assistance fee Legal and professional charges Auditors remuneration Depreciation on property, plant and equipment Amortization of intangible assets Research and development fund Provisions: - against doubtful debts - against doubtful receivables Donations Goodwill on acquisition of MAXCOM - written off on voluntary winding up Other expenses
35.1
35.2 35.3 18.5 19.10 35.4 24.4 30.2 35.5
2,498,035 63,999 307,816 466,905 483,034 3,331 285,063 3,877,765 337,342 21,654 1,169,588 259,465 239,281 1,874,506 75,162 2,871,727 14,834,673
2,255,784 45,572 255,842 475,323 439,897 4,942 233,967 3,743,561 282,365 16,842 1,128,848 294,502 220,230 1,645,016 140,927 60,175 26,424 2,759,392 14,029,609
35.1 35.2
This includes Rs 428,861 thousand (2011: Rs 338,541 thousand) in respect of employees retirement benefits. This represents Groups share of the amount payable to Etisalat - UAE, a related party, under an agreement for technical services at the rate of 3.5%, of the Groups consolidated annual revenue.
2012 Rs 000 2011 Rs 000
35.3
Auditors remuneration A. F. Ferguson & Co. Statutory audit, including half yearly review Tax services Out of pocket expenses Others Ernst & Young Ford Rhodes Sidat Hyder Statutory audit, including half yearly review Tax services Out of pocket expenses 5,600 8,667 600 1,887 4,500 150 250 21,654 5,350 3,542 525 750 4,500 1,925 250 16,842
137
35.4
This represents the Groups contribution to the National Information Communication Technology, Research and Development Fund (National ICT R&D Fund), at the rate of 0.5% (2011: 0.5%) of its gross revenues less inter-operator payments and related PTA / FAB mandated payments, in accordance with the terms and conditions of its license to provide telecommunication services. There were no donations during the year in which the directors or their spouses had any interest.
Note 2012 Rs 000 2011 Rs 000
35.5
36.
Selling and marketing expenses
Salaries, allowances and other benefits Call centre charges Sales and distribution charges Fuel and power Printing and stationery Travelling and conveyance Advertisement and publicity Customer port in fee - net Net cost of handsets sold GoP activation tax Depreciation on property, plant and equipment Others
36.1
18.5
2,004,153 42,666 2,009,558 90,882 2,224 10,536 2,934,321 89,134 802,146 58,392 119,757 8,163,769
1,842,948 30,381 1,431,814 75,536 3,300 9,828 3,068,079 167,321 108,447 418,209 58,192 296,573 7,510,628
36.1
This includes Rs 383,199 thousand (2011: Rs 304,648 thousand) in respect of employees retirement benefits.
2012 Rs 000 2011 Rs 000
37.
Other operating income
Income from financial assets: Return on bank deposits Mark-up on long-term loans Late payment surcharge from subscribers on over due bills Dividend Gain on sale of investments Gain on fair value remeasurement of: - short-term investments - forward exchange contracts 1,371,588 6,552 199,962 298,098 207,420 20,932 2,418,334 8,361 181,749 36,000 18,915
138
Annual Report 2012
Note
2012 Rs 000
2011 Rs 000
Income from non-financial assets: Gain on disposal of items of property, plant and equipment Gain on sale of obsolete stores Liabilities no longer payable written back Secondment income from Etisalat, UAE - a related party Amortization of deferred government grants Others 65,930 180,980 1,800,660 58,852 142,160 266,283 4,619,417 37.1 167,701 63,264 1,131,081 75,545 78,804 279,730 4,459,484
37.1 13
This includes Rs 1,340,114 thousand (2011: Rs Nil) related to reversal of liabilities on account of the National ICT R&D Fund, pursuant to an amendment in the holding Companys license by PTA.
Note 2012 Rs 000 2011 Rs 000
38.
Finance costs
Interest on: Long-term loans from banks Long-term liability Short-term running finances Finance lease Bank and other charges Exchange loss Imputed interest related to AJK license fee Long-term loans Acquisition of MAXCOM
2,157,920 172,462 19,293 31,894 238,461 667,418 8,528 6,375 2,871 3,305,222
2,330,736 29,557 567 31,488 263,711 51,380 12,359 47,592 6,624 2,774,014
38.1 39. Taxation
During the year finance costs of Rs Nil (2011: Rs 34,464 thousand) were capitalized. Current - for the year - for prior year Deferred Share of tax of an associate 11 3,301,662 (1,031,000) 2,270,662 3,199,027 5,469,689 434 5,470,123 1,989,923 522,691 2,512,614 4,864,762 7,377,376 7,377,376
139
39.1
Tax charge reconciliation The numerical reconciliation between the average effective tax rate and the applicable tax rate is as follows:
2012 % 2011 %
Applicable tax rate Effect of change in prior years tax Tax effect of minimum tax not recognised as deffered tax asset Utilization of minimum tax paid in prior years, not recognized as deferred tax asset Tax effect of income taxed but eliminated on consolidation Tax effect of amounts that are not deductible for tax purposes and others Average effective tax rate charged to the statement of comprehensive income
35.00 (6.10) 2.55 0.90 (2.65) 32.35

2012
35.00 3.31 3.71 3.60 1.12 11.74 46.74

2011
40.
Earnings per share - basic and diluted
Profit for the year Weighted average number of ordinary shares Earnings per share
Rupees in thousand Numbers in thousand Rupees
11,438,264 5,100,000 2.24
8,405,622 5,100,000 1.65
41.
Non-funded finance facilities
PTCL has non-funded financing facilities available with banks, which include facilities to avail letters of credit and letters of guarantee. The aggregate facility of Rs 16,625,000 thousand (2011: Rs 18,125,000 thousand) and Rs 5,500,000 thousand (2011: Rs 5,000,000 thousand) is available for letters of credit and letters of guarantee respectively, out of which the facility availed at the year end is Rs 5,133,626 thousand (2011: Rs 7,350,770 thousand). The letter of credit facility is secured by a hypothecation charge over certain assets of PTCL, amounting to Rs 16,985,000 thousand (2011: Rs 11,650,333 thousand).
140
Annual Report 2012
2012 Rs 000
2011 Rs 000
42.
Cash generated from operations
Profit before tax Adjustments for non-cash charges and other items: Depreciation and amortization Impairment Provision for doubtful trade debts and other receivables Provision for doubtful loans and advances Provision for doubtful recoverable from tax authorities Provision for obsolete stores, spares and loose tools Provision for stock and warranty against mobile phones Employees retirement benefits Imputed interest payable to previous shareholders of Maxcom Imputed interest on AJK license fee Imputed interest on long-term loans Interest income on long-term loans Gain on disposal of property, plant and equipment Unrealized gain on available-for-sale investments - net of tax Dividend Return on bank deposits Gain on fair value adjustment for forward exchange contracts Amortization of government grants Goodwill written off Liabilities no longer payable written back Finance costs Share of (profit) / loss from associate Effect on cash flows due to working capital changes: (Increase) / decrease in current assets Stores, spares and loose tools Stock in trade Trade debts Loans and advances Deposits and prepayments Recoverable from tax authorities Other receivables Increase / (decrease) in current liabilities: Trade and other payables Unearned income
16,908,387 22,359,085 191,759 1,874,506 284,623 83,381 4,029,659 2,871 8,528 6,375 (6,552) (65,930) 32,387 (1,371,588) (20,932) (142,160) (1,800,660) 3,287,448 (3,751) 45,657,436
15,782,998 22,006,964 1,785,943 9,964 466,176 73,992 56,722 3,265,905 (167,701) 30,590 (36,000) (2,418,334) (78,804) 26,424 (1,131,081) 2,668,418 1,357 42,343,533
112,041 50,294 (2,603,651) (1,752,633) 178,896 (2,490,634) (46,240) (6,551,927) 1,685,527 1,035,567 2,721,094 41,826,603
632,383 (241,265) (694,668) (94,037) (50,725) (729,817) 435,310 (742,819) 1,735,468 (262,447) 1,473,021 43,073,735
141
Note
2012 Rs 000
2011 Rs 000
43.
Cash and cash equivalents
Short-term investments Cash and bank balances Short-term borrowings
31 32
25,853,301 3,872,135 (1,688,703) 28,036,733
2,642,378 16,797,906 (234,676) 19,205,608
44.
Remuneration of Directors, Chief Executive 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 Chief Executive Executives
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
2012 Rs 000
2011 Rs 000
Managerial remuneration Honorarium Bonus Retirement benefits Housing Utilities
300 300
300 300 1
99,366 99,366 1
96,021 96,021 1
1,639,726 2,796 280,431 475,418 631,504 115,813 3,145,688 984
1,400,115 2,051 159,400 360,824 533,777 96,855 2,553,022 872
Number of persons
The Group also provides free medical and limited residential telephone facilities, to all its Executives, including the Chief Executive. The Chairman is entitled to free transport and a limited residential telephone facility, whereas, the Directors of the Group are provided only with limited telephone facilities; certain executives are also provided with the Group maintained cars. The aggregate amount charged in the consolidated financial statements for the year as fee paid to 9 directors (2011: 9 directors), is Rs 32,765 thousand (2011: Rs 7,885 thousand) for attending the Board of Directors, and its sub-committee, meetings. 45. 46. Rates of exchange Financial risk management 46.1 Assets in foreign currencies have been translated into Rupees at USD 1.0638 (2011: USD 1.1648) equal to Rs 100, while liabilities in foreign currencies have been translated into Rupees at USD 1.0616 (2011: USD 1.1648) equal to Rs 100. Financial risk factors The Groups 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 Groups overall risk management programme focuses on the unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance.
142
Annual Report 2012
Risk management is carried out by the Board of Directors (the Board). The Board has prepared a 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) Market risk (i) 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 Group is exposed to currency risk arising from various currency exposures, primarily with respect to the United States Dollar (USD), Swiss Franc (CHF), Arab Emirates Dirham (AED), EURO (EUR) and Australian Dollar (AUD). Currently, the Groups foreign exchange risk exposure is restricted to the amounts receivable from / payable to foreign entities. The Groups exposure to currency risk is as follows:
2012 Rs 000 2011 Rs 000
USD Trade and other payables Accrued network liability License fee payable Trade debts Cash and bank balances Net exposure EUR Trade and other payables Accrued network liability Trade debts Cash and bank balances Net exposure AED Trade and other payables CHF Trade and other payables AUD Loans and advances The following significant exchange rates were applied during the year: (5,319,952) (343,727) (163,408) 1,923,249 437,297 (3,466,541) (55,409) (19,386) 43,892 13,693 (17,210) (49,577) 3,028 (4,722,690) (5,287,691) (181,125) 2,559,588 336,973 (7,294,945) (69,355) 36,354 1,285 (31,716) (45,094) (7,395) 2,337
143
2012
2011
Rupees per USD Average rate Reporting date rate Rupees per EUR Average rate Reporting date rate Rupees per AED Average rate Reporting date rate Rupees per CHF Average rate Reporting date rate Rupees per AUD Average rate Reporting date rate
94.55 94.20 117.99 118.50 25.53 25.65 99.02 98.62 96.17 95.55
85.46 85.85 114.76 124.89 23.40 23.40 90.41 103.35 84.95 92.19
If the functional currency, at the reporting date, had fluctuated by 5% against the USD, EUR, AED, CHF and AUD with all other variables held constant, the impact on profit after taxation for the year would have been Rs 114,735 thousand (2011: Rs 238,191 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. (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 Group is exposed to equity securities price risk because of the investments held by the Group in money market mutual funds and classified on the statement of financial position as available for sale. To manage its price risk arising from investments in mutual funds, the Group diversifies its portfolio. Financial assets include investments of Rs 622,513 thousand (2011: Rs 285,506 thousand) which were subject to price risk. If redemption price on mutual funds, at the year end date, fluctuate by 5% higher / lower with all other variables held constant, total comprehensive income for the year would have been Rs 20,231 thousand (2011: Rs 14,275 thousand) higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds.
144
Annual Report 2012
(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 date of the statement of financial position, the interest rate profile of the Groups interest bearing financial instruments is:
2012 Rs 000 2011 Rs 000
Financial assets Fixed rate instruments: Staff loans Short-term investments - term deposits Bank balances - deposit accounts Treasury Bills Floating rate instruments Bank balances - deposit accounts Bank balances - saving accounts 723,703 9,611,508 15,619,280 358,984 518,868 26,832,343 Financial liabilities Floating rate instruments Long-term loans from banks Liability against assets subject to finance lease Long-term vendor liability Short-term running finance 20,500,000 107,248 7,893,758 1,688,703 30,189,709 Fair value sensitivity analysis for fixed rate instruments The Group does not account for any fixed rate financial assets and liabilities at fair value. Therefore, a change in interest rates at the date of consolidated statement of financial position would not affect the total comprehensive income of the Group. Cash flow sensitivity analysis for variable rate instruments If interest rates on variable rate instruments of the Group, 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 21,822 thousand (2011: Rs 57,024 thousand) higher / lower, mainly as a result of higher / lower markup income on floating rate loans / investments. 20,000,000 115,514 6,421,326 234,676 26,771,516 607,268 2,356,872 9,000,000 5,893,448 140,969 17,998,557
145
(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. The maximum exposure to credit risk at the reporting date is as follows:
2012 Rs 000 2011 Rs 000
Long-term investment Long-term loans Trade debts Loans and advances Deposits Accrued interest Receivable from the Government of Pakistan Other receivables Short-term investments Bank balances
83,900 4,133,080 10,164,030 4,275,578 65,191 175,661 2,164,072 798,362 25,853,301 3,872,135 51,585,310
83,900 3,186,519 9,434,885 3,330,225 85,301 377,822 2,164,072 504,042 2,642,378 16,769,650 38,578,794
The credit risk on liquid funds is limited, because the counter parties are banks with reasonably high credit ratings. In case of trade debts the Group believes that it is not exposed to a major concentration of credit risk, as its exposure is spread over a large number of counter parties and subscribers.
146
Annual Report 2012
The credit quality of bank balances and short term investments, 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:
Short term Rating Long term Rating Agency 2012 Rs 000 2011 Rs 000
National Bank of Pakistan Bank Al Falah Limited MCB Bank Limited Soneri Bank Limited Habib Metropolitan Bank Limited The Bank of Punjab NIB Bank Limited Habib Bank Limited Faysal Bank Limited Askari Bank Limited Allied Bank Limited United Bank Limited KASB Bank Limited Tameer Micro Finance Bank Bank AL HABIB Limited Summit Bank Limited Dubai Islamic Bank Citibank, N.A HSBC Bank Middle East Limited Silkbank Limited SME Bank Limited Standard Chartered Bank (Pakistan) Limited Meezan Bank Limited Barclays Bank PLC Mutual Fund Arif Habib Mutual Fund NAFA Mutual Fund BMA Mutual Fund Faysal Mutual Fund Askari
A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A1+ A3 A1 A1+ A2 A1 A1 P1 A2 A3 A1+ A1 A1+ AM 2 AM 2 AM 2 AM3+ AM3
AAA AA AA+ AA AA+ AA AA AA+ AA AA AA AA+ BBB A AA+ A A A+ A1 A BBB AAA AA AA N/A N/A N/A N/A N/A
JCRVIS PACRA PACRA PACRA PACRA PACRA PACRA PACRA JCRVIS PACRA PACRA JCRVIS PACRA JCRVIS PACRA JCRVIS JCRVIS S&Ps Moodys JCRVIS JCRVIS PACRA JCRVIS S&Ps PACRA PACRA JCR JCR PACRA
2,162,780 3,906,379 12,485 23,095 4,921 6,197 3 1,987,647 7,647 2,688,992 1,129,868 796,142 1,758 590 164,979 3,721 251,446 131,582 939 212 715 73,450 36,572 7,222 127,174 368,804 32,108 62,781 31,646 14,021,855
3,960,627 2,641,487 29,020 22,554 4,966 177,474 1,081,653 3,511,644 8,575 4,432,092 159,985 4,924 228 141 1,694,079 1,003,537 60,060 196,036 1,416 5,857 645 33,574 51,444 44,504 114,411 57,638 28,844 56,262 28,351 19,412,028
Due to the Groups long standing business relationships with these counterparties, and after giving due consideration to their strong financial standing, management does not expect non-performance by these counter parties on their obligations to the Group. Accordingly, the credit risk is minimal.
147
(c)
Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The Group 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, 2012:
Long-term loans Liability against assets subject to finance lease License fee payable Long-term security deposits Employees retirement benefits Long-term vendor liability Trade and other payables Interest accrued Short-term running finance
20,500,000 107,248 163,408 1,662,397 18,473,380 7,893,758 14,773,976 248,146 1,688,703 65,511,016
500,000 31,983 44,476 5,665,900 14,773,976 248,146 1,688,703 22,953,184
20,000,000 71,093 118,932 704,046 2,227,858 23,121,929
4,172 958,351 18,473,380 19,435,903
The following are the contractual maturities of financial liabilities as at June 30, 2011:
Long-term loans Liability against assets subject to finance lease License fee payable Long-term security deposits Employees retirement benefits Long-term vendor liability Trade and other payables Interest accrued Short-term running finance Dividend payable
20,000,000 115,514 181,230 1,646,400 17,018,391 6,421,326 16,495,952 417,093 234,676 3,375,631 65,906,213
9,000,000 32,075 42,984 3,232,951 16,495,952 417,093 234,676 3,375,631 32,831,362
11,000,000 71,093 138,246 740,744 3,188,375 15,138,458
12,346 905,656 17,018,391 17,936,393
148
Annual Report 2012
46.2
Fair value of financial assets and liabilities The carrying values of all financial assets and liabilities reflected in the consolidated financial statements approximate their fair values. Fair value is determined on the basis of objective evidence at each reporting date.
46.3
Financial instruments by categories

Fair value through profit or loss 2012 Rs 000 2011 Rs 000 2012 Rs 000 Available-for-sale 2011 Rs 000 2012 Rs 000 Loans and receivables 2011 Rs 000 2012 Rs 000 Total 2011 Rs 000
Financial assets as per statement of financial position Long-term investments Long-term loans Trade debts Loans and advances Deposits Accrued interest Receivable from the Government of Pakistan Other receivables Short-term investments Cash and bank balances 20,932 15,923,900 15,944,832 83,900 317,893 401,793 83,900 285,506 369,406 4,133,080 10,164,030 4,275,518 65,191 175,661 2,164,072 798,362 9,611,508 3,872,135 35,259,557 3,186,519 9,434,885 330,225 85,301 377,822 2,164,072 504,042 2,356,872 16,797,906 35,237,644 83,900 4,133,080 10,164,030 4,275,518 65,191 175,661 2,164,072 819,294 25,853,301 3,872,135 51,606,182 83,900 3,186,519 9,434,885 330,225 85,301 377,822 2,164,072 504,042 2,642,378 16,797,906 35,607,050
Liabilities at fair value through profit or loss 2012 Rs 000 2011 Rs 000
Other financial liabilities 2012 Rs 000
2011 Rs 000
2012 Rs 000
Total
2011 Rs 000
Financial liabilities as per statement of financial position Long-term loans Liability against assets subject to finance lease License fee payable Long-term security deposits Employees retirement benefits Long-term vendor liability Trade and other payables Interest accrued Short-term running finance Dividend payable 20,500,000 107,248 163,408 1,662,397 18,473,380 7,893,758 14,773,976 248,146 1,688,703 65,511,016 20,000,000 115,514 181,230 1,646,400 17,018,391 6,421,326 16,495,952 417,093 234,676 3,375,631 65,906,213 20,500,000 107,248 163,408 1,662,397 18,473,380 7,893,758 14,773,976 248,146 1,688,703 65,511,016 20,000,000 115,514 181,230 1,646,400 17,018,391 6,421,326 16,495,952 417,093 234,676 3,375,631 65,906,213
149
46.4
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 the Groups business. The Board of Directors monitors the return on capital employed, which the Group defines as operating income divided by total capital employed. The Board of Directors also monitors the level of dividends to ordinary shareholders. The Groups objectives when managing capital are: (i) to safeguard the groups ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders; and The Group 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 Group may, for example, adjust the amount of dividends paid to shareholders, issue new shares, or sell assets to reduce the debt. For working capital and capital expenditure requirements, the Group relies on internal cash generation and does not have any significant borrowings.
(ii) to provide an adequate return to shareholders.
47.
Transactions with related parties
The Groups related parties comprise its associated undertakings, the Government of Pakistan and its related entities, employees retirement benefit plans, and key management personnel. Amounts due from / (to) related parties, are shown under respective receivable and payable balances. Remuneration of key management personnel is disclosed in note 44. Additionally, the Group had transactions with the following related parties during the year: Associated undertakings TF Pipes Limited Emirates Telecommunication Corporation Etisalat International Pakistan Etisalat - Afghanistan Etihad Etisalat Company - Kingdom of Saudi Arabia (KSA) Thuraya Satellite Telecommunication Company Atlantique Telecom Pakistan MNP Database (Guarantee) Limited Employees benefit plans Pakistan Telecommunication Employees Trust PTCL Employees GPF Trust Telecom Foundation PTML - Employees Provident Fund PTML - Employees Gratuity Fund
150
Annual Report 2012
The Government of Pakistan and its related entities Transactions between the Group and its related parties other than those which have been disclosed elsewhere in these consolidated financial statements are:
2012 Rs 000
2011 Rs 000
Associates Sale of goods and services Purchase of goods and services Dividend paid Technical services assistance fee The Government of Pakistan and its related entities Sale of goods and services Purchase of goods and services National ICT R&D Fund Transfer under license agreements Dividend paid 48. Operating segment Information 48.1
1,106,814 1,158,326 2,088,450 3,896,100 2,199,865 8,470,233 239,281 350,763
1,685,270 1,278,756 2,088,450 3,743,561 1,784,686 7,228,382 220,230 623,080 5,549,369
Management has determined the operating segments based on the information that is presented to the Groups Board of Directors for allocation of resources and assessment of performance. The Group is organised into two operating segments i.e. fixed line communications (Wire line) and wireless communications (Wireless). The reportable operating segments derive their revenue primarily from voice, data and other services. The Groups Board of Directors monitor the results of the above mentioned segments for the purpose of making decisions about the resources to be allocated and for assessing performance based on total comprehensive income for the year. The segment information for the reportable segments is as follows:
Wire line Rs 000 Wireless Rs 000 Total Rs 000
48.2 48.3
Year ended June 30, 2012 Segment revenue Inter-segment revenue Revenue from external customers Segment results Year ended June 30, 2011 Segment revenue Inter-segment revenue Revenue from external customers Segment results 52,444,416 (4,965,088) 47,479,328 5,662,027 56,601,772 (1,529,903) 55,071,869 2,743,595 109,046,188 (6,494,991) 102,551,197 8,405,622
151
56,043,727 (5,220,426) 50,823,301 7,346,830
61,912,059 (1,942,072) 59,969,987 4,091,434
117,955,786 (7,162,498) 110,793,288 11,438,264
Information on assets and liabilities of the segments is as follows:

Wire line Rs 000 Wireless Rs 000 Total Rs 000
As at June 30, 2012 Segment assets Segments liabilities As at June 30, 2011 Segment assets Segments liabilities 48.4 Other segment information is as follows: Year ended June 30, 2012 Depreciation Amortization Finance cost Interest income Income tax expense Share of profit from associates Year ended June 30, 2011 Depreciation Amortization Finance cost Interest income Income tax expense Share of loss from associates 48.5 48.6 10,770,349 58,847 207,723 1,742,466 4,969,400 1,357 10,637,765 540,003 2,566,291 684,229 2,407,976 21,408,114 598,850 2,774,014 2,426,695 7,377,376 1,357 10,490,650 270,714 481,745 1,094,888 3,513,476 3,751 11,277,217 320,504 2,823,477 283,252 1,956,647 21,767,867 591,218 3,305,222 1,378,140 5,470,123 3,751 126,586,343 54,111,570 85,401,337 50,290,140 211,987,680 104,401,710 127,773,851 51,307,064 98,812,727 56,222,893 226,586,578 107,529,957
The Groups customer base is diverse with no single customer accounting for more than 10% of net revenues. The amount of revenue from external parties, total segment assets and segment liabilities is measured in a manner consistent with that of the financial information reported to the holding Companys Board of Directors.
152
Annual Report 2012
48.7
Breakdown of the revenue from all services by category is as follows:

2012 Rs 000 2011 Rs 000
Voice Data Other services
77,174,515 21,580,364 13,543,157 112,298,036
78,046,831 15,869,957 10,673,549 104,590,337
49. 50.
Events after the date of Consolidated Statement of Financial Position Corresponding figures
The holding Company announced a Voluntary Separation Scheme (VSS). Pending acceptance by the employees the financial impact of VSS cannot be determined at present. Corresponding figures have been rearranged and reclassified, wherever necessary for the purposes of better presentation and disclosure:
Reclassification from Reclassification to Rs 000
Capital work in progress Trade and other payables Trade and other payables Cost of services Selling and marketing expenses Administrative and general expenses Administrative and general expenses 51. 52. Date of authorization for issue General
Long-term loans and advances Interest accrued Stock-in-trade Revenue Cost of services Selling and marketing expenses Cost of services
2,633,759 29,979 7,692 2,039,140 40,632 36,085 225,621
These consolidated financial statements were authorized for issue on September 11, 2012 by the Board of Directors of the holding Company. Figures have been rounded off to the nearest thousand rupees, unless otherwise specified.
Chairman
President & CEO

153
154
Annual Report 2012
ANNEXES
155
Pakistan Telecommunication Company Limitied
as at June 30, 2012
pATTErN OF ShArEhOLDINg
Size of Holding Rs. 10 Shares
Number of Shares Held
Number of Shareholders
1 101 501 1,001 5,001 10,001 15,001 20,001 25,001 30,001 35,001 40,001 45,001 50,001 55,001 60,001 65,001 70,001 75,001 80,001 85,001 90,001 95,001 100,001 105,001 110,001 115,001 120,001 125,001 130,001 135,001 140,001 145,001 150,001 155,001 160,001 165,001 170,001 175,001
100 500 1,000 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 60,000 65,000 70,000 75,000 80,000 85,000 90,000 95,000 100,000 105,000 110,000 115,000 120,000 125,000 130,000 135,000 140,000 145,000 150,000 155,000 160,000 165,000 170,000 175,000 180,000
25,679 9,503 3,124 3,517 837 293 214 144 87 51 44 29 96 21 22 10 10 9 20 11 6 2 51 8 9 2 7 7 4 6 5 4 15 5 2 2 1 3 3
2,538,393 2,932,750 2,748,347 9,275,501 6,867,934 3,817,381 4,009,184 3,453,190 2,497,394 1,679,778 1,714,682 1,261,289 4,767,408 1,104,272 1,289,984 636,417 691,173 668,100 1,570,453 914,189 531,591 187,500 5,091,418 820,353 975,975 225,500 834,300 863,363 519,500 806,581 700,000 576,114 2,239,810 758,092 320,000 330,000 170,000 520,600 540,000
180,001 185,001 190,001 195,001 200,001 205,001 210,001 215,001 220,001 225,001 235,001 240,001 245,001 250,001 265,001 270,001 275,001 280,001 295,001 300,001 305,001 310,001 315,001 320,001 325,001 335,001 345,001 350,001 355,001 365,001 370,001 375,001 385,001 390,001 395,001 405,001 410,001 415,001 440,001
185,000 190,000 195,000 200,000 205,000 210,000 215,000 220,000 225,000 230,000 240,000 245,000 250,000 255,000 270,000 275,000 280,000 285,000 300,000 305,000 310,000 315,000 320,000 325,000 330,000 340,000 350,000 355,000 360,000 370,000 375,000 380,000 390,000 395,000 400,000 410,000 415,000 420,000 445,000
5 7 1 14 5 2 2 2 1 3 3 1 6 3 1 3 2 1 9 2 2 2 2 1 1 1 3 1 1 2 1 1 1 2 2 1 1 1 2
917,567 1,313,361 192,133 2,794,945 1,013,850 415,657 423,731 437,850 225,000 682,400 715,900 245,000 1,500,000 756,657 267,444 822,568 553,744 280,666 2,695,856 601,297 615,527 624,703 639,500 324,735 329,483 338,462 1,050,000 351,200 357,918 736,000 371,000 376,857 387,073 786,714 799,700 410,000 412,500 415,598 885,619
156
Annual Report 2012
as at June 30, 2012
445,001 455,001 460,001 470,001 475,001 490,001 495,001 500,001 510,001 530,001 535,001 560,001 595,001 605,001 650,001 660,001 690,001 695,001 730,001 745,001 750,001 785,001 790,001 840,001 875,001 925,001 935,001 960,001 995,001 1,050,001 1,075,001 1,095,001 1,110,001 1,115,001 1,125,001 1,140,001 1,175,001 1,195,001 1,220,001
450,000 460,000 465,000 475,000 480,000 495,000 500,000 505,000 515,000 535,000 540,000 565,000 600,000 610,000 655,000 665,000 695,000 700,000 735,000 750,000 755,000 790,000 795,000 845,000 880,000 930,000 940,000 965,000 1,000,000 1,055,000 1,080,000 1,100,000 1,115,000 1,120,000 1,130,000 1,145,000 1,180,000 1,200,000 1,225,000
1 1 1 3 3 1 7 1 1 1 1 1 4 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 2 1
446,500 457,000 460,636 1,422,716 1,435,798 494,190 3,498,000 502,604 512,539 530,901 539,446 560,239 2,400,000 608,670 650,600 662,650 690,400 700,000 730,900 1,500,000 754,750 787,000 790,358 840,758 877,532 929,954 940,000 961,100 1,000,000 1,055,000 2,154,750 1,100,000 1,110,393 1,117,300 1,127,000 1,142,905 1,179,500 2,390,902 1,220,500
1,300,001 1,395,001 1,420,001 1,495,001 1,560,001 1,600,001 1,635,001 1,725,001 1,745,001 1,765,001 1,820,001 1,825,001 1,860,001 1,920,001 1,995,001 2,195,001 2,320,001 2,570,001 2,615,001 2,670,001 2,700,001 2,995,001 3,080,001 3,095,001 3,125,001 3,155,001 3,245,001 3,330,001 3,345,001 3,585,001 3,755,001 3,940,001 3,995,001 4,240,001 4,495,001 4,810,001 4,845,001 4,935,001 5,385,001
1,305,000 1,400,000 1,425,000 1,500,000 1,565,000 1,605,000 1,640,000 1,730,000 1,750,000 1,770,000 1,825,000 1,830,000 1,865,000 1,925,000 2,000,000 2,200,000 2,325,000 2,575,000 2,620,000 2,675,000 2,705,000 3,000,000 3,085,000 3,100,000 3,130,000 3,160,000 3,250,000 3,335,000 3,350,000 3,590,000 3,760,000 3,945,000 4,000,000 4,245,000 4,500,000 4,815,000 4,850,000 4,940,000 5,390,000
1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 1 3 1 1 1 1
1,304,329 1,400,000 1,420,480 1,500,000 1,561,000 1,600,400 1,640,000 1,728,382 1,750,000 1,766,333 1,823,278 1,830,000 1,861,510 1,922,339 2,000,000 2,200,000 2,322,400 2,573,670 2,617,562 2,672,666 2,705,000 6,000,000 3,084,050 3,097,310 3,127,000 3,159,899 3,250,000 3,332,236 3,347,600 3,588,000 3,759,211 3,943,049 4,000,000 4,243,414 13,498,500 4,810,200 4,847,500 4,938,998 5,390,000
157
as at June 30, 2012
as at June 30, 2012
CATEgOrIES OF ShArEhOLDErS
Shareholders S.No. Category
No. of Shareholders
No. of Shares
Percentage
5,405,001 5,695,001 5,985,001 6,475,001 6,640,001 6,995,001 8,145,001 8,210,001 8,425,001 8,665,001 8,925,001 9,865,001 10,220,001 11,470,001 18,495,001 32,265,001 55,890,001 57,060,001 57,760,001 196,385,001 407,805,001 918,190,001 2,974,680,000 Total
5,410,000 5,700,000 5,990,000 6,480,000 6,645,000 7,000,000 8,150,000 8,215,000 8,430,000 8,670,000 8,930,000 9,870,000 10,225,000 11,475,000 18,500,000 32,270,000 55,895,000 57,065,000 57,765,000 196,390,000 407,810,000 918,195,000 2,974,685,000
1 1 1 1 1 1 1 1 1 1 1 2 1 1 1 1 1 1 1 1 1 1 1 44,085
5,410,000 5,699,698 5,985,639 6,476,079 6,644,100 7,000,000 8,145,568 8,213,500 8,430,000 8,667,100 8,925,477 19,736,247 10,225,000 11,472,230 18,500,000 32,266,854 55,893,800 57,060,074 57,764,103 196,387,991 407,809,524 918,190,476 2,974,680,002 5,100,000,000
1 2 3 4 5 6 7 8 9 10 11 12 13
Directors, CEO & children NIT & ICP Banks, DFI & NBFI Insurance companies Modarabas Public sector companies & corporations General public (local) General public (foreign) Others Foreign companies Holding more than 5% Mutual funds Pension funds Total
9 8 27 15 11 5 43,235 361 263 91 4 40 16 44,085
9 13,000,768 57,255,305 17,417,084 428,100 117,079,267 125,567,347 484,900 27,019,199 138,478,499 4,497,067,993 99,755,875 6,445,654 5,100,000,000
0.00 0.25 1.12 0.34 0.01 2.30 2.46 0.01 0.53 2.72 88.18 1.96 0.13 100.00
Trades in PTCL Shares
The Directors, Chief Executive Officer, Chief Financial Officer, Company Secretary, Head of Internal Audit and their spouses and minor children have not traded in PTCL shares during the financial year 2011-2012
158
Annual Report 2012
as at June 30, 2012
DETAILS OF CATEgOrIES OF ShArEhOLDErS
DIRECTORS, CEO & CHILDREN

Name Holding S. No. Folio Name Holding
S. No. Folio
1 2 3 4 5 6 7 8 9
82713 82714 82715 82716 83219 83349 83413 83414 83442 TOTAL
MR. ABDUL RAHIM A. AL NOORYANI MR. ABDUL AZIZ A. AL SAWALEH MR. FADHIL MUHAMMAD ERHAMA AL ANSARI MR. ABDUL AZIZ H. TARYAM DR. AHMED AL JARWAN MR. JAMIL AHMED KHAN MR. ABDUL WAJID RANA MR. FAROOQ AHMED AWAN MR. KAMRAN ALI
1 1 1 1 1 1 1 1 1 9
20 21 22 23 24 25 26 27
05181-21 07088-47 07088-62 07393-24 09332-28 10157-27 11940-4410 11940-6951 TOTAL
SME BANK LIMITED THE BANK OF PUNJAB, TREASURY DIVISION. THE BANK OF PUNJAB, TREASURY DIVISION. SUMMIT BANK LIMITED FIRST CREDIT & INVESTMENT BANK LIMITED BURJ BANK LIMITED ESCORTS INVESTMENT BANK LIMITED ESCORTS INVESTMENT BANK LIMITED
8,600 3,759,211 250,000 394,014 2,500 1,100,000 5,900 199,900 57,255,305
NIT & ICP

Name Holding
INSURANCE COMPANIES
Name Holding
S. No. Folio
S. No. Folio
1 2 3 4 5 6 7 8
4702 26869 33312 67726 71094 79615 02154-27 11353-22 TOTAL
NATIONAL BANK OF PAKISTAN TRUSTEE WING INVESTMENT CORPORATION OF PAKISTAN NATIONAL BANK OF PAKISTAN TRUSTEE WING INVESTMENT CORPORTION OF PAKISTAN NATIONAL INVESTMENT TRUST LTD. INVESTMENT CORPORATION OF PAKISTAN NATIONAL BANK OF PAKISTAN-TRUSTEE DEPARTMENT NI(U)T FUND NATIONAL INVESTMENT TRUST LIMITED
2,000 3,400 1,000 100 400 800 8,145,568 4,847,500 13,000,768
BANKS, DFI & NBFI

Name Holding
S. No. Folio
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
56890 73493 02139-29 02451-21 03277-2184 03277-2538 03277-4064 03277-4255 03277-7330 03277-8372 03277-9371 03459-996 03939-17934 05892-7814 07302-12390 TOTAL
PAKISTAN GUARANTEE INSURANCE CO.LTD. GULF INSURANCE CO. LTD. PREMIER INSURANCE LIMITED JUBILEE GENERAL INSURANCE COMPANY LIMITED EFU GENERAL INSURANCE LIMITED EFU LIFE ASSURANCE LTD NATIONAL INSURANCE COMPANY LIMITED PAKISTAN REINSURANCE COMPANY LIMITED RELIANCE INSURANCE COMPANY LTD. EXCEL INSURANCE CO.LTD. JUBILEE LIFE INSURANCE COMPANY LIMITED ASKARI GENERAL INSURANCE CO. LTD. SILVER STAR INSURANCE COMPANY LIMITED THE PAKISTAN GENERAL INS.CO. LTD ASIA INSURANCE COMPANY LIMITED
100 100 140,000 2,322,400 500,000 8,213,500 2,617,562 319,500 120,000 10,000 2,705,000 48,322 370,000 600 50,000 17,417,084
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
43305 57252 57664 67159 75124 78786 01446-31 02295-39 02626-37 02832-32 03335-57 03590-23 03798-52 03798-60 03889-28 03889-44 04127-28 04838-22 05132-26
UNITED BANK LIMITED. CRESCENT INVESTMENT BANK LTD. CRESCENT INVESTMENT BANK LTD. CRESECENT INVESTMENT BANK LTD. MUSLIM COMMERCIAL BANK LIMITED THE BANK OF PUNJAB MCB BANK LIMITED FAYSAL BANK LIMITED BANK AL HABIB LIMITED MEEZAN BANK LIMITED BANK ALFALAH LIMITED J S BANK LIMITED. THE BANK OF KHYBER THE BANK OF KHYBER NATIONAL BANK OF PAKISTAN NATIONAL BANK OF PAKISTAN MCB BANK LIMITED - TREASURY INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN ASKARI BANK LIMITED
600 1,000 1,000 200 690,400 100 50,000 1,055,000 600,000 3,159,899 750,000 5,699,698 1,823,278 72,000 530,901 32,266,854 560,239 30,597 4,243,414
MODARABAS
Name Holding
S. No. Folio
1 2 3 4 5 6 7 8 9 10 11
37257 02113-21 02667-17 02667-25 03277-1142 03277-1149 03277-4962 03277-7520 03277-7525 03525-52268 04077-25 TOTAL
L.T.V.CAPITAL MODARABA. FIRST EQUITY MODARABA TRUST MODARABA TRUST MODARABA FIRST PRUDENTIAL MODARABA B.F.MODARABA FIRST ALNOOR MODARABA FIRST HABIB MODARABA FIRST PAK MODARABA FIRST ELITE CAPITAL MODARABA FIRST FIDELITY LEASING MODARABA
100 50,000 10,000 95,000 20,000 57,000 132,500 5,000 2,500 52,000 4,000 428,100
159
as at June 30, 2012
PUBLIC SECTOR COMPANIES & CORPORATIONS

Name Holding S. No. Folio Name Holding
S. No. Folio
1 2 3 4 5
02683-23 03277-4070 06122-8946 06247-63 10819-26 TOTAL
STATELIFEINSURANCECORP.OFPAKISTAN EMPLOYEESOLD-AGEBENEFITSINSTITUTION TRUSTEEOVERSEASPAKISTANISPENSIONTRUST SAUDIPAKINDUSTRIAL&AGRICULTURALINVESTMENTCO.LTD.-PMD PAKBRUNEIINVESTMENTCOMPANYLIMITED
57,060,074 55,893,800 15,000 3,000,000 1,110,393 117,079,267
OTHERS
Name Holding
S. No. Folio
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38
20795 20800 25329 25330 39143 48919 56640 61251 62420 62470 62529 62586 63174 63570 68500 68502 73578 74270 75253 75761 76780 77695 77819 78341 78343 78345 78350 78388 78401 79171 79172 79173 80012 80014 80021 80642 80715 80717
SIR.E.HAROON JAFFER & SONS (PVT) LTD. JAFFER BROTHERS (PRIVATE) LTD GRAND LEISURE CORP (PVT) LTD. AREEN INTERNATION (PVT) LTD. CAPITOL TRAVELS (PRIVATE) LTD. YUNAS METAL WORKS PVT LTD SIDCO CONSTRUCTION LTD. ARSHAD CORPORATION (PVT)LTD UNIVERSAL BRUSHWARES (PVT) LTD. ENVICRETE LTD. TAURUS SECURITIES LTD. WORLD TRADE CENTRE (PVT) LTD. M/S YUNAS ELECTRONICS AJK, PVT LTD YUNAS ELECTRONICS PAK (PVT) LTD EVERGREEN TRADERS SHADAB ENTER PRISES KHAQAN NAJEEB (PVT) SERVICE FIRST CAPITAL SECURITIES CORPORATION LTD NAZIR, SINDH HIGH COURT, REF.1674/1997 IHSAN SONS (PVT) LTD. Y.S.SECURITIES AND SERVICES (PVT) LTD. AQEEL KARIM DHEDHI SECURITIES (PVT) LTD. Y.S. SECURITIES & SREVICES (PVT) LTD PRUDENTIAL SECURITIES LTD. PRUDENTIALL SECURITIES LTD. AL MAL SECURITIES & SERVICES LTD SAKHAWAT HUSSAIN BUKHARI (PVT)LTD FINEX SECURITIES LTD PRUDENTIAL SECURITIES.LTD KHADIM ALI SHAH BUKHARI & CO. LTD. INDOSUES W.I. CARR SECURITIES PVT. LTD. PREMIER CAPITAL MANAGEMENT PVT. LTD. FAWAD YOUSUF SECURITIES (PVT) LTD. ACE SECURTIES (PVT) LTD. MARS SECURITIES (PVT) LTD. ADAMJEE AUTOMOTIVE (PVT) LIMITED RAHAT SECURITIES LTD. ZAHID LATIF KHAN SECURITIES (PVT) LTD.
100 16,700 500 1,000 2,000 500 200 300 100 500 600 500 400 400 100 100 200 100 11,500 500 100 300 700 100 100 100 100 100 100 100 300 300 100 100 1,000 2,000 300 100
39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88
80721 80723 80725 80728 00307-46 00307-68332 00364-13688 00364-32225 00364-55242 00364-107787 00364-113140 00364-115541 00414-35 00513-32 00521-3878 00521-3894 00547-6432 00547-6457 00547-8651 00547-8701 00620-21 00695-10684 00695-10692 00695-10700 01057-11449 01164-7584 01339-34 01412-14092 01412-15727 01412-16410 01412-16618 01420-17 01552-52 01669-26 01826-34 01826-1529 01826-69559 01917-33 01917-41 03038-23279 03038-23295 03137-36 03228-43 03244-25 03277-894 03277-895 03277-973 03277-1225 03277-1339 03277-2102
KHADIM ALI SHAH BUKHARI & CO. LIMITED ZILLION CAPITAL SECURITIES (PVT) LTD. M.S. SECURITIES (PVT) LTD. ZAFAR SECURITIES (PVT) LTD. IGI FINEX SECURITIES LIMITED TRUSTEE NESTLE PAKISTAN LTD, EMPLOYEES PROVIDENT FUND TRUSTEES KUEHNE & NAGEL PAKISTAN SPF SAIF HOLDINGS LIMITED (05648) CRAFTSMAN (PVT) LTD (8095) PAK KUWAIT TEXTILES LIMITED PAK GREASE MANUFACTURING CO. (PVT) LTD. UHF CONSULTING (PRIVATE) LIMITED MOOSA,NOOR MOHAMMAD,SHAHZADA&CO.PVT.LTD RAHAT SECURITIES LIMITED TRUSTEE-SANOFI AVENTIS PAKISTAN-EMPLOYEES PROVIDENT FUND TRUSTEE-SANOFI AVENTIS PAKISTAN- EMPLOYEES GRATUITY FUND TRUSTEE - IBM ITALIA S.P.A. PAKISTAN EMPLOYEES GRATUITY FUND TRUSTEE - IBM SEMEA EMPLOYEES PROVIDENT FUND UNILEVER PAKISTAN LIMITED NON-MANAGEMENT STAFF GRATUITY FUND TRUSTEE-RAFHAN BEST FOODS EMPLOYEES PROVIDENT FUND TAURUS SECURITIES LIMITED TRUSTEE PAK TOBACCO CO. LTD MANAGEMENT PROV FUND (1386-2) TRUSTEE PAK TOBACCO CO. LTD EMPLOYEES PROVIDENT FUND(1385-5) TRUSTEE PAK TOBACCO CO LTD EMPLOYEES GRATUITY FUND(1383-4) SARDAR MOHAMMAD ASHRAF D BALUCH PVT. LTD TRUSTEES D.G.KHAN CEMENT CO. LTD. EMPLOYEES PROVIDENT FUND INTERMARKET SECURITIES LIMITED TRUSTEE, H.J.BEHRANA PARSI FIRE TEMPLE T TRUSTEES, SETH H.M. KHAJURINA TECH.TR.FN M.C. MAMA PARSI GIRL`S SEC. SCHOOL ZOROASTRIAN CO-OP. HOUSING SOCIETY LTD. STANDARD BEARER SECURITIES LIMITED FIRST CAPITAL EQUITIES LIMITED SHAFFI SECURITIES (PVT) LIMITED BMA CAPITAL MANAGEMENT LTD. TRUSTEE-ENGRO CORPORATION LIMITED. GRATUITY FUND TRUSTEE-CHERAT CEMENT COMPANY LTD. EMPLOYEES PROVIDENT FUND PRUDENTIAL SECURITIES LIMITED PRUDENTIAL SECURITIES LIMITED UNIIFIED VENTURES (PRIVATE) LIMITED UNIFIED D-LABS (PRIVATE) LIMITED MOOSANI SECURITIES (PVT) LTD. ABBASI & COMPANY (PRIVATE) LIMITED ZAFAR SECURITIES (PVT) LTD. M/S S. FAZALILAHI & SONS (PVT) LTD M/S IHSAN INDUSTRIES (PVT) LIMITED LUCKY ENERGY (PVT) LTD. HASHOO HOLDINGS (PVT) LTD PREMIER FASHIONS (PVT) LTD THE AGA KHAN UNIVERSITY FOUNDATION
100 100 200 200 1 861 20,000 5,000 20,000 30,000 63,500 788 31,000 100 338,462 27,196 55,105 460,636 24,545 89,181 900 392,700 539,446 662,650 5,500 100,000 25,000 25,000 2,000 40,000 7,500 1,100 34,000 308 105,000 83,000 100,000 20,400 200 25,000 10 415,598 100 135,000 100,500 3,000 50,000 200,000 30,000 475,000
160
Annual Report 2012
as at June 30, 2012
S. No. Folio
Name
Holding
S. No. Folio
Name
Holding
89 90 91 92 93 94 95 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 131 132 133 134 135 136 137 138
03277-2404 03277-3785 03277-3893 03277-4230 03277-4275 03277-4841 03277-4865 03277-6081 03277-7421 03277-7633 03277-7652 03277-9217 03277-9219 03277-9284 03277-9372 03277-9981 03277-10726 03277-11151 03277-11821 03277-12220 03277-12637 03277-13034 03277-13122 03277-13154 03277-14004 03277-14005 03277-14731 03277-14768 03277-14818 03277-15138 03277-16576 03277-17628 03277-18963 03277-19048 03277-19517 03277-23841 03277-24198 03277-25504 03277-31790 03277-32070 03277-35326 03277-35867 03277-38250 03277-45641 03277-48792 03277-55465 03277-57693 03277-61348 03277-63669 03277-65957
MOHAMAD AMIN BROS (PVT) LIMITED TRUSTEE CHERAT CEMENT CO.LTD.EMP.PRO.FND SITARA CHEMICAL INDUSTRIES LTD. CRESCENT STEEL AND ALLIED PRODUCTS LTD. TRUSTEES NRL OFFICERS PROVIDENT FUND BULK MANAGEMENT PAKISTAN (PVT.) LTD. SHAKOO (PVT) LTD. TRUSTEES ALOO&MINOCHER DINSHAW CHR.TRUST TRUSTEES SAEEDA AMIN WAKF TRUSTEES MOHAMAD AMIN WAKF ESTATE ISMAILIA YOUTH SERVICES JUPITER TEXTILE MILLS (PVT) LTD TRUSTEES AL-MAL GROUP STAFF PROVIDENT FN PAKISTAN HOUSE INTERNATIONAL LTD TRUSTEES ASIATIC P.R.NETWORK(PVT) EMP PF TRUSTEES OF FAROUKH&ROSHEN KARANI TRUST TRUSTEES WORLD MEMON FND.COMM.CEN.TRUST BANDENAWAZ (PVT) LTD TRUSTEES OF DHORAJI HOUSING&RELIEF TRUST TRUSTEES CHEVRON PAKISTAN LIMITED MNGT. STAFF PROVIDENT FUND TRUSTEES PAKISTAN PTA MNGT STAFF G.FUND PRUDENTIAL DISCOUNT &GUARANTEE HOUSE LTD MANG.COM.KARACHI ZARTHOSTI BANU MANDAL TRUSTEES HOMMIE&JAMSHED NUSSERWANJEE C.T TRUSTEES PAKISTAN PTA NON MGN STAFF GF TRUSTEES PAKISTAN PTA MNG STAFF PF TRUSTEES AKHTAR & HASAN(PVT)LTD.EMP.P.F AL NOOR MODARABA MANAGEMENT (PVT) LTD. TRUSTEES ADAMJEE ENTERPRISES STAFF P.F TRUSTEES ENGRO CORPORATION LTD. P.F TRUSTEES DUKE OF EDINBURGHS AWARD F.PAK TRUSTEES QAMARUNNISA SHARIF WEL.TRUST TRUSTEES OF HAJI MOHAMMED WELFARE TRUST TRUSTEES PAK PTA MNG STAFF DEF.CONT.SF TRUSTEES OF CHERAT CEMENT CO.STAFF GF TRUSTEES MCB EMPLOYEES FOUNDATION PAKISTAN SERVICES LTD. PRINTEK (PRIVATE) LIMITED RELIANCE MERCHANDISING CORP (PVT) LTD TRUSTEES ENGRO CORPORATION LTD,G.F ASLAM SONS (PVT) LTD TRUSTEE GUL AHMED TEXTILE MILLS LTD EMP P.F TRUSTEES OF STATE OIL COMPANY LTD.EMPLOYEES P.F TRUSTEES GLAXO LABORATORIES PAKISTAN LTD. PROVIDENT FUND TRUSTEES OF GREAVES PAKISTAN (PVT) LTD. EMP PROVIDENT FUND MARIAM ALI MUHAMMAD TABBA FOUNDATION MAGNUS INVESTMENT ADVISORS LIMITED POLYPROPYLENE PRODUCTS LTD TRUSTEE OF HAJI MOHAMMED BENEVOLENT TRUST AMANAH INVESTMENTS LIMITED
13,000 25,000 50,000 180,000 14,000 412,500 50,000 40,000 125,000 150,000 70,000 50,000 5,000 142,000 2,000 20,000 50,000 19,000 165,000 100,000 145,710 10,000 17,000 236,000 3,493 253,718 96,800 10,000 2,000 730,900 5,000 20,000 150,000 205,657 25,000 100,000 350,000 3,000 20,000 300,797 186,569 4,500 25,000 239,900 10,000 50,000 100 229,400 200,000 10,000
139 140 141 142 143 144 145 146 147 148 149 150 151 152 153 154 155 156 157 158 159 160 161 162 163 164 165 166 167 168 169 170 171 172 173 174 175 176 177 178 179 180 181 182 183 184 185 186 187 188
03277-67482 03277-67767 03277-72577 03277-76864 03277-76866 03277-77227 03277-78367 03277-78974 03293-12 03350-22 03475-28 03525-1895 03525-28788 03525-48472 03525-63817 03525-66812 03574-25 03715-27 03863-20 03939-11093 03939-12232 03939-12463 03939-12703 03939-15599 04044-36 04085-24 04093-23 04150-15346 04218-1868 04234-25 04234-5651 04291-2611 04317-25 04341-22 04341-3265 04432-21 04440-20 04481-26 04580-23 04705-10416 04705-48962 04705-50687 04705-68853 04705-68854 04804-10917 04820-23 04879-28 04895-26 04978-42 05116-28
TRUSTEES OF ENGRO CHEMICAL PAK LTD NON-MPT EMP GRATUITY FUND ANAM FABRICS (PVT) LTD. HAMEED SHAFI HOLDINGS (PVT) LTD. TRUSTEES OF PAKISTAN REFINERY LTD LABOUR & CLERICAL S. G. F. TRUSTEES OF PAKISTAN REFINERY LTD PROVIDENT FUND TRUSTEES INDUS MOTOR COMPANY LTD. EMPLOYEES PROVIDENT FUND TRUSTEE PNSC EMPLOYEES CONTRIBUTORY PROVIDENT FUND CS CAPITAL (PVT) LTD S.H. BUKHARI SECURITIES (PVT) LIMITED ZAHID LATIF KHAN SECURITIES (PVT) LTD. REPUBLIC SECURITIES LIMITED VOHRAH ENGINEERING (PVT.) LIMITED TRUSTEES D.G.KHAN CEMENT CO.LTD.EMP. P.F MANAGING COMMITTEE CRESCENT FOUNDATION NH SECURITIES (PVT) LIMITED. TRUSTEES NESTLE PAKISTAN LTD EMPLOYEES PROVIDENT FUND PROGRESSIVE INVESTMENT MANAGEMENT (PVT) LTD. EXCEL SECURITIES (PVT.) LTD. ACE SECURITIES (PVT.) LIMITED HIGHLINK CAPITAL (PVT) LTD AMCAP SECURITIES PVT LIMITED CAPITAL VISION SECURITIES PVT LIMITED EXCEL SECURITIES (PRIVATE) LIMITED BLACK STONE EQUITIES (PRIVATE) LIMITED TOTAL SECURITIES LIMITED M.R.A. SECURITIES (PVT) LIMITED PROGRESSIVE SECURITIES (PRIVATE) LIMITED ATLAS TEXTILE (PRIVATE) LIMITED TRUSTEES RESOURCE DEVELOPMENT FOUNDATION RAFI SECURITIES (PRIVATE) LIMITED FAIR EDGE SECURITIES (PVT) LTD HK SECURITIES (PVT.) LTD DALAL SECURITIES (PVT) LTD. ORIENTAL SECURITIES (PVT) LTD. RAO SYSTEMS (PVT.) LTD. ADAM SECURITIES (PVT) LTD. ZAFAR MOTI CAPITAL SECURITIES (PVT) LTD. DOSSLANIS SECURITIES (PVT) LIMITED CAPITAL VISION SECURITIES (PVT) LTD. NATIONAL LOGISTIC CELL SHAKIL EXPRESS (PVT) LTD TRUSTEES OF GENERAL RAHIM KHAN TRUST(GRK TRUST) TRUSTEES OF ARL GENRAL STAFF PROVIDENT FUND TRUSTEES OF ARL STAFF PROVIDENT FUND AMCAP SECURITIES (PVT) LTD STOCK VISION (PVT.) LTD. AKHAI SECURITIES (PRIVATE) LIMITED DJM SECURITIES (PRIVATE) LIMITED LIVE SECURITIES LIMITED TIME SECURITIES (PVT.) LTD.
34,000 538 70,000 33,000 110,000 50,000 50,000 170,000 200 200 1,500 2,500 240,000 129,500 10,000 307,535 500 1,000 56,992 5,155 25,000 43,000 10,700 5,000 1,000 350,000 300 300 5,000 30,000 500 9,000 10,000 300 14,219 446,500 85,000 148,400 18,800 500,000 1,000 200 40,000 15,000 25,000 3,500 38,500 300,000 217,893 75,800
161
as at June 30, 2012
S. No. Folio
Name
Holding
S. No. Folio
Name
Holding
189 190 191 192 193 194 195 196 197 198 199 200 201 202 203 204 205 206 207 208 209 210 211 212 213 214 215 216 217 218 219 220 221 222 223 224 225 226 227 228 229 230 231 232 233 234 235 236 237 238 239
05298-28 05306-25 05314-24 05348-21 05405-10923 05470-26 05504-20 05587-55 05587-21382 05660-4677 05736-15 05785-28 05801-24 05884-26 05942-28 06270-29 06361-28 06429-20 06445-28 06445-9870 06452-3112 06452-10604 06601-27 06684-29 06684-22999 06684-95722 06700-2740 06734-22 06874-3731 06882-25 06916-20 06924-29 06981-23 06999-22 07005-29 07161-21 07179-3008 07229-23 07260-29 07286-27 07294-26 07385-25 07419-6175 07450-9878 09639-13 09787-24 10231-27 10447-22 10470-29 10629-64934 10769-23
MAAN SECURITIES (PRIVATE) LIMITED FAIR EDGE SECURITIES (PRIVATE) LIMITED INVESTFORUM (SMC-PVT) LIMITED HH MISBAH SECURITIES (PRIVATE) LIMITED UNIFIED JUNCTIONS SERVICES (PVT) LTD B & B SECURITIES (PRIVATE) LIMITED MGM SECURITIES (PRIVATE) LIMITED FIRST NATIONAL EQUITIES LIMITED UNEX SECURITIES (PVT) LTD THE JINNAH SOCIETY NCC - PRE SETTLEMENT DELIVERY ACCOUNT ABM SECURITIES (PVT) LIMITED ADEEL & NADEEM SECURITIES (PVT) LTD. ISMAIL IQBAL SECURITIES (PVT) LTD. AAA SECURITIES (PRIVATE) LIMITED GROWTH SECURITIES (PVT) LTD. A. H. M. SECURITIES (PRIVATE) LIMITED ISLAMABAD SECURITIES (PRIVATE) LIMITED DARSON SECURITIES (PVT) LIMITED STOCK STREET (PVT) LIMITED. SIDDIQSONS DENIM MILLS LTD.STAFF PROVIDENT FUND TRUSTEE CHERAT CEMENT CO. LTD EMPLOYEES PROVIDENT FUND AXIS GLOBAL LIMITED MOHAMMAD MUNIR MOHAMMAD AHMED KHANANI SECURITIES (PVT.) LTD. PROGRESIVE SECURITIES (PVT) LTD. MAK SECURITIES (PRIVATE) LIMITED SHALIMAR ESTATES CO-OPERATIVE HOUSING SOCIETY LIMITED GAZIPURA SECURITIES & SERVICES (PRIVATE) LIMITED RYK MILLS LIMITED AWJ SECURITIES (SMC-PRIVATE) LIMITED. PASHA SECURITIES (PVT) LTD. HK SECURITIES (PVT) LTD. FAIR DEAL SECURITIES (PVT) LTD. MUHAMMAD AHMED NADEEM SECURITIES (SMC-PVT) LIMITED MAM SECURITIES (PVT) LIMITED ZHV SECURITIES (PVT) LIMITED MUHAMMAD BASHIR KASMANI SECURITIES (PVT) LTD. ALTAF ADAM SECURITIES (PVT) LTD. M.R. SECURITIES (SMC-PVT) LTD. DR. ARSLAN RAZAQUE SECURITIES (SMC-PVT) LTD. AL-HAQ SECURITIES (PVT) LTD. ISMAIL ABDUL SHAKOOR SECURITIES (PRIVATE) LIMITED SINDH GAS (PRIVATE) LIMITED HUM SECURITIES LIMITED KSR STOCK BROKERAGE (PVT) LTD. SNM SECURITIES (PVT) LTD. MSMANIAR FINANCIALS (PVT) LTD. PEARL CAPITAL MANAGEMENT (PRIVATE) LIMITED GPH SECURITIES (PVT.) LTD. TRUSTEE CHERAT CEMENT COMPANY LTD.STAFF GRATUITY FUND IMPERIAL INVESTMENTS (PVT) LIMITED
49,700 200 8,800 52,000 250,000 27,001 30,000 1,900 2,000 25,000 700,000 800 40,000 20,000 400 107,025 1,186 9 3,332,236 16,400 10,000 50,000 227,500 118,500 200 100 10,000 474,000 100 888 3,400 200 1,050 4 600 16,550 4,000 273,000 1,862 201,000 200 600 40,000 35,780 100 2,350 1,463 2,856 85,000 134,144 5,741
240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 257 258 259 260 261 262 263
11072-26 11072-34 11072-1271 11478-28 11676-23 11692-21 11692-17819 12005-22 12153-25 12161-24 12286-20 12369-1143 12666-536 12674-22 12948-29 13276-20 13284-29 13417-22 13417-21283 13417-23149 13904-22 1 1000001 2000004 TOTAL TOTAL
SEVEN STAR SECURITIES (PVT.) LTD. SEVEN STAR SECURITIES (PVT.) LTD. AL-HAQ SECURITIES (PVT) LLD. CMA SECURITIES (PVT) LIMITED A.I. SECURITIES (PRIVATE) LIMITED ABA ALI HABIB SECURITIES (PVT) LIMITED AFSA (PVT) LTD GUL DHAMI SECURITIES (PVT) LTD RAH SECURITIES (PVT) LIMITED HAJI ABDUL SATTAR SECURITIES (PVT.) LIMITED JSK SECURITIES LIMITED TRUSTEES LEINER PAK GELATINE LTD EMPLOYEES PROVIDENT FUND TRUSTEES OF SULAIMANIYAH TRUST BURJ CAPITAL PAKISTAN (PRIVATE) LIMITED BABA EQUITIES (PVT) LTD. - MT TAURUS SECURITIES LIMITED - MT MAAN SECURITIES (PRIVATE) LIMITED - MT INVEST CAPITAL MARKETS LIMITED Y. S. STOCKS ( PVT ) LIMITED IMPERIAL INVESTMENT (PVT) LTD. CYAN LIMITED PRESIDENT OF PAKISTAN PRESIDENT OF PAKISTAN PRESIDENT OF PAKISTAN
5,000 25,000 25,000 15,000 3,470 512,539 15,000 30,000 34,000 10,600 1,000 24,500 55,000 50,000 12,500 25,000 20,625 376,857 3,000 35,000 4,000,000 5,600 3,900 1,561,000 27,019,199 3,172,638,493
FOREIGN COMPANIES
Name Holding
S. No. Folio
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
25341 71121 83428 83436 1000002 1000007 1000015 1000040 1000082 1000213 1000251 1000373 1000530 1000711 1000898 1000957 1000963 1001143 1001181
GATES LIMITED BOSTON SAFE DEPOSIT & TRUST CO. M/S. J.P. MORGAN SECURITIES LIMITED M/S. LEGAL AND GENERAL ASSURANCE SOCIETY LTD. Citibank N.A., New York SOMERS NOMINEES (FAR EAST) LTD. STATE STREET BANK & TRUST CO. SOMERS NOMINEES (FAR EAST) LTD. BARING (GUERNSEY) LIMITED. ROYAL BANK OF SCOTLAND PLC U.K. NOMURA BANK (LUXEMBOURG) S.A. FLEDGELING NOMINEES INTERNATIONAL LTD. ASIAN CAPITAL HOLDINGS FUND. CREDIT LYONNAIS SECRITIES(SINGAPORE)PTE FIDUCIARY TRUST COMPANY INTERNATIONAL TEMPLETON DEVELOPING MARKETS TRUST MORGAN STANLEY BANK LUXEMBOURG CITIBANK N.A., NEW YORK UBL EXPORT PROCESSING ZONE BRANCH
1,500 100 275,900 79,800 6,644,100 500 600 100 1,000 100 100 100 500 300 5,000 1,100 800 3,000 150,000
162
Annual Report 2012
as at June 30, 2012
S. No. Folio
Name
Holding
S. No. Folio
Name
Holding
20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70
00364-18430 00521-502 00521-700 00521-1179 00521-2300 00521-2920 00521-3118 00521-3274 00521-3415 00521-3472 00521-3605 00521-3621 00521-3639 00521-3647 00521-3654 00521-3662 00521-3688 00521-3746 00521-3779 00521-3811 00521-3936 00521-4587 00521-4678 00521-4785 00521-4793 00521-4850 00521-4942 00521-5006 00521-5048 00521-5055 00521-5147 00521-5162 00521-5196 00521-5287 00521-5535 00521-5592 00521-5659 00547-716 00547-1938 00547-2068 00547-2282 00547-2621 00547-2753 00547-3595 00547-4429 00547-6267 00547-6622 00547-6697 00547-6903 00547-7885 00547-8115
EMIRATES INVESTMENT BANK PJSC STATE STREET BANK AND TRUST CO. DEUTSCHE BANK LONDON GLOBAL EQUITIES DEUTSCHE BANK SECURITIES INC. THE BANK OF NEW YORK MELLON SA/NV EATON VANCE COLLECTIVE INV TRT FOR EMP BENEFIT PLANS ACADIAN EMRG MARKETS EQUITY II FUND, LLC ING INTERNATIONAL SMALLCAP FUND CALIFORNIA PUBLIC EMPLOYEES RTM SYT-FUNDAMENTAL EMRG MKT RUSSELL INSTI FNDS PLC - CONSILIUM INVESTMENT MANAGEMENT ACADIAN INTERNATIONAL ALL CAP FUND UNITED TECHNOLOGIES CORPORATION MASTER RETIREMENT TRUST UPS GROUP TRUST UNIVERSITY OF SOUTHERN CALIFORNIA EMERGING MARKETS EQUITY MANAGERS PTF 1 OFFSHORES MASTER LP EATON VANCE STRUCTURED EMERGING MARKETS FUND EATON VANCE TAX MANAGED EMERGING MARKETS FUND THE BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM PPL SERVICES CORPORATION MASTER TRUST ACADIAN FRONTIER MARKETS EQUITY FUND ACADIAN ALL COUNTRY WORLD EX US FUND THE BANK OF NEW YORK MELLON THE BANK OF NEW YORK MELLON PENSION PROTECTION FUND TEACHER RETIREMENT SYSTEM OF TEXAS CORNELL UNIVERSITY EARNEST INSTITUTIONAL LLC WILMINGTON MULTI-MANAGER INTERNATIONAL FUND RUSSELL INVESTMENT COMPANY PLC FIRST CHURCH OF CHRIST SCIENTIST POLUNIN CAPITAL PARTNERS EMERGING MARKETS ACTIVE FUND ADVANCE SERIES TRUST - AST PARAMETRIC EMERGING MKTS EQT PRTF RTCC EMP BENEFIT FDS TRT RUSSELL FRONTIER MKT EQT FD WILMINGTON INTERNATIONAL EQUITY FUND SELECT, L.P. THE EMERGING FRONTIERS MASTER FUND LTD POLUNIN DISCOVERY FUNDS-FRONTIER MARKETS FUND EURIZON EASYFUND THE NORTHERN TRUST COMPANY CLSA SINGAPORE PTE LTD - CLIENT ACCOUNT MERRILL LYNCH INTERNATIONAL EMIRATES NATIONAL INVESTMENT CO. LLC SIMPLICITY ASIEN J.P.MORGAN WHITEFRIARS INC. THE DEPARTMENT OF THE STATE TREASURER OF MASSACHUSETTS FNIL A/C J.P.MORGAN SECURITIES (ASIA PACIFIC) LTD CLIENT A/C THE NORTHERN TRUST COMPANY BNP PARIBAS ARBITRAGE JP MORGAN WHITEFRIARS INC THE ROYAL BANK OF SCOTLAND PLC IBM DIVERSIFIED GLOBAL EQUITY FUND EATON VANCE INTL IRELND F.P-EATN V.INTL IRELND PPA E.M.EQ. F
26,400 2,200,000 144,756 100 961,100 1,127,000 790,358 274,568 3,097,310 5,410,000 201,762 840,758 1,195,292 314,103 110,000 4,810,200 4,498,500 1,766,333 130,000 8,925,477 1,142,905 267,444 251,714 1,922,339 1,220,500 1,195,610 387,073 135,000 144,358 134,937 4,500,000 1,117,300 3,127,000 80,366 307,992 3,588,000 444,825 1,100 2,500 186,004 3,084,050 500,000 11,472,230 1,900 2,000 48,828 479,328 650,600 440,794 608,670 3,943,049
71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91
00547-8222 00547-8487 00695-1535 00695-2764 00695-5148 00695-9892 00695-10122 00695-10817 00695-10916 00695-11096 00695-11187 00695-12102 03277-47575 03533-698 03533-706 03533-722 05264-7240 05264-12505 06502-755 06635-560 12732-1162 TOTAL
TUNDRA PAKISTAN FOND NTGI-QM COMMON DIVERSIFIED FRONTIER MARKETS INDEX FUND CREDIT SUISSE (HK) LTD (368-6) UNION BANK OF CALIFORNIA GLOBAL (460-1) MORGAN STANLEY & CO INTL PLC [644-1] MORGAN STANLEY MAURITIUS COMPANY LIMITED(1130-1) THE NAMURA TRUST AND BANKING CO. LIMITED (1153-5) GOLDMAN SACHS INVESTMENTS (MAURITIUS) I LIMITED [1400-5] PUBLIC EMP RETIREMENT ASSOCIATION OF NEW MEXICO [1404-0] UBS AG LONDON BRANCH [1408-2] NOMURA INTERNATIONAL PLC [1431-4] CITY OF PHILADELPHIA PUBLIC EMPLOYEES RETIRMENT SYS (1524-1) TRUSTEES OF DIAMOND INVESTMENT & RETIREMENT PLAN TRUST HABIB BANK AG ZURICH, ZURICH,SWITZERLAND HABIB BANK AG ZURICH, LONDON HABIB BANK AG ZURICH, DEIRA DUBAI KAYMO TRADING (FZE) MONTAGUE INTERNATIONAL TRADING LTD. HABIBSONS BANK LTD - CLIENT ACCOUNT M/S DUBAI ISLAMIC BANK U.A.E. ABT HOLDING LTD. 138,478,499
8,430,000 251,225 6,476,079 1,728,382 1,304,329 9,866,710 324,735 210,761 84,500 50,227 99,118 351,200 16,500 366,000 1,179,500 8,667,100 49,000 23,500 10,225,000 3,347,600 50,000
HOLDING MORE THAN 05%

Name Holding
S. No. Folio
1 2 3 4
2000001 2050000 04705-44589 04705-44676 TOTAL
PRESIDENT OF PAKISTAN PRESIDENT OF PAKISTAN ETISALAT INTERNATIONAL PAKISTAN (LLC) - FIRST CDC ACCOUNT ETISALAT INTERNATIONAL PAKISTAN (LLC) - Second CDC ACCOUNT
2,974,680,002 196,387,991 918,190,476 407,809,524 4,497,067,993
10 MUTUAL FUNDS
S. No. Folio Name Holding
1 2 3 4 5 6 7 8 9 10 11 12
05454-28 05652-23 05819-23 05959-27 05991-23 06130-25 06213-25 06411-21 06825-21 07062-23 07070-22 07377-26
JS VALUE FUND LIMITED CDC - TRUSTEE JS LARGE CAP. FUND CDC - TRUSTEE PAK STRATEGIC ALLOC. FUND CDC - TRUSTEE ATLAS STOCK MARKET FUND CDC - TRUSTEE MEEZAN BALANCED FUND CDC - TRUSTEE JS ISLAMIC FUND CDC - TRUSTEE UNIT TRUST OF PAKISTAN CDC - TRUSTEE AKD INDEX TRACKER FUND MC FSL - TRUSTEE JS KSE-30 INDEX FUND CDC - TRUSTEE AL MEEZAN MUTUAL FUND CDC - TRUSTEE MEEZAN ISLAMIC FUND CDC - TRUSTEE UNITED STOCK ADVANTAGE FUND.
1,830,000 2,000,000 19,000 600,000 1,861,510 750,000 1,750,000 219,957 49,563 2,573,670 9,869,537 3,250,000
163
as at June 30, 2012
13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40
09449-25 09456-24 09480-21 09506-26 10397-29 10603-21 10660-25 10801-27 10900-25 11049-29 11403-25 11809-26 12021-20 12120-28 12310-25 12526-29 12534-28 12625-27 12880-27 13052-26 13367-29 13581-22 13698-29 13714-25 13839-21 13946-28 13953-27 13961-26 TOTAL
CDC - TRUSTEE ATLAS ISLAMIC STOCK FUND CDC - TRUSTEE UNITED COMPOSITE ISLAMIC FUND CDC - TRUSTEE NAFA STOCK FUND CDC - TRUSTEE NAFA MULTI ASSET FUND CDC - TRUSTEE MEEZAN TAHAFFUZ PENSION FUND - EQUITY SUB FUND CDC - TRUSTEE APF-EQUITY SUB FUND CDC - TRUSTEE JS PENSION SAVINGS FUND - EQUITY ACCOUNT CDC - TRUSTEE NAFA ISLAMIC MULTI ASSET FUND CDC - TRUSTEE APIF - EQUITY SUB FUND MC FSL - TRUSTEE JS GROWTH FUND FIRST CAPITAL MUTUAL FUND LIMITED CDC - TRUSTEE IGI STOCK FUND CDC - TRUSTEE NIT STATE ENTERPRISE FUND CDC - TRUSTEE NIT-EQUITY MARKET OPPORTUNITY FUND CDC - TRUSTEE FIRST HABIB STOCK FUND MCBFSL-TRUSTEE URSF-EQUITY SUB FUND MCBFSL-TRUSTEE UIRSF-EQUITY SUB FUND CDC-TRUSTEE NAFA ASSET ALLOCATION FUND CDC-TRUSTEE NAFA SAVINGS PLUS FUND - MT CDC - TRUSTEE AKD AGGRESSIVE INCOME FUND - MT CDC - TRUSTEE PICIC INCOME FUND - MT CDC-TRUSTEE MEEZAN CAPITAL PROTECTED FUND-II CDC - TRUSTEE HBL IPF EQUITY SUB FUND CDC - TRUSTEE HBL PF EQUITY SUB FUND MCBFSL - TRUSTEE NAMCO BALANCED FUND - MT CDC - TRUSTEE KSE MEEZAN INDEX FUND MCBFSL - TRUSTEE PAK OMAN ADVANTAGE ASSET ALLOCATION FUND MCBFSL - TRUSTEE PAK OMAN ISLAMIC ASSET ALLOCATION FUND
600,000 1,500,000 5,400 165,000 399,700 200,000 119,300 3,000 200,000 4,500,000 250,000 940,000 57,764,103 5,985,639 187,188 100,000 100,000 2,000 295,856 152,992 5,000 494,190 80,000 50,000 280,666 502,604 50,000 50,000 99,755,875
Associated Companies, Undertakings and Related Parties (name wise details) Executives
Nil Nil
11 PENSION FUNDS
S. No. Folio Name Holding
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16
00521-3886 00547-6424 00695-10049 00695-10718 00695-10759 00695-11526 00695-11534 01446-866 03277-12636 03277-15506 03277-34872 03277-61129 03277-77228 03939-8891 04705-69173 10629-32543 TOTAL
TRUSTEE-SANOFI AVENTIS PAKISTAN SENIOR-EXECUTIVE PENSION FD TRUSTEE - IBM ITALIA S.P.A. PAKISTAN EMPLOYEES PENSION FUND TRUSTEE-UNILEVER PENSION PLAN (1145-3) TRUSTEE PAK TOBACCO CO LTD STAFF DEF CONTRI PEN FD (1384-1) TRUSTEE PAK TOBACCO CO LTD STAFF PENSION FUND [1390-2] TRUSTEE-UNILEVER PAKISTAN DC PENSION FUND SUB FUND-A[1465-1] TRUSTEE-UNILEVER PAKISTAN DC PENSION FUND SUB FUND-B[1464-4] TRUSTEE-MCB EMPLOYEES PENSION FUND TRUSTEES PAKISTAN PTA MNGT STAFF PEN.F TRUSTEES PERAC MNG&SUPERVISORY S.PEN FND TRUSTEES ENGRO CORPORATION LTD.MPT EMP DEF.CONT P.FUND TRUSTEE NATIONAL REFINERY LTD. MANAGEMENT STAFF PENSION FUND TRUSTEES INDUS MOTOR COMPANY LTD. EMPLOYEES PENSION FUND TRUSTEE- KHYBER PAKHTUNKHWA -PENSION FUND TRUSTEES OF ARL MANAGEMENT STAFF PENSION FUND TRUSTEE-PAK GUMS & CHEMICAL LTD EXCUTIVE STAFF PENSION FUND
329,483 78,359 1,420,480 30,087 2,672,666 212,970 187,300 200,000 48,655 2,310 929,954 42,890 50,000 180,000 50,000 10,500 6,445,654
164
Annual Report 2012
NOTICE OF 17Th ANNuAL gENErAL MEETINg
Notice is hereby given that the Seventeenth Annual General Meeting of Pakistan Telecommunication Company Limited will be held on Thursday, 18th October, 2012 at 10:30 a.m. at the Islamabad Serena Hotel, Sheesh Mahal Hall, Khayaban-e-Suhrwardi, Sector G-5, Opposite Convention Center, Islamabad, to transact the following business: Ordinary Business 1. 2. 3. To confirm the minutes of the last AGM held on October 19, 2011. To receive, consider and adopt the Audited Accounts for the year ended June 30, 2012, together with the Auditors and Directors reports. To appoint Auditors for the financial year ending June 30, 2013 and to fix their remuneration. The retiring Auditors M/s A. F. Ferguson & Co., Chartered Accountants being eligible have offered themselves for re-appointment. To elect Directors of the Company for another term of three years commencing from October 31, 2012 in terms of Section 178 of the Companies Ordinance, 1984. a. Pursuant to Section 178 (1) of the Companies Ordinance, 1984, the Board of Directors has fixed the number of elected Directors of the Company at nine. Pursuant to Section 178 (2)(b) of the Companies Ordinance, 1984, names of the retiring Directors are as under: 1. 3. 5. 7. 9. c. Mr. Amir Tariq Zaman Khan Mr. Kamran Ali Mr. Abdulrahim A. Al Nooryani Mr. Fadhil Al Ansari Mr. Jamal Saif Al Jarwan 2. 4. 6. 8. Mr. Abdul Wajid Rana Mr. Jamil Ahmed Khan Mr. Serkan Okandan Dr. Daniel Ritz
5.
To transact any other business with the permission of the Chair. By order of the Board
Dated: September 11, 2012. Islamabad Notes: 1.
(Farah Qamar) Company Secretary
4.
Any member of the Company entitled to attend and vote at this meeting may appoint any person as his/her proxy to attend and vote instead of him / her. Proxies in order to be effective must be received by the Company at the Registered Office not less than 48 hours before the time fixed for holding the meeting. Any member who seeks to contest the election to the office of Director shall, file with the Company, not later than 14 days before the meeting at which elections are to be held, a notice of his/her intention to offer him / herself for election as a Director. Declaration in accordance with the Listing Regulations along with consent to act as Director under section 184 of the Companies Ordinance, 1984 may also be filed. The Share Transfer Books of the Company will remain closed from October 12, 2012 to October 18, 2012 (both days inclusive). Members are requested to notify any change in address immediately to our Shares Registrar, M/s FAMCO Associates (Pvt.) Limited at Ground Floor, State Life Building No. 1-A, I.I. Chundrigar Road, Karachi. Any individual Beneficial Owner of CDC, entitled to vote at this meeting, must bring his / her original CNIC with him / her to prove his / her identity, and in case of proxy, a copy of shareholders attested CNIC must be attached with the proxy form. Representatives of corporate members should bring the usual documents required for such purpose.
2.
b.
3. 4.
Pursuant to Section 178 (3) of the Companies Ordinance, 1984, the retiring Directors have indicated their intentions to offer themselves for election to the office of Director.
5.
165
NOTES
166
PaKIstan teLeCoMMunICatIon CoMPany LIMIted
FOrM OF prOXy
I/we of being a member of Pakistan Telecommunication Company Limited, and a holder of Ordinary Shares as per Share Register Folio No. hereby appoint Mr./Mrs./Miss of as my / our proxy to vote for me / us and on my / our behalf at the and / or CDC Participant I.D. No.
Seventeenth Annual General Meeting of the Company to be held on Thursday, October 18, 2012 at 10:30 a.m. and at any adjournment thereof.
Signed this_________________________day of_________________________2012. For beneficial owners as per CDC List
Signature on Rs. 5/Revenue Stamp 1. Signature Name: Address: CNIC No. or passport No. Witness 2. Witness Signature Name: Address: CNIC No. or passport No.
Notes: i) ii) The proxy need not be a member of the Company. The instrument appointing a proxy must be duly stamped, signed and deposited at the office of the Company Secretary PTCL, Headquarters, Sector G-8/4, Islamabad, not less than 48 hours before the time fixed for holding the meeting. iii) Signature of the appointing member should match with his / her specimen signature registered with the Company. iv) If a proxy is granted by a member who has deposited his / her shares into Central Depository Company of Pakistan Limited, the proxy must be accompanied with participants ID number and account / sub-account number along with attested copies of the Computerized National Identity Card (CNIC) or the Passport of the beneficial owner. Representatives of corporate members should bring the usual documents required for such purpose.
Annual Report 2012
167
168
AFFIX CORRECT POSTAGE
To, The Company Secretary,

PTCL Headquarters, Sector G-8/4, Islamabad-44000

PTCL

Uploaded by

PTCL

Uploaded by

Pakistan Telecommunication Company Limited

Annual Report 2012

Consolidated Financial Statements

Pakistan Telecommunication Company Limited

Vision & Mission

Annual Report 2012

Core Values Professional Integrity Customer Satisfaction Teamwork Company Loyalty

Pakistan Telecommunication Company Limited

Chairman PTCL Board

AmIr TArIQ ZAmAn KhAn AmIr TArIQ ZAmAn KhAn

Member PTCL Board

ABDUL WAjID RANA

Member PTCL Board

SerKAn OKAndAn SerKAn OKAndAn

Member PTCL Board

JAmIL Ahmed KhAn JAmIL Ahmed KhAn IL Ahmed KhA

Annual Report 2012

Member PTCL Board

KAmrAn ALI KAmrAn ALI

Member PTCL Board

dr. dAnIeL rITZ

Member PTCL Board

jAMAL SAIF AL jARWAN

President & Chief Executive Officer

Pakistan Telecommunication Company Limited

Muhammad Nehmatullah Toor

Syed Mazhar Hussain

Furqan habib Qureshi

jamal Abdalla Salim Hussain Al Suwaidi

Company Secretary Farah Qamar Legal Affairs Zahida Awan

Annual Report 2012

Awards and Achievements 2011-2012

ESRI Special Achievement in GIS Award

Best Telecom Operator in South Asia

by Global media Links & Business milestones of Pakistan

2nd Global HR Excellence Award

Best Wireless Broadband

10th Teradata National IT Excellence Award

for 3G eVO Wireless Broadband Internet Project

by National Forum for Environment & Health (NFEH)

National Environmental Excellence Award

Best Corporate Social Responsibility Initiative Award

Pakistan Telecommunication Company Limited

Muhammad Nehmatullah Toor

Syed Mazhar Hussain

Furqan Habib Qureshi

Jamal Abdalla Salim Hussain Al Suwaidi

Annual Report 2012

Pakistan Telecommunication Company Limited

Year ended june 30

Annual Report 2012

Pakistan Telecommunication Company Limited

Operating Highlights - Graphs

Revenue and Trade Debts

9.17 2011 7.50 9.62

Profit / (Loss) Before Tax

Profit / (Loss) After Tax

Current Assets and Current Liabilities

Return on Operating Assets and Equity

Return on Operating Assets

Annual Report 2012

Capacity: Installed Vs In Service

Dividend Payout per Share

2007 (0.55) 2008

Total Assets Vs Shareholders Equity

Breakup Value Vs Market Value

19.49 2008 2009 17.24

Earnings per Share

Pakistan Telecommunication Company Limited

Group CEO's Message

Annual Report 2012

Pakistan Telecommunication Company Limited

Annual Report 2012

3. Products & Services

Pakistan Telecommunication Company Limited

Annual Report 2012