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Report
We have audited the annexed statement of financial position of Pakistan Telecommunication Company Limited (“the
Company”) as at June 30, 2010 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 Company’s 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) In our opinion, proper books of accounts have been kept by the Company as required by the Companies Ordinance, 1984;
(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 except for the changes as stated in note
2.1 to the financial statements with which we concur;
(ii) the expenditure incurred during the year was for the purpose of the Company’s business; and
(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the
objects of the Company;
(c) 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 Company’s affairs as at June 30, 2010 and of the comprehensive income, its cash flows and
changes in equity for the year then ended; and
(d) 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.
A. F. Ferguson & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
Islamabad. Islamabad.
99,758,711 99,389,559
Non current liabilities
Long term security deposits 7 720,964 990,055
Deferred taxation 8 2,949,770 2,379,000
Employees’ retirement benefits 9 15,512,803 14,142,099
Deferred government grants 10 1,632,701 1,061,044
20,816,238 18,572,198
Current liabilities
Trade and other payables 11 24,922,197 26,114,171
Payable to PTA against WLL license fee 12 1,894,950 1,953,971
Dividend payable 3,375,631 7,650,000
Provision for taxation – 368,180
30,192,778 36,086,322
150,767,727 154,048,079
The annexed notes from 1 to 43 form an integral part of these financial statements.
Chairman
Annual Report 2010 | 39
Assets
91,298,316 90,888,021
Long term investments 16 6,681,965 5,607,439
Long term loans 17 7,337,210 3,332,378
105,317,491 99,827,838
Current assets
Stores, spares and loose tools 18 4,075,863 5,201,991
Trade debts 19 10,171,530 10,760,974
Loans and advances 20 599,031 590,061
Accrued interest income 21 571,127 821,027
Recoverable from tax authorities 22 7,164,971 1,059,608
Receivable from Government of Pakistan 23 2,164,072 2,164,072
Other receivables 24 787,633 698,270
Short term investments 25 13,493,865 21,017,790
Cash and bank balances 26 6,422,144 11,906,448
45,450,236 54,220,241
150,767,727 154,048,079
The annexed notes from 1 to 43 form an integral part of these financial statements.
Cash flows from investing activities
Capital expenditure (12,870,439) (9,455,527)
Purchase of intangible assets – (397,979)
Proceeds from disposal of property, plant and equipment 140,578 206,039
Short term investments 1,221,886 (1,221,886)
Increase in long term investments (1,074,526) (2,000,000)
Long term loans – net (53,655) 62,565
PTA WLL license fee (210,550) –
Loan to the wholly owned subsidiary – PTML (4,000,000) (3,000,000)
Return on long term loans and short term investments 3,952,363 2,751,824
Government grants received 571,657 966,044
Dividend income 695,239 –
The annexed notes from 1 to 43 form an integral part of these financial statements.
(Rupees in thousand)
Balance as at July 01, 2008 37,740,000 13,260,000 1,683,074 30,500,000 14,705,300 97,888,374
Balance as at June 30, 2009 37,740,000 13,260,000 1,683,074 30,500,000 16,206,485 99,389,559
Balance as at June 30, 2010 37,740,000 13,260,000 2,113,704 30,500,000 16,145,007 99,758,711
The annexed notes from 1 to 43 form an integral part of these financial statements.
1.2 Activities
The Company provides telecommunication services in Pakistan. It owns and operates telecommunication facilities and
provides domestic and international telephone services and other communication facilities throughout Pakistan. The
Company has also been licensed to provide such services to territories of Azad Jammu and Kashmir and Gilgit Baltistan.
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 as are notified under the Companies Ordinance, 1984, provisions of
and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives
of the Companies Ordinance, 1984 shall prevail.
(i) IAS 1 (Revised), ‘Presentation of financial statements’ (effective for annual periods beginning on or after
January 01, 2009). The revised standard prohibits the presentation of items of income and expenses (that is
non–owner changes in equity) in the statement of changes in equity, requiring ‘non–owners changes in equity’
to be presented separately from owners changes in equity. All ‘non–owners changes in equity’ are required to be
shown in a performance statement. Companies can choose whether to present one performance statement (the
statement of comprehensive income) or two statements (statement of comprehensive income and statement
of other comprehensive income). The Company has preferred to present one statement.
(ii) IFRS 3 (Revised), ‘Business Combinations’ (effective for annual periods beginning on or after July 01, 2009).
The revised standard continues to apply the acquisition method to business combinations, with some significant
changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition
date, with contingent payments classified as debt subsequently remeasured through the income statement.
There is a choice on an acquisition–by–acquisition basis to measure the non–controlling interest in the acquiree
at fair value or at the non–controlling interest’s proportionate share of the acquiree’s net assets. All acquisition–
related costs should be expensed. The Company’s acquisition during the year has been recorded in accordance
with IFRS 3 (Revised).
(iii) IAS 23 (Revised), ‘Borrowing Costs’ (effective for annual periods beginning on or after January 01, 2009). The
revised standard requires capitalization of borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset. The Company’s previous policy was in line with the revision
and therefore the adoption of the revised IAS 23 and the consequent change in accounting policy had no impact
on the earnings of the Company during the year ended June 30, 2010.
(iv) IFRIC 18, ‘Transfer of assets from customers’ (effective for annual periods beginning on or after July 01,
2009). The interpretation clarifies the accounting treatment of consideration received from customers to
construct or acquire an item of property, plant and equipment for provision of services to customers. The
44 | Pakistan Telecommunication Company Limited
interpretation requires recognition of property, plant and equipment in accordance with IAS 16 ‘Property, plant
and equipment’ and recognition of income as per IAS 18 ‘Revenue’. The Company’s current accounting policy
is in compliance with this interpretation and therefore there is no effect on the Company’s financial statements.
2.2 Amendments and Interpretations to published accounting standards not effective during the year and not yet adopted
by the Company:
Effective date
(annual periods beginning on or after)
The management anticipates that except for the effects on the financial statements, of IFRS 2 – Share based payments
(Amendments), if any, adoption of above standards, amendments and interpretations in future periods will have no
material impact on the Company’s financial statements except for additional disclosures. The management is currently
considering the implications of IFRS 2 (Amendments).
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.
Grants that compensate the Company for expenses incurred are recognized in income for the year on a systematic
basis in the same period in which the related expenses are recognized. Grants that compensate the Company for cost
of an asset are recognized in income for the year on a systematic basis over the expected useful life of the related
asset, upon its capitalization.
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 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
the 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.
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 item will flow to the
Company. The carrying amount of any replaced part as well as other repairs and maintenance costs are charged to
income for the year during the period in which they are incurred.
Depreciation is calculated using the straight–line method to allocate their cost over their estimated useful lives, at the
rates mentioned in note 14, after taking into account their residual values.
Depreciation on additions to property, plant and equipment, is charged from the month in which relevant asset is
acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Any
impairment loss, or its reversal, is also charged to income. Where an impairment loss is recognized, the depreciation
charge is adjusted in future periods to allocate the assets’ revised carrying amount less the residual value over its
estimated useful life.
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.
(i) Licenses
These are stated 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, at the
rate specified in note 15, 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.
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 software over its estimated useful life, at
Annual Report 2010 | 47
the rate specified in note 15, 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 an intangible is acquired
or capitalized, while no amortization is charged for the month in which the intangible is disposed off.
The Company classifies its financial assets in four categories: held to maturity, loans and receivables, fair value
through profit or loss and available–for–sale. The classification depends on the purpose for which the financial assets
were acquired. Management determines the classification of its financial assets at initial recognition.
A financial asset is classified in this category if it is acquired by the Company with the intention and ability to
hold it till its maturity.
48 | Pakistan Telecommunication Company Limited
Loans and receivables are non–derivative financial assets with fixed or determinable payments that are
not quoted in an active market. The Company’s loans and receivables comprise ‘Trade debts’, ‘Loans and
advances’, ‘Accrued interest income’, ‘Receivable from Government of Pakistan’, ‘Other receivables’, ‘Short
term investments’ and ‘Cash and bank balances’.
Financial assets at fair value through profit or loss, are financial assets held for trading. A financial asset is
classified in this category, if acquired principally for the purpose of selling in the short–term. Assets in this
category are classified as current assets.
(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 off these assets within twelve months of the date of statement of financial position.
Financial assets are derecognized, when the rights to receive cash flows from the investments have expired or have
been transferred.
Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category
are recognized as income for the period in which they arise. Dividend income from available–for–sale investments and
financial assets at fair value through profit or loss, is recognized in income for the year, when the Company’s right to
receive dividend is established.
(c) Impairment
The Company assesses at each statement of financial position date whether there is objective evidence that a financial
asset or a group of financial assets is impaired. In the case of equity securities classified as available–for–sale, a
significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the
security is impaired. If any such evidence exists for available–for–sale financial assets, the impairment loss is reduced
from value of other comprehensive income and recognized in income for the year. Impairment losses recognized in
income on equity instruments are not reversed.
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 Company’s activities as described below:
Revenue from telecommunication services comprises of amounts charged to customers in respect of monthly
line rent, line usage and provision of telecommunication services (including data services). Revenue also
includes the net income received and receivable from revenue sharing arrangements entered into with overseas
and local telecommunication companies.
Revenue is recognized based on the fair value received or receivable for the services rendered, net of services
tax, rebates and discounts. Revenue from fixed line business, mainly in respect of line rent and line usage, is
invoiced and recorded as part of a periodic billing cycle. Revenue from the sale of prepaid credit is deferred
until such time as the customer uses the air time, or the credit expires.
Return on bank deposits and investments is recognized using the effective interest method.
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 the statement of other comprehensive income, where
the related tax is also recognized in statement of 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
statement of financial position date. 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 amount of assets and liabilities in the financial statement and the corresponding tax base
used in the computation of taxable profit.
Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income 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,
based on tax rates that have been enacted or substantially enacted by the statement of financial position date.
The Company operates an approved funded provident plan covering permanent employees. For the purposes of the
plan, a separate trust titled 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% (2009: 15%) per annum. The Company also
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.
The Company operates an approved funded pension plan through a separate trust called 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.
The Company operates an unfunded and unapproved gratuity plan for its New Terms and Conditions (NTC) /
contractual employees.
The Company provides post retirement medical facility to pensioners and their families. Under the unfunded
plan, all such ex–employees, their spouses and children up to the age of 21 except unmarried daughters which
are not subject to 21 years age limit and parents residing with and dependent on the employee are entitled to
this benefit. The pensioner and the family are entitled to the facility up to the life of the pensioner and spouse.
There are no annual limits to the cost of drugs, hospitalized treatment and consultation fees.
The Company provides a facility to its employees for accumulating their annual earned leave. Under this plan,
regular employees are entitled to four days of earned leaves per month. Unutilized leave can be accumulated
without limit and can be used at any time, subject to the Company’s approval, up to 120 days in a year without
providing medical certificate, 180 days with medical certificate and 365 days during the entire service of the
employee. Up to 180 days of accumulated leave can be encashed on retirement, provided the employee has
a minimum leave balance of 365 days. Leaves are encashed at latest emoluments applicable for 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, to a maximum of 28 days.
New Terms and Conditions (NTC) / contractual employees are entitled to three days earned leave per month.
Unutilized leaves can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed on
departure at gross pay.
The liability recognized in the statement of financial position in respect of defined benefit plans is the present value
of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, if any,
together with adjustments for unrecognized actuarial gains / losses, if any.
The defined benefit obligation is calculated annually, by independent actuary using the projected unit credit method.
The most recent valuations were carried out as at June 30, 2010. The present value of the defined benefit obligation,
is determined by discounting the estimated future cash outflows using 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
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’ (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 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.
Annual Report 2010 | 51
6. Share capital
6.1 Authorized share capital
2010 2009 2010 2009
(Number of shares in thousand) (Rupees in thousand)
11,100,000 11,100,000 “A” class ordinary shares of Rs 10 each 111,000,000 111,000,000
3,900,000 3,900,000 “B”class ordinary shares of Rs 10 each 39,000,000 39,000,000
6.4 Except for voting rights, the “A” and “B” class ordinary shares rank pari passu in all respects. “A” class ordinary shares
carry one vote and “B” class ordinary shares carry four votes, save for the purposes of election of directors. “A”
class ordinary shares 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, submitted to the Company by the holders
of three fourths of the “B” class ordinary shares. In the event of termination of the license issued to the Company
under the provisions of Pakistan Telecommunication (Re–organization) Act, 1996, the “B” class ordinary shares shall
be automatically converted into “A” class ordinary shares.
6.5 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 the
international investors, also exchangeable, at the option of 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, 2010, 599,506 thousand (2009: 599,500 thousand) “A” class ordinary shares had been exchanged for
such vouchers.
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, along with management control. Emirates Telecommunication
Corporation (Etisalat), UAE was the successful bidder. The shares, alongwith management control, were transferred
with effect from April 12, 2006 to Etisalat International Pakistan (EIP), UAE which is a subsidiary of Etisalat.
52 | Pakistan Telecommunication Company Limited
6.7 Ordinary shares of the Company held by related parties as at the year end are as follows:
2010 2009
(Number of shares)
Etisalat International Pakistan (LLC) SE (“B” class ordinary shares) 407,809,524 407,809,524
Etisalat International Pakistan (LLC) (“B” class ordinary shares) 918,190,476 918,190,476
1,326,000,000 1,326,000,000
8. Deferred taxation
The liability for deferred taxation comprises of
timing differences relating to:
2,949,770 2,379,000
The gross movement in deferred tax liability
during the year is as follows:
6,369,562 5,392,080
Gratuity – unfunded 9.1 498,256 391,609
Accumulating compensated absences 9.1 926,338 1,025,164
Post retirement medical facility 9.1 7,718,647 7,333,246
15,512,803 14,142,099
Annual Report 2010 | 53
9.1 The latest actuarial valuations of the defined benefit plans were conducted at June 30, 2010 using the projected unit
credit method. Details of these defined benefit plans are as follows:
9,230,559 3,514,287 1,139,102 932,231 423,702 314,871 926,338 1,025,164 7,807,167 6,448,686 19,526,868 12,235,239
Unrecognized actuarial gains / (losses) (3,947,110) 1,035,921 (52,989) (90,359) 74,554 76,738 – – (88,520) 884,560 (4,014,065) 1,906,860
Liability as at June 30 5,283,449 4,550,208 1,086,113 841,872 498,256 391,609 926,338 1,025,164 7,718,647 7,333,246 15,512,803 14,142,099
Balance as at June 30 62,752,225 53,610,885 1,139,102 932,231 423,702 314,871 926,338 1,025,164 7,807,167 6,448,686 73,048,534 62,331,837
733,067 160,160 249,576 217,490 133,961 138,282 (42,665) 268,310 820,907 587,109 1,894,846 1,371,351
Experience adjustment on plan liabilities losses 6,098,147 953,077 778,679 2,581,597 603,337
Experience adjustment on plan assets – (losses) / gains 1,115,117 (1,735,854) (522,664) 3,776,675 2,611,253
2010 2009
(Rupees in thousand)
9.4 Major categories of plan assets of the defined benefit pension plan (funded) as a percentage of total plan assets are
as follows:
2010 2009
(Percentage)
The effect of 1% increase in the medical cost trend rate in the present value of defined benefit obligations for medical
cost is Rs 2,295,307 thousand (2009: Rs 1,892,189 thousand), and the effect of 1% decrease in the medical cost
trend rate in the present value of defined benefit obligations for medical cost is Rs 1,904,949 thousand (2009: Rs
1,563,113 thousand).
9.6
In the next financial year, the expected contribution to be paid to the funded pension plan by the Company is Rs
1,623,346 thousand (2009: Rs 463,242 thousand).
Note 2010 2009
(Rupees in thousand)
416,304 379,443
Sales tax payable 993,095 1,061,915
Advances from customers 1,705,615 1,856,153
Technical services fee payable to related party 29.2 447,441 503,467
Retention money payable to contractors / suppliers 11.1 5,394,281 5,914,707
Payable to
Research and Development Fund 29.4 2,773,454 2,397,144
Universal Service Fund 11.3 3,523,508 6,122,799
Pakistan Telecommunication Authority 6,542 34,542
Unclaimed dividend 131,253 120,342
VSS benefits payable 55,734 61,057
Consideration payable on acquisition of
a subsidiary – MAXCOM 16.3 67,396 –
Other liabilities 469,143 432,851
24,922,197 26,114,171
56 | Pakistan Telecommunication Company Limited
2010 2009
(Rupees in thousand)
391,457 114,178
11.3 This includes Rs 230,591 thousand (2009: Rs 3,458,866 thousand) representing the last installment out of total
amount of Rs 3,458,866 thousand payable to Universal Service Fund for the period commencing from May 1, 2008 to
December 31, 2008 in fifteen equal monthly installments.
2010 2009
(Rupees in thousand)
2,105,500 1,953,971
Payment made during the year (210,550) –
1,894,950 1,953,971
13. Contingencies and commitments
Contingencies
13.1 1,574 cases (2009: 1,850 cases) have been filed against the Company primarily by subscribers and employees.
Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial impact
at present. However, the management and the Company’s legal advisor 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.
13.2 In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all
messages, inter alia, through card phone services and mobile telephone services within and outside the city of Karachi.
Telecard Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration
of its services and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of
Pakistan ordered for immediate restoration of Pay Card services including rebate relief and discount to all pay phone
Annual Report 2010 | 57
service providers. In view of relief and discount offered by the Government, Telecard Limited withheld payments on
account of their monthly bills to the Company and obtained a stay order from the Honourable Sindh High Court for
an amount of Rs 110,033 thousand against the Company.
On the instructions of the Honourable Court, external consultants calculated the rebate and discount amounting to Rs
349,953 thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In
the suit, final arguments of the parties are to be reheard. The Company has also filed a claim against Telecard Limited
for aggregate receivables amounting to Rs 334,099 thousand up to December 31, 2001.
In another case, identical to the above matter, M/s Telefon has claimed Rs 97,337 thousand from the Company. In
the last hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing.
The management and the Company’s legal advisor are of the view that the outcome of the appeal is expected to be
favourable.
13.3 The Employees’ Old–Age Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of
Employees’ Old–Age Benefits (EOBI) Act, 1976 for payment of Company’s and employees’ contribution amounting to
Rs 1,496,829 thousand for the period January 01, 1996 to May 31, 2005. The management has filed a writ petition
against the demand before the Honourable High Court, which is pending for hearing. However, the management and
legal advisor are of the view that the case would be decided in the favour of the Company.
13.4 In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the
repealed Income Tax Ordinance, 1979 for the assessment years 1996 – 1997 to 1998 – 1999 on failure to withhold /
deduct tax under section 50(3) while making payments to non resident satellite companies. The Company filed a writ
petition before the Honourable Lahore High Court against the said notices, which was dismissed. An appeal was filed
against the dismissal before the Honourable Supreme Court of Pakistan which was also dismissed and the Company
was advised by the Honourable Court to file an appeal before the Income Tax Appellate Authorities. Subsequently, the
Company filed an appeal with the Commissioner Income Tax (CIT) Appeals who has annulled the order of the Taxation
Officer. The department has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT
(Appeals).
Pending final outcome of the appeal, no provision has been made in these financial statements for the demands
aggregating Rs 1,599,557 thousand (2009: Rs 1,599,557 thousand). The management and the Company’s tax advisor
are of the view that the outcome of the appeal is expected to be favourable.
13.5 Consequent to an audit of Federal Excise Duty (FED) collected by the Company from subscribers for the years 1998 – 99
and 1999 – 2000 the Rawalpindi Collectorate of Federal Excise Department raised a demand for excise duty along
with additional duties and penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company
with the Federal Board of Revenue (FBR), Government of Pakistan for resolution. A committee was formed comprising
representatives from the Company and FBR. As a result of the negotiations, the Company deposited an amount of Rs
466,176 thousand on account of FED.
It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate
forums and, in the event of a favourable decision, the amount would be refunded to the Company by Collectorate
of Federal Excise. The Company has filed an appeal to contest the additional duties and penalties levied by the
Collectorate. During the year ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided
by the Custom, Federal Excise and Sales Tax Appellate Tribunal in favour of PTCL, subject to submission of proof.
Pending the final outcome, no provision has been made in these financial statements for the above demand, since the
management and the Company’s lawyer are of the view that the outcome of the appeal is expected to be favourable.
13.6 In respect of tax years 2006 and 2007, the Additional Commissioner of Income Tax (ACIT) inter alia, amended the
Company’s income tax assessment on the grounds, that the Company’s claim of a concessional rate of tax at 1%
of revenue received from international customers, (provided for through Clause 3 of Part II of Second Schedule to
the Income Tax Ordinance, 2001) is not in accordance with such legal provisions, as underlying telecommunication
58 | Pakistan Telecommunication Company Limited
services have not been rendered outside Pakistan, and as a result raised a demand of Rs 1,659,000 thousand. The
Commissioner of Income Tax (CIT Appeals) and Income Tax Appellate Tribunal (ITAT) have endorsed the departmental
view and presently Company’s reference against the judgment of ITAT, in this respect, is pending before the Rawalpindi
Bench of the Honourable Lahore High Court. The management and the Company’s lawyer consider that the litigation
would eventually be settled in the Company’s favour.
13.7 The tax authorities selected tax year 2007 for audit purposes and created additional tax demand of Rs 2,345,628
thousand by disallowing certain expenses citing non–deduction of respective withholding tax as the prime reason. The
Commissioner Income Tax (Appeals) withheld the decision of the taxation officer and the ensuing appeal filed by the
Company is pending before the Income Tax Appellate Tribunal (ITAT). Further, the Company has also challenged the
selection of tax year 2007 for audit by the tax authorities before the Honorable Islamabad High Court (not functional at
present). No provision has been made in these financial statements pending outcome of the appeals which is expected
to be in favour of the Company.
13.8 Based on an audit of 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 1,018,568 thousand on the premise that the
Company has claimed total input tax without apportioning the same between allowable and exempt supplies and
the exempt supplies were also not declared in these returns. The Company is in appeal against the said order before
Commissioner Inland Revenue–Appeals (CIR Appeals) and has also challenged the same through a writ petition filed
before Rawalpindi bench of the Honourable Lahore High Court.
No provision on this account has been made in these financial statements as the management and the Company’s tax
advisor consider that based on the underlying legal and factual position, the litigation would eventually settle in the
Company’s favour.
13.9 For tax year 2008, the Taxation Officer (TO) raised a demand of Rs 4,559,208 thousand on the plea that the Company
has erroneously applied average rate of tax while deducting withholding tax from payments made to employees under
the Voluntary Separation Scheme (VSS) as the required options before concerned commissioners of income tax were
not filed by such employees. Commissioner Income Tax (Appeals) upheld the decision of TO and disposing of the
ensuing second appeal, the Income Tax Appellate Tribunal (ITAT) remanded the case back to the TO for verification of
filing of options before concerned commissioners in the light of related law. The Company has also filed a reference
application with the Rawalpindi Bench of the Honorable Lahore High Court which is pending.
The management and the Company’s tax advisor are of the view that the eventual outcome of the case is expected to
be in favour of the Company and, as such, no provision has been made in the financial statements on this account.
2010 2009
(Rupees in thousand)
3,401,565 2,035,337
Commitments
13.11 Commitments in respect of contracts for capital expenditure amount to Rs 14,127,643 thousand (2009: Rs 12,352,378
thousand).
Annual Report 2010 | 59
88,219,285 87,567,351
Cost 1,643,226 74,151 9,838,254 1,009,184 102,895,985 118,024,486 1,008,318 444,310 1,566,821 5,715,407 242,220,142
Accumulated depreciation – (21,821) (2,701,091) (351,389) (71,323,741) (80,785,132) (518,677) (296,127) (1,335,671) (2,086,315) (159,419,964)
Net book value 1,643,226 52,330 7,137,163 657,795 31,572,244 37,239,354 489,641 148,183 231,150 3,629,092 82,800,178
As explained in note 1.1, the property and rights in the above assets 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 such freehold land, was not formally transferred in the name of the Company in the land revenue records. The
Company initiated the process of transfer of title of land in its name in the previous years, which is still ongoing and shall be
completed in due course of time.
60 | Pakistan Telecommunication Company Limited
12,215,082 12,565,744
14.3 Disposal of property, plant and equipment:
All items of property, plant and equipment disposed off during the year, individually have a book value of less than
Rs 50,000.
2010 2009
(Rupees in thousand)
14,258,596 9,836,588
2010 2009
(Rupees in thousand)
14.6 Advances to suppliers include balances with the following related parties:
Telecom Foundation 61,659 147,206
Emirates Telecommunication Corporation – 1,685,532
61,659 1,832,738
Annual Report 2010 | 61
Note 2010 2009
(Rupees in thousand)
2,756,232 2,952,648
Software
Bill printing software 15.5 6,015 7,655
Billing and automation of broadband 15.5 36,085 45,297
Enterprise Resource Planning (ERP) SAP system 15.6 280,699 315,070
322,799 368,022
3,079,031 3,320,670
62 | Pakistan Telecommunication Company Limited
15.2 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 for an agreed license fee of Rs 249,344
thousand. In the year ended June 30, 2005, PTA modified the previously issued license to provide telecommunication
services to include spectrum license at an agreed license fee of Rs 4,278,639 thousand. This license allows the
Company to provide wireless local loop 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.
15.3 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 (Re–organization) Act, 2005 and the Northern Areas Telecommunication (Re–organization)
(Adaptation and Enforcement) Order, 2006 to the Company. The purpose of the license is 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, for 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.
15.4 PTCL acquired the IPTV license from PEMRA on October 01, 2006 for an agreed price of Rs 9,900 thousand. The cost
of the license is being amortized on a straight–line basis over a period of 5 years.
15.5 The cost of the software is being amortized on a straight–line basis over a period of 5 years.
15.6 This represents cost of the SAP – Enterprise Resource Planning (ERP) system with a useful life of 10 years.
6,681,965 5,607,439
Associate – unquoted
TF Pipes Limited
1,658,520 (2009: 1,658,520)
ordinary shares of Rs 10 each
Ordinary shares held 40% (2009: 40% ) 23,539 23,539
6,598,065 5,523,539
Annual Report 2010 | 63
83,900 83,900
16.3 On March 01, 2010 the Company acquired 100% shareholding of MAXCOM. MAXCOM provides broadband services
to customers in the cities of Karachi and Hyderabad. In terms of agreement between the Company and previous
shareholders of MAXCOM, the purchase consideration will be paid to the previous shareholders on a revenue sharing
basis commencing from March 2010 to August 2012. On basis of estimates prepared by management, the Company
has recognized the present value of the consideration payable amounting to Rs 74,526 thousand.
337,010 332,178
Others 200 200
7,337,210 3,332,378
17.1 This represents unsecured loans of Rs 3,000,000 thousand, Rs 2,000,000 thousand and Rs 2,000,000 thousand
(June 30, 2009: Rs 3,000,000 thousand) to PTML, a wholly owned subsidiary of the Company, under subordinated
debt agreements. First two loans are recoverable in eight equal quarterly installments commencing after a grace
period of four years in 2013 and 2014 respectively, and carry mark–up at the rate of three months KIBOR plus 82
basis points. Third loan is recoverable in eight equal quarterly installments commencing after a grace period of three
years in 2014 and carry mark–up at the rate of three months KIBOR plus 180 basis points.
The maximum amount of the loan to PTML outstanding at any time since the date of previous statement of financial
position was Rs 7,000,000 thousand (2009: Rs 3,000,000 thousand).
64 | Pakistan Telecommunication Company Limited
17.2 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 15% per annum (2009: 12.5% per annum), whereas,
loans to other employees are interest free. The loans are recoverable in monthly installments spread over a period of
5 to 10 years. These loans are secured against future pension payments of employees.
This balance also includes Rs 14,821 thousand (2009: Rs 35,670 thousand) receivable from employees against sale
of vehicles, recoverable in monthly installments spread over a period of 1 to 2 years.
4,075,863 5,201,991
18.1 Stores, spares and loose tools include items which may result in property, plant and equipment but are not
distinguishable.
752,352 723,731
Write off against provision (124,029) (74,140)
Note 2010 2009
(Rupees in thousand)
24,849,019 25,677,054
International
Considered good 19.2 2,935,276 3,194,576
Considered doubtful 953,959 885,740
3,889,235 4,080,316
28,738,254 29,757,370
Provision for doubtful debts 19.3 (18,566,724) (18,996,396)
10,171,530 10,760,974
19.1 These include amounts due from the following related parties:
PTML 443,808 412,309
MAXCOM 18,250 –
462,058 412,309
19.2 These include amounts due from the following related parties:
Etisalat – Afghanistan 21,685 100,502
Etisalat – UAE 419,914 657,771
Mobily – Saudi Arabia 312,070 528,119
753,669 1,286,392
These amounts are interest free and accrued in the normal course of business.
20,881,607 20,113,464
Trade debts written off against provision (2,314,883) (1,117,068)
599,031 590,061
20.1 This includes advance of Rs 6,841 thousand (2009: Rs 6,841 thousand) given to TF Pipes Limited, a related
party.
66 | Pakistan Telecommunication Company Limited
571,127 821,027
21.1 This represents markup on loan to PTML, a wholly owned subsidiary, as indicated in note 17.1
Note 2010 2009
(Rupees in thousand)
7,164,971 1,059,608
23. Receivable from Government of Pakistan
This represents the balance amount receivable from Government of Pakistan on account of its agreed share in the
voluntary separation scheme offered to the Company’s employees during 2008.
787,633 698,270
– –
787,633 698,270
13,493,865 21,017,790
25.1 Term deposits
Term Maturity Profit rate % 2010 2009
(months) Upto per annum (Rupees in thousand)
13,238,949 21,017,790
25.2 Units of mutual funds
Units of open – end mutual funds:
Pakistan Cash Management Fund
2,013,768 (2009: Nil) units 102,059 –
NAFA Government Securities Liquid Fund
5,011,856 (2009: Nil) units 51,493 –
BMA Empress Cash Fund
2,416,129 (2009: Nil) units 25,691 –
Faysal Saving Growth Fund
489,285 (2009: Nil) units 50,455 –
Askari Sovereign Cash Fund
232,801 (2009: Nil) units 25,218 –
254,916 –
26. Cash and bank balances
Balances with banks
Deposit accounts 26.1 4,796,454 10,304,147
Current accounts
Local currency 1,331,971 730,292
Foreign currency (USD 3,430 thousand
(2009: USD 10,751 thousand)) 293,686 871,981
6,422,111 11,906,420
Cash in hand 33 28
6,422,144 11,906,448
68 | Pakistan Telecommunication Company Limited
26.1 The balances in deposit accounts bear mark–up which ranges from 5% to 13% per annum (2009: 5% to 19.5% per
annum).
Note 2010 2009
(Rupees in thousand)
27. Revenue
Domestic 27.1 50,080,664 53,039,455
International 27.2 7,093,863 6,199,546
57,174,527 59,239,001
27.1 Revenue is exclusive of Federal Excise Duty amounting to Rs 6,703,713 thousand (2009: Rs 8,611,191 thousand).
27.2 International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and
has been shown net of interconnect cost, relating to the other operators and Access Promotion Charges aggregating
to Rs 11,261,154 thousand (2009: Rs 10,886,794 thousand).
38,258,711 37,732,282
28.1 This includes Rs 1,576,511 thousand (2009: Rs 1,140,964 thousand) in respect of employees’ retirement benefits.
Annual Report 2010 | 69
7,223,780 8,935,261
29.1 This includes Rs 161,062 thousand (2009: Rs 113,822 thousand) in respect of employees’ retirement benefits.
29.2 This represents an amount of PTCL’s share payable to Emirates Telecommunication Corporation (Etisalat), a related
party, under a technical service agreement between the Company and Etisalat for a period of five years commencing
October 1, 2006 at the rate of 3.5% of PTCL group’s consolidated annual revenue.
10,500 9,500
29.4 This represents the Company’s contribution to the Information Communication Technology (ICT) Research and
Development Fund at the rate of 0.5% (1% till November 17, 2009) of its gross revenue less inter operator payments
and payments toward research and development activities in Pakistan, in accordance with the terms and conditions of
its license to provide telecommunication services.
70 | Pakistan Telecommunication Company Limited
29.5 Provision against doubtful debts is net of security deposits written back, amounting to Rs 222,751 thousand (2009:
Rs Nil) against receivable balances of customers in default.
29.6 There were no donations during the year in which the directors or their spouses had any interest.
Note 2010 2009
(Rupees in thousand)
2,142,324 1,817,071
30.1 This includes Rs 157,273 thousand (2009: Rs 116,565 thousand) in respect of employees’ retirement benefits.
5,134,646 4,267,172
31.1 Included in interest on long term loans is an amount of Rs 603,257 thousand (2009: Rs 263,333 thousand) accrued
on the loan given to PTML, the wholly owned subsidiary, as shown in note 17.1.
31.2 This includes dividend from PTML, the wholly owned subsidiary, amounting to Rs 673,239 thousand (2009: Rs
Nil).
2010 2009
(Rupees in thousand)
403,240 908,524
Annual Report 2010 | 71
33. Taxation
Current 4,416,196 3,080,732
Deferred 8 570,770 1,789,000
4,986,966 4,869,732
33.1 Tax charge reconciliation
Numerical reconciliation between the average effective tax rate and the applicable tax rate is as follows:
2010 2009
(Percentage)
(0.08) (0.27)
The aggregate amount charged in the financial statements for the year as fees to 9 directors (2009: 9 directors) is Rs
11,682 thousand (2009: Rs 3,736 thousand) for attending Board of Directors and sub–committee meetings.
35. Rates of exchange
Assets in foreign currencies have been translated into Pak Rupees at USD 1.1709 (2009: USD 1.2331) equal to Rs 100,
while liabilities in foreign currencies have been translated into Pak Rupees at USD 1.1682 (2009: USD 1.2300) equal to
Rs 100.
72 | Pakistan Telecommunication Company Limited
26,489,040 29,118,948
(363,712) 678,546
24,899,178 34,337,391
37. Cash and cash equivalents
Short term investments with maturity upto three months 25 13,493,865 19,795,904
Cash and bank balances 26 6,422,144 11,906,448
19,916,009 31,702,352
38. Capacity
Access Lines Installed (ALI) Access Lines In Service (ALIS)
2010 2009 2010 2009
(Number)
ALI represents switching lines. ALI include 232,786 (2009: 225,195 ) and ALIS include 107,477 (2009: 115,575)
Primary Rate Interface (PRI) and Basic Rate Interface (BRI). ALI and ALIS also include 3,055,930 (2009: 2,656,000)
and 1,236,932 (2009 : 1,305,675) WLL connections respectively.
The difference between ALI and ALIS is due to pending and potential future demand.
2010 2009
40. Financial risk management
40.1 Financial risk factors
The Company’s 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 Company’s 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.
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) and Australian Dollar (AUD). Currently, the Company’s
foreign exchange risk exposure is restricted to the amounts receivable from / payable to foreign entities. The
Company’s exposure to currency risk is as follows:
2010 2009
(Rupees in thousand)
USD
Trade and other payables (3,590,376) (6,950,383)
Trade debts 4,042,311 3,995,351
Cash and bank balances 293,608 874,131
CHF
Trade and other payables (5,660) (5,385)
AUD
Loans and advances 1,850 1,673
74 | Pakistan Telecommunication Company Limited
The following significant exchange rates were applied during the year:
2010 2009
Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices (other than those arising from interest rate risk or currency risk), whether
those changes are caused by factors specific to the individual financial instrument or its issuer, or factors
affecting all similar financial instruments traded in the market.
The Company is 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 includes available–for–sale investments of Rs 254,916 thousand (2009: Rs Nil) 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, profit after taxation for the year would have been Rs 12,749 thousand (2009: Rs Nil)
higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds.
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.
Annual Report 2010 | 75
At the date of statement of financial position, the interest rate profile of the Company’s interest bearing
financial instruments is:
2010 2009
(Rupees in thousand)
Financial assets
25,544,657 34,777,536
Fair value sensitivity analysis for fixed rate instruments
The Company does not account for any fixed rate financial assets and liabilities at fair value. Therefore, a change
in interest rates at the date of statement of financial position would not affect the total comprehensive income
of the Company.
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 64,797 thousand (2009: Rs 11,250 thousand) higher / lower, mainly as a result of higher / lower mark–up
income on floating rate loans / investments.
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:
2010 2009
(Rupees in thousand)
41,546,579 51,290,792
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 concentration of credit risk as its exposure
is spread over a large number of counter parties and subscribers. Long term loan includes loan of Rs 7,000,000
thousand to a subsidiary–PTML.
76 | Pakistan Telecommunication Company Limited
The credit quality of cash and 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:
Rating Rating
Short term Long term Agency 2010 2009
(Rupees in thousand)
National Bank of Pakistan A1+ AAA JCR–VIS 3,940,843 15,636,639
Bank Alfalah Limited A1+ AA PACRA 3,171,623 4,000,593
MCB Bank Limited A1+ AA PACRA 38,003 11,281
Habib Metropolitan
Bank Limited A1+ AA+ PACRA 38,425 1,000,000
The Bank of Punjab A1+ AA– PACRA 5,644,946 3,937,071
NIB Bank Limited A1+ AA– PACRA 4,507,112 1,500,192
Faysal Bank Limited * A1+ AA PACRA – 1,476
Royal Bank of Scotland * A1+ AA PACRA 1,164 1,754,080
Askari Bank Limited A1+ AA PACRA 101,425 2,000,000
Allied Bank Limited A1+ AA PACRA 136,991 2,558,243
United Bank Limited A1+ AA+ JCR–VIS – 26
Bank Al Habib Limited A1+ AA+ PACRA 101,521 –
Dubai Islamic Bank A1 A JCR–VIS 479,337 –
Citibank, N.A. A1 A+ S&P’s 1,050,827 –
Silkbank Limited * A–3 A– JCR–VIS 7,705 –
SME Bank Limited A–3 BBB JCR–VIS 22,448 –
Standard Chartered Bank
(Pakistan) Limited A1+ AA– PACRA 418,677 –
Meezan Bank Ltd A1 AA– JCR–VIS 13 –
Mutual Fund – Arif Habib AM 2 + N/A PACRA 102,059 –
Mutual Fund – NAFA AM 2 – N/A PACRA 51,493 –
Mutual Fund – BMA AM 2 – N/A JCR–VIS 25,691 –
Mutual Fund – Faysal AM 2 – N/A JCR–VIS 50,455 –
Mutual Fund – Askari AM3 N/A PACRA 25,218 –
19,915,976 32,399,601
Due to the Company’s long standing business relationships with these counter parties, 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.
*These banks have been placed on watchlist by the State Bank of Pakistan and the most recent rating of Royal Bank of
Scotland and Silkbank was carried out in September 2008 and June 2009 respectively.
Annual Report 2010 | 77
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, 2010:
Liabilities at fair value
through profit and loss Other financial liabilities Total
2010 2009 2010 2009 2010 2009
(Rupees in thousand)
Financial liabilities as per statement
of financial position
(i) to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and
(ii) to provide an adequate return to shareholders.
The Company manages the capital structure in the context of economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust the capital structure, the Company may, for example, adjust the
amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt.
For working capital requirements and capital expenditure, the Company primarily relies on internal cash generation
and does not have any significant borrowings.
Annual Report 2010 | 79
Subsidiaries
TF Pipes Limited
Etisalat International Pakistan
Etisalat – Afghanistan
Emirates Telecommunication Corporation
Mobily – Saudi Arabia
Thuraya Satellite Company
Employees’ retirement benefit plans
Disclosure of transactions between the Company and related parties other than those which have been disclosed
elsewhere in these financial statements:
2010 2009
(Rupees in thousand)
Subsidiaries Purchase of goods and services 1,604,145 1,417,608
Consideration paid against adjustment of
tax losses of PTML 1,198,943 –
Sale of goods and services 5,138,960 5,203,768
Mark–up on long term loans 603,257 263,333
Equity contribution 1,000,000 2,000,000
Disbursement of loan 4,000,000 3,000,000
Consideration paid on acquisition of MAXCOM 7,130 –
43. General
Figures have been rounded off to the nearest thousand rupees unless otherwise specified.
We have audited the annexed consolidated financial statements comprising consolidated statement of financial position of
Pakistan Telecommunication Company Limited (the holding company) and its subsidiaries (hereinafter referred as the “Pakistan
Telecommunication Group”) as at June 30, 2010 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 companies, Pak Telecom Mobile Limited and Maskatiya Communications
(Private) Limited were audited by one of the joint auditors, Ernst & Young Ford Rhodes Sidat Hyder and Rizwani Imtiaz &
Co, respectively, whose reports have been furnished to us and our opinion in so far it relates to the amounts included for
such companies, is based solely on the report of the said auditors. These financial statements are the responsibility of the
holding company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
Our audit was conducted in accordance with International Standards on Auditing and accordingly included
such tests of accounting records and such other auditing procedures as we considered necessary.
In our opinion, the consolidated financial statements audited by us present fairly the financial position of
Pakistan Telecommunication Group as at June 30, 2010 and the results of its operations for the year then ended.
A. F. Ferguson & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
Islamabad Islamabad
108,074,758 105,252,934
Non current liabilities
Long term loans 7 13,000,000 9,000,000
Payable to PTA against license fee 8 169,847 167,090
Deferred taxation 9 10,633,651 7,205,377
Employees’ retirement benefits 10 15,676,877 14,252,785
Deferred government grants 11 1,632,701 1,061,044
Long term security deposits 12 1,295,008 1,478,764
Long term liabilities 13 10,459,040 13,931,199
52,867,124 47,096,259
Current liabilities
Trade and other payables 14 33,697,723 31,918,337
Interest and mark–up accrued 15 284,273 291,240
Current portions of:
Long term loans 7 – 100,949
Payable to PTA against license fee 8 1,935,288 1,977,762
Long term liabilities 13 5,980,398 19,476,149
Unearned income 1,855,127 1,376,256
Dividend payable 3,375,631 7,650,000
47,128,440 62,790,693
208,070,322 215,139,886
The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.
Chairman
Annual Report 2010 | 85
Assets
155,799,817 149,072,861
Long term investments 19 108,910 108,095
Long term loans 20 337,210 332,378
156,245,937 149,513,334
Current assets
Stores, spares and loose tools 21 4,075,863 5,201,991
Stock in trade 22 385,199 470,673
Trade debts 23 10,385,233 10,875,750
Loans and advances 24 718,211 963,418
Accrued interest income 25 456,523 795,435
Recoverable from tax authorities 26 7,747,957 1,118,703
Receivable from Government of Pakistan 27 2,164,072 2,164,072
Other receivables 28 2,324,902 1,833,154
Short term investments 29 13,493,865 21,017,790
Cash and bank balances 30 10,072,560 21,185,566
51,824,385 65,626,552
208,070,322 215,139,886
18,634,511 16,739,076
Taxation
Group (6,888,502) (5,816,257)
Associate (439) (337)
37 (6,888,941) (5,816,594)
The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.
The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.
(Rupees in thousand)
Balance as at July 01, 2008 37,740,000 13,260,000 1,683,074 30,500,000 18,797,345 101,980,419
Balance as at June 30, 2009 37,740,000 13,260,000 1,683,074 30,500,000 22,069,860 105,252,934
Balance as at June 30, 2010 37,740,000 13,260,000 2,113,704 30,500,000 24,461,054 108,074,758
The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.
Pakistan Telecommunication Company Limited (“the holding Company”) was incorporated in Pakistan on December
31, 1995 and commenced business on January 01, 1996. The Company is listed on Karachi, Lahore and Islamabad
stock exchanges. The Company was established to undertake the telecommunication business formerly carried on by
Pakistan Telecommunication Corporation (PTC). The business was transferred to the Company on January 01, 1996
under the Pakistan Telecommunication (Re–organization) Act, 1996 at which date the Company took over all the
properties, rights, assets, obligations and liabilities of PTC except those transferred to National Telecommunication
Corporation (NTC), Frequency Allocation Board (FAB), Pakistan Telecommunication Authority (PTA) and Pakistan
Telecommunication Employees Trust (PTET). The registered office of the Company is situated at PTCL Headquarters,
G–8/4, Islamabad.
As a consequence of PTCL’s privatization during 2006, 26% of its shares were acquired by Etisalat International
Pakistan (LLC), based in the U.A.E.
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 in phases, commencing 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
G–8/4, Islamabad.
On March 01, 2010 the holding Company acquired 100 % shares of MAXCOM.
MAXCOM was incorporated in Pakistan on September 06, 2004 as a private limited company under the Companies
Ordinance, 1984, to provide broadband services in the cities of Karachi and Hyderabad. The registered office of the
Company is situated at PTCL, Southzone Office Clifton, Karachi.
2. Statement of compliance
These consolidated financial statements have been prepared in accordance with approved accounting standards as
applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance,
1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the
provisions or directives of the Companies Ordinance, 1984 shall prevail.
changes in equity’ to be presented separately from ‘owners changes in equity’. All ‘non–owners changes in equity’ are
required to be shown in a performance statement. Groups can choose whether to present one performance statement
(the statement of comprehensive income) or two statements (statement of comprehensive income and statement of
other comprehensive income). The Group has preferred to present one statement.
(ii) IAS 7 (Amendments), ‘Statement of Cash Flows’ (effective for annual periods beginning on or after January 01, 2009)
requires the Group to disclose total consideration paid, the portion of consideration consisting of cash and cash
equivalents and the amount of cash and cash equivalents in the subsidiary whose control is obtained during the year.
Additional disclosures consequent to this amendment have been disclosed in note 44.
(iii) IFRS 3 (Revised), ‘Business Combinations’ (effective for annual periods beginning on or after July 01, 2009). The
revised standard continues to apply the acquisition method to business combinations, with some significant changes.
For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with
contingent payments classified as debt subsequently re–measured through the income statement. There is a choice
on an acquisition–by–acquisition basis to measure the non–controlling interest in the acquiree at fair value or at the
non–controlling interest’s proportionate share of the acquiree’s net assets. All acquisition–related costs should be
expensed. The Group’s acquisition during the year has been recorded in accordance with IFRS 3 (Revised).
(iv) IFRS 8, ‘Operating Segments’ (effective for annual periods beginning on or after January 01, 2009). IFRS 8 replaces IAS
14, ‘Segment reporting’. The new standard requires a ‘management approach’, under which segment information is
presented on the same basis as that used for internal reporting purposes, and introduces detailed disclosures regarding
the reportable segments and products. Under IFRS 8, operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision–maker. The management has determined that the Group
has two reportable segments as the Board of Directors views the Group’s operations as two reportable segments.
The adoption of this standard has only resulted in certain additional disclosures to these financial statements of the
Pakistan Telecommunication Group as disclosed in note 46.
(v) IAS 23 (Revised), ‘Borrowing Costs’ (effective for annual periods beginning on or after January 01, 2009). The revised
standard requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset. The Group’s policy is in line with the revision and therefore the adoption of the revised
IAS 23 and the consequent change in accounting policy had no impact on the earnings of the Group during the year
ended June 30, 2010.
(vi) IFRIC 18, ‘Transfer of assets from customers’ (effective for annual periods beginning on or after July 01, 2009). The
interpretation clarifies the accounting treatment of consideration received from customers to construct or acquire an
item of property, plant and equipment for provision of services to customers. The interpretation requires recognition
of property, plant and equipment in accordance with IAS 16 ‘Property, plant and equipment’ and recognition of
income as per IAS 18 ‘Revenue’. The Group’s current accounting policy is in compliance with this interpretation and
therefore there is no effect on the Group’s financial statements.
2.2 Amendments and Interpretations to published accounting standards not effective during the year and not yet adopted
by the Group:
Effective date
(annual periods beginning on or after)
The management anticipates that except for the effects on the financial statements, of IFRS 2 – Share based payments
(Amendments), if any, adoption of above standards, amendments and interpretations in future periods will have no
material impact on the Group’s financial statements except for additional disclosures. The management is currently
considering the implications of IFRS 2 (Amendments).
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.
4. Significant accounting judgement and estimates
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
Group’s accounting policies. Estimates and judgements are continually evaluated and are based on historic experience
including expectation 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
Actuarial valuation of pension, gratuity, medical and compensated leave absence contributions (note 5.22) requires
use of certain assumptions related to future periods including increase in remuneration / medical costs, expected long
term return on plan assets and the discount rate used to convert future cash flows to current values.
5.1 Consolidation
(a) Subsidiary
Subsidiaries are all 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.
92 | Pakistan Telecommunication Group
From the current year, consequent to revision of IFRS 3 ‘Business Combinations’, 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 acqusition 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 acquiree’s identifiable net assets. Acqusition costs
incurred are expensed. If the business combination is acheived in stages, the acqusition date fair value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value as at the acqusition date through profit and
loss. Any contingent consideration to be transferred by the acquirer are recognized at fair value at the acqusition 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 untill 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 Group’s 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 of such assets.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Previously, the purchase method of accounting was used and the cost of an acquisition was measured as the fair value
of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs
directly attributable to the acquisition. Business combination achieved in stages were accounted for as separate steps.
Any additional acquired share of interest did not affect previously recognized goodwill. Contingent consideration was
recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a
reliable estimate was determinable. Subsequent adjustments to the contingent consideration used to affect goodwill.
This change in method of accounting for acquisition of subsidiaries does not have any impact on these financial
statements.
(b) Associates
Associates are all entities over which the group has significant influence but not control, 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 Group’s investment in associates includes
goodwill identified on acquisition, net of any accumulated impairment loss.
The Group’s share of its associates’ post–acquisition profits or losses is recognized in the statement of comprehensive
income, and its unrealized gains on transactions between the Group and its associates are eliminated to the extent of
the Group’s interest in the associates. Unrealized losses on the assets transferred are also eliminated to the extent of
the Group’s 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 statement of comprehensive
income.
5.2 Functional and presentation currency
Items included in the financial statements of the Group are measured and presented using the currency of the primary
economic environment in which the entity operates (the functional currency), which is the Pakistan Rupee (Rs).
Annual Report 2010 | 93
5.3 Foreign currency transactions and translation
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency using the exchange rate prevailing at 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.
5.4 Insurance reserve
The assets of the holding Company are self insured. The holding Company has created an insurance reserve.
Appropriation out of profits are made on the discretion of the Board of Directors. The reserve is to be utilized to meet
any loss resulting from theft, fire or natural disasters.
Grants that compensate the Group for expenses incurred are recognized in income for the year on a systematic basis in
the same period in which the related expenses are recognized. Grants that compensate the Group for cost of an asset
are recognized in income for the year on a systematic basis over the expected useful life of the related asset, upon its
capitalization.
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.
5.8 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 the
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.
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 item will flow to
the Group. The carrying amount of any replaced part as well as other repairs and maintenance costs are charged to
income for the year during the period in which they are incurred.
Depreciation is calculated using the straight–line method to allocate their cost over their estimated useful lives, at the
rates mentioned in note 17, after taking into account their residual values.
Depreciation on additions to property, plant and equipment, is charged from the month in which relevant asset is
acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Any
impairment loss, or its reversal, is also charged to income. Where an impairment loss is recognized, the depreciation
charge is adjusted in future periods to allocate the assets’ revised carrying amount less the residual value over its
estimated useful life.
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.
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 Group’s 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 circumstance 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 stated 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, as
disclosed in note 18.1 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.
is calculated using the straight–line method to allocate the cost of the software over its estimated useful life,
as disclosed in note 18.1 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 an intangible is acquired
or capitalized, while no amortization is charged for the month in which the intangible is disposed off.
in an active market. The Group’s loans and receivables comprise ‘Trade debts’, ‘Loans and advances’, ‘Accrued
interest income’, ‘Receivable from Government of Pakistan’, ‘Other receivables’, ‘Short term investments’ 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 off these assets within twelve months of the date of statement of financial position.
Financial assets are derecognized, when the rights to receive cash flows from the investments have expired or have
been transferred.
Gains or losses arising from changes in the fair value of financial assets, at fair value through profit or loss category,
are recognized in income in the period in which they arise. Dividend income, from available–for–sale investments and
financial assets at fair value through profit or loss, is recognized in income, when the Group’s right to receive dividend
is established.
(c) Impairment
The Group assesses at each statement of financial position date whether there is objective evidence that a financial
asset or a group of financial assets is impaired. In the case of equity securities classified as available–for–sale, a
significant or prolonged decline in the fair value of a security below its cost is considered as an indicator that the
security is impaired. If any such evidence exists for available–for–sale financial assets, the impairment loss is reduced
from value of other comprehensive income and recognized in income for the year. Impairment losses recognized in
income on equity instruments are not reversed.
in value.
5.20 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 Group’s activities.
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 Group’s activities as described below:
(i) Rendering of telecommunication services
Revenue from telecommunication services comprises of amounts charged to customers in respect of monthly
line rent, line usage, cellular operations and provision of other telecommunication services (including data
services). Revenue also includes the net income received and receivable from revenue sharing arrangements
entered into with overseas and local telecommunication companies.
Revenue is recognized based on the fair value received or receivable for the services rendered, net of services
tax, rebates and discounts. Revenue from fixed line business, mainly in respect of line rent and line usage, is
invoiced and recorded as part of a periodic billing cycle. Revenue from the sale of prepaid credit is deferred
until such time as the customer uses the air time, or the credit expires. Unutilized airtime is carried in the
statement of financial position as unearned income.
(ii) Income on bank deposits
Return on bank deposits and investments is recognized using the effective interest method.
(a) Current
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
statement of financial position date. 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 amount of assets and liabilities in the financial statement and the corresponding tax base
used in the computation of taxable profit.
Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income 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,
based on tax rates that have been enacted or substantially enacted by the statement of financial position date.
98 | Pakistan Telecommunication Group
5.22 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 the PTCL and its subsidiary–PTML are as follows:
PTCL
(a) Defined contribution plan
The Company operates an approved funded provident plan covering permanent employees. For the purposes of the
plan, a separate trust titled 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% (2009: 15%) per annum. The Company also
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.
The liability recognized in the statement of financial position in respect of defined benefit plans is the present value
of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, if any,
together with adjustments for unrecognized actuarial gains / losses, if any.
The defined benefit obligation is calculated annually, by independent actuary using the projected unit credit method.
The most recent valuations were carried out as at June 30, 2010. The present value of the defined benefit obligation
is determined by discounting the estimated future cash outflows using 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
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’ (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 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) Defined contribution plan
The Company operates an approved contributory provident fund for all its employees, and for which, contributions are
charged to income for the year.
6. Share capital
6.1 Authorized share capital
2010 2009 2010 2009
(Number of shares in thousand) (Rupees in thousand)
11,100,000 11,100,000 “A” class ordinary shares of Rs 10 each 111,000,000 111,000,000
3,900,000 3,900,000 “B”class ordinary shares of Rs 10 each 39,000,000 39,000,000
6.4 Except for voting rights, the “A” and “B” class ordinary shares rank pari passu in all respects. “A” class ordinary shares
carry one vote and “B” class ordinary shares carry four votes, save for the purposes of election of directors. “A”
class ordinary shares 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, submitted to the Company by the holders
of three fourths of the “B” class ordinary shares. In the event of termination of the license issued to the Company
under the provisions of Pakistan Telecommunication (Re–organization) Act, 1996, the “B” class ordinary shares shall
be automatically converted into “A” class ordinary shares.
6.5 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 the
international investors, also exchangeable, at the option of 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, 2010, 599,506 thousand (2009: 599,500 thousand) “A” class ordinary shares had been exchanged for
such vouchers.
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, alongwith management control. Emirates Telecommunication
Corporation (Etisalat), UAE was the successful bidder. The shares, alongwith management control, were transferred
with effect from April 12, 2006 to Etisalat International Pakistan (EIP), UAE which is a subsidiary of Etisalat.
Annual Report 2010 | 101
6.7 Ordinary shares of the Company held by related parties as at the year end are as follows:
2010 2009
(Number of shares)
Etisalat International Pakistan (LLC) SE (“B” class ordinary shares) 407,809,524 407,809,524
Etisalat International Pakistan (LLC) (“B” class ordinary shares) 918,190,476 918,190,476
1,326,000,000 1,326,000,000
13,000,000 9,100,949
Current portion thereof – (100,949)
13,000,000 9,000,000
4,000,000 100,949
7.1.1 The loan carries mark–up @ 3 Month KIBOR plus 1.80%, effectively resulting in a mark–up rate, ranging between
14.060% and 14.150% per annum during the current year.
7.1.2 This represents two loans carrying mark–up @ 3 Month KIBOR plus 1.80%, effectively resulting in a mark–up rate,
ranging between 14.060% and 14.150% per annum during the current year.
7.1.3 The loan carries mark–up @ 3 Month KIBOR plus 1.75%, effectively resulting in a mark–up rate, ranging between
14.010% and 14.10% per annum during the current year.
7.1.4 The above loans are secured by way of first charge ranking pari passu by way of hypothecation over all
present and future movable equipment and other assets of PTML. These loans were disbursed on March 29,
2010 and have a grace period of three years from the disbursement date and are repayable in eight equal quarterly
installments, commencing June 29, 2013 till March 29, 2015.
Note 2010 2009
(Rupees in thousand)
9,000,000 9,000,000
102 | Pakistan Telecommunication Group
7.2.1 This represents a term finance loan, obtained by PTML, from a syndicate of commercial banks. The outstanding
balance represents the unpaid principal sum due to the syndicate at the date of the statement of financial position.
The loan carries mark–up rate of 0.69 % over a simple average of 3 months KIBOR prevailing on the last five working
days prior to the date of first disbursement, and thereafter prior to each installment period, effectively resulting
in a mark up rate, ranging between 13.020% and 13.450% (2009: 10.83% to 16.19%) per annum during the current
year.
The loan is secured by first ranking pari passu charge by way of hypothecation over all present and future assets
(excluding land) of PTML. The loan is repayable in July 2011.
7.2.2 This represents a term finance loan, obtained by PTML, from a syndicate of commercial banks. The outstanding
balance represents the unpaid principal sum due to the syndicate at the date of the statement of financial position.
The loan carries a mark–up rate of 0.69 % over 3 months KIBOR, prevailing on the last working day prior to the
date of the first disbursement, and thereafter prior to each installment period, effectively resulting in a mark–up
rate, ranging between 12.910% and 13.440% (2009: 10.83% to 16.19%) per annum during the current year.
The loan is secured by first ranking pari passu charge by way of hypothecation over all present and future
assets (excluding land) of PTML. The loan is repayable in July 2011.
Note 2010 2009
(Rupees in thousand)
2,105,135 2,144,852
Current portion of license fee payable (1,935,288) (1,977,762)
169,847 167,090
8.1 Payable to PTA against license fee – PTCL
Payable to PTA against WLL license fee 2,105,500 2,105,500
Present value adjustment (631,756) (631,756)
2,105,500 1,953,971
Payment made during the year (210,550) –
1,894,950 1,953,971
Current portion shown under current liabilities (1,894,950) (1,953,971)
– –
8.2 Payable to PTA against license fee – PTML
Payable to PTA against AJK license fee 8.2.1 298,600 325,725
Imputed interest charged (45,879) (94,194)
252,721 231,531
Payment made during the year (42,700) (40,650)
210,021 190,881
Current portion shown under current liabilities (40,174) (23,791)
169,847 167,090
Annual Report 2010 | 103
8.2.1 This represents a license fee of USD 5,000 thousand, in respect of the PTML’s operations in AJK, payable to the
PTA in ten equal annual installments without any interest. The license fee will be repaid over a period of ten years
commencing June 2007 to 2016, in USD or equivalent Pak Rupees. Accordingly, at initial recognition, the amount
payable was discounted to the present value of future cash flows at the rate of 6% per annum representing LIBOR.
9. Deferred taxation
The liability / (assets) for deferred taxation comprises of timing differences relating to:
10,633,651 7,205,377
6,369,562 5,392,080
Gratuity
Funded 10.1 71,314 51,460
Unfunded 10.1 498,256 391,609
569,570 443,069
Accumulating compensated absences 10.1 1,019,098 1,084,390
Post retirement medical facility 10.1 7,718,647 7,333,246
15,676,877 14,252,785
104 | Pakistan Telecommunication Group
10.1 The latest actuarial valuations of the Group’s defined benefit plans were conducted at June 30, 2010 using the pro-
jected unit credit method. Details of these defined benefit plans are as follows:
9,230,559 3,514,287 1,139,102 932,231 93,632 70,483 423,702 314,871 1,019,098 1,084,390 7,807,167 6,448,686 19,713,260 12,364,948
Unrecognized actuarial gains / (losses) (3,947,110) 1,035,921 (52,989) (90,359) (22,318) (19,023) 74,554 76,738 – – (88,520) 884,560 (4,036,383) 1,887,837
Liability as at June 30 5,283,449 4,550,208 1,086,113 841,872 71,314 51,460 498,256 391,609 1,019,098 1,084,390 7,718,647 7,333,246 15,676,877 14,252,785
Balance as at June 30 62,752,225 53,610,885 1,139,102 932,231 209,446 152,555 423,702 314,871 1,019,098 1,084,390 7,807,167 6,448,686 73,350,740 62,543,618
733,067 161,182 249,576 217,490 71,314 51,460 133,961 138,282 1,133 299,916 820,907 587,108 2,009,958 1,455,438
Experience adjustment on plan liabilities losses 6,098,147 953,077 778,679 2,581,597 603,337
Experience adjustment on plan assets – (losses) / gains 1,115,117 (1,735,854) (522,664) 3,776,675 2,611,253
Experience adjustment on plan liabilities – losses 6,244 3,196 4,645 2,326 4,616
Experience adjustment on plan assets – gains 2,659 5,930 1,464 – –
10.4 Major categories of plan assets as a percentage of total plan assets are as follows:
Pension funded Gratuity funded
2010 2009 2010 2009
(Percentage)
The effect of 1% increase in the medical cost trend rate in the present value of defined benefit obligations for medical
cost is Rs 2,295,307 thousand (2009: Rs 1,892,189 thousand) and the effect of 1% decrease in the medical cost
trend rate in the present value of defined benefit obligations for medical cost is Rs 1,904,949 thousand (2009: Rs
1,563,113 thousand).
In the next financial year, the expected contribution to be paid to the funded pension plan and funded gratuity plan
by the Group is Rs 1,623,346 thousand (2009: Rs 463,242 thousand) and Rs 80,071 thousand (2009: Rs 60,131
thousand) respectively.
11.1 This represents the grant from the Universal Service Fund (a Government formed agency) received as assistance
towards development of telecommunication infrastructure in rural areas comprising of telecom infrastructure projects
for basic telecom access, transmission and broad band services spread over the country.
16,439,438 33,407,348
Current portion thereof (5,980,398) (19,476,149)
13.1 These include liabilities aggregating to Rs 10,000,000 thousands which are due within twelve months of the date
of statement of financial position. However, PTML has entered into financial agreements with banks and PTCL for
repayment of the above liabilities, therefore the liabilities have been classified as long term.
714,698 521,005
Sales tax payable 1,650,608 1,496,997
Advances from customers 1,612,761 1,576,153
Technical services fee payable to related party 33.2 874,721 864,059
Retention money payable to contractors / suppliers 5,407,995 5,924,366
Payable to
Research and Development Fund 2,773,454 2,397,144
Universal Service Fund 14.3 3,523,508 6,122,799
Pakistan Telecommunication Authority 6,542 34,542
Unclaimed dividend 131,253 120,342
VSS benefit payable 55,734 61,057
Consideration payable on acquisition of a subsidiary – MAXCOM 67,396 –
Others 691,519 758,768
33,697,723 31,918,337
263,361 76,211
These relate to the normal business of the Group and are interest free.
108 | Pakistan Telecommunication Group
14.2 This includes Rs 640,711 thousand (2009: Rs 573,155 thousand) representing a provision against EOBI contribution
payable under the EOBI Act 1976, for employees hired subsequent to PTCL’s incorporation. The holding Company has
withheld payment to EOBI, pending the settlement of the court case, as discussed in note 16.3. The provision made
during the year is Rs 67,556 thousand (2009: Rs 53,304 thousand).
14.3 This includes Rs 230,591 thousand (2009: Rs 3,458,866 thousand) representing the last installment out of total
amount of Rs 3,458,866 thousand payable to Universal Service Fund for the period commencing from May 1, 2008 to
December 31, 2008 in fifteen equal monthly installment.
2010 2009
(Rupees in thousand)
284,273 291,240
Contingencies – PTCL
16.1 1,574 cases (2009: 1,850 cases) have been filed against the Company primarily by subscribers and employees.
Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial
impact at present. However, the management and the Company’s legal advisor are of the view that the outcome of
these cases is expected to be favorable and a liability, if any, arising on the settlement of these cases is not likely to
be material.
16.2 In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all
messages, inter alia, through card phone services and mobile telephone services within and outside the city of Karachi.
Telecard Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration
of its services and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of
Pakistan ordered for immediate restoration of Pay Card services including rebate relief and discount to all pay phone
service providers. In view of relief and discount offered by the Government, Telecard Limited withheld payments on
account of their monthly bills to the Company and obtained a stay order from the Honourable Sindh High Court for
an amount of Rs 110,033 thousand against the Company.
On the instructions of the Honourable Court, external consultants calculated the rebate and discount amounting to Rs
349,953 thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In
the suit, final arguments of the parties are to be reheard. The Company has also filed claims against Telecard Limited
for aggregate receivables amounting to Rs 334,099 thousand up to December 31, 2001.
In another case, identical to the above matter, M/s Telefon has claimed Rs 97,337 thousand from the Company. In
the last hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing.
The management and the Company’s legal advisor are of the view that the outcome of the appeal is expected to be
favourable.
16.3 The Employees’ Old–Age Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of
Employees’ Old–Age Benefits (EOBI) Act, 1976 for payment of Company’s and employees contribution amounting to
Rs 1,496,829 thousand for the period January 01, 1996 to May 31, 2005. The management has filed a writ petition
against the demand before the Honourable High Court, which is pending for hearing. However, the management and
legal advisor are of the view that the case would be decided in the favour of the Company.
16.4 In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the
repealed Income Tax Ordinance 1979 for the assessment years 1996 – 1997 to 1998 – 1999 on failure to withhold /
Annual Report 2010 | 109
deduct tax under section 50(3) while making payments to non resident satellite companies. The Company filed a writ
petition before the Honourable Lahore High Court against the said notices, which was dismissed. An appeal was filed
against the dismissal before the Honourable Supreme Court of Pakistan which was also dismissed and the Company
was advised by the Honourable Court to file an appeal before the Income Tax Appellate Authorities. Subsequently, the
Company filed an appeal with the Commissioner Income Tax (CIT) Appeals who has annulled the order of the Taxation
Officer. The department has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT
(Appeals).
Pending final outcome of the appeal, no provision has been made in these financial statements for the demands
aggregating Rs 1,599,557 thousand (2009: Rs 1,599,557 thousand). The management and the Company’s tax advisor
are of the view that the outcome of the appeal is expected to be favourable.
16.5 Consequent to an audit of Federal Excise Duty (FED) collected by the Company from subscribers for the years 1998–99
and 1999–2000 the Rawalpindi Collectorate of Federal Excise Department raised a demand for excise duty along with
additional duties and penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company with
the Federal Board of Revenue (FBR), Government of Pakistan for resolution. A committee was formed comprising
representatives from the Company and FBR. As a result of the negotiations, the Company deposited an amount of Rs
466,176 thousand on account of FED.
It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate
forums and, in the event of a favourable decision, the amount would be refunded to the Company by Collectorate of
Federal Excise. The Company has filed an appeal to contest the additional duties and penalties levied by the Collectorate.
During the year ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided by the Custom,
Federal Excise and Sales Tax Appellate Tribunal in favour of PTCL, subject to submission of proof. Pending the final
outcome, no provision has been made in these financial statements for the above demand, since the management and
the Company’s lawyer are of the view that the outcome of the appeal is expected to be favourable.
16.6 In respect of tax years 2006 and 2007, the Additional Commissioner of Income Tax (ACIT) inter alia, amended the
Company’s income tax assessment on the grounds, that the Company’s claim of a concessional rate of tax at 1%
of revenue received from international customers, (provided for through Clause 3 of Part II of Second Schedule to
the Income Tax Ordinance, 2001) is not in accordance with such legal provisions, as underlying telecommunication
services have not been rendered outside Pakistan, and as a result raised a demand of Rs 1,659,000 thousand. The
Commissioner of Income Tax (CIT Appeals) and Income Tax Appellate Tribunal (ITAT) have endorsed the departmental
view and presently Company’s reference against the judgment of ITAT, in this respect, is pending before the Rawalpindi
Bench of the Honourable Lahore High Court. The management and the Company’s lawyer consider that the litigation
would eventually be settled in the Company’s favour.
16.7 The tax authorities selected tax year 2007 for audit purposes and created additional tax demand of Rs 2,345,628
thousand by disallowing certain expenses citing non–deduction of respective withholding tax as the prime reason. The
Commissioner Income Tax (Appeals) withheld the decision of the taxation officer and the ensuing appeal filed by the
Company is pending before the Income Tax Appellate Tribunal (ITAT). Further, the Company has also challenged the
selection of tax year 2007 for audit by the tax authorities before the Honorable Islamabad High Court (not functional at
present). No provision has been made in these financial statements pending outcome of the appeals which is expected
to be in favour of the Company.
16.8 Based on an audit of 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 1,018,568 thousand on the premise that the
Company has claimed total input tax without apportioning the same between allowable and exempt supplies and
the exempt supplies were also not declared in these returns. The Company is in appeal against the said order before
Commissioner Inland Revenue – Appeals (CIR Appeals) and has also challenged the same through a writ petition filed
before Rawalpindi bench of the Honourable Lahore High Court.
No provision on this account has been made in these financial statements as the management and the Company’s tax
advisor consider that based on the underlying legal and factual position, the litigation would eventually settle in the
Company’s favour.
110 | Pakistan Telecommunication Group
16.9 For tax year 2008, the Taxation Officer (TO) raised a demand of Rs 4,559,208 thousand on the plea that the Company
has erroneously applied average rate of tax while deducting withholding tax from payments made to employees under
the Voluntary Separation Scheme (VSS) as the required options before concerned commissioners of income tax were
not filed by such employees. Commissioner Income Tax (Appeals) upheld the decision of TO and disposing of the
ensuing second appeal, the Income Tax Appellate Tribunal (ITAT) remanded the case back to the TO for verification of
filing of options before concerned commissioners in the light of related law. The Company has also filed a reference
application with the Rawalpindi Bench of the Honorable Lahore High Court which is pending.
The management and the Company’s tax advisor are of the view that the eventual outcome of the case is expected to be
in favour of the Company and, as such, no provision has been made in the financial statements on this account.
2010 2009
(Rupees in thousand)
3,401,565 2,035,337
16.12 Letter of guarantees issued to Custom Authorities – 46,859
16.13 The company is in appeal against various claims made by the Income Tax and Sales Tax authorities before the
Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal and Sales Tax Appellate Tribunal, AJK. However,
no provision has been made there against in the financial statements, as these cases are pending adjudication before
the authorities, and the management believes that the company has a prima facie valid claim.
18,967,439 25,255,605
152,082,836 145,207,712
Annual Report 2010 | 111
Land Buildings on Lines Apparatus, plant Office Furniture Computer & elec– Submarine
Freehold Leasehold Freehold land Leasehold land and wires and equipment equipment and fittings Vehicles trical equipment cables Total
(Rupees in thousand)
As explained in note 1.1, the property and rights in the above assets at January 01, 1996 were transferred to the holding
Company from Pakistan Telecommunication Corporation, under the Pakistan Telecommunication (Reorganization) Act, 1996.
However, the title to freehold land, was not formally transferred in the name of the holding Company in the land revenue
records. The holding Company initiated the process of transfer of title of land in its name in the previous years, which is still
ongoing and shall be completed in due course of time.
17.2 Apparatus, plant and equipment include borrowing costs aggregating to Rs 378,248 thousand (2009: Rs 362,019
thousand) capitalized during the year at the average capitalization rate of 1.79% (2009: 1.28%) per annum.
112 | Pakistan Telecommunication Group
17.3 The depreciation charge for the year has been allocated as follows:
Cost of services 32 20,279,048 18,165,584
Administrative and general expenses 33 822,126 778,263
Selling and marketing expenses 34 61,076 62,829
21,162,250 19,006,676
17,959,087 13,297,795
Capital work–in–progress (CWIP) includes an amount of Rs 337,985 thousand (2009: Rs 443,426 thousand) in respect
of overheads relating to development regions.
2010 2009
(Rupees in thousand)
61,659 1,832,738
18. Intangible assets
Goodwill 26,424 –
Other intangible assets 18.1 3,690,557 3,865,149
3,716,981 3,865,149
Frequency
Licenses Software vacation charges Total
(Rupees in thousand)
Frequency
Licenses Software vacation charges Total
(Rupees in thousand)
3,151,985 3,386,927
Software – PTCL
Bill printing software 18.7 6,015 7,655
Billing and automation of broadband 18.7 36,085 45,297
Enterprise Resource Planning
(ERP) SAP system 18.8 280,699 315,070
Software – PTML 18.9 128,443 –
451,242 368,022
Frequency vacation charges 18.10 87,330 110,200
3,690,557 3,865,149
18.3 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 for an agreed license
fee of Rs 249,344 thousand. In the year ended June 30, 2005, PTA modified the previously issued license to provide
telecommunication services to include spectrum license at an agreed license fee of Rs 4,278,639 thousand. This
license allowed the holding Company to provide the wireless local loop services in Pakistan over a period of 20 years
commencing October 2004. The cost of the license is being amortized on straight–line basis over the period of the
license.
Annual Report 2010 | 115
18.4 PTA has issued a license under section 5 of the Azad Jammu and Kashmir Council Adaptation of Pakistan
Telecommunication (Re–organization) Act, 1996, Northern Areas Telecommunication (Re–organization) Act, 2005
and 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 for an agreed license fee of Rs. 109,270 thousand. The
cost of the license is being amortized on straight–line basis over the period of the license.
18.5 PTCL acquired the IPTV license from PEMRA on October 01, 2006 for the agreed price of Rs 9,900 thousand. The
cost of license is being amortized on straight–line basis over the period of 5 years.
18.6 PTA has issued two licenses to the subsidiary company to establish, maintain and operate cellular services in Pakistan
and AJK for a period of 15 years commencing May 1999 and June 2006 respectively.
18.7 The cost of the software is being amortized on a straight–line basis over a period of 5 years.
18.8 This represents cost of the SAP – Enterprise Resource Planning (ERP) system with a useful life of 10 years.
18.9 Software comprise machine independent IT software purchased as a separate asset. Useful life of software is 3
years.
18.10 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.
18.11 The amortization charge for the year has been allocated as follows:
Note 2010 2009
(Rupees in thousand)
491,237 287,487
108,910 108,095
25,010 24,195
116 | Pakistan Telecommunication Group
19.1.1 The Group’s share in the net assets of the associate – TF Pipes Limited is:
Note 2010 2009
(Rupees in thousand)
83,900 83,900
337,010 332,178
Others 200 200
337,210 332,378
20.1 These loans and advances by PTCL 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 15% per annum (2009: 12.5% per annum),
whereas, loans to other employees are interest free. The loans are recoverable in monthly installments spread over a
period of 5 to 10 years. These loans are secured against future pension payments of employees.
This balance also includes Rs 14,821 thousand (2009: Rs 35,670 thousand) receivable from employees of the PTCL
against sale of vehicles, recoverable in monthly installments spread over a period of 1 to 2 years.
Annual Report 2010 | 117
4,075,863 5,201,991
21.1 Stores, spares and loose tools include items which may result in property, plant and equipment but are not
distinguishable.
752,352 723,731
Write off against provision (124,029) (74,140)
385,199 470,673
118 | Pakistan Telecommunication Group
24,386,961 24,983,785
International
Considered good 23.1 2,935,276 3,194,576
Considered doubtful 953,959 885,740
3,889,235 4,080,316
PTML
Considered good – secured 23.2 294,270 195,948
Considered good – unsecured 365,594 612,097
Considered doubtful – unsecured 233,715 193,200
893,579 1,001,245
MAXCOM – unsecured
Considered good 15,897 –
Considered doubtful 5,744 –
21,641 –
29,191,416 30,065,346
Provision for doubtful debts 23.3 (18,806,183) (19,189,596)
10,385,233 10,875,750
23.1 These include amounts due from the following related parties:
Etisalat – Afghanistan 21,685 100,502
Etisalat – UAE 433,405 770,594
Mobily – Saudi Arabia 312,070 528,119
767,160 1,399,215
These amounts are interest free and accrued in the normal course of business.
23.2 These are secured against customer deposits, aggregating to Rs 351,928 thousand (2009: Rs 338,166 thousand).
This also include unbilled revenue related to postpaid subscribers, aggregating to Rs 163,315 thousand (2009:
Rs 153,910 thousand).
21,121,066 20,306,664
Trade debts written off against provision (2,314,883) (1,117,068)
718,211 963,418
24.1 This represents loan to Pakistan MNP Database (Guarantee) Limited for working capital purposes, carrying interest @
13% (2009: 13%) per annum on prior disbursements and 17% per annum on disbursements made during the current
year.
24.2 These include advances to Executives, amounting to Rs 19,569 thousand (2009: Rs 5,541 thousand).
24.3 These include advances of Rs 6,841 thousand (2009: Rs 6,841 thousand) given to TF Pipes Limited, a related party.
2010 2009
(Rupees in thousand)
456,523 795,435
26. Recoverable from tax authorities
Income tax 6,646,547 59,095
Federal excise 466,176 466,176
Sales tax 635,234 593,432
7,747,957 1,118,703
2,324,902 1,833,154
Considered doubtful – Others 185,239 185,239
Provision for doubtful receivables 28.1 (185,239) (185,239)
– –
2,324,902 1,833,154
13,493,865 21,017,790
29.1 Term deposits
Term Maturity Profit rate % 2010 2009
(months) Upto per annum (Rupees in thousand)
13,238,949 21,017,790
Annual Report 2010 | 121
254,916 –
10,046,491 21,162,956
Cash in hand 26,069 22,610
10,072,560 21,185,566
30.1 The balances in deposit accounts bear mark–up which ranges from 5 % to 13.8 % per annum (2009: 5 % to 19.7 %
per annum).
30.2 This includes foreign currency balances of USD 192 thousand (2009: USD 108 thousand) and Euro 39 thousand
(2009: Euro 22 thousand). The effective interest / mark–up rate on saving accounts ranged from 4% to 12.65% (2009:
5% to 17%) per annum.
30.3 As at June 30, 2010, PTML had undrawn running finance facilities aggregating to Rs 1,960,000 thousand (2009: Rs
1,960,000 thousand).
Note 2010 2009
(Rupees in thousand)
31. Revenue
Domestic 31.1 91,958,760 86,613,483
International 31.2 6,947,005 6,106,898
98,905,765 92,720,381
31.1 Revenue is exclusive of Federal Excise Duty amounting to Rs 14,593,713 thousand (2009: Rs 15,501,191
thousand).
31.2 International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and
has been shown net of interconnect cost, relating to the other operators and Access Promotion Charges aggregating to
Rs 11,261,154 thousand (2009: Rs 10,886,794 thousand).
122 | Pakistan Telecommunication Group
62,212,774 55,154,403
32.1 This includes Rs 1,617,133 thousand (2009: 1,162,633 thousand) in respect of employees’ retirement benefits.
12,617,632 13,488,954
33.1 This includes Rs 251,121 thousand (2009: Rs 156,284 thousand) in respect of employees’ retirement benefits.
Annual Report 2010 | 123
33.2 This represents an amount payable to the Emirates Telecommunication Corporation (Etisalat), a related party, under a
technical service agreement between the Group and Etisalat for a period of five years commencing October 1, 2006,
at the rate of 3.5% of the Group’s consolidated annual revenue.
33. 3 Auditors’ remuneration
The expenses for the legal and professional services include the following in respect of auditors’ services for:
2010 2009
(Rupees in thousand)
14,051 10,600
33.4 This represents the Group’s contribution to the Information Communication Technology (ICT) Research and Development
Fund at the rate of 0.5% (1% till November 17, 2009) of its gross revenue less inter operator payments and payments
toward research and development activities in Pakistan, in accordance with the terms and conditions of its license to
provide telecommunication services.
33.5 Provision against doubtful debts is net of security deposits written back, amounting to Rs 222,751 thousand (2009:
Rs Nil), against receivable balances of customers in default.
33.6 There were no donations during the year in which the directors or their spouses had any interest.
Note 2010 2009
(Rupees in thousand)
7,424,363 7,996,056
34.1 This includes Rs 206,077 thousand (2009: 139,796 thousand) in respect of employees’ retirement benefits.
124 | Pakistan Telecommunication Group
2010 2009
(Rupees in thousand)
5,277,011 5,223,655
221,262 185,132
3,293,496 4,473,429
37. Taxation
Group
Current 3,451,037 3,080,732
Deferred 3,437,465 2,735,525
6,888,502 5,816,257
Share of tax of an associate 439 337
6,888,941 5,816,594
2010 2009
(Percentage)
2010 2009
41,838,254 38,383,410
(554,267) 1,096,200
Increase in current liabilities:
Trade and other payables 1,676,081 4,612,821
Unearned income 478,871 350,032
2,154,952 4,962,853
43,438,939 44,442,463
126 | Pakistan Telecommunication Group
23,566,425 40,981,470
The aggregate amount charged in the financial statements for the year as fees to 9 directors (2009: 9 directors) is Rs
11,682 thousand (2009: Rs. 4,236 thousand) for attending Board of Directors and sub–committee meetings.
42. Rates of exchange
Assets in foreign currencies have been translated into Pak Rupees at USD 1.1709 (2009: USD 1.2331) equal to Rs 100,
while liabilities in foreign currencies have been translated into Pak Rupees at USD 1.1682 (2009: USD 1.2300) equal to
Rs 100.
Risk management is carried out by the Board of Directors (the Board). The Board has provided ‘Risk Management
Policy’ covering specific areas such as foreign exchange risk, interest rate risk, credit risk and investment of excess
liquidity. All treasury related transactions are carried out within the parameters of this policy.
Annual Report 2010 | 127
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), Australian Dollar (AUD), Euros and Swiss Franc (CHF). Currently, the Group’s
foreign exchange risk exposure is restricted to the amounts receivable from / payable to the foreign entities.
The Group’s exposure to currency risk is as follows:
2010 2009
(Rupees in thousand)
USD
Trade and other payables (3,687,435) (7,496,354)
Long term liabilities (10,676,940) (22,194,711)
Trade debts 4,042,311 4,197,014
Cash and bank balances 294,493 882,907
EURO
Trade and other payables (53,683) (19,621)
Trade debts 30,459 69,560
Cash and bank balances 4,131 2,477
CHF
Trade and other payables (5,660) (5,385)
AUD
Loans and advances 1,850 1,673
The following significant exchange rates were applied during the year:
2010 2009
If the functional currency, at reporting date, had fluctuated by 5% against the USD, EURO, CHF and AUD with
all other variables held constant, the impact on profit after taxation for the year would have been Rs 327,000
thousand (2009: Rs 798,000 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.
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.
The short term investments includes available for sale investments of Rs 254,916 thousand (2009: Rs Nil)
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, profit after taxation for the year would have been Rs 12,749 thousand (2009: Rs Nil)
higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds.
Interest rate risk represents the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
At the date of statement of financial position, the interest rate profile of the Group’s interest bearing financial
instruments is:
2010 2009
(Rupees in thousand)
Financial assets
22,152,816 41,044,036
Floating rate instruments
Long term loans 13,000,000 9,100,949
Annual Report 2010 | 129
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 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 111,713 thousand (2009:
Rs 316,700 thousand) higher / lower, mainly as a result of higher / lower markup income on floating rate loans /
investments.
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:
2010 2009
(Rupees in thousand)
39,952,576 59,167,563
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.
130 | Pakistan Telecommunication Group
The credit quality of cash and 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:
Rating Rating
Short term Long term Agency 2010 2009
(Rupees in thousand)
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, 2010:
Liabilities at fair value
through profit and loss Other financial liabilities Total
2010 2009 2010 2009 2010 2009
(Rupees in thousand)
Financial liabilities as per statement
of financial position
(a)
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and
Annual Report 2010 | 133
For working capital requirements and capital expenditure, the Group relies on internal cash generation and bank
borrowings.
(Rupees in thousand)
Assets
Property, plant and equipment 33,879
Long term deposits 7,354
Deferred taxation 9,191
10,853
Loans and advances 308
Receivable from tax authorities 1,932
Other receivables 460
Cash and bank balances 11,120
Less: Liabilities
Trade and other payables (26,995)
44.2 The goodwill is attributable to the acquired customer base and economies of scale expected from combining the
operations of the Group and MAXCOM.
(Rupees in thousand)
Associates
TF Pipes Limited
Etisalat International Pakistan
Etisalat – Afghanistan
Emirates Telecommunication Corporation
Mobily – Saudi Arabia
Thuraya Satellite Company
Associates
Purchase of goods and services 1,763,280 2,393,250
Sale of goods and services 5,699,037 8,410,141
Advances against capital expenditure – 1,685,532
46.2 The Group’s 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.
Annual Report 2010 | 135
46.5 The Group’s customer base is diverse with no single customer accounting for more than 10% of net revenues.
46.6 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 Group’s Board of Directors.
98,905,765 92,720,382
48. Date of authorization for issue
These financial statements were authorized for issue on August 26, 2010 by the Board of Directors of the holding
Company.
49. General
Figures have been rounded off to the nearest thousand rupees unless otherwise specified.
Pattern of Shareholding
As at June 30, 2010
Pattern of Shareholding
As at June 30, 2010
Pattern of Shareholding
As at June 30, 2010
Categories of Shareholders
As at June 30, 2010
INSURANCE COMPANIES
1 02139–29 PREMIER INSURANCE LIMITED 90,000
2 02451–21 NEW JUBILEE INSURANCE COMPANY LIMITED 1,322,400
3 03277–10526 HABIB INSURANCE CO. LIMITED 250,000
4 03277–15009 CENTURY INSURANCE COMPANY LIMITED 33,500
5 03277–17338 EAST WEST LIFE ASSURANCE COMPANY LIMITED 50,000
6 03277–2538 EFU LIFE ASSURANCE LIMITED 6,413,500
7 03277–3711 ADAMJEE INSURANCE COMPANY LIMITED 175,000
8 03277–4064 NATIONAL INSURANCE COMPANY LIMITED 350,000
9 03277–4255 PAKISTAN REINSURANCE COMPANY LIMITED 440,000
10 03277–48501 TAKAFUL PAKISTAN LIMITED 5,500
11 03277–57588 ATLAS INSURANCE LIMITED 121,500
12 03277–6454 ALPHA INSURANCE CO. LIMITED 20,000
13 03277–7330 RELIANCE INSURANCE COMPANY LIMITED 90,000
14 03277–9371 NEW JUBILEE LIFE INSURANCE CO. LIMITED 1,705,000
15 03277–9404 ALLIANZ EFU HEALTH INSURANCE LIMITED 100,000
16 03459–996 ASKARI GENERAL INSURANCE CO. LIMITED 38,322
17 56890 PAKISTAN GUARANTEE INSURANCE CO. LIMITED 100
18 73493 GULF INSURANCE CO. LIMITED 100
Total 11,204,922
MODARABAS & MUTUAL FUNDS
1 00646–4138 FIRST PRUDENTIAL MODARABA 10,000
2 02113–21 FIRST EQUITY MODARABA 75,000
3 02667–25 TRUST MODARABA 155,000
4 03277–1149 B.F.MODARABA 57,000
5 03277–1651 FIRST UDL MODARABA 75,000
6 03277–4962 FIRST ALNOOR MODARABA 147,500
7 03277–7525 FIRST PAK MODARABA 5,000
8 03525–52268 FIRST ELITE CAPITAL MODARABA 52,000
9 04077–25 FIRST FIDELITY LEASING MODARABA 4,000
10 05454–28 JS VALUE FUND LIMITED 1,750,000
11 05520–28 GOLDEN ARROW SELECTED STOCKS FUND LIMITED 100,000
12 05652–23 CDC – TRUSTEE JS LARGE CAP. FUND 6,202,091
13 05959–27 CDC – TRUSTEE ATLAS STOCK MARKET FUND 1,100,000
14 05991–23 CDC – TRUSTEE MEEZAN BALANCED FUND 1,580,500
15 06072–23 CDC – TRUSTEE FIRST DAWOOD MUTUAL FUND 401,645
16 06171–21 CDC – TRUSTEE FAYSAL BALANCED GROWTH FUND 2,050,000
17 06197–29 CDC – TRUSTEE ALFALAH GHP VALUE FUND 200,050
18 06213–25 CDC – TRUSTEE UNIT TRUST OF PAKISTAN 9,403,557
19 06221–24 CDC – TRUSTEE JS AGGRESSIVE ASSET ALLOCATION FUND 390,000
20 06395–25 ASIAN STOCK FUND LIMITED 800,000
21 06403–22 CDC – TRUSTEE FAYSAL INCOME & GROWTH FUND 500,000
22 06411–21 CDC – TRUSTEE AKD INDEX TRACKER FUND 234,953
23 06486–24 SAFEWAY MUTUAL FUND LIMITED 700,000
24 06619–26 CDC – TRUSTEE AKD OPPORTUNITY FUND 111,339
25 06726–23 CDC – TRUSTEE PAKISTAN INTERNATIONAL ELEMENT ISLAMIC FUND 1,000,000
26 06825–21 MCFSL – TRUSTEE JS KSE – 30 INDEX FUND 89,275
27 07062–23 AL MEEZAN MUTUAL FUND LIMITED 3,696,200
28 07070–22 CDC – TRUSTEE MEEZAN ISLAMIC FUND 9,506,653
29 07096–20 FDIBL TRUSTEE – NAMCO BALANCED FUND 710,100
30 07252–20 CDC – TRUSTEE FAYSAL ASSET ALLOCATION FUND 1,000,000
31 09449–25 CDC – TRUSTEE ATLAS ISLAMIC STOCK FUND 900,000
32 09480–21 CDC – TRUSTEE NAFA STOCK FUND 2,223,000
33 09506–26 CDC – TRUSTEE NAFA MULTI ASSET FUND 1,156,980
34 09738–29 CDC – TRUSTEE MCB DYNAMIC STOCK FUND 574,765
35 10108–22 CDC – TRUSTEE ASKARI ASSET ALLOCATION FUND 250,000
144 | Pakistan Telecommunication Company Limited
36 10397–29 CDC – TRUSTEE MEEZAN TAHAFFUZ PENSION FUND – EQUITY SUB FUND 229,500
37 10447–9718 FIRST PRUDENTIAL MODARABA 10,000
38 10520–21 TRUSTEE – PPF EQUITY (SUB–FUND) 100,000
39 10603–21 CDC – TRUSTEE APF – EQUITY SUB FUND 90,000
40 10660–25 CDC – TRUSTEE JS PENSION SAVINGS FUND – EQUITY ACCOUNT 61,000
41 10710–28 CDC – TRUSTEE ALFALAH GHP ISLAMIC FUND 150,000
42 10728–27 CDC – TRUSTEE HBL – STOCK FUND 1,550,000
43 10801–27 CDC – TRUSTEE NAFA ISLAMIC MULTI ASSET FUND 626,400
44 10850–22 TRUSTEE PIPF EQUITY SUB – FUND 48,800
45 10900–25 CDC – TRUSTEE APIF – EQUITY SUB FUND 190,000
46 11049–29 MC FSL – TRUSTEE JS GROWTH FUND 9,077,804
47 11056–28 CDC – TRUSTEE HBL MULTI – ASSET FUND 80,000
48 11320–25 B.R.R. GUARDIAN MODARABA 50,000
49 11403–25 FIRST CAPITAL MUTUAL FUND LIMITED 150,000
50 11429–23 MC FSL – TRUSTEE JS CAPITAL PROTECTED FUND – IV 453,089
51 11577–25 CDC – TRUSTEE MEEZAN CAPITAL PROTECTED FUND – I 100,000
52 11809–26 CDC – TRUSTEE IGI STOCK FUND 1,215,000
53 11924–22 CDC – TRUSTEE ALFALAH GHP ALPHA FUND 256,540
54 12021–20 CDC – TRUSTEE NIT STATE ENTERPRISE FUND 54,628,382
55 12047–28 CDC – TRUSTEE PAK OMAN ADVANTAGE ISLAMIC FUND 200,000
56 12054–27 CDC – TRUSTEE PAK OMAN ADVANTAGE STOCK FUND 125,000
57 12120–28 CDC – TRUSTEE NIT – EQUITY MARKET OPPORTUNITY FUND 5,985,639
58 12278–21 MCFSL–TRUSTEE ASKARI ISLAMIC ASSET ALLOCATION FUND 35,000
59 12310–25 CDC – TRUSTEE FIRST HABIB STOCK FUND 182,600
60 12336–23 CDC – TRUSTEE LAKSON EQUITY FUND 162,850
61 12435–21 MCFSL TRUSTEE JS PRINCIPAL SECURE FUND II 475,000
62 37257 L.T.V. CAPITAL MODARABA 100
Total 123,444,312
PUBLIC SECTOR COMPANIES & CORPORATIONS
1 02683–15 STATE LIFE INSURANCE CORP. OF PAKISTAN 943,396
2 02683–23 STATE LIFE INSURANCE CORP. OF PAKISTAN 54,316,633
Total 55,260,029
OTHERS
1 00307–46 IGI FINEX SECURITIES LIMITED 1
2 00307–56279 CAPITAL VISION SECURITIES (PVT) LIMITED 5,100
3 00307–9500 Y.S. SECURITIES & SERVICES (PVT) LIMITED 32,900
4 00364–10155 TRUSTEE EAPCL MPT EMP. PENSION FUND 20,000
5 00364–13688 TRUSTEES KUEHNE & NAGEL PAKISTAN SPF 20,000
6 00364–55242 CRAFTSMAN (PVT) LIMITED (8095) 100,000
7 00364–83467 AMIR FINE EXPORTS (PVT) LIMITED 37,500
8 00414–35 MOOSA, NOOR MOHAMMAD, SHAHZADA & CO. (PVT) LIMITED 43,500
9 00539–14700 TECNO PACK TELECOM (PVT) LIMITED 10,000
10 00539–30 WE FINANCIAL SERVICES LIMITED 2,100
11 00547–6424 TRUSTEE – IBM ITALIA S.P.A. PAKISTAN EMPLOYEES PENSION FUND 20,000
12 00547–6432 TRUSTEE – IBM ITALIA S.P.A. PAKISTAN EMPLOYEES GRATUITY FUND 20,000
13 00547–6457 TRUSTEE – IBM SEMEA EMPLOYEES PROVIDENT FUND 20,000
14 00620–18650 PANTHER EXPORTS (PVT) LIMITED 63,000
15 00620–21 TAURUS SECURITIES LIMITED 2,900
16 00653–3683 TRUSTEE – NISHAT (CHUNIAN) LIMITED EMPLOYEES PROVIDENT FUND 10,000
17 00695–10049 TRUSTEE – UNILEVER PENSION PLAN (1145–3) 600,000
18 00695–10684 TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED (1386–2) 36,610
19 00695–10692 TRUSTEE PAKISTAN TOBACCO COMPANY LI MITED (1385–5) 20,700
20 00695–10700 TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED (1383–4) 40,000
21 00695–10759 TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED [1390–2] 52,000
Annual Report 2010 | 145
79 03277–34872 TRUSTEES ENGRO CHEMICAL PAK LIMITED MPT EMP DEF. CONT P. FUND 715,000
80 03277–35326 ASLAM SONS (PVT) LIMITED 286,569
81 03277–35867 TRUSTEE GUL AHMED TEXTILE MILLS LIMITED EMP P. F 2,500
82 03277–3785 TRUSTEE CHERAT CEMENT CO. LIMITED EMP. PRO. FND 20,000
83 03277–38250 TRUSTEES OF STATE OIL COMPANY LIMITED. EMPLOYEES P. F 25,000
84 03277–3893 SITARA CHEMICAL INDUSTRIES LIMITED 50,000
85 03277–4070 EMPLOYEE’S OLD–AGE BENEFITS INSTITUTION 55,893,800
86 03277–4230 CRESCENT STEEL AND ALLIED PRODUCTS LIMITED 302,500
87 03277–4275 TRUSTEES NRL OFFICERS PROVIDENT FUND 14,000
88 03277–4841 BULK MANAGEMENT PAKISTAN (PVT) LIMITED 415,500
89 03277–4865 SHAKOO (PVT) LIMITED 50,000
90 03277–48792 TRUSTEES OF GREAVES PAKISTAN (PVT) LIMITED EMP PROVIDENT FUND 10,000
91 03277–5006 PAK GREASE MFG. (PVT) LIMITED 70,500
92 03277–543 SIDDIQSONS DENIM MILLS LIMITED 215,000
93 03277–55465 MARIAM ALI MUHAMMAD TABBA FOUNDATION 150,000
94 03277–57693 MAGNUS INVESTMENT ADVISORS LIMITED 100
95 03277–6081 TRUSTEES ALOO & MINOCHER DINSHAW CHR. TRUST 40,000
96 03277–61129 TRUSTEE NATIONAL REFINERY LIMITED MANAGEMENT STAFF PENSION FUND 42,890
97 03277–61348 POLYPROPYLENE PRODUCTS LIMITED 229,400
98 03277–63669 TRUSTEE OF HAJI MOHAMMED BENEVOLENT TRUST 200,000
99 03277–64919 FIRHAJ FOOTWEAR (PVT) LIMITED 20,000
100 03277–64984 SAUDI PAK REAL ESTATE LIMITED 100,000
101 03277–65957 AMANAH INVESTMENTS LIMITED 10,000
102 03277–67482 TRUSTEES OF ENGRO CHEMICAL PAK LIMITED NON–MPT EMP GRATUITY FUND 88,063
103 03277–70845 NOMAN ABID HOLDINGS LIMITED 16
104 03277–7421 TRUSTEES SAEEDA AMIN WAKF 125,000
105 03277–7633 TRUSTEES MOHAMAD AMIN WAKF ESTATE 150,000
106 03277–7652 ISMAILIA YOUTH SERVICES 70,000
107 03277–7702 TRUSTEES JAMIA MASJID REHMANIA TRUST 6,000
108 03277–894 M/S S. FAZALILAHI & SONS (PVT) LIMITED 100,500
109 03277–895 M/S IHSAN INDUSTRIES (PVT) LIMITED 3,000
110 03277–9217 JUPITER TEXTILE MILLS (PVT) LIMITED 50,000
111 03277–9219 TRUSTEES AL–MAL GROUP STAFF PROVIDENT FN 5,000
112 03277–9284 PAKISTAN HOUSE INTERNATIONAL LIMITED 142,000
113 03277–9351 TRUSTEES CRESCENT STEEL & ALLIED PROD G. F. 61,500
114 03277–9352 TRUSTEES CRESCENT STEEL & ALLIED PROD PN. F 150,500
115 03277–9353 TRUSTEES CRESCENT STEEL & ALLIED PROD SPF 42,500
116 03277–9372 TRUSTEES ASIATIC P.R. NETWORK (PVT) EMP PF 2,000
117 03277–973 LUCKY ENERGY (PVT) LIMITED 50,000
118 03277–9981 TRUSTEES OF FAROUKH & ROSHEN KARANI TRUST 20,000
119 03293–12 S.H. BUKHARI SECURITIES (PVT) LIMITED 200
120 03319–26 KHALID JAVED SECURITIES (PVT) LIMITED 13,000
121 03350–22 ZAHID LATIF KHAN SECURITIES (PVT) LIMITED 200
122 03475–28 REPUBLIC SECURITIES LIMITED 1,500
123 03525–1895 VOHRAH ENGINEERING (PVT) LIMITED 2,500
124 03525–48472 MANAGING COMMITTEE CRESCENT FOUNDATION 129,500
125 03525–63817 NH SECURITIES (PVT) LIMITED 10,000
126 03525–6645 TRUSTEES PACKAGES LIMITED MGT. STAFF PEN. FUND 10,000
127 03525–66811 TRUSTEES NESTLE PAKISTAN LIMITED MANAGERIAL STAFF PENSION FUND 30,000
128 03525–66812 TRUSTEES NESTLE PAKISTAN LIMITED EMPLOYEES PROVIDENT FUND 30,000
129 03525–66813 TRUSTEES NESTLE PAKISTAN LIMITED EMPLOYEES GRATUITY FUND 20,000
130 03525–68468 TRUSTEES GHANI GLASS LIMITED EMPLOYEES PROVIDENT FUND 10,000
131 03574–25 PROGRESSIVE INVESTMENT MANAGEMENT (PVT) LIMITED 1,500
132 03715–27 EXCEL SECURITIES (PVT) LIMITED 12,300
133 03855–21 DARSON SECURITIES (PVT) LIMITED 300
134 03863–20 ACE SECURITIES (PVT) LIMITED 80,600
135 03939–12703 EXCEL SECURITIES (PVT) LIMITED 2,450
Annual Report 2010 | 147
307 80721 KHADIM ALI SHAH BUKHARI & CO. LIMITED 100
308 80723 ZILLION CAPITAL SECURITIES (PVT) LIMITED 100
309 80725 M.S. SECURITIES (PVT) LIMITED 200
310 80728 ZAFAR SECURITIES (PVT) LIMITED 200
Total 75,481,407
GOVERNMENT OF PAKISTAN
1 1 PRESIDENT OF PAKISTAN 5,600
2 1000001 PRESIDENT OF PAKISTAN 3,900
3 2000001 PRESIDENT OF PAKISTAN 2,974,680,002
4 2000004 PRESIDENT OF PAKISTAN 1,577,400
5 2050000 PRESIDENT OF PAKISTAN 196,387,991
Total 3,172,654,893
FOREIGN COMPANIES
1 00364–11161 RO LIMITED (032985) 200,000
2 00364–18430 ARAB EMIRATES INVESTMENT BANK P.J.S.C. 26,400
3 00521–1179 DEUTSCHE BANK SECURITIES INC. 100
4 00521–2185 THE BANK OF NEW YORK MELLON SA/NV 110,000
5 00521–2300 THE BANK OF NEW YORK MELLON SA/NV 3,326,631
6 00521–2342 THE BANK OF NEW YORK MELLON SA/NV 110,000
7 00521–2631 THE BANK OF NEW YORK MELLON SA/NV 601,500
8 00521–2839 THE BANK OF NEW YORK MELLON SA/NV 12,544
9 00521–502 STATE STREET BANK AND TRUST CO. 24,600,953
10 00521–528 THE BANK OF NEW YORK MELLON 44,204,009
11 00521–700 DEUTSCHE BANK LONDON GLOBAL EQUITIES 2,016,843
12 00547–1938 CLSA SINGAPORE PTE LIMITED – CLIENT ACCOUNT 2,500
13 00547–2068 MERRILL LYNCH INTERNATIONAL 1,671,452
14 00547–2282 EMIRATES NATIONAL INVESTMENT CO. LLC 3,084,050
15 00547–2316 DUBAI ISLAMIC BANK PJSC 3,347,600
16 00547–2399 HSBC FUND SERVICES A/C. 006–606669–431 1,000,000
17 00547–2407 LEGAL & GENERAL ASSURANCE (PENSIONS MANAGEMENT) LIMITED 1,227,800
18 00547–2712 THE ROYAL BANK OF SCOTLAND N.V. 4,164,951
19 00547–2753 J.P.MORGAN WHITEFRIARS INC. 11,143,500
20 00547–2779 THE NORTHERN TRUST CO. A/C IBM DIVERSIFIELD GLOBAL EQUITY FD 3,831,265
21 00547–3306 WILMINGTON INTERNATIONAL EQUITY FUND SELECT, L.P – FM 2 80,366
22 00547–3421 CFSIL RE COMMONWEALTH EMERGING MARKETS FUND 2 526,000
23 00547–3595 THE DEPARTMENT OF THE STATE TREASURER OF MASSACHUSETTS 1,900
24 00547–3793 ADVANCE SERIES TRUST – AST PARAMETRIC EMERGING MARKETS EQUITY 1,307,700
25 00547–3843 OLD WESTBURY FUNDS INC A/C OLD WESTBURY GLOBAL OPPORTUNITY 901,720
26 00547–4023 WILMINGTON MULTI–MANAGER INTERNATIONAL FUND 135,000
27 00547–4064 THE NORTHERN TRUST CO, MELBOURNE BRANCH FUTURE FUND CLIENTS 201,500
28 00547–4429 FNIL A/C J.P. MORGAN SECURITIES (ASIA PACIFIC) LIMITED CLIENT A/C 2,000
29 00547–4841 THE NORTHERN TRUST COMPANY 4,502,535
30 00547–4932 THE NORTHERN TRUST COMPANY 384,498
31 00547–4940 THE NORTHERN TRUST COMPANY 3,998,329
32 00547–4981 THE NORTHERN TRUST COMPANY 84,500
33 00547–6150 THE NORTHERN TRUST COMPANY 174,975
34 00547–6267 THE NORTHERN TRUST COMPANY 88,183
35 00547–6622 BNP PARIBAS ARBITRAGE 479,328
36 00547–6697 JP MORGAN WHITEFRIARS INC 650,600
37 00547–716 THE NORTHERN TRUST COMPANY 1,100
38 00695–10122 THE NAMURA TRUST AND BANKING CO. LIMITED (1153–5) 324,735
39 00695–10783 SEI INSTITUTIONAL INVESTMENT TRUST [1395–1] 1,439,600
40 00695–10817 GOLDMAN SACHS INVESTMENTS (MAURITIUS) I LIMITED [1399–3] 308,972
41 00695–1089 GOLDMAN SACHS & CO. [148–9] 253,000
Annual Report 2010 | 151
Notice is hereby given that the Fifteenth Annual General Meeting of Pakistan Telecommunication Company Limited will be
held on Thursday, 28th October, 2010 at 10:30 a.m. at the Islamabad Serena Hotel, Sheesh Mahal Hall, Opposite Convention
Center, Sector G–5, Khayaban–e–Suhrwardy, Islamabad, to transact the following business:
1. To confirm the minutes of the last AGM held on 31st October, 2009.
2. To receive, consider and adopt the Audited Accounts for the year ended 30th June, 2010, together with the Auditors’
and Directors’ reports.
3. To approve and declare the interim cash dividend of 17.5% (Rs. 1.75 per share) already announced and paid for the
year ended June 30, 2010.
4. To appoint Auditors for the financial year ending 30th June, 2011 and to fix their remuneration. The retiring Auditors
M/s A. F. Ferguson & Co., Chartered Accountants and M/s Ernst & Young Ford Rhodes Sidat Hyder, Chartered
Accountants, being eligible, offer themselves for reappointment.
Notes:
1. 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.
2. The Share Transfer Books of the Company will remain closed from 18th October, 2010 to 28th October, 2010 (both
days inclusive).
3. Members are requested to notify any change in address immediately to our Share Registrar, M/s FAMCO Associates
(Pvt.) Limited at Ground Floor, State Life Building No. 1–A, I.I. Chundrigar Road, Karachi.
4. Any individual Beneficial Owner of CDC, entitled to vote at this meeting, must bring his/her original NIC with him/
her to prove his/her identity, and in case of proxy, a copy of shareholder’s attested NIC must be attached with the
proxy form. Representatives of corporate members should bring the usual documents required for such purpose.
Form of Proxy
Pakistan Telecommunication Company Limited
I/We
Of
Ordinary Shares as per Share Register Folio No. and / or CDC Participant
the Fifteenth Annual General Meeting of the Company to be held on Thursday, October 28, 2010 at 10:30 a.m. and at any
adjournment thereof.
Signature
on Rs. 5/-
Revenue
Stamp
1. Witness 2. Witness
Signature: Signature:
Name: Name:
Address: Address:
Notes
(i) The proxy need not be a member of the Company.
(ii) 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 participant’s 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.
AFFIX
CORRECT
POSTAGE
To
The Company Secretary
Pakistan Telecommunication Company Limited
PTCL Headquarters, Sector G–8/4,
Islamabad–44000