Tnm annualreport 2010


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2010 annual report

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Tnm annualreport 2010

  1. 1. “A Tree For Every Child” Day “Our goal is to The foundation of our strong brand and customer loyalty is that TNM is an integral part of Malawi’s develop mobile economic growth.telecommunicationservices and offerings Our colour green represents the prosperity derived that are accessible from agriculture and the environment. and within reach In 2010 we grew our subscriber base by 38% to of every Malawian 1,1 million subscribers, we upgraded our infra- to give them the structure quality and services, we constructed over 70 new base stations and extended our means and ability coverage to cover 74% of Malawi and 85% of to reach their full Malawi’s population.potential and allow them to play a full We are Malawian, offer best customer value and service availability.role in the develop- ment of Malawi.” TNM is “always with you”
  2. 2. CHANGING PEOPLE’S LIVESVoice, SMS and data are critical enabling tools for trade, business and sociallives of the people of Malawi.Higher levels of subsidy on handsets play a pivotal role in allowing accessto mobile telephony services.A COG IN MALAWI’S EDUCATION INITIATIVESTNM offers E-learning “English” through a push SMS application developedwith the British Council.An SMS-based farmer education platform is being developed for the tobaccofarming industry.WORLD CLASS INNOVATIONBased on EDGE/3.5G further developments will include e-banking services.
  4. 4. CELEBRATING 15 YEARS OF GROWTHFrom our incorporation date on 24th March 1995 and operator launch on 15thDecember 1995 we have grown steadily:-• From a switching capacity of 7,000 subscribers to 2,000,000• From 40 staff to over 400 staff• From 36 BTS to 380 sites• Geographic coverage of 74% of Malawi• Population coverage of 85% of MalawiWE PAY TRIBUTE TO OUR FOUNDERSFollowing our incorporation on 24th March 1995, TNM was launched on 15th December1995. During 2010 we celebrated our 15th birthday and reflected on our captivating history. Ourbirth represented a new dawn in telecommunications and a shift in lifestyle for the peoplein Malawi.At a time when investors worldwide did not believe that Southern Africa had a viable eco-nomic case for mobile telephony technology, Telekom Malaysia took a bold step to investin Malawi by forming a joint venture with the then government-owned Malawi Postal andTelecommunications Corporation (MPTC).By the end of 1995 Malawi became the second country to introduce mobile telephony servicesand TNM became the third operator in the region after South Africa’s MTN and Vodacom, wholaunched their services about 6 months earlier.Following launch our humble 7,000 subscriber switch capacity was scaled up to 10,000within a few months. At that time 36 BTS covered only Blantyre, Lilongwe, Mzuzu and Zomba.TNM’s switching capacity is now in excess of 2 million subscribers and we enjoy a geographiccoverage of over 74% and population coverage of 85% through over 380 BTS sites.From a staff complement of 40 in 1995, TNM is now a much bigger family providing directand indirect employment to over 400 young Malawian employees in various career fieldsand through 15,000 dealers, contractors and suppliers.Our brand has created an indelible mark in the hearts and lives of Malawians over theyears to the extent that TNM is now synonymous with mobile telecommunications.After our successful listing on the Malawi Stock Exchange in 2008, shareholders have enjoyedconsistent dividend flows at a time of unprecedented investment into telecommunicationsinfrastructure. TNM distributes dividends by way of a first interim dividend declared in Augustor September, a second interim dividend declared in November or December and a finaldividend declared at the AGM in May or June:- 2008 2009 2010Year end 31 December1st interim Dividend declared: K320m September K201m August K201m August Amount per share: 3t 2t 2t2nd interim Dividend declared: K201m December K201m December K201m December Amount per share: 2t 2t 2tFinal Dividend declared: K201m June 2009 K201m June 2010 K201m June 2011 Amount per share: 2t 2t Always with you 2
  5. 5. CELEBRATING 15 YEARS OF GROWTHTNM was an integral part of By providing a reliable communication medium, TNMthe introduction of mobile now plays a dominant role in facilitating social, business and other economic activities. TNM’s contribution to telephony in Africa the national economy cannot be over-emphasized: through various taxes and levies, the mobile telecom- munications sector has become one of the biggest contributors to GDP of the country. We are proud to be the pioneers of the mobile telecom- munication in Malawi and appreciate the support we have received from our customers over the years. Along our journey some of the men and women responsible for our growth have departed this world. They would have been proud to see baby TNM grown into the pillar of Malawian society we have become. We wish to pay tribute to the men and women who began the journey with TNM. OUR JOURNEY:- • 1995. TNM was launched on 15 December 1995 with 36 base transceiver stations covering Blantyre, Lilongwe, Mzuzu and Zomba, the third network in Southern Africa after South Africa’s MTN and Vodacom • 1996. TNM started commercial operations in January 1996 offering post-paid services with a capacity of 7,000 subscribers. In the same year capacity was increased to 10,000 subscribers • 2000. In June 2000 TNM launched pre-paid services and in January 2001 TNM launched its SMS service • 2002. In 2002 TNM launched international roaming • 2005. In April 2005 TNM recorded 100,000 customers 3 Always with you
  6. 6. CELEBRATING 15 YEARS OF GROWTH• 2007. In March 2007 TMB’s stake was acquired by MTL Mobile TNM pays tribute to those resulting in the company becoming wholly Malawian owned with that have contributed to PCL as de facto controlling shareholder through its majority share holding in MTL and MTL mobile Malawi’s telecommunica- tions growth over the past• 2007. In June 2007 Telekom Networks Malawi was re-branded to TNM with a brand promise, ‘always with you’ 15 years• 2008. In November 2008 TNM successfully raised MK2.58bn in new capital and listed on the Malawi Stock Exchange and significantly expanded its service offerings• 2008. In October 2008 NGN was commissioned replacing the legacy switch and was followed by introduction of GPRS/EDGE• 2009. In December 2009 TNM was the first mobile phone operator to launch 3.5G technology in Malawi• 2010. In 2010 TNM customers reached the 1 million Always with you 4
  7. 7. SUSTAINABILITY REPORT We recognise that Through our people and our communities TNM seeks to sustainable business promote sustainable stakeholder value through sound envi-processes are a fundamental ronmental, social, economic and business management andpre-requisite for the creation moral practices of value for stakeholders OUR SUSTAINABILITY OBJECTIVES • The creation of direct and indirect wealth for all shareholders and stakeholders without compromising future generations • The responsible management of biodiversity, sensitive environments and land use to ensure environmental protection and growth • To meet and exceed applicable legal and regulatory requirements in every respectFostering relationships with • To provide a working environment built on principles of respect, fair communities is critical to labour practices and decent working conditions for our staff toensuring economic growth ensure that each person reaches their full potentialand corporate sustainability. • The development of a lasting positive legacy for our communities through regular, sustained and participative communication andTNM supports projects that collaboration improve health care, the environment and support OUR PEOPLE vulnerable children • Our staff complement grew to 408 in 2010 and is expected to grow further in 2011 • Our staff development and training initiatives continued • We launched “Don’t Judge Love”, our HIV and AIDS policy TNM Limited believes in providing quality of life for its employees in a manner that embraces respect, dignity and consideration. Respect for others is at the heart of our business. Diversity and inclusion is built into Full management our mission, core values and ethical principles. continuity is a key focus The HIV pandemic has affected everyone directly or indirectly. As an employer, TNM Limited realises the impact this has on employee productivity. In December 2010 we launched our ‘Don’t Judge Love’ HIV workplace policy which aims to remove the stigma of HIV and encourage employees to face up to the reality of HIV and mitigate its effects. One key initiative launched Diversity promotes understanding, respect and ultimately enables usin realizing the quality of life to better serve our customers, staff and communities. Our respect for our employees was our of, commitment to and the promotion of diversity in people was one “Don’t Judge Love’ HIV and key driver of growth in the year under review. AIDS policy TNM is in the process of guaranteeing full management continuity through comprehensive management training, succession planning and competitive long term oriented remuneration policies which include: an internal staff development program for talented senior local staff, an employee share ownership scheme, long-term oriented fringe benefits and an active diaspora recruitment initiative. We also continued making significant investment in staff training and skills development during 2010. These initiatives included programmes to improve the managerial and personal skills of our junior and middle management staff. 5 Always with you
  8. 8. SUSTAINABILITY REPORTOUR COMMUNITY INVOLVEMENT• We continued to support YONECO, a non-profit making organization based in Zomba which focuses on youth development, human rights and democracy programmes• We contributed to the Safe Motherhood initiative through the 1st Lady Callista Muntharika• In association with the Heritage for Environment Trust we planted 12,000 treesDuring the year under review we continued our support of initiatives targetting health,youth and environment, areas that provide the potential for improving communities to ensurethe vulnerable can play a more meaningful role in our country’s economic development.YONECO - Youth Net and CounsellingTNM continues to partner YONECO in providing a national toll-free help line for youth to reportabuse and receive professional counseling on sexual and reproductive health, humanrights and HIV / AIDS issues. YONECO responds to over 200 helpline calls a day.YONECO’s youth advocacy programme also supports the entertainment of vulnerablestreet and prison children during the festive season.Safe motherhoodAbsence of equipment, poor communications and poor roads are contributing factors toMalawi’s maternal mortality rate of 807 deaths per 100,000 births, the second highest insub-Saharan Africa.The Callista Mutharika Safe Motherhood initiative was founded by the First Lady CallistaMutharika in July 2010 to address Malawi’s high maternal mortality rate. The First Lady, CallistaMutharika was kind enough to receive a donation of equipment and communicationstools dedicated to the Thekerani Health Centre in Thyolo from TNM valued at MK4.5m.TNM’s support included bicycle ambulances, delivery beds, payphones, a generator andother hospital equipment.Tree plantingIn partnership with the Heritage for Environment Trust we participate every year in an initiativecalled “a tree for every child” which individually provides a tree for each school pupil in13 schools in Zomba. Each pupil is responsible for the health of each sapling as a way ofpromoting sustainable reforestation awareness. In 2010 this initiative was responsible forplanting 12,000 trees.We are committed to our roots and our corporate social responsibility, Green orotherwise. Youth Net and Counselling Safe motherhood Tree Always with you 6
  9. 9. TNM focused on enhancing our customers’ experience of the network in 2010 to increase the market share LETTER FROM THE CHAIRMAN Dear Stakeholders 3 May 2011 WE CELEBRATE 15 YEARS OF CONTINUOUS GROWTH On 15th December 2010 we celebrated our 15th birthday and commemorated TNM’s captivating involvement in enabling a new dawn of telecommunications in Malawi. Looking at our past 15 years of continuous growth we have seen how telecommunications improves our communities through the extension of mobile phones to potentially all members of our society. However the impact is most significant to users with low education, literacy and incomes through our low cost handsets. From an economic development perspective, the impacts of mobile telecommunications services are tangible and significant: in facilitating reduction in travel times and costs, improvements Dr Mathews Chikaonda - Chairman in marketing efficiencies, encouragement of entrepreneurialism (especially for small business), as well as the education and banking sector innovation to name just a few. “TNM is proud to be part The various taxes, levies and fees we pay (licence, fees, levies of the growth in on net operating revenue, VAT on airtime, excise tax on air- telecommunications in time, VAT on handset equipment, duties imports, corporate Malawi and contribute to tax and income tax) contribute substantially to our national economy. TNM has paid over MK2.85 bn and MK3.25 bn in National objectives to the taxes and fees in 2009 and 2010 alone. extent that we do” Other taxes Other taxes 247 Excise 313 Excise MACRA fees 952 MACRA fees 1 069 and levies and levies 367 484 Corporate Corporate tax tax 393 318 VAT VAT 891 1 063 OUR CONTRIBUTION IN 2009 OUR CONTRIBUTION IN 2010 Figures in Million Kwacha Figures in Million Kwacha Taxes Included in the calculation are Excise Tax, VAT, corporate taxes, licence fees, levies, duties, and fringe benefit tax 7 Always with you
  10. 10. LETTER FROM THE CHAIRMAN Worthy of mention is our recent consistent dividend 600 721 paying history which has continued during our ex- pansion. We look forward to continuing our involve- ment in the growth of our nation and believe that Malawi’s telecommunications markets will continue to grow because our market is still relatively young measured by relative overall telecommunication 600 penetration rates. Malawi’s Census in 2008 indicated that Malawi’s population in 2008 was 13.1 million 2008 2009 2010 and 48% (or 6.3 million) of this population is aged 18 DIVIDENDS PAID OVER THE PAST THREE YEARS Figures in Million Kwacha years and above. Malawi’s penetration rate at the end of 2010 is 23%, still behind our regional peers. Malawi’s informal sector is widespread and strong and we intend to address this potential with our PENETRATION RATE % combined approach of low cost handsets, low denomination vouchers, growth of our current 85% network population coverage and growth from our current 74% geographical coverage further. The role of telecommunications in Malawi’s economic growth measured by the Telephony Penetration Rate over the years is testimony to our investment into our economy. We expect to see our telecommunications market expanding to penetration levels of over 50% or over 7.0 million subscribers by 2015 if consumer demands are met. We therefore plan to continue investing heavily in infrastructure growth and service improvement to deliver consistent and reliable high quality service.By aggressively addressing rural and low usage segments on voice we intend to enhanceour customer base to over 1,5m subscribers in 2011, enhance customer loyalty, improveand optimize distribution efficiency and finally, further position TNM as an innovative brandfocusing on exciting customer life styles.In the immediate future we are anticipating a more challenging operating and competitiveenvironment. Our strong brand, Malawian identity, recent investment and restructuringinitiatives stand us in good stead to meet these challenges and ensure that we share in thegrowth we anticipate, to the benefit of all of our stakeholders.In closing I would like to thank all the members of the Board, management and staff of TNMfor the hard work and commitment to our goals.A special appreciation is extended to all our customers and to you our shareholder whocontinue to be a source of inspiration and support for our truly Malawian telecommunicationscompany.DR MATHEWS Always with you 8
  11. 11. Landirani Trust donation CEO’S COMMENTARY Dear Stakeholder 3 May 2011 WE CELEBRATE 15 YEARS OF CONTINUOUS GROWTH Throughout 2010 we focused on enhancing our customers’ experience by improving our products and services. We deepened our community involvement and empowered TNM personnel to better serve our customers. The result is that I am pleased to report that TNM has once again contributed meaningfully to Malawi’s increased Telephony Penetration Rate and economic development. Our growth is underpinned by continuing investment in our network which, over the past 15 years has evolved to embrace the latest technologies (from GPRS/EDGE to 3.5G/ HSPDA) which are comparable to any other world class operator. This continuing investment has enabled us to retain Willem Swart - Chief Executive Officer and register more customers on our network through ex- panded capacities, extended coverage and new product offerings including data services. Our initiatives to increase In 2010 we focused on rural area coverage and distribute low-cost handsets haveimproving our existing net- also been successful and are set to’s quality, capacity and Shareholders have enjoyed their three years of uninterrupted efficiency specifically with dividends during a period of unprecedented infrastructure investment and the company continues to apply its dividend regards to transmission policy of distributing between 40% and 60% of its profits. I now comment on our financial and operating performance Aggressive investment in in more detail. infrastructure, low cost SUMMARY FINANCIAL RESULTS handset distribution and • Revenue growth +21% from MK8.2bn to MK9.9bn aggressive marketing • EBITDA growth +25% from MK2.9bn to MK3.6bn enabled satisfactory rev- • Profit after tax declined by 13% to MK1.1bn • Depreciation increase +55% from MK1.04bn to MK1.61bn enue and EBITDA growth • Net finance charges increase of +248% from MK0.12bn to MK0.42bn 9 Always with you
  12. 12. CEO’S COMMENTARYTNM recorded satisfactory revenue growth of 21% in 2010 and our EBITDA margin improvedto 37% from 35% in 2009 as a result of effective cost management.The recent financing of and investment into infrastructure resulted in a decline in profit fromMK1.215bn in 2009 to MK1.060bn in 2010 as a result of significantly increased depreciationand finance charges (MK571m and MK273m respectively).TNM continues to enjoy a strong balance sheet and a return on equity that exceeds ourcost of debt finance. Our capital expenditure investment programmes are expected tocontinue in the short to medium term in line with recent average investment levels.SUBSCRIBERS AND MARKET SHARE• TNM’s subscriber base rose 38% to 1.14 million subscribers• Market share grew by 4% to 37%• ARPU at MK841 recorded a decline of 17%The estimated market-share for telecommunication operators as at 31 December 2010 isshown below:- 2010 PSTN Mobile pre-paid Mobile post-paidAirtel 1,958,000 - 1,950,000 8,000TNM 1,140,000 - 1,129,870 10,130MTL 125,000 125,000 - -Access 7,000 7,000 - -Total 3,230,000 132,000 3,079,870 18,130Malawi’s mobile lines per 100 inhabitants have risen from 0.7 in 2002 to 23 as at 31 December2010.The combination of subsidised handset programs and improved infrastructure capacityimproved subscriber growth to the extent that our mobile market share grew significantlyfrom 33% to 37%.TNM’s 2010 ARPU decreased from MK1,017 to MK841 as a result of an increased lower-usage customer base.NETWORK• Phase 2 - 3.5 G roll out for data services were extended to Lilongwe, Mzuzu, Zomba and other major towns• Over 70 new BTS constructed and rolled out New base stations Improved customer service Upgraded Always with you 10
  13. 13. CEO’S COMMENTARY NETWORK (continued) The New Generation Networks (NGN) technology introduced in 2008 continued to enable capacity upgrades to be undertaken on our existing hardware architecture. In 2010 we improved service quality, network resilience and redundancy for various critical network elements. The latter included the integration of a New Generation Call Server and Media Gateway at the Lilongwe Technical Centre providing TNM with geographical redundancy of critical network elements. During the first half of the year enhancement of our 3.5 G data network coverage was extended beyond the cities of Blantyre , Lilongwe, Mzuzu and Zomba to other major towns in the country. As part of our transmission diversity strategy, we now have three switching centres located at Limbe, Blantyre and Lilongwe connected by a combination of fibre and microwave. Transmission is critical to TNM’s business and during 2010, TNM established high capacity fibre connectivity between Blantyre Data Centre and Lilongwe Data Centre and also established a complete microwave ring network in both cities. Our efforts to improve our network did not only extend to new technology and upgrades. We also replaced and re-deployed older equipment at 60 sites in Lilongwe and Mzuzu and this improved the coverage, capacity and quality of our services. As part of the efforts to improve base station availability, specifically due to power related issues, hybrid power equipment was deployed at specific sites. This improved network availability with associated cost savings in diesel and generator maintenance. PRODUCTS AND SERVICES • TNM was the first to change tariff and recharge denominations into Malawi Kwacha • In November 2010 we launched voice and data pre-paid bundles During 2010 we were the first to change recharge voucher denominations from US dollar/ Units to Malawi Kwacha. We also launched voice and data prepaid bundles which enjoyed significant uptake by a broad spectrum of TNM prepaid subscribers. New billing systems for pre-paid and postpaid services were commissioned during the year providing TNM the flexibility to support dynamic product offerings, maintain customer loyalty and contribute to re-gaining market share. SUPPORTING SPORT • TNM maintains its leader as the premier sponsor of football in Malawi • TNM continues to sponsor Malawi’s biggest golf tournament, the Malawi Open The Malawi Open Golf Tournament Public Relations TNM Fun Day11 Always with you
  14. 14. CEO’S COMMENTARY TNM Super League Football TrophyTNM has sponsored Malawi’s largest football league since2005 and our annual contribution has truly made a differ-ence as it is critical in bringing people together and divert-ing youth away from inappropriate behavior. TNM’s competitiveWe continue to sponsor and enable the development of golf environment is becomingin Malawi and we continue to sponsor Malawi’s biggest golftournament, The Malawi Open. This is our way of contributing more challenging, but we areto the development of the sport and also to interact with our not resting on our laurelscustomers who enjoy the sport.COMPETITION AND REGULATION• Following Airtel’s acquisition of Zain’s African assets Zain was rebranded to Airtel in 2010 and we welcome them to Malawi. Airtel has announced its intentions to invest in the low-end price sensitive segment of Malawi’s market. Limited access to foreign• Access, the 2nd fixed line operator offers a fixed mobile exchange, intermittent CDMA wireless product and recorded an estimated power supply and lack of 7,000 subscribers at the end of December 2010• G-Mobile, was awarded Malawi’s third GSM-900 licence electricity grid in many in June 2008 and has yet to commence operations. rural areas, are currentThe Communications Act 1998, still under review, and the obstacles to growthpossibility of the introduction of Universal Licences in 2011, isexpected to provide new opportunities for TNM and we willmodify our strategies accordingly.Our Malawian roots, long history in Malawi and strong brandprovide competitive advantage over new market entrants. TNM will continue to investOUTLOOK AND STRATEGY in the latest technologies to• Growing our data services is a priority be at par with the changes• Organisational structures are being improved including in the industry restructuring• We are preparing for difficult conditions in the short to medium term• We remain resilient in applying our strategies to keep TNM on a growth Always with you 12
  15. 15. CEO’S COMMENTARY Our investment into OUTLOOK AND STRATEGY (continued) We are looking to consolidate recent gains and infrastructure investment infrastructure is expected by adopting a more regional focus in our organizational structures. Our to continue in line with objective: to deliver quality of service improvements to our customers recent average historical in line with key regulatory performance indicators. levels We are re-deploying some sites to improve coverage within existing areas and are considering infrastructural sharing opportunities as means to reduce the cost of investment and mitigate foreign ex- change shortages. Fibre optic based connectivity is being pursued to offer bandwidth at lower cost in line with our strategies to increase penetration in data markets. By the end of 2011, TNM plans to have an IP Radio Access networkOur 2011 strategy will focus completed and add the 3.5 G network layer to most of the existing on quality and the coverage areas. In the longer term, the declining cost of network roll management of steady out due to technological advancements and vendor competition is growth within an positive for TNM. increasingly competitive Notwithstanding that we are preparing for difficult conditions, we remainand challenging operating resilient in applying our strategies to keep TNM on a growth path. Thankfully the capital investments made in the past few years have environment provided the short and medium-term foundation for growth. INVESTOR RELATIONS TNM’s investor website provides comprehensive and timely investment data and categorised email alerts. I invite investors and stakeholders to register online and to communicate with us at any time. We welcome your feedback.We have started deployinghybrid power equipment APPRECIATION I wish to thank the TNM Board of Directors for the strategic governance,to save diesel and reduce guidance and support provided during this period. maintenance costs A special thank you to the whole TNM family. It is through the com- mitment and calibre of our members of staff that we continue to achieve growth upon growth each year. Appreciation also goes to all our partners and suppliers for their in- valuable support. Finally, the network would not be what it is without all you customers out there. We thank you for your continued support. On behalf of the TNM Team WILLEM SWART Chief Executive Officer 13 Always with you
  16. 16. CORPORATE GOVERNANCEThe Board is committed to ensuring that TNM conforms with the major “Good corporateprinciples of modern corporate governance namely, accountability, governance practice is anintegrity, and transparency as contained in the King Code of CorporateGovernance Principles and the King Report on Governance (“King III”), important ingredient inand the Code of Best Practice for Corporate Governance in Malawi. creating andIn our Malawian context TNM continues to embrace and abide by sustaining shareholderthe main principles of modern corporate governance as contained inthe Malawi Code II (Code of Best Practice for Corporate Governance value and ensuring thatin Malawi). behaviour is ethical, legalWe are a company that is very aware of how our operations have both and transparent.”positively and negatively affected the lives of our Malawian community.Our operations seek to enhance positive aspects and eradicate thenegative aspects of our operations in the communites in which weoperate. These principles form the foundation upon which the coreprinciples of the King III Code were launched in 2009.BOARD STRUCTURE AND POLICIES Our internal controlTNM’s Board is responsible to shareholders for creating and delivering procedures providesustainable shareholder value through management of the Company’s reliable, valid and timelybusiness. TNM’s Board therefore determines TNM’s strategic objectivesand policies to deliver long-term value and provide overall strategic information for monitoringdirection within a framework of rewards, incentives and controls. and evaluatingIn this regard, the company has at Board level, an Audit Committee, management andan Appointments and Remuneration Committee and a Procurement company performanceCommittee. The Committees comprise non-Executive Directors.TNM’s unitary Board structure comprises 8 non-executive directorswhose responsibilities are set out in a formal charter. Dr. MathewsChikaonda is TNM’s non-executive Chairman.INTERNAL CONTROLThe Board of directors is responsible for TNM’s systems of internal control.These systems are designed to provide reasonable, but not absolute,assurance as to the integrity and reliability of the financial statementsand to safeguard, verify and maintain accountability of its assets andto detect and minimise significant fraud, potential liability, loss andmaterial misstatement while complying with applicable laws andregulations.In carrying out these responsibilities, the Board considers what is appropriatefor the Company’s business and reputation, the materiality of financialand other risks inherent in the business and the relative costs andbenefits of implementing specific controls.The Board also seeks to ensure that management strikes an appropriatebalance between promoting long-term growth and delivering short-term objectives within its system of internal controls to provide assuranceof effective and efficient operations, internal financial controls andcompliance with law and Always with you 14
  17. 17. YOUR BOARD MEMBERS (Left to Right): Prof. M. Chikaonda, Mr. H. Anadkat, Mr. H. Gombachika, Mr. S. Minaar, Mr. P. Mulipa TNM has a Board comprising of eight directors, all of whom are non-executive. The Chief Executive Officer of the Company attends Board meetings by invitation only. Prof. Mathews Chikaonda Chairman Dr. Mathews Aurelius Padzuwa Chikaonda, 56, is the Chairman and non-executive Director. His qualifications include BA (Hons), Dip. Business, MBA and a PhD. Dr. Chikaonda served as the Assistant and Associate Professor of Finance (1988 -1991) and (1992-94), re- spectively at Memorial University of Newfoundland in Canada. In “Your board’s role is to set addition to executive management and corporate restructuringthe tone at the top in order experience, Dr. Chikaonda has over 14 years experience in eco- nomic management and policy formulation at national level. Dr.for the company to achieve Chikaonda served as a Deputy Governor (1994-1995) and later long-term sustainability” as Governor (1995-2000) of the Reserve Bank of Malawi. In March 2000, he was appointed to the Cabinet and served in the Govern- ment of Malawi as Minister of Finance and Economic Planning until January 2002. Dr. Chikaonda has been Chairman of the TNM Board since his appointment thereto on 5th April 2007. Mr. Hitesh Anadkat Vice Chairman Mr. Hitesh Natwarlal Anadkat, 50, is the Vice Chairman and non- executive Director. His qualifications include Masters of BusinessWe operate with unyielding Administration, Bachelor of Science Economics (Hons). Prior to returning to Malawi to establish First Merchant Bank, Mr. Anadkat integrity, obeying all laws worked in a corporate finance house in USA specialising in mergers, and adhering to stringent acquisitions and valuations. Mr. Anadkat holds chairmanships and directorates and business interests in a number of other sectors of code of business conduct. the Malawian economy, principally banking, manufacturing and We will not tolerate property development.unethical business conduct Dr Harry Gombachika Directorby our team members. We Dr. Harry Gombachika, 45, is a non- executive Director. He holds BSc EEng, Dip Eng, MSc EEng, and a PhD (Telecommunications). Dr. will act with integrity and Gombachika is a senior Lecturer in Telecommunication Engineer- respect towards all. ing at the Malawi Polytechnic, University of Malawi. He is currently the Dean of Postgraduate Studies and Research at the Polytechnic. He has served in various University of Malawi Committees. Currently he is a Senate Representative of the University Council. In addition he is an external examiner for Masters Degree (Telecommunication Major) thesis at the University of Botswana. He has conducted re- search and published on various issues of wireless networking both fixed and mobile. Dr Stephanus Minaar Director Dr. Stephanus Johannes Minnaar, 43, an independent director holds a PhD in Engineering from Stellenbosch University RSA, where he also completed in B.Eng and M. Engineering degrees in industrial/ 15 Always with you
  18. 18. YOUR BOARD MEMBERS(Left to Right): Mr. J. O’Neill, Mr. J. Regout, Ms. T. Tembo, Mrs. H. Singo, Mr. J. Larcombe.Mechanical Engineering. He also holds a B.Com(honours) degree in Finance from the University ofCape Town and is a CFA charter holder. He serves on the advisory committee of the Engineering facultyof the University of Stellenbosch.Mr Pius P. Mulipa DirectorMr. Pius Percy Mulipa, 58, is a non-executive Director. His qualifications include Bachelor of Arts, Diploma(Mgt) and MSc (Mgt). Mr. Mulipa is the Group Operations Executive in Press Corporation Limited andis responsible for the operations of seven of the Press Group’s subsidiary and associate companies. Hehas held various senior management positions within the Press Corporation Group over the past 17years. He once served as the Chief Executive Officer for TNM Limited.Mr. John M. O’Neill DirectorMr. John M. O’Neill, 56, is a non-executive Director. He holds a BSc in Mathematics and ManagementSciences, and FCA. Mr. O’Neill is an Executive Director of First Merchant Bank and his previous experienceincludes a career of 17 years with an international accountancy firm Deloitte, in the United Kingdomand Malawi, including six years as a partner in its Malawi practice. He holds numerous other directorshipsin companies in various sectors of the economy.Mr James Adhemar Regout DirectorMr. James Adhemar Regout, 61, is a non-executive Director. He holds a Masters of Business Administrationin Economics. Mr. Regout is an experienced portfolio manager and currently serves as the ExternalInvestments Manager for Old Mutual Investment Group (SA) with executive responsibility for Old MutualMalawi’s asset management operations, regional listed equity portfolios and a global private equityfund of funds. Mr. Regout also holds directorates in a number of prominent companies in Malawi.Mrs. Tamara Tembo Director (appointed 21 June 2010)Mrs. Tamara Tembo, 34, is a non-executive Director. Her qualifications include a MBA, FCCA, and Diplomain Accountancy (PAEC). Ms Tamara Tembo is the current Chief Financial Officer of Malawi Telecom-munications Limited, having served as Head of Internal Audit from July 2007 to May 2010. She has alsoserved as a Senior Internal Auditor for Press Corporation Limited between March 2001 and June 2001,and as an Audit Senior at KPMG from July 1999 to February 2001. Ms. Tamara Tembo has also actedas Director for Malawi Net between June 2010 to January 2011 and for the Institute of Internal Auditorsfrom 2006 to 2007.Mrs. Hilda Singo Alternate Director to Mrs Tamara TemboMrs. Hilda Singo, 46, is alternate non executive Director to Mrs Tamara Tembo. Her qualifications includeB.Com, MBA, ACMA, CPA. She is the Company Secretary and Head of Administration at Malawi Telecom-munications Limited. She is an experienced financial manager with wide cross-sectoral experience indifferent facets of financial and management accounting, project management and change managementin both private and public sectors.Mr Jonathan Larcombe Alternate Director to James Adhemar RegoutMr. Jonathan Larcombe, 36, is alternate Director to James Adhemar Regout, CA (SA) Chartered Accountant,CFA, B.Com Honours. Mr. Jonathan Larcombe is the current Senior Equity Analyst and Portfolio Manager ofGlobal Technology Fund and has been involved in top private equity buyouts in South Africa between2003 and Always with you 16
  19. 19. CORPORATE GOVERNANCE TNM’s board seeks to BOARD MEETINGS The Board holds formal meetings and periodic strategic sessions at least expand its view of success four times a year and reviews its governance practices continually and redefine it in terms of and which may from time to time be amended to ensure that TNMlasting positive impacts for adopts and successfully implements sustainable business practices. Special board meetings may be convened on an ad hoc basis, when business, society and the necessary, to consider issues requiring urgent attention or decision. environment During the year under review, 3 Board meetings were held. Attendance Attendance Record % • Dr. Mathews Chikaonda 2 /3 67 • Mr. Hitesh Anadkat 3 /3 100 • Mr. Pius Mulipa 3 /3 100 • Mr. John O’Neill 3 /3 100 • Mr. Kenneth Mthuzi 1 /1 100 • Mr. James Regout 0 /3 - • Dr Steve Minaar 1 /3 33 • Dr. Harry Gombachika 3 /3 100 • Mrs Tamara Tembo 2 /2 100 Mr Kenneth Mthuzi resigned on 21 June 2010 and was immediately replaced by Mrs Tamara Tembo Mrs Hilda Singo acts as alternate to Mrs Tamara Tembo Mr Jonathan Larcombe serves as alternate to Mr James Regout “Our board committees BOARD COMMITTEES The Board is authorised to form committees to assist in the execution ofform an important part of its duties, powers and authorities. The Board has 3 standing committees, TNM’s governance namely, the Audit Committee, the Appointments and Remuneration processes” Committee and the Financial and Procurement Committee. The terms of reference and composition of the committees are deter- mined and approved by the Board and have been adopted on an annual basis. The Board of TNM has established an Audit Committee, a Remuneration Committee and a Financial and Procurement Committee whose Chairmen, Mr. John O’Neill, Mr. Hitesh Anadkat and Mr Pius Mulipa respectively, report formally to the Board. The Audit Committee’s role is ensuring proper management of the business operations in compliance with statutory obligations, policies, procedures, regulations and prudent business practices. The committee also reviews and evaluates the Company’s financial and accounting policies, evaluates the work and findings of internal audit, evaluates the external auditors and reviews the financial statements of the Company for recommendations to the Board for approval. Members of the Audit Committee and their respective attendance records are as follows: Attendance Record % • Mr. John Michael O’Neill 100 • Dr. Harry Gombachika 100 17 Always with you
  20. 20. CORPORATE GOVERNANCE Attendance Record %• Mrs. Tamara Tembo Note 1 100• Mr. Kenneth Mthuzi Note 2 100Note 1 Appointed on 21st June 2010 and attended 2 meetingsNote 2 Resigned on 21st June 2010 and attended 1 meetingThe Appointments and Remuneration Committee determines and agrees with the Board theframework or broad policy for the remuneration of staff. No Director or manager is involvedin any decision regarding his or her own remuneration. Members of the Appointments andRemuneration Committee and their respective attendance records are as follows: Attendance Record %• Mr. Hitesh Natwarlal Anadkat (Chairman) 100• Mr. Pius Percy Mulipa 50• Dr. Harry Gombachika 100The Finance and Procurement Committee determines and agrees with the Board theframework and broad procurement policies for the procurement of goods and services by TNM.Members of the Finance and Procurement Committee and their respective attendancerecords are as follows: Attendance Record %• Mr. Pius Mulipa (Chairman) 100%• Mr. Hitesh Anadkat 100%• Mrs. Tamara Tembo 100%OTHER DIRECTORS’ INTERESTSAs provided by the Companies Act 1984 and the Company’s articles of association, thedirectors are bound to declare any time during the year, in writing whether they haveany material interest in any contract of significance with the Company, which could havegiven rise to a related conflict of interest. No such conflicts were reported for this year.TNM has adopted detailed policies and procedures covering the regulation and reportingof transactions in securities of TNM by Directors and Always with you 18
  21. 21. (Standing left to right): Mr. P. Mtamba, Ms. C. Mwansa, Mr. C. Kamoto, (Seated left to right): EXECUTIVE MANAGEMENT Mr. D. Chetty, Mr. W. Swart, Mr. M. MatandikaThe CEO, Mr. Willem Swart, is assisted by David Chetty Chief Technical Officerfive senior management employees:- Mr. Chetty holds a National Telecommunications Diploma and aMr. David Chetty, National Higher Diploma in Post School Education and is currentlyChief Technical Officer undertaking an MBA. Mr. Chetty has worked in Senior ManagementMr. Macleod Matandika, positions with mobile operators, vendors and service companiesChief Finance Officer in EMEA since 1994, including MTN, Celtel, Swedtel and Nokia. HeMr. Charles Kamoto, started his telecom career in 1984, initially in the fixed line industry,Chief Commercial Officer moving to mobile in 1994, where he specialized in mobile operatorMr. Patrick Mtamba, start-ups.Managing Executive-Human ResourcesMrs. Christina Mwansa, Macleod Matandika Chief Finance OfficerManaging Executive-Legal and Regulatory Mr. Macleod Matandika holds a Masters in Business Administration and is an accountant from the Malawi Polytechnic. He joined theWillem Swart Chief Executive Officer company at its commencement as the Operations Accountant up toMr. Willem Swart is a chartered 1998. He has wide experience in the mobile industry and has been partaccountant (SAICA) and a member of the growth of the company. Prior to his appointment as Chiefof institute of Directors in Southern Financial Officer in 2008 he worked as a management accountantAfrica. Mr. Swart has more than 17 and previously also as Billing Accountant.years’ experience in mobile telecommunication industry at senior man- Charles Kamoto Chief Commercial Officeragement and at board level within Mr. Kamoto holds a Masters in Business Administration and Bachelorthe Vodacom group. He was part of of Business Administration and has over 10 years experience in thethe initial team that set up Vodacom telecommunications arena, having joined TNM as Branch Executive(Pty) Ltd and held several posts in- in 2000. He has held a range of positions during his tenure, seven ofcluding Chief Officer of International which have been in executive management.Business Vodacom Group Ltd up toJuly 2010 and was responsible for 29 Patrick Mtamba Managing Executive-Human Resourcescompanies, including 4 Mobile Net- Holding a Bachelor of Business Administration and currently a studentwork Operations, Gateway Carrier of PhD in Industrial Relations at Columbia University, Mr. Mtamba hasServices and Vodacom Africa worked for the past 12 years in HR, Supply Chain and General Ad- ministration, mostly in senior management positions in companies suchBusiness Services, Chief Executive as Carlsberg, Coca-Cola, Old Mutual and Illovo.Officer of Vee Networks Ltd (Tradingas V-mobile Nigeria), ManagingDirector of Vodacom Congo (DRC) Christina Mwansa Managing Executive-Legal Holding a Bachelor of Law Honors Degree from Chancellor College,Ltd, Finance Director of Vodacom University of Malawi, Ms. Mwansa joined TNM in 2000 as Legal Officer,Service Provider Company (Pty) Ltd and was subsequently appointed Company Secretary. She hasand Vodacom (Pty) Ltd. He held been a licensed Legal Practitioner for over 10 years.directorship in several companieswithin the Vodacom Group. 19 Always with you
  22. 22. DIRECTORS’ ANNUAL REPORTThe Directors have pleasure in presenting their report and the audited financial statementsof Telekom Networks Malawi Limited for the year ended 31 December 2010.NATURE OF BUSINESSThe company is engaged in providing telecommunication services in accordance with itslicence issued by Malawi Communications Regulatory Authority (MACRA).REGISTERED OFFICETelekom Networks Malawi Limited is a company incorporated in Malawi under the MalawiCompanies Act, 1984. It was listed on the Malawi Stock Exchange in November 2008.The address of its registered office is, Livingstone Towers, Fifth Floor, Glyn Jones Road, P. OBox 3039, Blantyre, Malawi.FINANCIAL PERFORMANCEThe results and state of affairs of the company are set out in the accompanying statementof financial position, statement of comprehensive income, statement of changes in equity,statement of cash flows and notes to the financial statements which includes a summaryof significant accounting policies.DIRECTORATE AND SECRETARIATDirectors and Company Secretary who served during the year are listed below:Prof. Dr. Matthews Chikaonda ChairmanMr. Hitesh Anadkat Vice ChairmanDr. Harry Gombachika DirectorDr. Stephanus Minaar DirectorMr. Pius P. Mulipa DirectorMr. John M. O’Neill DirectorMr. James Regout DirectorMr. Jonathan Larcombe Alternate to Mr. James RegoutMrs. Hilda Singo Alternate to Mrs. Tamara TemboMr. Ken Mthuzi Director (resigned with effect from 21 June 2010)Mrs. Tamara Tembo Director (with effect from 21 June 2010)Mrs. Christina Mwansa Company SecretaryDIVIDENDSDuring the year a total dividend of K602.4 million was declared. K200.8 million was paid inJuly 2010 and K200.8 million was paid in October 2010. The balance of K200.8 million whichwas declared in December 2010 was paid in January 2011.AUDITORSDeloitte, Certified Public Accountants, P O Box 187, Blantyre, have signified their willingnessto continue in office and a resolution is to be proposed at the forthcoming Annual GeneralMeeting in relation to their appointment as auditors in respect of the year ending 31 December2011.BY ORDER OF THE BOARDDIRECTOR: Always with you 20
  23. 23. STATEMENT OF DIRECTORS’ RESPONSIBILITIES For the year ended 31 December 2010 The Companies Act, 1984, requires the directors to prepare financial statements for each financial period which give a true and fair view of the state of affairs of the company as at the end of the financial period and of the operating results for that period. The Act also requires the directors to ensure the company keeps proper accounting records which disclose with reasonable accuracy the financial position of the company and enable them to ensure that the financial statements comply with the Companies Act, 1984. In preparing the financial statements the directors accept responsibility for the following: • Maintenance of proper accounting records; • Selection of suitable accounting policies and consistent application thereof; • Making judgements and estimates that are reasonable and consistently applied; • Compliance with applicable accounting standards when preparing financial statements; and • Preparation of financial statements on a going concern basis unless it is inappropriate to presume that the company will continue in business in the foreseeable future. The directors also accept responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to maintain adequate systems of internal control to prevent and detect fraud and other irregularities. The directors are of the opinion that the financial statements give a true and fair view of the state of the financial affairs of the company and of its operating results, so far as concerns the members of the company. DIRECTOR’S EMOLUMENTS AND RELATED PAYMENTS Director’s emoluments and related payments for the year ended 31 December 2010. Name Position Amount (MK’mn) Dr. Mathews Chikaonda* Chairman 1.10 Mr. Hitesh Anadkat Vice Chairman 1.10 Dr. Harry Gombachika Director 1.10 Dr. Stephanus Minaar Director 0.75 Mr. Ken Mthuzi* Director 0.60 Mr. James Regout* Director 0.70 Mr. Pius P. Mulipa* Director 1.05 Mrs. Tamara Tembo* Director 0.50 Mr. John M. O’Neill Director 1.05 Mr. Jonathan Larcombe* Alternate to Mr. James Regout Mrs. Hilda Singo* Alternate to Mrs. Tamara Tembo TOTAL 7.95 Note:* These fees were not paid direct to the individuals but to the respective shareholders they represent. DIRECTOR: DIRECTOR:21 Always with you
  24. 24. INDEPENDENT AUDITOR’S REPORT P.O. Box 187 Public Accountants Blantyre First Floor Malawi INDEbank House Kaohsiung Road Tel: +265 (0) 1 822 277 +265 (0) 1 820 506 Fax: +265 (0) 1 821 229 Email: THE MEMBERS OFTELEKOM NETWORKS MALAWI LIMITEDWe have audited the financial statements of Telekom Networks Malawi Limited as set out onpages 23 to 48, which comprise statement of comprehensive income, statement of financialposition as at 31 December 2010, statement of changes in equity and statement cash flows forthe year then ended, and a summary of significant accounting policies and other explanatorynotes.MANAGEMENT’S RESPONSIBILITY FOR THE FINANCIAL STATEMENTSManagement is responsible for preparation and fair presentation of these financial statementsin accordance with International Financial Reporting Standards, and for such internal control asmanagement determines is necessary to enable the preparation of financial statements thatare free from material misstatement, whether due to fraud or error.AUDITOR’S RESPONSIBILITYOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with International Standards on Auditing. Those standardsrequire that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor’s judge-ment, including the assessment of the risks of material misstatement of the financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internalcontrol relevant to the entity’s preparation and fair presentation of the financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity’s internal control. An auditalso includes evaluating appropriateness of accounting policies used and the reasonablenessof accounting estimates made by management, as well as evaluating the overall presentationof the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to providea basis for our audit opinion.OPINIONIn our opinion the financial statements give a true and fair view of the financial position of thecompany as of 31 December 2010, and of its financial performance and its cash flows for theyear then ended in accordance with International Financial Reporting Standards and in themanner required by the Companies Act, 1984.AUDITORS17 February 2011 Audit Tax Consulting Financial AdvisoryResident Partners: N.T. Uka J.S. Melrose L.L. Katandula V.W. Beza C.A. Kapenda A member firm of Deloitte Touche Always with you 22
  25. 25. STATEMENT OF COMPREHENSIVE INCOME For the year ended 31 December 2010 2010 2009 NOTE K’000 K’000 Revenue 7 9,930,466 8,205,000 Direct operational costs 8 (3,567,577) (3,058,020) GROSS PROFIT 6,362,889 5,146,980 Other income 9 104,550 74,299 Selling and administrative expenses 10 (2,820,578) (2,301,291) EARNINGS BEFORE INTEREST, TAX, DEPRECIATION AND AMORTIZATION 3,646,861 2,919,988 Depreciation and amortization 11 (1,611,738) (1,040,792) RESULTS FROM OPERATING ACTIVITIES 2,035,123 1,879,196 Finance income 12 30,219 59,082 Finance expenses 12 (454,060) (180,802) NET FINANCE EXPENSE (423,841) (121,720) Profit before income tax 1,611,282 1,757,476 Income tax expense 13 (551,561) (542,689) PROFIT FOR THE YEAR 1,059,721 1,214,787 OTHER COMPREHENSIVE INCOME - - TOTAL COMPREHENSIVE INCOME FOR THE YEAR 1,059,721 1,214,787 EBITDA MARGIN 37% 36% EBITDA PER SHARE (MK) 0.36 0.29 DIVIDEND PER SHARE (MK) 0.06 0.06 EARNINGS PER SHARE Basic earnings per share (MK) 14 0.11 0.12 Number of ordinary shares in issue 20 10,040,450 10,040,45023 Always with you
  26. 26. STATEMENT OF FINANCIAL POSITION For the year ended 31 December 2010 2010 2009 NOTE K’000 K’000ASSETSNon-current AssetsProperty, plant and equipment 15 13,207,818 9,231,585Intangible assets 16 187,765 98,890Total non-current assets 13,395,583 9,330,475Current AssetsInventories 81,798 181,956Trade and other receivables 17 1,245,800 1,565,062Amount due from related companies 18 88,778 8,216Bank and cash balances 19 852,802 642,042Total current assets 2,269,178 2,397,276Total Assets 15,664,761 11,727,751CAPITAL AND LIABILITIESEquityShare capital 20 401,618 401,618Share premium 21 2,346,921 2,346,921Retained earnings 4,526,968 4,069,674Total equity 7,275,507 6,818,213Non-current LiabilitiesDeferred tax 22 667,805 434,456Long-term portion of interest bearing loans 23 342,661 427,523Employee benefits liabilities 24 141,824 106,892Total non-current liabilities 1,152,290 968,871Current LiabilitiesBank overdraft 19 2,089,332 1,703,085Current portion of interest bearing loans 23 91,376 14,742Dividend payable 25 200,809 200,809Deferred income 26 250,031 260,850Trade and other payables 27 4,583,722 1,682,157Income tax liabilities 21,694 79,024Total current liabilities 7,236,964 3,940,667Total liabilities 8,389,254 4,909,538TOTAL EQUITY AND LIABILITIES 15,664,761 11,727,751The financial statements were approved and authorized for issue by the Board of Directors on17 February 2011 and were signed on its behalf by:DIRECTOR: Always with you 24
  27. 27. STATEMENT OF CHANGES IN EQUITY For the year ended 31 December 2010 SHARE SHARE RETAINED CAPITAL PREMIUM EARNINGS TOTAL K’000 K’000 K’000 K’000 2009 Balance at 1 January 2009 401,618 2,346,921 3,457,314 6,205,853 Profit for the year - - 1,214,787 1,214,787 Dividend declared - - (602,427) (602,427) Balance at 31 December 2009 401,618 2,346,921 4,069,674 6,818,213 2010 Balance at 1 January 2010 401,618 2,346,921 4,069,674 6,818,213 Profit for the year - - 1,059,721 1,059,721 Dividend declared - - (602,427) (602,427) Balance at 31 December 2010 401,618 2,346,921 4,526,968 7,275,50725 Always with you
  28. 28. STATEMENT OF CASH FLOWS For the year ended 31 December 2010 2010 2009 NOTE K’000 K’000CASH FLOWS FROM OPERATING ACTIVITIESCash receipts from customers 10,157,555 7,786,733Cash payments to suppliers and employees (6,495,006) (4,998,190)Net cash generated from operations 3,662,549 2,788,543Interest paid 12 (408,713) (115,678)Income tax paid (375,542) (630,235)NET CASH GENERATED BY OPERATING ACTIVITIES 2,878,294 2,042,630CASH FLOWS TO INVESTING ACTIVITIESInterest received 12 30,219 59,082Acquisition of property, plant and equipment 15 (2,351,719) (4,459,951)Purchase of software 16 (123,005) (77,990)Proceeds from sale of property, plant and equipment 15,995 982NET CASH USED IN INVESTING ACTIVITIES (2,428,510) (4,477,877)CASH FLOWS TO FINANCING ACTIVITIESDividend paid 25 (602,427) (602,427)Repayments of loans (22,844) -Proceeds from loans - 442,265NET CASH USED IN FINANCING ACTIVITIES (625,271) (160,162)NET DECREASE IN CASH AND CASH EQUIVALENTS (175,487) (2,595,409)Cash and cash equivalents at beginning of year (1,061,043) 1,534,366CASH AND CASH EQUIVALENTS AT END OF YEAR 19 (1,236,530) (1,061,043)ADDITIONAL STATUTORY REQUIREMENTDecrease in net working capital (3,424,395) (2,270,344) Always with you 26
  29. 29. NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2010 1. GENERAL INFORMATION Telekom Networks Malawi Limited (TNM) is a company domiciled in Malawi and incorporated under the Malawi Companies Act, 1984 Cap.46:03. The address of the company’s registered office is Livingstone Towers, Fifth floor, Glyn Jones Road, P O Box 3039, Blantyre. The company was listed on the Malawi Stock Exchange on 3 November 2008. The company primarily is involved in the provision of telecommunication services in accordance with its licence issued by Malawi Communications Regulatory Authority (MACRA). 2. ADOPTION OF NEW AND REVISED INTERNATIONAL FINANCIAL REPORTING STANDARDS 2.1 Standards and Interpretations affecting amounts reported and/or disclosed in the financial statements In the current year, the entity has adopted those new and revised Standards and Interpretations issued by the International Accounting Standards Board and the International Financial Reporting Interpretations Committee of the International Accounting Standards Board that are relevant to its operations and are effective for annual reporting periods beginning on 1 January 2010. The adoption of these new and revised Standards and Interpretations did not have a significant impact on the financial statements of the company; 2.2 Standards and Interpretations in issue, not yet effective At the date of authorization of these financial statements, the following relevant Standards and Interpretations were in issue but not yet effective: 2.2.1 IFRS 7 Financial Instruments: Disclosures Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). 2.2.2 IFRS 7 Financial Instruments: Disclosures Amendments enhancing disclosures about transfers of financial assets (effective for annual periods beginning on or after 1 July 2011). 2.2.3 IFRS 9 Financial Instruments: Classification and Measurement (effective for annual periods beginning on or after 1 January 2013). 2.2.4 IAS 1 Presentation of Financial Statements Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). 2.2.5 IAS 12 Income Taxes Limited scope amendment (recovery of underlying assets). Effective for annual periods beginning on or after 1 January 2012. 2.2.6 IAS 24 Related Party Disclosures Revised definition of related parties (effective for annual periods beginning on or after 1 January 2011). 2.2.7 IAS 32 Financial Instruments: Presentation Amendments relating to classification of rights issues (effective for annual periods beginning on or after 1 February 2010). 2.2.8 IFRIC 13 Customer Loyalty Programmes Amendments resulting from May 2010 Annual Improvements to IFRSs (effective for annual periods beginning on or after 1 January 2011). 2.2.9 IFRIC 14 IAS19 - The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction November 2009 Amendments with respect to voluntary prepaid contributions (effective for annual periods beginning on or after 1 January 2011). 2.2.10 IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments (effective for annual periods beginning on or after 1 July 2010). The directors anticipate that these Standards and Interpretations in future periods will have no significant impact on the financial statements of the company.27 Always with you
  30. 30. NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 20103. SIGNIFICANT ACCOUNTING POLICIES Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and the provisions of the Malawi Companies Act, 1984. Basis of preparation The financial statements are prepared in terms of the historical cost convention. No other procedures have been adopted to reflect the impact on the financial statements of specific price changes or changes in the general level of prices. The principal accounting policies are set out below.3.1 Functional and presentation currency These financial statements are presented in Malawi Kwacha, which is the company’s functional currency. All financial information presented in Malawi Kwacha has been rounded to the nearest thousand.3.2 Use of estimates and judgements The preparation of financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected. Judgements made by management in the application of IFRS’s that have significant effect on the amounts recognized in the financial statements are discussed in note 4 to these financial statements.3.3 Foreign currency Transactions in foreign currencies are converted to Malawi Kwacha at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are converted to Malawi Kwacha at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognized in profit or loss, except for those capitalized into property, plant and equipment under policy note 3.4.4. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are converted using the exchange rate at the date of the transaction. Non- monetary assets and liabilities denominated in foreign currencies that are stated at fair value are converted to Malawi Kwacha at foreign exchange rates ruling at the dates the fair value was determined.3.4 Property, plant and equipment 3.4.1 Recognition and measurements Items of property, plant and equipment are measured at cost less accumulated de- preciation and accumulated impairment losses. The cost of self-constructed assets includes the cost of material and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and Always with you 28
  31. 31. NOTES TO THE FINANCIAL STATEMENTS For the year ended 31 December 2010 3.4 Property, plant and equipment (continued) 3.4.2 Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefit embodied within the part will flow to the company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognized in profit or loss as incurred. 3.4.3 Depreciation No depreciation is provided for land. Depreciation is recognized in the profit or loss on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives of assets for current and comparative periods are as follows:- - Buildings 20 years - Equipment and machinery 8-15 years - Furniture & fittings 5 years - Other equipment 5 years - Motor vehicles 5 years 3.4.4 Determination of residual values and useful lives The assets’ residual values, useful lives and depreciation methods are reviewed and adjusted, if appropriate, at each reporting date. Where the carrying amount of an asset is greater than its estimated residual value, no further depreciation is charged. 3.4.5 Gains and losses on disposal Gains and losses on disposals of an item of property, plant and equipment are de- termined by comparing the proceeds with the carrying amount of the item and are recognized net within “other income” in the statement of comprehensive income. 3.4.6 Interest and exchange losses on loans Interest and exchange losses on loans which are utilized for the construction of qualifying property, plant and equipment are capitalized until the commissioning of the related asset after which they are dealt with in profit or loss. Qualifying assets are those that necessarily take a substantial period of time to get ready for their intended use or sale. 3.3.7 Capital work in progress Capital work in progress is an integral part of property, plant and equipment and measured at cost. Cost includes all expenditures directly attributable to the asset under construction. Capital work in progress is not depreciated until it is available for use upon which it is capitalized to its relevant class of property, plant and equipment. 3.5 Intangible assets Computer software acquired by the company is recognized initially at cost. Cost includes all directly attributable costs in order to bring the asset into a state for its intended use. Computer software is measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the specific asset to which it relates. Amortization is recognized in the profit or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use. The estimated useful life for current and comparative periods for acquired computer software is 5 years.29 Always with you