Consolidated Annual Business Report 2012 Telekom

CONSOLIDATED BUSINESS REPORT FOR 2012 Summary report Telecommunications Company Telekom Srbija a.d. and subsidiaries Basic indicators of operation Introductory note by the Director General Development and business environment Background Market Corporate management Corporate bodies and Corporate management system Business Operations Strategy Services Investments Customers Employees Risk management Report on Corporate Social Responsibility Financial results Consolidated statement Financial statements of the parent company and subsidiaries Key financial indicators 6 SUMMARY REPORT TELECOMMUNICATIONS COMPANY (the Official Gazette of the Republic of Serbia No. TELEKOM SRBIJA A.D. AND 29. of 7 April 2006), RATEL granted to the Compa- SUBSIDIARIES ny, by a procedure of substitution of the applicable GSM/GSM1800 licence, the Licence for the public mobile telecommunications network and services of Telecomunications Company the public mobile telecommunications network, in Telekom Srbija a.d., Belgrade keeping with the GSM/GSM1800 and UMTS/IMT- 2000 standard. Telecommunications Company Telekom Srbija a.d. (hereafter: Telekom Srbija or Parent Company or On 16 June 2009, the Parent Company obtained Company), in keeping with the Law on Electronic the Licence for the public fixed wireless tele- Communications (the Official Gazette of the Repub- communications network (FWA) in the frequency lic of Serbia No. 44 of 30 June 2010 – hereafter: Law band of 411.875-418.125/421.875-428.125 MHz and on Electronic Communications) and the licences voice services, packet switched data and simultane- issued by the relevant regulatory body (hereafter: ous voice and data transmission (CDMA Licence). RATEL), performs the activity related to electronic The Licence was issued for the period of 10 years, communications, which comprises the construction and the commercial operation was to commence or installation, maintenance, operation and lease within six months from the Licence effective date. of the public communications networks and the accompanying assets and provision of the publicly Beside the above mentioned Licences, Telekom available electronic services. Srbija was registered in the registry of operators kept by RATEL for the service related to the broad- Upon its incorporation in 1997, under the then band network access and distribution of the media applicable law, Telekom Srbija acquired the right content. to perform the telecommunications activity. On 31 December 2012, Telekom Srbija’s share in the The Company held the position of as an exclusive capital of the subsidiaries is as follows: fixed telephony operator until 9 June 2005, when, in compliance with the Telecommunications Law Share (the Official Gazette of the Republic of Serbia No. percentage 44 of 24 April 2003 with Amendments No. 36 of 27 April 2006 (hereafter: Telecommunications Law), Telekom Srpske a.d., Banja Luka 65 % such position ceased to exist in legal terms. In ac- mtel DOO, Podgorica 51 % cordance with the then applicable Law on Telecom- Telus a.d., Beograd 100 % munications, on 13 April 2007, the Company was granted the Licence by RATEL, by a substitution pro- FiberNet DOO, Podgorica 100 % cedure, for construction, possession and operation TS:NET BV, Amsterdam 100 % of the public fixed telecommunications network and provision of services of the public fixed telecommu- HD-WIN d.o.o., Beograd 51 % nications network. During 1998, the Company introduced the GSM mobile telephony network and commenced the provision of mobile telephony services. On 28 July 2006, pursuant to the Telecommunications Law and the Rules on the number of and the period for which the licence for the public mobile telecommunications networks and services is issued and the mini- mum requirements and lowest one-off licence fee 7 SUBSIDIARIES network and provision of mobile public telecom- TELEKOMUNIKACIJE REPUBLIKE SRPSKE A.D., munications services and licence for the provision BANJA LUKA of public telecommunications services via fixed wireless access (WIMAX) in Montenegro. For the Telekomunikacije Republike Srpske a.d. Banja Luka, purpose of creating the conditions for the provi- (hereafter: Telekom Srpske) with the registered seat sion of services subject to the licence granted, on at Banja Luka is engaged in the provision of tele- 4 April 2007, a new legal entity was incorporated communications services in the fields of the fixed under the name: “Društvo za telekomunikacije and mobile telephony in the national and interna- “mtel“ DOO, Podgorica“ (hereafter: mtel). tional traffic, Internet and multimedia services as its core activity. Telekom Srpske is also registered Having obtained the licence for the operation of for the provision of other telecommunications ser- the mobile telephony network, a state-of-the-art vices, including other fixed telephone services, data mobile network was constructed in the shortest transmission, lease of lines, private links, services period of time ever – only 77 days. in the entire network area, add-on services in the field of the mobile telephony and add-on ser- The core activity of mtel is provision of telecommu- vices. Telekom Srpske also renders the services nications services in the field of the mobile and related to the lease, design, construction, recon- fixed wireless telephony and Internet services. struction, installation, management and security of the telecommunications infrastructure. In the course of 2000, Telekom Srpske introduced the BUSINESS COMPANY FOR THE MAINTENANCE GSM mobile telephony network. AND SECURITY OF FACILITIES, PROPERTY AND OTHER SERVICES “Telus“ A.D., BEOGRAD On 12 October 2004, the Regulatory Agency for Communications of Bosnia and Herzegovina Within its registered activity, the Business Compa- (RAK) issued to Telekom Srpske a licence for the ny for the Maintenance and Security of Facilities, provision of the GSM services in the territory of Property and Other Services “Telus“ a.d. (hereafter: Bosnia and Herzegovina for the period of 15 years Telus), is engaged in the provision of the following from the issuance date. In addition, on 26 March services: 2009, Telekom Srpske was granted the licence for the provision of mobile services via universal mo- - security of facilities and property (FTO-physical bile telecommunications systems (UMTS licence), and technical security, PPZ- fire protection and for the period of 15 years. The licence for the pro- money escort services), vision of fixed telephony services was issued on - maintenance of hygiene in business premises 1 June 2002 for the period of 15 years, while the and buildings and licence for the provision of Internet services was - services related to auxiliary jobs (performed by issued on 1 July 2002, extended on 1 July 2012, for non-qualified workers). the period of 10 years. The licence for the provision of multimedia services was issued on 16 Since 2008, Telus has possessed a certificate for March 2010 for the period of one year to be ex- the SRPS ISO 9001 Standard – Quality Manage- tended every year. ment System, and since 2012, a certificate for the OHSAS 18001 Standard– Occupational Health and TELECOMMUNICATION COMPANY “mtel“ DOO, Safety Advisory Services. The 2013 plan envisages PODGORICA introduction of a new quality standard: ISO 14001 – Environmental Management Systems. In a consortium with Ogalar B.V., Amsterdam, the Parent Company was granted, in 2007, a special licence for the construction, possession and operation of the mobile public telecommunications 8 TELECOMMUNICATIONS COMPANY “FiberNet“ TELECOMMUNICATIONS COMPANY “HD-WIN“ DOO, PODGORICA D.O.O., BEOGRAD The core activity of Telecommunications Company Telecommunications Company “HD-WIN“ d.o.o. “FiberNet“ DOO (hereafter: FiberNet) is the con- (hereafter: HD-WIN) deals with cable telecommu- struction, possession, operation and maintenance nications via TV Channel Arena Sport and holds the of the transport and telecommunications network right to broadcasting the sports channels in the ter- and provision of telecommunications services. ritory of Serbia, Bosnia and Herzegovina, Montene- gro and Croatia. FiberNet is the owner of 72 optical fibres in the optical cable laid down along the railway section on The Arena Sport Channels are currently distributed the Vrbnica–Bar route. The use of the optical cable by over 70 distributers in the territory of Serbia, enabled construction of the communications net- Bosnia and Herzegovina, Croatia and Montenegro work in the SDH and DWDM technology. and in the territory of Macedonia where the content of the UEFA Champions League and Europe- The purpose of the constructed communications an League is broadcast via the IPTV system of the network is to provide transport capacities for the Macedonian Telecom through the services of Arena providers of communications services in the terri- Sport channel. tory of Montenegro and connection with foreign telecommunications networks. The Arena Sport channels are represented on the platforms of all major telecommunications operators (T-Com Montenegro, T-Com Macedonia, T-Com Croatia, BH Telecom, m:tel RS, HT Eronet, TS:NET, B.V., AMSTERDAM Telekom Srbija). The core activity of Business Company TS:NET, B.V., with the seat in Amsterdam, the Netherlands (hereafter: TS:NET, B.V.) is the lease of telecommunications equipment and performance of the related activities for the purpose of creating the conditions for the construction and operation of the interna- tional transport network of the Parent Company. 9 KEY BUSINESS INDICATORS The

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