Sri Lanka Telecom PLC Annual Report 2015 Sri Lanka Telecom PLC Sri Lanka Telecom Annu al Report 201 5 Scan to view t he online version of this Annual Report Welcome to Sri Lanka Telecom PLC’s Annual Report 2015 -------- 03 Highlights -------- 04 Message from the Group Chairman -------- 06 Group Chief Executive Officer’s Review -------- 08 Stewardship 12 Board of Directors -------- 12 Leadership Team -------- 20 Corporate Governance -------- 25 Remuneration & Nomination Committee Report -------- 31 Risk Management -------- 32 Business Model 36 About Us -------- 36 Operating Environment -------- 38 Strategic Direction -------- 43 Stakeholders -------- 47 Materiality -------- 51 Value Creation and Capital Formation -------- 52 Management Discussion and Analysis 56 Financial Capital -------- 56 Institutional Capital -------- 62 Investor Capital -------- 64 Customer Capital -------- 67 Business Partner Capital -------- 78 Employee Capital -------- 79 Social and Environmental Capital -------- 84 Leadership and Recognition 90 Our Vision Driving Two Decades of Internet History in Sri Lanka -------- 90 All Sri Lankans seamlessly connected with world-class information, Awards and Accolades -------- 92 communication and entertainment services. Our Technological Milestones -------- 94 Our Mission Financial Reports 97 Annual Report of the Board of Directors on Your trusted and proven partner for innovative and exciting the Affairs of the Company -------- 98 communication experiences delivered with passion, quality Statement of Directors in Relation to their Responsibility and commitment. for the Preparation of Financial Statements -------- 103 Audit Committee Report -------- 104 Independent Auditors’ Report -------- 106 Our Values Statement of Profit or Loss and Other Comprehensive Income -------- 107 Statement of Financial Position -------- 108 Customer Caring Trustworthy Statement of Changes in Equity – Group -------- 109 We put our customers at the We are true to our promises Statement of Changes in Equity – Company -------- 110 centre of everything we do Statement of Cash Flow -------- 111 Innovative Responsive Notes to the Financial Statements -------- 112 We continuously invent We are ready to listen and new opportunities through act promptly Supplementary Information 165 creative thinking Our Subsidiary Businesses -------- 165 Teamwork Excellence Ten Year Progress - Group -------- 167 We are one team with a common We are committed to Portfolio of Lands -------- 168 purpose to achieve common goals exceptional performance GRI Content Index -------- 172 Abbreviations -------- 175 Results Driven Notice of Annual General Meeting -------- 176 We are committed to enhancing Form of Proxy -------- Enclosed shareholder value Corporate Information -------- Inner Back Cover Sri Lanka Telecom PLC Annual Report 2015 Stewardship Business Model Management Discussion and Analysis Leadership and Recognition Financial Reports Supplementary Information We pioneered telecommunications in Sri Lanka more than 150 years ago. We re-invented ourselves many times over to lead the telecom and digital revolutions in the country. We forge ahead in the spirit of pioneering and innovation. [ 01 ] Sri Lanka Telecom PLC Annual Report 2015 Welcome to Sri Lanka Telecom PLC’s Annual Report 2015 This Annual Report 2015 of Sri Lanka Telecom PLC is an integrated report. It communicates coherently and concisely Compliance the relationships and interdependence of the many aspects of This Annual Report 2015, covers the 12-month period our business - such as strategy, governance, performance and 1 January to 31 December 2015 and is consistent with prospects - in the context of creating value over time. our usual annual reporting cycle for financial and sustainability reporting. The underlying concepts that provide the structure of our integrated reporting, are discussed in the section on Business There are no significant changes from previous reporting Model commencing on page 36, where we also explain the periods in the scope and aspect boundaries. The most recent broader meaning of value creation and capital formation – previous Annual Report, dated 27 February 2015, covered the a recurrent theme that runs throughout the Report. 12-month period ending 31 December 2014. It is available on our website www.slt.lk. In preparing this Report we have drawn on concepts, principles and guidance given in the following where The information contained in this Report, as in the past, applicable: is in compliance with all applicable laws, regulations and Global Reporting Initiative (GRI) Sustainability Reporting standards as well as guidelines for voluntary disclosures. Guidelines G4; Details are given in the section on corporate governance (page 25) and the independent auditors’ report (page 106). The International Integrated Reporting Framework; and The Smart Integrated Reporting MethodologyTM. Precautionary Principle The Company applies the precautionary principle in relation Report Boundary to social and environmental sustainability. We are highly mindful of the impacts caused to society and environment The overall boundary of this Annual Report comprises by our actions and take necessary actions to mitigate Sri Lanka Telecom PLC and its subsidiaries, duly identified as such risks. ‘SLT’ or the ‘Company’ individually, and ‘Group’ collectively. Consistent with the framework adopted in the previous year, key financial aspects are discussed in the context of the Company and the Group. SLT Group’s business is dominated Queries by two principal segments, namely, fixed ICT operations and We welcome your comments or questions on this Report. mobile ICT operations. Our Management Discussion and You may contact: Analysis thus treats these two segments either separately or as one ‘ICT business’ as appropriate and duly identified Mr Mahesh Athukorale, as such. Company Secretary Sri Lanka Telecom, Lotus Road, Colombo 01, Sri Lanka. Telephone: +94 11 239 9478 Email: [email protected] Web: www.slt.lk [ 03 ] Annual Report 2015 Sri Lanka Telecom PLC Stewardship Highlights Business Model Management Discussion and Analysis Leadership and Recognition Financial Reports Supplementary Information 2015 2014 Change (%) Group Revenue (Rs. billion) 68.02 65.04 4.58 Operating profit (Rs. million) 6,789 5,711 18.88 Profit before tax (Rs. million) 5,515 8,251 -33.16 Profit after tax (Rs. million) 3,724 6,001 -37.94 Earnings per share (Rs.) 2.06 3.32 -37.94 Return on equity (%) 5.71 9.39 Company Revenue (Rs. billion) 40.56 38.95 4.13 Operating profit (Rs. million) 2,371 2,227 6.47 Profit before tax (Rs. million) 2,795 4,859 -42.48 Profit after tax (Rs. million) 1,728 3,324 -48.01 Earnings per share (Rs.) 0.96 1.84 -48.01 Return on equity (%) 2.94 5.67 Mobitel Revenue (Rs. billion) 32.56 30.60 6.41 Profit before tax (Rs. million) 3,351 3,461 -3.16 Profit after tax (Rs. million) 2,713 2,817 -3.69 Revenue (Rs. million) Profit before tax (Rs. million) 75,000 8,750 60,000 7,000 45,000 5,250 30,000 3,500 15,000 1,750 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 SLT Mobitel Group SLT Mobitel Group Profit after tax (Rs. million) Earnings per share (Rs.) 7,500 3.75 6,000 3.00 4,500 2.25 3,000 1.50 1,500 0.75 0 0 2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 SLT Mobitel Group SLT Group [ 04 ] Sri Lanka Telecom PLC Annual Report 2015 Stewardship Highlights Business Model Management Discussion and Analysis Leadership and Recognition Financial Reports Supplementary Information Centres of Excellence Realignment of the organisation structure to the needs of the business successfully carried out through centres of excellence focused on planning, sales, service delivery and network operation Customers Fixed ICT Mobile ICT Broadband PEO TV Mobile Subscribers 8.5% 39.6% 9.3% 490,048 531,437 124,851 174,278 5,400,000 5,900,000 (2014) (2015) (2014) (2015) (2014) (2015) Speed Up Campaign ‘Speed Up’ campaign launched to aggressively promote countrywide adoption of fibre and LTE services New Products Fibre optic broadband launched Cloud platform established Projects Increased the coverage of SLT set up a PoP in Completely migrated to 3,128 km of fibre optic cable SLT carrier grade Wi-Fi Singapore for improved the NGN network from added to the network under network to more than Internet reliability the legacy network i-Sri Lanka project 200 sites island wide [ 05 ] Message from Annual Report 2015 Sri Lanka Telecom PLC the Group Chairman The digital revolution is turning the world into an all-pervasive information system. Superfast broadband is driving this revolution in transforming the global economy and lifestyles, be it in creating new business models, improving process efficiencies, reducing costs and much more. However, to achieve full potential, it also calls for overcoming certain hurdles, particularly those of a technical, behavioural and regulatory nature. [ 06 ] Sri Lanka Telecom PLC Annual Report 2015 Message from the Group Chairman As the flagship national ICT solutions provider and the Group revenue in 2015 rose by a modest 4.6% while national backbone network operator, we at SLT are at operating profit increased by a commendable 18.9% over the the forefront of this revolution in Sri Lanka. Ours is a previous year. While these are sound results that have also two-pronged strategy that supports national ICT imperatives remained consistent over the past, the temporary setback while delivering long-term value to shareholders. in profitability during the year was due to a large foreign exchange loss arising