The ‘House’ that SLT Builds Contents Welcome to Sri Lanka Telecom PLC’s Annual Report 2016 -------- 03 Highlights -------- 04 Stewardship 06 Board of Directors -------- 06 Leadership Team -------- 12 Corporate Governance -------- 20 Remuneration and Nomination Committee Report -------- 33 Report of the Related Party Transactions Review Committee -------- 34 Sri Lanka Risk Management -------- 35 Messages 40 Message from the Group Chairman -------- 40 Group Chief Executive Officer’s Review -------- 42 Sri Lanka Telecom PLC T Annual Report Business Model 45 el About Us -------- 45 ec 2016 Operating Environment -------- 47 om PLC Strategic Direction -------- 50 Stakeholders -------- 57 Materiality -------- 60 Value Creation and Capital Formation -------- 61 Management Discussion and Analysis 64 Financial Capital -------- 64 Annua Institutional Capital -------- 70 Investor Capital -------- 74 Customer Capital -------- 78 Business Partner Capital -------- 89 Employee Capital -------- 90 Social and Environmental Capital -------- 99 l Regulatory Capital -------- 103 R e Our Vision p Empowering Digital Lifestyles 105 ort All Sri Lankans seamlessly connected with world-class information, communication and entertainment services. Financial Reports 109 Annual Report of the Board of Directors on Our Mission the Affairs of the Company -------- 110 Statement of Directors in Relation to their Responsibility Your trusted and proven partner for innovative and exciting for the Preparation of Financial Statements -------- 115 2016 communication experiences delivered with passion, quality Audit Committee Report -------- 116 and commitment. Independent Auditors’ Report -------- 119 Statement of Profit or Loss and Other Comprehensive Income -------- 120 Our Values Statement of Financial Position -------- 121 Statement of Changes in Equity – Group -------- 122 Customer Caring Trustworthy Statement of Changes in Equity – Company -------- 123 We put our customers at the We are true to our promises Statement of Cash Flow -------- 124 centre of everything we do Notes to the Financial Statements -------- 125 Innovative Responsive We continuously invent We are ready to listen Supplementary Information 179 new opportunities through and act promptly Our Subsidiary Businesses -------- 179 creative thinking Ten Year Progress – Group -------- 181 Portfolio of Lands -------- 182 Teamwork Excellence GRI Content Index -------- 186 We are one team with a common We are committed to purpose to achieve common goals exceptional performance Abbreviations -------- 189 Notice of Annual General Meeting -------- 190 Results Driven Form of Proxy -------- Enclosed Scan to view the online version We are committed to enhancing Corporate Information -------- Inner Back Cover of this annual report shareholder value The ‘House’ that SLT Builds Contents Welcome to Sri Lanka Telecom PLC’s Annual Report 2016 -------- 03 Highlights -------- 04 Stewardship 06 Board of Directors -------- 06 Leadership Team -------- 12 Corporate Governance -------- 20 Remuneration and Nomination Committee Report -------- 33 Report of the Related Party Transactions Review Committee -------- 34 Sri Lanka Tel Risk Management -------- 35 Messages 40 Message from the Group Chairman -------- 40 Group Chief Executive Officer’s Review -------- 42 Sri Lanka Telecom PLC Annual Report Business Model 45 About Us -------- 45 ec 2016 Operating Environment -------- 47 Strategic Direction -------- 50 om PLC Stakeholders -------- 57 Materiality -------- 60 Value Creation and Capital Formation -------- 61 Management Discussion and Analysis 64 Financial Capital -------- 64 Institutional Capital -------- 70 Annua Investor Capital -------- 74 Customer Capital -------- 78 Business Partner Capital -------- 89 Employee Capital -------- 90 Social and Environmental Capital -------- 99 l Regulatory Capital -------- 103 Rep Our Vision Empowering Digital Lifestyles 105 ort All Sri Lankans seamlessly connected with world-class information, communication and entertainment services. Financial Reports 109 Annual Report of the Board of Directors on Our Mission the Affairs of the Company -------- 110 Statement of Directors in Relation to their Responsibility Your trusted and proven partner for innovative and exciting for the Preparation of Financial Statements -------- 115 2016 communication experiences delivered with passion, quality Audit Committee Report -------- 116 and commitment. Independent Auditors’ Report -------- 119 Statement of Profit or Loss and Other Comprehensive Income -------- 120 Our Values Statement of Financial Position -------- 121 Statement of Changes in Equity – Group -------- 122 Customer Caring Trustworthy Statement of Changes in Equity – Company -------- 123 We put our customers at the We are true to our promises Statement of Cash Flow -------- 124 centre of everything we do Notes to the Financial Statements -------- 125 Innovative Responsive We continuously invent We are ready to listen Supplementary Information 179 new opportunities through and act promptly Our Subsidiary Businesses -------- 179 creative thinking Ten Year Progress – Group -------- 181 Portfolio of Lands -------- 182 Teamwork Excellence GRI Content Index -------- 186 We are one team with a common We are committed to purpose to achieve common goals exceptional performance Abbreviations -------- 189 Notice of Annual General Meeting -------- 190 Results Driven Form of Proxy -------- Enclosed Scan to view the online version We are committed to enhancing Corporate Information -------- Inner Back Cover of this annual report shareholder value Over the years, SLT’s role in the lives of Sri Lankans has evolved exponentially. Always embracing and leveraging the technology of the future, we have taken the Nation and our people into an exciting and still unfolding digital world, where the home is now the centre of a digital lifestyle. Today, basic communication sits comfortably with on demand services, computer gaming, Over the Top (OTT) content, entertainment services and more – right there in the home. It’s the ‘house’ that SLT builds – for the people and the Nation – an initiative we intend strengthening well into the future. [ 1 ] [ 2 ] Sri Lanka Telecom PLC Annual Report 2016 Welcome to Sri Lanka Telecom PLC’s Annual Report 2016 This Annual Report 2016 of Sri Lanka Telecom PLC is an integrated report. It provides a comprehensive yet concise Compliance communication on the relationships and interdependent aspects that formulate our business. It considers the issues of This Report covers the 12-month period 1 January to strategy, governance, performance and prospects within the 31 December 2016, and as such is concordant with our habitual encapsulation of prolonged and sustainable value creation. reporting cycle for financial and sustainability reporting. The section on Business Model, commencing on page 45, We do not notice any noteworthy changes in scope nor aspect outlines the concepts that build up the structure of our boundaries from preceding reporting periods. The immediate reporting approach. We continually elaborate on the preceding Annual Report, dated 29 March 2016, covering the twin importance of value creation and capital formation 12-month period ending 31 December 2015, is available on the throughout the Report. corporate website www.slt.lk This Report draws on concepts, principles and instructions at applicable times from: Precautionary Principle Global Reporting Initiative (GRI) Sustainability Reporting The Company applies a stringent precautionary principle Guidelines G4 with regards to social and environmental sustainability. The International Integrated Reporting Framework We are highly cognisant that our operations cause reciprocal The Smart Integrated Reporting MethodologyTM. impacts on society and the environment, and we take all necessary actions to alleviate such risks. Report Boundary Queries This Annual Report addresses the operations of Sri Lanka Telecom PLC and its subsidiaries. As such, they are identified We welcome your comments or questions on this Report. as ‘SLT’ or the ‘Company’ on an individual basis; and ‘Group’ You may contact: on a collective one. Mr Mahesh Athukorale, Company Secretary Following on from the preceding years, key financial Sri Lanka Telecom, aspects are to be discussed in the context of the Company Lotus Road, Colombo 01, and the Group. The SLT Group’s business operations are Sri Lanka. made up of fixed ICT operations and mobile ICT operations. Telephone: +94 11 239 9478 Consequently, these two segments are identified separately Email: [email protected] in the Management Discussion and Analysis section. Web: www.slt.lk Where appropriate, they may be aggregated and termed as ‘ICT business’ and correctly identified as such. [ 3 ] Highlights 2016 2015 Change (%) Group Revenue (Rs. billion) 73.80 68.02 8.50 EBITDA (Rs. million) 20,126 20,008 0.59 Operating profit (Rs. million) 5,726 6,789 -15.66 Profit before tax (Rs. million) 6,497 5,515 17.81 Profit after tax (Rs. million) 4,790 3,724 28.63 Earnings per share (Rs.) 2.65 2.06 28.64 Company Revenue (Rs. billion) 43.13 40.56 6.34 EBITDA (Rs. million) 9,903 10,144 -2.38 Operating profit (Rs. million) 1,167 2,371 -50.78 Profit before tax (Rs. million) 2,643 2,795 -5.44 Profit after tax (Rs. million) 1,725 1,728 -0.17 Earnings per share (Rs.) 0.96 0.96 -0.17 Mobitel Revenue (Rs. billion) 35.92 32.56 10.32 Profit before tax (Rs. million) 4,899 3,363 45.67 Profit after tax (Rs. million) 4,111 2,725 50.86 [ 4 ] Highlights Centres of Excellence Group