WorldReginfo - 77f6e99d-e686-4835-b7d4-37445d78f290 rch 009 CONTENTS PAGE 1 INTRODUCTION .................................................................................................................................. 1 1.1 Highlights of the Telekom Slovenia Group in 2008 ....................................................................... 1 1.2 Future ambitions ............................................................................................................................ 6 1.3 The Telekom Slovenia Group on the map of Europe .................................................................... 8 1.4 The Telekom Slovenia Group ........................................................................................................ 9 1.5 Statement by the President of the Management Board .............................................................. 10 1.6 Statement of Responsibility of the Management Board .............................................................. 13 1.7 Report by the Supervisory Board of Telekom Slovenije, d. d. for the 2008 business year ......... 14 1.8 Governance and management report .......................................................................................... 15 1.9 Telekom Slovenije, d. d. retains investors‟ trust .......................................................................... 24 1.10 Significant events in the Telekom Slovenia Group in 2008 ......................................................... 30 1.11 Significant events after the balance-sheet date ........................................................................... 32 1.12 Honest, open and up-to-date communication .............................................................................. 33 1.13 Risk management ........................................................................................................................ 35 1.14 Intensive investment activities in the future ................................................................................. 41 1.15 Growth in broadband and mobile connections ............................................................................ 42 BUSINESS REPORT OF THE TELEKOM SLOVENIA GROUP ................................................................ 43 2 SLOVENIA .......................................................................................................................................... 43 2.1 Environment analysis ................................................................................................................... 43 2.1.1 Macroeconomic environment ............................................................................................... 43 2.1.2 Development opportunities and slowing growth on the ICT market ..................................... 44 2.1.3 Regulatory environment ....................................................................................................... 49 2.1.4 Competition signalling interest in providing convergent services ......................................... 51 2.1.5 Maintaining our leading market shares ................................................................................ 52 2.2 Sales and marketing .................................................................................................................... 61 2.2.1 Fixed telephony services ...................................................................................................... 64 2.2.2 Mobile services ..................................................................................................................... 67 2.2.3 Leased lines and VPN services ............................................................................................ 68 2.2.4 Enhanced range of broadband services ............................................................................... 68 2.2.5 Wholesale (inter-carrier operations) ..................................................................................... 70 2.2.6 Systems integration .............................................................................................................. 72 2.2.7 Extensive development of new content ................................................................................ 72 2.2.8 Construction and maintenance of the network ..................................................................... 73 2.2.9 In harmony with nature ......................................................................................................... 74 2.3 Significant projects at the Telekom Slovenia Group .................................................................... 74 2.4 Leader in the development of convergent services and the network .......................................... 76 2.5 Network development and management ..................................................................................... 77 WorldReginfo - 77f6e99d-e686-4835-b7d4-37445d78f290 2.5.1 Fixed network ....................................................................................................................... 77 2.5.2 Mobile network...................................................................................................................... 78 3 SOUTH EASTERN EUROPE AND THE DEVELOPMENT OF OPERATIONS (M&A) ...................... 80 3.1 Environment analysis ................................................................................................................... 80 3.1.1 Market shares ....................................................................................................................... 81 3.1.2 Regulation ............................................................................................................................. 83 3.2 Sales and marketing .................................................................................................................... 85 3.3 Network and service development............................................................................................... 87 4 OPERATING RESULTS OF THE TELEKOM SLOVENIA GROUP ................................................... 89 4.1 Telekom Slovenia Group ............................................................................................................. 89 4.2 Performance and financial management ..................................................................................... 90 4.3 Telekom Slovenije, d. d. .............................................................................................................. 95 4.4 Mobitel, d. d. ................................................................................................................................ 96 4.5 South Eastern Europe and other companies ............................................................................... 96 5 SUSTAINABILITY REPORT .............................................................................................................. 99 5.1 Responsible monitoring of sustainable development .................................................................. 99 5.2 Responsible human resource management ................................................................................ 99 5.3 Social responsibility ................................................................................................................... 105 5.4 Environmental responsibility ...................................................................................................... 107 5.5 Responsibility to customers ....................................................................................................... 110 5.6 Responsibility to suppliers ......................................................................................................... 114 5.7 Responsible security policy ....................................................................................................... 115 6 FINANCIAL REPORT ...................................................................................................................... 116 6.1 Introductory notes ................................................................................................................... 116 6.2 Financial report of the Telekom Slovenia Group.................................................................. 117 6.2.1 Financial statements of the Telekom Slovenia Group ........................................................ 117 6.2.2 Notes to the consolidated financial statements and summary of significant accounting policies of the Telekom Slovenia Group .......................................................................................... 123 6.2.3 Independent Auditor's Report ............................................................................................. 166 6.3 Financial report of Telekom Slovenije, d. d. ......................................................................... 167 6.3.1 Financial statements of Telekom Slovenije, d.d. ................................................................ 167 6.3.2 Notes to the financial statements and summary of significant accounting policies of Telekom Slovenije, d.d. ..................................................................................................................... 173 6.3.3 Independent Auditor's Report ............................................................................................. 209 7 DICTIONARY OF TELECOMMUNICATION TERMS ...................................................................... 210 WorldReginfo - 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