Annual Report 2010 Telekom Slovenia Group Telekom Slovenije, d. d. Annual Report 2010 Telekom Slovenia Group Telekom Slovenije, d. d. Ljubljana, 5 April 2011 WorldReginfo - 3b4abfc3-6534-4884-8ade-0ba293160bfe Annual Report 2010 Telekom Slovenia Group Telekom Slovenije, d. d. Contents 1 INTRODUCTION ............................................................................................................................................ 1 1.1 Highlights of the Telekom Slovenia Group .............................................................................. 1 1.2 Letter from the President of the Management Board .............................................................. 2 1.3 Statement of responsibility of the Management Board ........................................................... 5 1.4 Strategic development plan ..................................................................................................... 6 1.5 The Telekom Slovenia Group on the map of Europe ............................................................. 9 1.6 Organisation of the Telekom Slovenia Group ....................................................................... 10 1.7 Report of the Supervisory Board ........................................................................................... 12 1.8 Corporate governance statement .......................................................................................... 15 1.9 Share trading and ownership structure ................................................................................. 25 1.10 Significant achievements of the Telekom Slovenia Group .................................................... 29 1.11 Significant events after the balance sheet date ..................................................................... 30 1.12 Risk management .................................................................................................................. 31 2 BUSINESS REPORT OF THE TELEKOM SLOVENIA GROUP ................................................................... 42 2.1 Financial results of the Telekom Slovenia Group .................................................................. 42 2.1.1 Key financial performance indicators..................................................................................... 42 2.2 Financial management and performance .............................................................................. 43 2.3 Investments ........................................................................................................................... 46 2.4 Business environment and trends in the sector .................................................................... 47 2.4.1 Macroeconomic environment ................................................................................................ 47 2.4.2 Trends in the ICT sector ........................................................................................................ 47 2.4.3 Regulation of the electronic communications market and the competition protection .......... 50 2.5 Sales and marketing .............................................................................................................. 53 2.5.1 Market position ...................................................................................................................... 53 2.5.2 Brand Management ............................................................................................................... 55 2.5.3 Sales and marketing .............................................................................................................. 58 2.5.4 Development of services and the network ............................................................................ 62 2.5.5 Financial results from the operations of Telekom Slovenia Group companies ..................... 66 3 SUSTAINABILITY REPORT ......................................................................................................................... 69 3.1 Responsible management of sustainable development ........................................................ 70 3.2 Responsible human resource management .......................................................................... 73 3.2.1 Commitment to non-discrimination ........................................................................................ 73 3.2.2 Employee structure ................................................................................................................ 74 3.2.3 Educational structure of employees ...................................................................................... 74 3.2.4 Employment of disabled persons .......................................................................................... 75 3.2.5 Organisational climate and employee satisfaction and culture ............................................. 75 WorldReginfo - 3b4abfc3-6534-4884-8ade-0ba293160bfe Annual Report 2010 Telekom Slovenia Group Telekom Slovenije, d. d. 3.2.6 Employee training and development ..................................................................................... 76 3.2.7 Managing innovation ............................................................................................................. 78 3.2.8 Cooperation with employee representatives ......................................................................... 78 3.2.9 Responsibility for employees and related groups outside the workplace.............................. 78 3.2.10 Health and safety at work ...................................................................................................... 79 3.2.11 Family-Friendly company certificate ...................................................................................... 79 3.2.12 Communication with employees ............................................................................................ 80 3.3 Social responsibility ............................................................................................................... 80 3.3.1 Major sponsorships and donations ........................................................................................ 80 3.3.2 Protection of competition ....................................................................................................... 82 3.4 Environmental responsibility .................................................................................................. 82 3.4.1 Environmental developments in 2010 ................................................................................... 83 3.4.2 Overview of the key environmental objectives in 2010 ......................................................... 83 3.4.3 Environmental indicators ....................................................................................................... 85 3.5 Responsibility to customers ................................................................................................... 88 3.6 Responsibility for quality ........................................................................................................ 90 3.7 Responsibility to suppliers ..................................................................................................... 91 3.8 Responsibility for security ...................................................................................................... 92 3.9 Content according to GRI G3 reporting guidelines................................................................ 93 3.10 Suistainability verification statement...................................................................................... 95 4 FINANCIAL REPORT .................................................................................................................................. 96 4.1 Introductory notes .................................................................................................................. 96 4.2 Financial report of the Telekom Slovenia Group ................................................................... 97 4.2.1 Financial statements of the Telekom Slovenia Group ........................................................... 97 4.2.2 Notes to the consolidated financial statements of the Telekom Slovenia Group and summary of significant accounting policies of the Group .................................................................... 104 4.2.3 Independent Auditor's Report for the Telekom Slovenia Group .......................................... 152 4.3 Financial report of Telekom Slovenije, d. d. ........................................................................ 153 4.3.1 Financial statements of Telekom Slovenije, d. d. ................................................................ 153 4.3.2 Notes to the financial statements and summary of significant accounting policies of Telekom Slovenije, d. d. ..................................................................................................................... 160 4.3.3 Independent Auditor's report ............................................................................................... 202 5 ABBREVIATIONS OF TECHNICAL TERMS .............................................................................................. 203 WorldReginfo - 3b4abfc3-6534-4884-8ade-0ba293160bfe Annual Report 2010 Telekom Slovenia Group Telekom Slovenije, d. d. 1 INTRODUCTION 1.1 Highlights of the Telekom Slovenia Group In 2010 the Telekom Slovenia Group: - generated EUR 843.5 million in operating revenues, down 1.5% on the previous year; - introduced several