(UNAUDITED BUT REVIEWED)
TOTAL ACCESS COMMUNICATION PUBLIC COMPANY LIMITED AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE-MONTH PERIODS ENDED 31 MARCH 2007 AND 2006
1. GENERAL INFORMATION
1.1 The Company’s general information
The Company was incorporated as a public company limited under the laws of Thailand and listed
on the Stock Exchange of Singapore in 1995. The Company operates its business in Thailand and is
principally engaged in the provision of wireless telecommunications services and the sale of
handsets and accessories.
The Company’s registered address is 333/3 Chai Building, Vibhavadi Rangsit Road, Chomphon,
Chatuchak, Bangkok.
a)
Procedure for the restructuring and the listing of TAC’s ordinary shares as listed securities on
the Stock Exchange of Thailand
Resolutions of Board of Directors No. 2/2007 held on 19 March 2007 approved restructuring
between United Communication Industry Plc. (UCOM) and the Company (TAC) for the
purpose of listing TAC on the Stock Exchange of Thailand (SET). UCOM currently derives
its income from its investment in TAC and it has no other core business operations.
Therefore, it is categorized as a holding company and, under the SET Regulation No.
BorJor/Ror 01-00 Re: Listing of Ordinary Shares and Preference Shares as Listed Securities
B.E. 2544 (2001), is required to hold not less than 51 percent of the total voting shares of a
company that is an operating company (a core company) that invests in an infrastructure
project. Such "core company" may not be a listed company. Therefore, if TAC is listed on
the SET, TAC would not meet the criteria to be a "core company" of UCOM, and UCOM
would consequently have to delist its shares from the SET within 6 months from the date
TAC’s shares are listed. The key steps of the restructuring, approved by the Board of
Directors, are summarised below.
1.
A reduction of the par value of TAC’s ordinary shares from Baht 10 per share to Baht
2 per share. At present, TAC’s share capital comprises 458,016,126 ordinary shares
with a par value of Baht 10 each. Following the reduction of par value, TAC’s share
capital will comprise 2,290,080,630 ordinary shares with a par value of Baht 2 each,
decreasing registered share capital from Baht 5,114 million to be Baht 4,580 million,
and increasing registered share capital to be Baht 6,439 million by issuing 82 million
(UNAUDITED BUT REVIEWED)
of new ordinary shares with a par value at Baht 2 each to support the initial public
offering and issuing up to 847,692,965 new ordinary shares to allocate to the
shareholders of UCOM.
2.
An initial public offering of 222 million TAC ordinary shares, or 9.36 percent of total
issued share capital, comprising 82 million newly issued shares with a par value of
Baht 2 each and the sell down of 140 million TAC ordinary shares with a par value
Baht 2 each held by UCOM; and the listing of TAC on the SET.
3. A tender offer for all UCOM ordinary shares in accordance with Notification No.
GorJor. 6/2543, settled by means of an issue of new TAC ordinary shares, with a
share exchange ratio of 1.95 TAC shares with a par value of Baht 2 each to 1 UCOM
share with a par value of Baht 10 each (following the reduction of the par value of
TAC shares from Baht 10 to Baht 2), with no cash alternative offered.
4. A selective capital reduction by cancelling 847,692,965 TAC ordinary shares with a
par value Baht 2 held by UCOM (following the sell down of 140,000,000 ordinary
shares of TAC with a par value Baht 2 each held by UCOM) and making cash
distribution to UCOM at par value of each TAC shares that is cancelled of Baht
1,695,385,930, in order to avoid cross-shareholding between UCOM and TAC in
accordance with the related regulations.
The Company’s Board of Directors will propose the above steps of restructuring plan for the
shareholders’ approval during the Extraordinary General Meeting of shareholders No. 1/2007
scheduled on 30 April 2007.
b) In the first quarter of 2007, DTAC Network Co., Ltd, a subsidiary of the Company, was
awarded an International Direct Dialing License (type 3) by the National Telecommunication
Commission (NTC), for a duration of 20 years.
1.2 Basis for the preparation of interim financial statements
These interim financial statements have been prepared in accordance with Accounting Standards
Pronouncement No. 41 “Interim financial statements”, which allows the Company to choose to
present condensed interim financial statements. However, the Company presented the balance
sheets, the statements of income, changes in shareholders’ equity, and cash flows in the full format
used in the annual financial statements.
These interim financial statements are intended to provide information additional to that included in
the latest annual financial statements. Accordingly, they focus on new activities, events and
circumstances so as not to duplicate information previously reported. These interim financial
statements should therefore be read in conjunction with the latest annual financial statements.
(UNAUDITED BUT REVIEWED)
1.3 Significant accounting policies
The interim financial statements are prepared using the same accounting policies and methods of
computation as were adopted for the financial statements for the year ended 31 December 2006
except the change in accounting policy for investments in subsidiaries and associated companies in
the separate financial statements from equity method to cost method as described in Note 5 to the
interim financial statements.
1.4 Basis of consolidation
The consolidated financial statements are prepared using the same basis as the consolidated
financial statements for the year ended 31 December 2006 and include the interim financial
statements for the three-month period ended 31 March 2007 of Total Access Communication
Public Company Limited ("the Company") and the following subsidiaries:
Percentage
of shareholding
31 March 31 December
2007
2006
(Audited)
Nature of business
Subsidiaries directly held by the Company
WorldPhone Shop Company Limited
TAC Property Company Limited
TAC Investment Limited
100
100
100
100
100
100
TAC Service Company Limited
DTAC Network Co., Ltd.
100
100
100
100
DTAC Wireless Co., Ltd.
100
100
DTAC Internet Service Co., Ltd.
100
100
Public Radio Co., Ltd.
100
100
Ceased operations in 2003
Asset management
Holding company (registered in Western Samoa and
financial statements presented in US dollars) (ceased
operation in 2005)
Ceased operation in 2001
Incorporate to provide telecommunications network
services (not yet commenced operation)
Incorporate to provide mobile phone services (not yet
commenced operation)
Incorporate to provide internet service (not yet
commenced operation)
Incorporate to provide taxi radio services (not yet
commenced operation)
Subsidiaries held through TAC Property Company Limited
Eastern Beach Company Limited
TAC Finance Company B.V.
100
100
100
100
Viphavadee Office Building Company Limited
100
100
Land development
Finance company (registered in Netherlands and
financial statements presented in US dollars)
Property development (office building)
(UNAUDITED BUT REVIEWED)
Assets and revenues of the Company which are included in the consolidated financial statements
constitute approximately 99 and 100 percent of the consolidated totals, respectively.
2. AGREEMENTS TO OPERATE CELLULAR TELEPHONE SERVICES
The Company has commitments and obligations under agreements listed below relating to the operation
of cellular telephone services with counterparties as described in the financial statements for the year
ended 31 December 2006.
2.1 Agreement with CAT Telecom Public Company Limited (“CAT”) to operate cellular telephone
services
2.2 Airtime Provider Agreement with The International Engineering Plc.
2.3 Assignment of a certain portion of the rights and obligations under the agreement to operate the
cellular telephone services (“Assignment of right agreement”) with Digital Phone Company Limited
(“DPC”).
3. EXCISE TAX
On 28 January 2003, the Ministry of Finance announced the introduction of an excise tax for
telecommunication businesses, whereby excise tax is to be collected on revenue from mobile
telecommunication service at a rate of 10 percent. This tax can be deducted from the fees to be paid to
CAT, and is payable to the Excise Department on a monthly basis.
However, on 23 January 2007 the Cabinet passed a resolution approving a proposal to have the Finance
Ministry stipulate a zero rate of excise tax for telecommunication services. This change in the applicable
excise tax rate will be effective when it is announced by the Ministry of Finance.
On 26 February 2007, the Ministry of Finance approved that excise tax on telecommunication services is
collected at a zero rate, thus the Company changed a calculation of excise tax using the zero rate from 26
February 2007 onwards.
4. INTERCONNECTION CHARGE
The Notification Re: Uses and Interconnections of Telecommunication Networks B.E. 2549 (the
“Interconnection Notification”) stipulates that telecommunication business operators who have
telecommunication networks are required to grant other operators effective access to their networks.
The Company has received an approval from the National Telecommunications Commission (NTC) for
the Reference of Interconnect Offer (RIO) on 29 August 2006, which requires the licensee who owns
network and the licensee who request for interconnection shall negotiate among themselves in relation to
the Interconnection Charge Contract pursuant to the RIO of the interconnection provider, within 90 days
from the receiving date of the intention letter as stipulated in the Interconnection Notification.
(UNAUDITED BUT REVIEWED)
In case, any both licensees can not reach the agreement within mentioned period it shall be considered that
the dispute has occurred. Each party shall has the right to submit the case according to the dispute
dissolution pursuant to the Interconnection Notification.
The Company has entered into the interconnection charge agreements with other operators and the
effective period of the agreements is listed below.
a)
b)
c)
Operators
True Move Co., Ltd.
Advance Info Service Plc.
Triple T Broadband Co., Ltd.
Effective period
17 November 2006 onwards
30 November 2006 onwards
22 December 2006 onwards
The interconnection charges have already been applied between the Company and the above operators
from the beginning of 2007.
5. CHANGE IN ACCOUNTING POLICY FOR INVESTMENTS IN SUBSIDIARIES AND
ASSOCIATED COMPANY IN THE SEPARATE FINANCIAL STATEMENTS
On 1 January 2007, the Company has changed accounting policy for investments in subsidiaries and
associated company from equity method to cost method in the separate financial statements in compliance
with the Federation of Accounting Professions issued Notification No. 26/2006 regarding Accounting
Standard No. 44 “Consolidated Financial Statements and Accounting for Investments in Subsidiaries”
(Amendment No. 1), under which investments in subsidiaries, jointly controlled entities and associates are
to be presented in the separate financial statements under the cost method rather than the equity method.
In this regards, the Company restated its previous year’s separate financial statements, as presented herein
for comparative purposes, as though the investments in subsidiaries and associated company had
originally been recorded using the cost method. This had the effect of net income for the three-month
periods ended 31 March 2007and 2006 by increasing net income of Baht 3 million (0.01 Baht per share)
and decreasing net income of Baht 20 million (0.04 Baht per share), respectively. The cumulative effects
of the accounting change are presented under the heading of “Cumulative effect of the change in
accounting policy for investments in subsidiaries and associated company” in the statements of changes in
shareholders’ equity in the separate financial statements.
(UNAUDITED BUT REVIEWED)
6. ACCOUNTS RECEIVABLE - TRADE
(Unit : Thousand Baht)
Consolidated
Company Only
31 March 2007 31 December 2006 31 March 2007 31 December 2006
(Audited)
(Audited)
Accounts receivable - telephone services
3,050,774
2,678,278
3,050,774
2,678,278
Accounts receivable - international
telephone roaming services
483,791
459,992
483,791
459,992
Accounts receivable - sales of
telephone sets and starter kits
110,357
113,747
95,915
99,305
Accounts receivable - others
103,674
108,167
34,383
38,877
Total
3,748,596
3,360,184
3,664,863
3,276,452
Less : Allowance for doubtful accounts
(719,687)
(649,877)
(635,954)
(566,145)
Accounts receivable - trade, net
3,028,909
2,710,307
3,028,909
2,710,307
The aging of the outstanding balances of trade accounts receivable - telephone services as at 31 March
2007 and 31 December 2006, based on due date, is as follows:
In due
Over due less than 1 month
Over due 1 month to 3 months
Over due 3 months to 6 months
Over due over 6 months
Total
Less : Allowance for doubtful accounts
Accounts receivable - telephone services, net
(Unit : Thousand Baht)
Consolidated/Company Only
31 March 2007 31 December 2006
(Audited)
1,794,904
1,529,995
464,675
430,177
176,131
204,853
226,370
213,964
388,694
299,289
3,050,774
2,678,278
(615,852)
(537,809)
2,434,922
2,140,469
(UNAUDITED BUT REVIEWED)
The Company has set up allowance for doubtful accounts based on collection experience. The Company
establishes the allowance for doubtful accounts at the period-end at a certain percentage of revenue from
telephone services, to provide against the balance of all accounts receivable - telephone services in each
aging period on a progressive basis.
The aging of the outstanding balances of trade accounts receivable - international telephone roaming
services as at 31 March 2007 and 31 December 2006, based on due date, is as follows:
(Unit : Thousand Baht)
Consolidated/Company Only
31 March 2007 31 December 2006
(Audited)
368,120
367,119
64,585
66,783
36,039
15,896
9,980
5,416
5,067
4,778
483,791
459,992
(5,111)
(5,061)
478,680
454,931
In due
Over due less than 1 month
Over due 1 month to 3 months
Over due 3 months to 6 months
Over due over 6 months
Total
Less : Allowance for doubtful accounts
Accounts receivable - international telephone roaming services, net
The aging of the outstanding balances of trade accounts receivable - sales of telephone sets and starter kits
as at 31 March 2007 and 31 December 2006, based on due date, is as follows:
In due
Overdue less than 1 month
Overdue 1 month to 3 months
Overdue 3 months to 6 months
Overdue 6 months
Total
Less: Allowance for doubtful accounts
Accounts receivable - sales of telephone
sets and starter kits
Consolidated
31 March 31 December
2007
2006
(Audited)
81,727
82,851
1,492
1,443
145
316
1,006
174
25,987
28,963
110,357
113,747
(26,388)
(29,530)
83,969
84,217
(Unit: Thousand Baht)
The Company Only
31 March
31 December
2007
2006
(Audited)
81,727
82,851
1,492
1,443
145
316
1,006
174
11,545
14,521
95,915
99,305
(11,946)
(15,088)
83,969
84,217
(UNAUDITED BUT REVIEWED)
The aging of the outstanding balances of trade accounts receivable - others as at 31 March 2007 and
31 December 2006, based on due date, is as follows:
In due
Overdue less than 1 month
Overdue 1 month to 3 months
Overdue 3 months to 6 months
Overdue 6 months
Total
Less: Allowance for doubtful accounts
Accounts receivable - others, net
Consolidated
31 March 31 December
2007
2006
(Audited)
10,065
5,003
4,854
15,415
281
7,861
15,943
286
72,531
79,602
103,674
108,167
(72,336)
(77,477)
31,338
30,690
(Unit: Thousand Baht)
The Company Only
31 March
31 December
2007
2006
(Audited)
10,065
5,003
4,854
15,415
281
7,861
15,943
286
3,240
10,312
34,383
38,877
(3,045)
(8,187)
31,338
30,690
7. RELATED PARTY TRANSACTIONS
During the periods, the Company and its subsidiaries had significant business transactions with related
parties. These transactions, which have been concluded on commercial terms and bases agreed upon in
the ordinary course of businesses between the Company and those companies. Below is a summary of
those transactions.
(UNAUDITED BUT REVIEWED)
Transactions with associated company, subsidiaries and related companies
(Unit : Million Baht)
For the three-month periods ended 31 March
Consolidated
Company Only
2007
2006
2007
2006
Pricing Policy
Transactions with subsidiaries (eliminated from the consolidated financial statements)
Rental and service expenses
19
19
as per agreement
Interest expense
44
as per agreement
Transactions with associated company : United Distribution Business Co., Ltd.*
Sales of goods
6,443
7,081
6,443
7,081
selling price less a certain margin, as per agreement
Purchases of goods
26
61
26
61
market price
Rental and service expense
3
36
3
36
as per agreement
Transactions with related company : United Communication Industry Plc. (“UCOM”)
Sales on right of E-Refill
service
55
55
as per agreement
Sales of voucher card
52
52
as per agreement
Service expenses
2
160
2
160
as per agreement
Transactions with other related companies
International roaming
service income
109
Service income
Service expenses
226
Service fees for installation
of cell site equipment
353
Management fee
35
58
7
194
109
226
58
7
194
as per agreement
market price
as per agreement
625
40
353
35
625
40
as per agreement
as per agreement
* The Company paid marketing support expense for the three-month periods ended 31 March 2007 at Baht 17 million (2006:
Baht 43 million) to dealers through United Distribution Business Co., Ltd.
The significant outstanding balances arising from the above transactions, as separately presented in the
balance sheets, comprise the following:
Consolidated
31 March 2007 31 December 2006
(Audited)
Trade accounts receivable - subsidiary
WorldPhone Shop Co., Ltd.
Less : Allowance for doubtful accounts
Total trade accounts receivable - subsidiary - net
-
-
(Unit : Thousand Baht)
Company Only
31 March 2007 31 December 2006
(Audited)
199,503
(199,503)
-
199,503
(199,503)
-
(UNAUDITED BUT REVIEWED)
Consolidated
31 March 2007 31 December 2006
(Audited)
Trade account receivable - associated company
United Distribution Business Co., Ltd. (Note 7.1)
Total trade account receivable - associated company
Trade accounts receivable - related companies
United Communication Industry Plc.(2)
Telenor Mobile AS(1)
Digi Com(1)
Sonofon AS(1)
Telenor Sverige AB(1)
Others
Total trade accounts receivable - related companies
(Note 7.2)
Advances to related companies
Advances to subsidiaries
WorldPhone Shop Co., Ltd.
TAC Service Co., Ltd.
Others
Less : Allowance for doubtful accounts
Advances to related companies
Advances to related companies
Less : Allowance for doubtful accounts
4,702,851
4,702,851
5,109,672
5,109,672
4,702,851
4,702,851
5,109,672
5,109,672
65,233
35,203
3,723
8,207
19,445
6,910
4,689
25,873
4,037
5,382
16,733
3,038
65,233
35,203
3,723
8,207
19,445
6,910
4,689
25,873
4,037
5,382
16,733
3,038
138,721
59,752
138,721
59,752
16,580
34,074
3,528
(16,772)
37,410
16,580
35,245
192
(16,772)
35,245
-
-
6,125
(5,942)
183
9,997
(5,942)
4,055
6,125
(5,942)
183
9,997
(5,942)
4,055
183
4,055
37,593
39,300
1,310,607
1,310,607
1,325,053
1,325,053
Total advances to related companies - net
Amounts due from related parties
Amounts due from subsidiary
TAC Property Co., Ltd. (Note 7.3)
Total amounts due from a subsidiary
Amounts due from related companies
Amounts due from related companies
Less : Allowance for doubtful accounts
Total amounts due from related companies - net
Trade account payable - subsidiary
TAC Property Co., Ltd.
Total trade account payable - subsidiary
(Unit : Thousand Baht)
Company Only
31 March 2007 31 December 2006
(Audited)
159,563
(159,230)
333
-
159,451
(159,230)
221
-
-
5,213
5,213
5,213
5,213
(UNAUDITED BUT REVIEWED)
Consolidated
31 March 2007 31 December 2006
(Audited)
Trade accounts payable - related companies
United Telecom Sales and Services Co., Ltd.(2)
Benchachinda Holding Co., Ltd.(2)
Others
Total trade accounts payable - related companies
Advances from related parties
Advances from associated company
United Distribution Business Co., Ltd.
Advances from related companies
Telenor Consult AS(1)
Telenor ASA(1)
Others
Total advances from related parties
(Unit : Thousand Baht)
Company Only
31 March 2007 31 December 2006
(Audited)
369,599
66,340
435,939
286,736
212,586
1
499,323
369,599
66,340
435,939
286,736
212,586
1
499,323
3,128
5,147
3,128
5,147
25,332
14,041
16,255
55,628
58,756
14,823
23,876
38,699
43,846
25,332
14,041
13,338
52,711
55,839
14,823
20,959
35,782
40,929
Relationship with the related companies
(1) have same ultimated shareholder
(2) have same directors
7.1
The aging of trade account receivable - associated company as at 31 March 2007 and 31 December
2006 based on due date, is as follow:
In due
Over due less than 1 month
Over due 1 month to 3 months
Over due 3 months to 6 months
Over due over 6 months
Trade account receivable - associated company
(Unit : Thousand Baht)
Consolidated/Company Only
31 March 2007
31 December 2006
(Audited)
4,019,950
3,962,891
682,854
1,146,846
(41)
(153)
58
58
30
30
4,702,851
5,109,672
(UNAUDITED BUT REVIEWED)
7.2
As at 31 March 2007, most of the outstanding trade accounts receivable - related companies are
current and over due less than three months.
7.3 The amount due from TAC Property Co., Ltd. (a subsidiary) comprises receivables arising from
sales of equipment to support cellular telephone services. There is no fixed term for repayment and
no interest is charged.
Directors and management’s remuneration
For the three-months period ended 31 March 2007, the Company paid salaries, meeting allowance and
gratuities to their directors and management totaling Baht 23.3 million (the three-month period ended
31 March 2006: Baht 26.6 million) (Subsidiaries: none).
Guarantee obligations with related parties
The Company had outstanding guarantees with its related parties as described in Note 24.4 to the interim
financial statements.
8. OTHER CURRENT ASSETS
Income tax refundable
Value added tax suspension
Prepaid expenses
Prepaid rental - land for cell sites
Value added tax refundable
Withholding tax deducted at source
Account receivable - CAT
Deferred cost of unearned revenue from
telephone services
Others
Total
Less : Provision for impairment of assets
Total other current assets - net
(Unit : Thousand Baht)
Consolidated
Company Only
31 March 2007 31 December 2006 31 March 2007 31 December 2006
(Audited)
(Audited)
153,144
153,144
153,144
153,144
139,425
120,972
131,771
113,474
144,510
120,643
144,496
120,644
165,393
203,884
165,393
203,884
10,756
28,800
10,301
28,333
10,250
9,577
266,024
253,579
266,024
253,579
551,804
62,542
1,503,848
(13,211)
1,490,637
907,839
48,286
1,846,724
(13,211)
1,833,513
551,804
57,835
1,480,768
1,480,768
907,839
45,939
1,826,836
1,826,836
(UNAUDITED BUT REVIEWED)
9. INVESTMENTS IN SUBSIDIARIES / ASSOCIATED COMPANY
Investments in subsidiaries
Company Only
Paid-up share capital
Percentage of shareholding
Investments at cost
31 March
2007
31 December
2006
31 March
2007
Million Baht
Million Baht
Percent
Percent
450
20
1
1
1
1
1
450
20
1
1
1
1
1
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
450,000
19,998
1,000
1,000
1,000
1,000
1,000
Subsidiaries held through TAC Property Co., Ltd.
Eastern Beach Co., Ltd.
80
TAC Finance Company B.V.
0.5
Viphavadee Office Building Co., Ltd.
208.6
80
0.5
208.6
100
100
100
100
100
100
-
Subsidiaries directly held by the Company
WorldPhone Shop Co., Ltd.
TAC Investment Ltd.
TAC Service Co., Ltd.
TAC Property Co., Ltd.
DTAC Network Co., Ltd.
DTAC Wireless Co., Ltd.
DTAC Internet Service Co., Ltd.
Public Radio Co., Ltd.
31 December
2006
31 March
2007
31 December
2006
Thousand Baht
Total investments in subsidiaries, net
Impairment loss on investments
31 March
2007
Thousand Baht
Thousand Baht
450,000
19,998
1,000
1,000
1,000
1,000
1,000
(450,000)
(19,998)
-
-
474,998
474,998
(469,998)
31 December
2006
Thousand Baht
(Restated)
(450,000)
(19,998)
-
(469,998)
Net
31 March
2007
Thousand Baht
Thousand Baht
(Restated)
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
1,000
-
-
5,000
5,000
On 12 November 2004, the Board of Directors Meeting No. 5/2004 passed a resolution approving the
dissolution of TAC Investment Limited (“TACI”) and is now in the process of the dissolving TACI.
During 2005 the Company filed a lawsuit against the subsidiary in the Central Intellectual Property and
International Trade Court and consequently written-off those balance as bad debt as a result of the Court
order.
Investments in associated company
United Distribution Business Co., Ltd.
Percentage of shareholding
31 March 31 December
2007
2006
Percent
Percent
25
25
Consolidated
Investments at equity
31 March 31 December
2007
2006
224,882
231,057
(Unit: Thousand Baht)
Company Only
Investments at cost
31 March 31 December
2007
2006
50,000
31 December
2006
50,000
(UNAUDITED BUT REVIEWED)
10. OTHER LONG-TERM INVESTMENTS
Consolidated
31 March 2007 31 December 2006
(Audited)
Debt securities
Other investments
Digital Phone Co., Ltd.
Other companies
Less : Provision for impairment loss
Other companies - net
Total other investments
Total other long-term investments
(Unit : Thousand Baht)
Company Only
31 March 2007 31 December 2006
(Audited)
487
487
487
487
197,600
67,333
(65,733)
1,600
199,200
199,687
197,600
67,333
(65,733)
1,600
199,200
199,687
197,600
56,933
(55,333)
1,600
199,200
199,687
197,600
56,933
(55,333)
1,600
199,200
199,687
In January 2006, the Company sold all 25.4 million of its shares in The International Engineering Public
Company Limited at an average selling price of Baht 7.06 per share with gain on sale of Baht 55.4
million.
11. ASSIGNMENT OF RIGHTS AND OBLIGATIONS UNDER THE AGREEMENT TO OPERATE
CELLULAR TELEPHONE SERVICES
As at 31 March 2007, the Baht 580 million (31 December 2006 : Baht 580 million) balance of “Account
receivable from assignment of right - net” represents the consideration receivable from DPC as a result of
the Company’s permitting DPC to use the Company’s network and facilities and transferring to DPC part
of the rights and obligations to operate cellular telephone services, together with related accrued interest,
less the balance of “Advance received - other” (which represents unearned revenue from DPC) and
provision for loss. The consideration receivable from the assignment of right is secured by a portion of the
rights and obligations under DPC’s agreement to operate cellular telephone services (although if DPC
defaults, the return of certain rights and obligations to the Company would have to be approved by CAT).
The outstanding balance of consideration receivable under the assignment of rights agreement, which was
due for payment between 30 September 2002 and 30 September 2005, was converted using an exchange
rate based on the lower of Baht 38.57 per USD 1 or the average prevailing exchange rate quoted by the
Bank of Thailand at the date specified in the agreement, and earns interest at a rate of 9.50 percent per
annum. As at 31 March 2007 the Company has not received the amounts totaling USD 122.9 million
which, according to the assignment of rights agreement, were due to be paid by DPC between 30
September 2002 and 30 September 2005. As discussed in Note 25.2 to the interim financial statements,
currently the Company submitted disputes to the Arbitration Office in relation to the payments defaulted
(UNAUDITED BUT REVIEWED)
on by DPC totalling USD 134.5 million (including interest amounting to USD 11.6 million calculated
from the date of default until the date that the Company submitted the disputes) and called for settlement
of the amounts then due. The Company’s management believes that the outcome of the arbitration process
is unlikely to materially affect the financial position of the Company.
12. PROPERTY, PLANT AND EQUIPMENT
The movement of property, plant and equipment for the three-month period ended 31 March 2007 is
presented below:
(Unit: Thousand Baht)
Consolidated
Cost
31 December 2006
Purchase/Transfer in
Disposal/Transfer out
31 March 2007
Accumulated depreciation
31 December 2006
Depreciation
Depreciation of disposals/Transfer out
31 March 2007
Allowance for impairment
31 December 2006
Loss on impairment of assets (reversal)
31 March 2007
Net book value
31 December 2006
31 March 2007
The Company Only
10,513,804
166,602
(16,542)
10,663,864
8,386,299
166,602
(16,542)
8,536,359
6,010,091
172,661
(15,424)
6,167,328
5,176,663
152,345
(15,425)
5,313,583
96,506
96,506
85,975
85,975
4,407,207
3,123,661
4,400,030
3,136,801
(UNAUDITED BUT REVIEWED)
13. DEFERRED RIGHT TO USE OF EQUIPMENT
The movement of deferred right to use of equipment for the three-month period ended 31 March 2007 is
presented below:
(Unit: Thousand Baht)
Consolidated
Cost
31 December 2006
Addition
31 March 2007
Accumulated amortisation
31 December 2006
Amortisation
31 March 2007
Net book value
31 December 2006
31 March 2007
The Company Only
108,183,791
3,948,388
112,132,179
108,183,791
3,947,848
112,131,639
35,420,761
1,596,841
37,017,602
35,420,761
1,596,837
37,017,598
72,763,030
75,114,577
72,763,030
75,114,041
14. OTHER NON-CURRENT ASSETS
Deferred expenses - net
Deferred underwriting fees / arrangement fees for
loans and bonds - net
Deposits
Others
Total other non-current assets
Amortisation included in the income statements
(Unit : Thousand Baht)
Consolidated
Company Only
31 March 2007 31 December 2006 31 March 2007 31 December 2006
(Audited)
(Audited)
989,730
928,505
989,730
936,219
443,151
1,098,190
65,357
2,596,428
476,087
895,715
69,317
2,369,624
443,151
1,097,908
65,363
2,596,152
476,087
895,442
69,312
2,377,060
189,053
746,607
189,053
920,078
(UNAUDITED BUT REVIEWED)
15. LONG-TERM LOANS
15.1 USD 30 million loan facility from Nordic Investment Bank
15.2 USD 40 million loan facility from Nordic Investment Bank
15.3 Loan obtained from a group of financial institutions
15.4 USD 170 million loan facilities from Finish Export Credit Ltd.
Total
Less : Current portion
Long-term loans - net of current portion
(Unit : Thousand Baht)
Consolidated/Company Only
31 March 2007 31 December 2006
(Audited)
1,111,687
1,111,687
1,644,000
1,644,000
7,151,368
7,151,368
6,661,450
6,661,450
16,568,505
16,568,505
(5,657,600)
(5,657,600)
10,910,905
10,910,905
15.1 In order to hedge the foreign exchange rate and interest rate risks associated with the above loan,
the Company entered into a cross currency swap agreement with a foreign financial institution to
swap the loan to a Baht 1,270 million loan with a floating Baht interest rate as stipulated in the
agreement. The possible future financial impact of this agreement is reflected in the estimates of
the fair value of derivative instruments provided in Note 23.5 to the interim financial statements.
15.2 In order to hedge the foreign exchange rate and interest rate risks associated with the above loan,
the Company entered into a cross currency swap agreement to swap the full amount of the loan to a
Baht 1,644 million loan, with a fixed Baht interest rate as stipulated in the agreement for the period
from 30 November 2005 to 30 November 2007, and a floating interest rate as stipulated in the
agreement from 30 November 2007 onwards. The possible future financial impact of this
agreement is reflected in the estimates of the fair value of derivative instruments provided in Note
23.5 to the interim financial statements.
15.3 Baht loan
The interest expense of this Baht loan has been covered by interest rate swap agreement that result
in the Company paying a fixed rate as stipulated in the agreement. The possible future financial
impact of this agreement is reflected in the estimates of the fair value of derivative instruments
provided in Note 23.5 to the interim financial statements.
JPY loan
The Company entered into the cross currency and interest swap agreement with the Thailand branch
of a foreign financial institution, to swap the loan of JPY 9,515 million to a Baht 3,151 million loan,
with a fixed Baht interest rate as stipulated in the agreement. The possible future financial impact of
this agreement is reflected in the estimates of the fair value of derivative instruments provided in
Note 23.5 to the interim financial statements.
(UNAUDITED BUT REVIEWED)
15.4 The Company entered into cross currency and interest swap agreements with the Thailand branch
of a foreign financial institution, to swap the full amount of the Tranche A, effective on 3 April
2006 and 28 August 2006 and Tranche B, effective on 31 October 2006 to a Baht 6,661 million
loan, with a fixed Baht interest rate as stipulated in the agreements. The possible future financial
impact of these agreements is reflected in the estimates of the fair value of derivative instruments
provided in Note 23.5 to the interim financial statements.
15.5 On 31 March 2007 and 31 December 2006, the Company has credit facilities with a group of
financial institutions which are not drawn down.
Baht loan
Facility
Interest rate
Interest period
Principal repayment schedule
JPY loan
Facility
Interest rate
Interest period
Principal repayment schedule
: Baht 2,000 million
: THBFIX that present on Reuters Screen and, plus a margin
as stipulated in the agreement
: as agreed with a group of financial institutions (to be
determined later)
: 8 semi-annual installments in the amounts specify in the
agreement from 26 March 2008 to 26 September 2011
: JPY 12,000 million
: JPYLIBOR plus a margin as stipulated in the agreement
: as agreed with a group of financial institutions (to be
determined later)
: 8 semi-annual installments in the amounts specify in the
agreement from 26 March 2008 to 26 September 2011
15.6 On 31 March 2007 and 31 December 2006, the Company has a credit facility with Finnish Export
Credit Ltd. (“FEC”) which is not drawn down.
Facility
: USD 119 million
Interest rate
: 5.58 percent per annum
Interest period
: every 6 months
Principal repayment schedule
: 14 semi-annual installments in the amounts specify in the
agreement from 31 January 2008 to 31 July 2014.
The above long-term loan facility agreements contain covenants relating to various matters, such as
the maintenance of financial ratio, restrictions on incurring indebtedness and creating or permitting
the subsistence of security interest on property and assets, a prohibition on making loans or
granting guarantees except under certain conditions, and restrictions on the payment of dividends.
(UNAUDITED BUT REVIEWED)
16. DEBENTURES
Thai Baht debentures
Less Current portion
Thai Baht debentures - net of current
portion
(Unit : Thousand Baht)
Consolidated
Company Only
31 March 2007 31 December 2006 31 March 2007 31 December 2006
(Audited)
(Audited)
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
20,000,000
The movements of Thai baht debentures for the three-month period ended 31 March 2007 are as follows:
(Unit : Million Baht)
Balance
as at
1 January 2007
16.1
16.2
16.3
Debentures of Baht 5,000 million (issued on
30 October 2002)
a) Debentures of Baht 4,000 million
b) Debentures of Baht 1,000 million
Debentures of Baht 9,000 million (issued on
25 September 2003)
a) Debentures of Baht 3,000 million
b) Debentures of Baht 2,500 million
c) Debentures of Baht 3,500 million
Debentures of Baht 6,000 million (issued on
24 August 2006)
a) Debentures of Baht 3,000 million
b) Debentures of Baht 3,000 million
Addition debentures issued
Less :
Debentures
repayment
Balance
as at
31 March 2007
4,000
1,000
-
-
4,000
1,000
3,000
2,500
3,500
-
-
3,000
2,500
3,500
3,000
3,000
20,000
-
-
3,000
3,000
20,000
As at 31 March 2007, the interest of the following debentures have been covered by interest rate swap
agreements.
(UNAUDITED BUT REVIEWED)
Debentures of Baht 9,000 million
a)
Debentures of Baht 3,000 million
The interest expenses of these debentures have been covered by interest rate swap agreements. As a
result, the Company is obliged to pay interest at a fixed rate specified in the agreements from 25
September 2005 to 25 March 2007 and at the floating rate specified in the agreements for the
remaining period. The possible future financial impact of these agreements is reflected in the
estimates of the fair value of derivative instruments provided in Note 23.5 to the interim financial
statements.
b)
Debentures of Baht 2,500 million
The interest expenses of these debentures have been covered by interest rate swap agreements. As a
result, the Company is obliged to pay interest at a fixed rate specified in the agreements from 25
September 2005 to 25 March 2007 and at the floating rate specified in the agreements for the
remaining period. The possible future financial impact of these agreements is reflected in the
estimates of the fair value of derivative instruments provided in Note 23.5 to the interim financial
statements.
c)
Debentures of Baht 3,500 million
The interest expenses of these debentures have been covered by interest rate swap agreements that
result in the Company paying a fixed interest rate specified in the agreement plus a certain margin
as stipulated under the additional swap agreements. The possible future financial impact of these
agreements is reflected in the estimates of the fair value of derivative instruments provided in Note
23.5 to the interim financial statements.
All Thai Baht debentures contain covenants relating to various matters such as the maintenance of
financial ratio, restrictions on creating or permitting the creation of security interest on property and
assets, a prohibition on making loans or granting guarantees except under certain conditions, and
restrictions on the payment of dividends.
(UNAUDITED BUT REVIEWED)
17. OTHER CURRENT LIABILITIES
Excise tax payable
Interest payable
Accrued expenses
Other accounts payable
Corporate income tax payable
Value added tax payable
Others
(Unit : Thousand Baht)
Consolidated
Company Only
31 March 2007 31 December 2006 31 March 2007 31 December 2006
(Audited)
(Audited)
446,996
446,996
345,325
386,878
345,325
386,878
902,654
734,850
890,225
723,335
905,746
860,471
905,742
860,468
1,953,743
1,325,411
1,945,862
1,317,681
201,602
201,602
211,074
65,999
203,181
58,280
4,520,144
3,820,605
4,491,937
3,793,638
18. FINANCIAL COSTS
Interest expense
Amortisation on deferred financial cost and deferred
expenses of early redemption on bills of exchange
Total financial costs
(Unit : Thousand Baht)
For the three-month periods ended 31 March
Consolidated
Company Only
2007
2006
2007
2006
584,428
826,838
584,428
792,522
32,580
617,008
35,229
862,067
32,580
617,008
86,585
879,107
19. CORPORATE INCOME TAX
Income tax payable on taxable profit for the year
Add/Less : Net increase/decrease in deferred tax
assets/liabilities on temporary
differences and other related write-off
Income tax expenses - net
(Unit : Thousand Baht)
For the three-month periods ended 31 March
Consolidated
Company Only
2007
2006
2007
2006
867,422
892,566
866,889
892,380
(210,322)
(280,394)
(210,322)
(280,394)
657,100
612,172
656,567
611,986
(UNAUDITED BUT REVIEWED)
As at 31 March 2007 and 31 December 2006 the deferred tax assets/liabilities arose from the following
temporary differences:
Allowance for doubtful accounts : accounts receivable - trade
Provision for loss on account receivable from assignment of right (Note 19.1)
Allowance for inventory obsolescence
Accrued expenses
Unrealised loss on derivative instruments for long-term loans and bonds
Others
(Unit: Thousand Baht)
Consolidated/Company Only
31 March 31 December
2007
2006
(Audited)
620,963
542,870
1,894,760
1,894,760
21,908
24,884
19,312
19,433
1,418,624
1,099,416
(16,599)
(323,466)
3,958,968
3,257,897
1,187,691
Deferred tax assets/liabilities (30%)
977,369
19.1 Deferred tax assets relate to the provision for loss on accounts receivable from the assignment of
rights. As at the balance sheet date the Company is in the process of recovery of those balance from
this receivable through an arbitration process, as discussed in Note 25.2 to interim the financial
statements.
20. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the net income for the period by the weighted average
number of ordinary shares in issue during the period.
Diluted earnings per share is calculated by dividing net income for the period by the weighted average
number of ordinary shares in issue during the period plus the weighted average number of ordinary shares
which would need to be issued to convert all dilutive potential ordinary shares into ordinary shares.
21. DEPRECIATION AND AMORTISATION EXPENSES
Depreciation expense
Property, Plant and equipment
Amortisation expense
Deferred right to use of equipment
Other non-current assets
- group as selling and administration expenses
- group as financial cost
Total depreciation and amortisation expenses
(Unit : Thousand Baht)
For the three-month periods ended 31 March
Consolidated
Company Only
2007
2006
2007
2006
172,661
196,500
152,345
176,180
1,596,841
1,330,452
1,596,837
1,330,452
156,472
32,580
1,958,554
160,614
35,229
1,722,795
156,472
32,580
1,938,234
160,614
86,585
1,753,831
(UNAUDITED BUT REVIEWED)
22. OPERATING INCOME BEFORE
AMORTISATION (EBITDA)
Net income for the period
Add
: Financial costs
: Corporate income tax
: Depreciation expense
: Amortisation expense
: Interest income
: Foreign exchange gain/loss
EBITDA
INTEREST,
Note
18
19
21
21
TAXES,
DEPRECIATION
AND
(Unit : Thousand Baht)
Consolidated
For the three-month periods ended 31 March
2007
2006
1,558,832
1,256,687
617,008
862,067
657,100
612,172
172,661
196,500
1,753,313
1,491,066
(17,418)
(4,623)
27,068
25,456
4,768,564
4,439,325
23. FINANCIAL INSTRUMENTS
23.1 Financial risk management policies
The Company and subsidiaries are exposed to risks from changes in market interest rates and in
currency exchange rates, and from nonperformance of contractual obligations by counterparties.
The Company and subsidiaries use derivative instruments, as and when they are considered
appropriate, to manage such risks. Additionally, the Company has a policy in entering with the
counterparties who has a good financial position, therefore the Company believes that the Company
will not receive a significant loss from the counterparties.
The Company and subsidiaries do not speculate in or engage in the trading of any derivative
financial instruments.
23.2 Interest rate risk
Interest rate risk is the risk that future movement in market interest rates will effect the results of the
Company and subsidiaries’ operations and their cash flows. The Company’s and subsidiaries’
exposure to interest rate risk relate primarily to their deposits at financial institutions, short-term
loan, trust receipts, long-term loans, and bonds.
As at 31 March 2007 the significant financial assets and liabilities (Part of these are under
derivative instruments as described in Notes 15 and 16 to the interim financial statements) are
classified by type of interest rate as follows:
(UNAUDITED BUT REVIEWED)
Items
Note
(Unit : Million Baht)
Consolidated
Floating
Fixed
interest rate
interest rate
Total
Financial assets
Deposits at financial institutions
1,932
699
2,631
Fixed deposits at financial institutions
74
74
Financial liabilities
Trust receipt
980
980
Long-term loans
15
1,112
15,456(1)
16,568
Thai Baht debentures
16
5,500
14,500
20,000
(1)
The interest rate on Baht 1,644 million of long-term loans for the period from 30 November 2007 is equal to
THBFIX plus a certain margin.
Financial assets and liabilities carry fixed interest rates can be classified by maturity (or the date of
new interest rate is introduced) (if any).
(Unit : Million Baht)
Items
Note
Financial assets
Deposits at financial institutions
Fixed deposits at financial institutions
Financial liabilities
Trust receipts
Long-term loans
Thai Baht debentures
(1)
15
16
Consolidated
Within
Over
12 months 12 months
Total
Interest rate
699
74
-
699
74
4.17%
3.56% - 5.03%
980
5,340
-
10,116
14,500
980
15,456(1)
14,500
4.60% - 5.55%
5.38% - 6.59%
5.80% - 6.35%
The interest rate on Baht 1,644 million of long-term loan from the period as from 30 November 2007 is equal
to THBFIX plus a certain margin.
(UNAUDITED BUT REVIEWED)
23.3 Foreign currency risk
The Company and subsidiaries’ exposure to foreign currency risk arised mainly from purchasing of
equipment transactions and borrowing that are denominated in foreign currencies. The Company
and subsidiaries primarily utilise forward exchange contracts and currency swap agreements to
reduce the exchange rate risk arising from these instruments (Note 15). As at 31 March 2007 the
Company and subsidiaries had the following foreign currency assets and liabilities (after the
execution of forward exchange contracts and cross currency swap agreements for certain parts of
their liabilities) which were not covered by forward contracts to reduce foreign exchange rate risk:
Consolidated
Assets
Deposits at financial institutions
Trade accounts receivable - other companies
Trade accounts receivable - related companies
Liabilities
Trade accounts payable(*)
Amount
(Million)
Foreign currency
2.6
0.6
0.5
0.3
1.4
USD
EUR
GBP
SDRs
SDRs
1.0
6.8
2.6
(0.4)
0.5
1.7
(6.8)
Exchange rate
as at
31 March 2007
(Baht per foreign
currency)
34.8965
46.3955
68.3415
52.8913
52.8913
USD
EUR
Amount due to related company
NOK
Net assets (liabilities)
USD
EUR
GBP
SDRs
NOK
(*) net of the amounts of USD 89.3 million covered by forward contracts with due on
December 2007.
35.1354
46.9522
5.7885
April 2007 to
23.4 Credit risk
The Company is exposed to credit risk primarily with respect to trade accounts receivable. The
Company’s management manages the risk by adopting credit control policies and procedures. In
addition, the Company does not have high concentration of credit risk since it has a large customer
base. Therefore, the Company does not expect to incur material financial loss. The maximum
exposure to credit risk is limited to the carrying amount of receivables less allowance for doubtful
debts as stated in the balance sheets.
(UNAUDITED BUT REVIEWED)
23.5 Fair value
A fair value is the amount for which an asset can be exchanged or a liability settled between
knowledgeable, willing parties in an arm’s length transaction.
The fair value is determined by reference to the market price of the financial instrument or by using
an appropriate valuation technique, such as discounted cash flows etc.
Given that all financial assets are short-term, parts of financial liabilities are short-term, the
Company’s management believes that the fair value of financial assets and short-term financial
liabilities does not materially differ from their carrying value.
The carrying values (original values excluded the carrying values of related forward exchange and
cross currency swap contracts) and fair values of long-term financial liabilities and the fair values of
derivative instruments as at 31 March 2007 are presented below.
Consolidated
Carrying values
Hedged
Loan from Finnish Export Credit Ltd.
Loan from a group of financial institutions
Thai Baht debentures
Unhedged
Loan from Nordic Investment Bank
Thai Baht debentures
Derivative instruments
Unfavourable derivative instruments
(Unit : Million Baht)
Fair values
5,973
6,849
6,000
6,027
6,865
5,818
2,328
14,000
2,366
14,377
-
(1,415)
The fair value of financial instruments are estimated on the following criteria.
-
The fair values of long-term loans have been determined based on discounted cash flow
analysis, by using discount rates equal to the prevailing rates of return as of the balance sheet
date for financial instruments having substantially the same terms and characteristics.
(UNAUDITED BUT REVIEWED)
-
The fair values of Thai Baht bonds are presented at their fair value, based on the latest yield
rated quoted by the Thai Bond Market Association as of the date on which the investments
are value or the discounted cash flow method. The discounted rate is based on the prevailing
rates of return as of the balance sheet date for financial instruments having substantially the
same terms and characteristics.
-
The fair values of derivative instruments have been calculated using quoted market rates to
terminate the contracts at the balance sheet date.
24. COMMITMENTS
24.1 Lease commitments
As at 31 March 2007 the Company has the following operating lease commitments for the lease of
office buildings:
2007
2008
2009 onwards
(Unit : Million Baht)
Consolidated/Company Only
45.5
43.1
36.8
The Company also has operating lease obligations with regard to land for cell sites installation.
Currently, the Company pays land rental fees of approximately Baht 30 million per month.
24.2 Capital commitments
As at 31 March 2007 the Company has capital commitments of Baht 3,127 million (31 December
2006 : Baht 1,252 million) mainly in respect of the purchase of tools and equipment for providing
cellular telephone services.
24.3 Pledged deposits at financial institutions
As at 31 March 2007 deposits at financial institutions of a subsidiary amounting to Baht 0.8 million
(31 December 2006 : Baht 1 million) are pledged with the bank to secure facilities granted by the
bank.
24.4 Bank guarantees
As at 31 March 2007 there were outstanding bank guarantees of Baht 877 million (31 December
2006 : Baht 861 million) issued by banks on behalf of the Company in respect of certain
performance bonds required in the normal course of business of the Company. Bank guarantees are
primarily issued to CAT to secure the royalty fee paid under the Agreement to Operate Cellular
Telephone Services.
(UNAUDITED BUT REVIEWED)
As at 31 March 2007 there were outstanding bank guarantees of Baht 3 million (31 December 2006
: Baht 3 million) issued by banks on behalf of subsidiaries and related company in respect of certain
performance bonds required in the normal course of business of the subsidiaries and related
company. These guarantees are secured by deposits at financial institutions of the subsidiary and by
the Company’s guarantee.
24.5 Agreements to install cell site equipment
As at 31 March 2007 the Company has an outstanding commitment of approximately Baht 426
million (31 December 2006 : Baht 692 million) under an agreement to install cell site equipment
made with United Telecom Sales and Services Co., Ltd., a related company.
24.6 Agreement to install and maintain transmission networks
On 4 May 2006 the Company entered into an agreement to install and maintain transmission
networks with Benchachinda Holding Ltd., a related company. This related company will provide
transmission engineering network design and configuration, installation and maintenance services
for transmission networks for a period of 3 years. The Company is committed to pay service fees at
the rate specified in the agreement. Currently, the Company pays such service fees at a rate of
approximately Baht 38 million per month.
24.7 Other service agreements
As at 31 March 2007, the Company has commitments of approximately Baht 13 million under
financial advisory service agreements relating to the Company’s application for the listing of its
shares on the Stock Exchange of Thailand.
25. LITIGATION AND COMMERCIAL DISPUTES
25.1 Outstanding litigation
In March 2003 the Company, WorldPhone Shop Company Limited (“the subsidiary”) and directors
of the subsidiary were sued by am/pm (Thailand) Company Limited which claimed damages
totaling Baht 450 million in relation to improper transfer of the license to use the am/pm trademark
in Thailand, and subsequent benefit of use of this trademark. (On 1 January 2003 the subsidiary
terminated the assignment agreement to operate am/pm shops in Thailand and stopped using the
am/pm trademark since 31 December 2003.) The Court has already dismissed the complaint.
Currently, it is under the appeal procedures. If there is no appeal the case will be ended. The
Company’s management is not able to determine the extent of losses, if any, that may arise from
this case, but it is believed that any possible liability that may arise will not be material to the
Company’s financial position. Consequently, as at 31 March 2007, the Company has not provided
for losses that may arise as a result of this case in its financial statements.
(UNAUDITED BUT REVIEWED)
25.2 Commercial disputes
(a) Dispute between the Company and DPC regarding the default on payments of amounts due
as a result of the assignment of a certain portion of the rights and obligations to operate a
telephone service under the PCN 1800 system.
As discussed in Note 11 to the interim financial statements, DPC defaulted on payment of
amounts due to be paid to the Company between 30 September 2002 and 30 September 2005
totaling USD 122.9 million. The Company currently submitted its disputes with regard to
DPC’s default on payment of amounts due to be paid to the Company totaling USD 134.5
million (including interest from the default date until the date that the Company submitted the
disputes amounting to USD 11.6 million) to the Arbitration Office for settlement and called
for DPC to make payment of the amount due, including due interest, plus interest from the
default date until the date that DPC makes payment to the Company. The arbitration
proceedings are continuing, and the Company’s management believes that the outcome of the
arbitration process is unlikely to have a material adverse effect on the financial position of the
Company.
(b) Dispute between the Company and CAT regarding fees on amounts received from the cellular
mobile telecommunications network roaming agreement with DPC.
In 2002 CAT requested the Company pay fees on amounts received as a result of the
provision of roaming services to DPC on its telecommunications network. CAT subsequently
submitted a letter dated 25 August 2003 requesting the Company pay fees amounting to Baht
476 million to CAT on the amounts received as a result of the provision of such roaming
services. On 31 August 2004 CAT submitted the dispute in relation to the fees on revenue
received from the cellular mobile telecommunications network roaming to the Arbitration
Office for settlement and called for the Company to make payment of such fee together with
a penalty totaling Baht 692 million (calculated to the date of submitted the dispute). However,
the Company’s management believes that the outcome of the arbitration process is unlikely to
have a material adverse effect on the financial position of the Company because they contend
that the revenue received from DPC is to compensate the Company for the costs incurred to
expand the network to accommodate the increase in network traffic as a result of DPC being
granted such roaming, and this kind of revenue is not part of the service revenue which forms
the basis for the calculation of the fees to be paid to CAT under the agreement to operate
cellular telephone services made between the Company and CAT. In addition, DPC pays fees
to CAT on the revenue that it generates from its roaming on the Company’s network.
Therefore as at 31 March 2007 the Company has not accrued the fees requested by CAT in its
financial statements.
(UNAUDITED BUT REVIEWED)
(c) Dispute between the Company and CAT regarding the calculation methodology for the
revenue sharing that the Company submitted to CAT relating to the fee reduction on access
charge.
On 18 May 2005 and 19 July 2005, CAT submitted a letter informing the Company that its
calculation methodology for the revenue sharing from the date that the Company received
the fee reduction on access charge from TOT was incorrect. According to CAT, the
Company had underpaid revenue sharing to CAT by a total of Baht 448 million (calculated
from 16 September 1996 to 15 September 2004). However the Company contends that the
calculation was based on the methodology that the Company was supplied with by CAT for
revenue sharing purposes, and to which the Company consented. The Company has informed
CAT of this. The Company therefore has not accrued the revenue sharing requested by CAT
in its financial statements.
(d) The commercial dispute between the Company and CAT regarding the payment of the
numbering fee which CAT (an NTC-licensed telecommunication business operator) is
obliged to pay to the National Telecommunications Commission (NTC) on a monthly basis
under the Telecommunications Business Act.
During the fourth quarter of 2005, CAT submitted a letter calling for the Company to make
payment of numbering fees for those numbers which the Company have been allocated to
provide telecommunication service under the Concession agreement at a rate of 1 Baht per
numbering per month, as from September 2005 to August 2006. The Company submitted a
request for a ruling on which party is responsible for the number fee burden to the NTC. The
NTC’s response was that the licensed telecommunications operator is responsible for the
payment of the numbering fee and any third party which is not the licensed
telecommunications operator has no obligation to pay the numbering fee previously allocated
to the Company. Management of the Company are therefore confident that the Company is
not responsible for the numbering fees. According to the dispute between the Company and
CAT, Black Case No. 85/2549, CAT demanded the Company to reimburse the numbering
fees (for the period August 2005 - August 2006) which CAT had already paid to the NTC in
the amount of Baht 169.6 million. Previously, CAT had demanded the Company to
reimburse such amount of money but the Company denied to make any payment. Then, on
7 September 2006 CAT filed the complaint to the Thai Arbitration Office demanding the
Company to compensate the principal amount together with interests totaling Baht 171
million.
(UNAUDITED BUT REVIEWED)
e)
Dispute between the Company and CAT regarding fees on revenue received from the
network roaming, revenue from customers who fraudulently registered documents and which
cannot be collected.
On 4 April 2006, CAT submitted a dispute to the Arbitration Office in relation to requesting
additional fees from the Company on revenues as follows:
- Fees on revenues from interconnection charges amounting to Baht 7.8 million, which the
Company charged to other operators for permission to use the Company’s network. The
Company contends that the revenues received from other operators represent
compensation for the costs incurred to expand the network to accommodate the increase
in network traffic as a result of these other operators being granted such roaming.
- The fees on uncollectible service revenues from customers of the 1800 system who
fraudulently registered documents amount to Baht 38.9 million. The Company contends
that in the past CAT waived the fees on uncollectible revenues from customers of the
800 system who fraudulently used of the services, and that the nature of the fraud in the
case of the additional fees which CAT is requesting the Company pay is the same.
As at 31 March 2007, the Company has not accrued the additional fees requested by CAT,
which including fines and surcharges (calculated to the date of submitted the dispute) total
Baht 58.3 million in its financial statements because the Company’s management believes
that the various revenues do not constitute part of the service revenue which forms the basis
for the calculation of the fees to be paid to CAT and CAT has formerly waived collection of
fees of this type.
25.3 Commercial dispute between the Company and TOT Plc. (TOT) in relation the access charge
payment
On 2 October 2006, the Company issued a letter to TOT requesting it to enter into negotiation
regarding the interconnection agreement between the Company’s network and TOT’s network and,
on 17 November 2006, the Company issued a written notification informing TOT and CAT
Telecom Public Company Limited (“CAT”) that the Company would amend the rates for
calculating the access charge under the Access Charge Agreement entered into with TOT on the
basis that the rate and the collection of access charge under the Access Charge Agreement were
contrary to the law in a number of respects. The Company also informed TOT and CAT that it
would pay the interconnection charge to TOT at the rate which is in compliance with the law or at
the provisional rate announced by the NTC while negotiations on the interconnection agreement
with TOT has not been concluded.
(UNAUDITED BUT REVIEWED)
However, on 23 November 2006, TOT issued a letter to the Company informing the Company that
it was not entitled to interconnect its network with the TOT network because the Company was not
a telecommunications licensee, as granted by the NTC, and did not have its own
telecommunications network. TOT also claimed that the Access Charge Agreement did not violate
any law. Therefore, the rate and the collection of access charge under the Access Charge
Agreement continued to apply.
TOT later refused to allow the Company’s new telecommunications numbers, allocated to the
Company by the NTC, to interconnect with its network on the basis that the Company insisted on
paying the interconnection charge as considered to be prescribed by the law, instead of the access
charge as prescribed by the Access Charge Agreement. In response to TOT’s refusal to connect the
Company’s new telecommunications numbers, on 17 January 2007, the Company brought a claim
to the Thai Central Administrative Court seeking a ruling to end this dispute. At the same time, it
also informed the NTC of the TOT’s refusal to enter into negotiation regarding the interconnection
agreement and requested that the NTC resolve the dispute under the dispute resolution process.
On 7 February 2007, TOT rejected a payment of Baht 110 million made by the Company for
interconnection charges for the period from 18 to 30 November 2006. The Company has placed this
amount and the amounts of interconnection charges to be due in subsequent periods, in a separate
bank account in the Company's name and is therefore ready to make payment of these
interconnection charges to TOT, whenever TOT expresses a wish to receive such amounts.
The net effect of the Company amending its recording of the access charge under the previous
Access Charge Agreement by recording interconnection charges for the period of 18 November
2006 to 31 March 2007 and to 31 December 2006 in what it considers to be compliance with current
law, as described in Note 4 to the interim financial statements, is the decrease in expenses by
approximately Baht 1,190 million and Baht 700 million, respectively.
As at 31 December 2006, the Baht 280 million, balance of deferred interconnection cost of
unearned revenue from telephone services, included under the caption of “Other current assets”,
represents advances paid to TOT for voucher cards sold up to 17 November 2006 net with the
realized interconnection costs up to 31 December 2006.
26. FINANCIAL INFORMATION BY SEGMENT
The principal operations of the Company and subsidiaries involve a single industry segment, operating
wireless telecommunications services and distributing handsets, are carried out exclusively in Thailand.
As a result, all revenues, operating profits and assets reflected in these financial statements pertain to this
industry segment and geographic area.
(UNAUDITED BUT REVIEWED)
27. SUBSEQUENT EVENTS
27.1 Forward exchange contracts
Subsequent to 31 March 2007, the Company has entered into a number of significant forward
exchange contracts with banks to purchase approximately USD 22.5 million, to cover payments for
the purchases of cellular telephone service equipment in 2007.
28. RECLASSIFICATION
Certain amounts in the financial statements as at 31 December 2006 and for the three-month period ended
31 March 2006 have been reclassified to conform to the current period classifications, with no effect on
previously reported net income or shareholders’ equity, except the effect from the change in accounting
policy as described in Note 5 to the interim financial statements.
29. APPROVAL OF INTERIM FINANCIAL STATEMENTS
These interim financial statements were authorised for issue by the Company’s authorised director on
24 April 2007.
30. SIGNIFICANT DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY
ACCEPTED IN THAILAND AND INTERNATIONAL FINANCIAL REPORTING STANDARDS
These consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in Thailand (“Thai GAAP”), which differ in certain significant respects from
International Financial Reporting Standards (“IFRS”). Certain significant differences (other than
classification, presentation and disclosure requirements) between Thai GAAP and IFRS as applicable to
the consolidated financial statements of the Company and its subsidiaries for the threee-month period
ended 31 March 2007 and for the year ended 31 December 2006 are summarised below. This summary
should not be construed as being exhaustive nor presenting a true and fair view of the Company’s
operating results and financial position as it is presented for the purpose of giving preliminary information
only.
(UNAUDITED BUT REVIEWED)
Significant differences between Thai GAAP and IFRS
30.1 Accounting for derivatives
Thai GAAP does not presently have any effective accounting guidance for accounting for
derivatives.
Under IFRS, a company has to recognise all of its derivative instruments as either assets or
liabilities in the balance sheet at fair value. The accounting for changes in the fair value (i.e., gains
or losses) of a derivative instrument depends on whether it has been designated and qualifies as part
of a hedging relationship and further, on the type of hedging relationship (i.e. as either a fair value
hedge, cash flow hedge, or a hedge of a net investment in a foreign operation).
30.2 Deferred financial costs
Thai GAAP does not presently have any effective accounting guidance for accounting for financial
instruments, in respect of recognition and measurement. In general, there is no prohibition on
deferral of the financial costs of extinguished debts on a refinancing deal provided that the
Company has derived benefit from such refinancing.
IFRS requires an exchange of financial liabilities with substantially different terms and conditions
to be accounted for as an extinguishment of the old financial liability and the recognition of a new
financial liability. Therefore, the outstanding deferred cost attributable to the issue of the old
financial liability is to be written off.
The following table is a summary of numerical reconciliation of consolidated net income for the threemonth periods ended 31 March 2007 and 2006 and consolidated total shareholders’ equity as at 31 March
2007 and 31 December 2006 between those shown in consolidated financial statements prepared under
Thai GAAP and IFRS. This summary should not be construed as being exhaustive nor presenting a true
and fair view of the Company’s operating results and financial position as it is presented for the purpose
of giving preliminary information only.
(UNAUDITED BUT REVIEWED)
(Unit : Million Baht)
As reported in these consolidated financial statements under Thai GAAP
Add (Less) : Thai GAAP /IFRS significant differences (net of tax effect)
1. Accounting for derivatives (Note 30.1)
2. Deferred financial costs (Note 30.2)
Under International Financial Reporting Standard (“IFRS”)
Consolidated
net income
For the three-month
periods ended
31 March
2007
2006
(Restated)
1,559
1,257
(126)
12
1,445
71
15
1,343
Consolidated
total shareholders’ equity
31 March 31 December
2007
2006
(Restated)
43,015
41,421
(863)
(97)
42,055
(332)
(109)
40,980