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Enriching Lives
2003Annual
(128740-P)
Report
OUR
Vision
OUR VISION IS TO BE THE COMMUNICATIONS COMPANY OF CHOICE FOCUSED ON DELIVERING EXCEPTIONAL VALUE TO OUR CUSTOMERS AND OTHER STAKEHOLDERS.
OUR
Mission
To achieve our vision, we are determined to do the following: Be the recognised leader in all markets we serve Be a customer-focused organisation that provides one-stop total solution Build enduring relationships based on trust with our customers and partners Generate shareholder value by seizing opportunities in Asia Pacific and other selected regional markets Be the employer of choice that inspires performance excellence
No man is an island. No nation exists in isolation. We need to communicate, interact and exchange information. From family to friends to business associates, our lives are made richer through the power of interaction. At Telekom Malaysia, we dedicate ourselves to creating new ways to keep you in communication. With fixed lines, mobile, Internet, Wi-Fi, broadband and more, we are opening possibilities to enrich your lives. Richer than ever before.
Audit Committee Report Statement on Internal Control Chairmans Statement Chief Executives Statement OPERATIONS REVIEW Fixed Line Services TM TelCo Cellular Celcom (Malaysia) Berhad Box Article 1 Mobility Solutions Multimedia Services TM Net Sdn. Bhd. Box Article 2 The World of Broadband International Operations TM International Sdn. Bhd. Facilities Management TM Facilities Sdn. Bhd. Other Subsidiaries
48 52 56 60
68 78 82 88 94 98 106 112 122 128 131 134 135 137 144 149 150
002
CONTENTS
TELEKOM MALAYSIA BERHAD
Annual Report 2003
Educational Excellence Human Resources Customer Relationship Management Research and Development Towards a Safe and Healthy Work Culture Quality Initiatives
Financial Calendar 2003 Notice of Annual General Meeting Statement Accompanying the Notice of Annual General Meeting Five-Year Group Financial Highlights Group Financial Performance 2003 Group Segmental Analysis Business and Other Statistics Group Financial Review Group Structure Corporate Information Board of Directors Profile of the Board of Directors Group Business Management Corporate Governance Statement Risk Management Additional Compliance Information
3 4 6 8 10 11 12 14 20 22 24 26 36 38 44 46
Our Contributions to the Nation Awards & Recognition Highlights of the Year 2003 Corporate & Social Responsibilities Caring for Shareholders Caring for Customers Caring for Employees Caring for Community Reports and Financial Statements Shareholding Statistics List of Top 30 Shareholders Shareholders and Investor Information Net Book Value of Land & Buildings Usage of Properties Group Directory Proxy Form
156 157 158 160 162 252 253 255 256 257 258
20 27
May 2003 18th Annual General Meeting (AGM) of the Company. May 2003 Announcement of the unaudited consolidated 1st quarter results for the three months ended 31 March 2003.
29-30 23 26
May 2003 Book Closure for determining the entitlement of the dividend. June 2003 Date of payment of the final dividend of 10 sen per share (less 28% Malaysian Income Tax) in respect of the financial year ended 31 December 2002. August 2003 Announcement of the unaudited consolidated 2nd quarter results for the six months ended 30 June 2003.
21 26 26 18
November 2003 Announcement of the unaudited consolidated 3rd quarter results for the nine months ended 30 September 2003. February 2004 Announcement of the audited consolidated results and the proposed final dividend and special dividend for the financial year ended 31 December 2003. April 2004 Issuance of Notice of the 19th AGM, Notice of Book Closure for Payment of Dividend and Annual Report for the financial year ended 31 December 2003. May 2004 19th AGM of the Company.
26-27 21
May 2004 Book Closure for determining the entitlement for the dividend. June 2004 Date of payment of the final dividend of 10 sen per share (less 28% Malaysian Income Tax) and special dividend of 10 sen per share (less 28% Malaysian Income Tax) in respect of the financial year ended 31 December 2003.
003
18 May 2004
1.
To receive the Audited Financial Statements for the financial year ended 31 December 2003 together with the Reports of the Directors and Auditors thereon. (Ordinary Resolution 1) To approve the declaration of a final dividend of 10 sen per share (less 28% Malaysian Income Tax) and special dividend of 10 sen per share (less 28% Malaysian Income Tax) in respect of the year ended 31 December 2003. (Ordinary Resolution 2) To re-elect the following Directors retiring pursuant to Article 103:(i) Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor (Ordinary Resolution 3) Ir. Prabahar N.K. Singam Dato Lim Kheng Guan Rosli bin Man Tan Poh Keat Datuk Dr. Halim bin Shafie (Ordinary Resolution 4) (Ordinary Resolution 5) (Ordinary Resolution 6) (Ordinary Resolution 7) (Ordinary Resolution 8)
2.
3.
004
(vii) Dato Abdul Majid bin Haji Hussein (Ordinary Resolution 9) To approve the Directors' fees and remuneration. (Ordinary Resolution 10) To re-appoint the retiring Auditors and to authorise the Directors to fix their remuneration. (Ordinary Resolution 11) As SPECIAL BUSINESS To consider and if thought fit to pass the following Ordinary Resolution:Authority to Allot and Issue Shares THAT subject to the Companies Act, 1965 (the Act), the Articles of Association of the Company, approval from the Malaysia Securities Exchange Berhad (MSEB) and other Government or regulatory bodies, where such approval is necessary, full authority be and is hereby given to the Board of Directors pursuant to Section 132D of the Act, to issue shares in the capital of the Company at any time upon such terms and conditions and for such purposes as the Directors may in their discretion deem fit provided always that the aggregate number of shares to be issued, shall not exceed 10% of the issued share capital of the Company. (Ordinary Resolution 12) 7. To transact any other business of the Company of which due notice has been received.
5.
NOTICE IS HEREBY GIVEN THAT the Nineteenth Annual General Meeting of the Company will be held at 10:00 a.m., on Tuesday, 18 May 2004 at the Grand Ballroom, 9th Floor, The Legend Hotel, 100 Jalan Putra, 50350 Kuala Lumpur, for the following purposes:-
6.
FURTHER NOTICE IS HEREBY GIVEN THAT a Depositor shall be eligible to attend this meeting only in respect of:(a) Shares deposited into the Depositors Securities Account before 12:30 p.m. on 7 May 2004 (in respect of shares which are exempted from Mandatory Deposit); Shares transferred into the Depositors Securities Account before 4:00 p.m. on 7 May 2004 in respect of Ordinary Transfer; Shares bought on the MSEB on a cum entitlement basis according to the Rules of the MSEB.
Notes: 1. A member entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote in his stead. A Proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. 2. A member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting provided that where a member of the Company is an authorised nominee as defined in accordance with the provisions of the Securities Industry (Central Depositories) Act 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. Where a member appoints two (2) proxies, the appointments shall be invalid unless the proportion of the holding to be represented by each proxy is specified. This instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly appointed under a power of attorney or if such appointee is a corporation, either under its common seal or under the hand of an officer or attorney duly appointed under a power of attorney. A corporation which is a member, may by resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representative at the Meeting, in accordance with Article 92 of the Company's Articles of Association. This instrument appointing the proxy must be deposited at the office of the Share Registrar, Tenaga Koperat Sdn. Bhd., 20th Floor, Plaza Permata (formerly known as IGB Plaza), Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof. Explanatory Note for Ordinary Resolution No. 12 In line with the Company's plan for expansion/diversification, the Company is actively looking into prospective areas so as to broaden its operating base and earnings potential. As the expansion/diversification may involve the issuance of new shares, the Directors, under present circumstances would be required to convene a general meeting to approve the issuance of new shares even though the number involved is less than 10% of the issued share capital. In order to avoid any delay and cost involved in convening a general meeting to approve such issue of shares, it is considered appropriate that the Directors be now empowered to issue shares in the Company up to an amount not exceeding in total, 10% of the issued share capital of the Company for the time being, for such purposes as they consider would be in the interest of the Company. This authority unless revoked or varied at a general meeting will expire at the next Annual General Meeting of the Company.
(b)
(c)
Shareholders are reminded that pursuant to the Securities Industry (Central Depositories) (Amendment No. 2) Act, 1998 (SICDA) which came into force on 1 November 1998, all shares not deposited with Malaysian Central Depository Sdn. Bhd. (MCD) by 12:30 p.m. on 1 December 1998 and not exempted from Mandatory Deposit, have been transferred to the Minister of Finance (MOF). Accordingly, the eligibility to attend this Meeting for such undeposited shares will be the MOF.
3.
4.
5.
6.
(b)
(c)
7.
Shareholders are reminded that pursuant to SICDA, all shares not deposited with MCD by 12:30 p.m. on 1 December 1998 and not exempted from Mandatory Deposit, have been transferred to the MOF. Accordingly, the dividend for such undeposited shares will be paid to MOF. By Order of the Board
Wang Cheng Yong (MAICSA 0777702) Zaiton Ahmad (MAICSA 7011681) Secretaries Kuala Lumpur 26 April 2004
005
DIRECTORS RANKING FOR RETIREMENT AND RE-ELECTION AT THE 19TH ANNUAL GENERAL MEETING
The Directors retiring by rotation and who are seeking re-election, pursuant to Article 103 of the Companys Articles of Association are as follows:1. 2. 3. 4. 5. 6. 7. Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor Ir. Prabahar N.K. Singam Dato Lim Kheng Guan Rosli bin Man Tan Poh Keat Datuk Dr. Halim bin Shafie Dato Abdul Majid bin Haji Hussein
The respective profiles of the above Directors are set out in the Profile of the Board of Directors on pages 26 34 inclusive, of this Annual Report. Their securities holdings in the Company and its subsidiaries are set out in the Analysis of Shareholdings on page 254 of this Annual Report.
006
31 March 2003
20 May 2003
10:00 a.m.
Grand Ballroom 9th Floor, The Legend Hotel 100 Jalan Putra 50350 Kuala Lumpur
007
In RM Million 1. 2. 3. 4. 5. 6. 7. Operating revenue Profit before taxation# ^ Profit after taxation# ^ Profit after taxation and minority interests# ^ Total shareholders fund# * ^ Total assets# ^ ~ Total borrowings ~
GROWTH RATES OVER PREVIOUS YEARS 1. 2. 3. 4. 5. Operating revenue Profit before taxation# ^ Total shareholders fund# * ^ Total assets# ^ ~ Total borrowings ~ -1.8% -52.1% -4.1% 0.0% 2.0% 12.5% 23.0% 6.7% 6.6% 5.2% 9.7% 95.4% 11.8% 0.3% -16.5% 1.7% -37.4% 8.1% 5.6% 8.4% 20.0% 18.3% 12.5% 24.6% 52.5%
008
1999 RATIO 1. 2. 3. 4. 5. 6. 7. 8. Return on shareholders fund# * ^ Return on total assets# ^ Debt equity ratio ^ Dividend rate Dividend cover# ^ Earnings per share# ^ Basic Net tangible assets per share# * ^ Share price information High Low 7.7% 3.5% 0.7 10.0% 2.9 29.5 sen 382.0 sen RM14.70 RM7.55
2000
2001
2002
2003
4.7% 2.1% 0.7 10.0% 1.9 19.1 sen 399.9 sen RM17.70 RM9.65
12.7% 6.5% 0.5 15.0% 3.8 56.6 sen 444.8 sen RM12.60 RM7.50
5.7% 3.0% 0.5 10.0% 2.7 26.8 sen 433.0 sen RM10.20 RM6.90
8.3% 4.0% 0.7 20.0% 2.1 43.6 sen 391.0 sen RM9.20 RM7.15
# * ^ ~
Comparative figures for 1999 are restated to conform with the changed accounting policy in year 2000 on the treatment of foreign exchange differences as well as the prior year adjustment on the Groups share of post acquisition profits less losses of associates. Comparative figures for 1999 2001 are restated to conform with the change in accounting policy in year 2002 on the recognition of liabilities with respect to dividend proposed. Comparative figures for 1999 2002 are restated to conform with the change in accounting policy in year 2003 with respect to the recognition of deferred tax and goodwill. Comparative figures for 2000 2002 are restated to conform with current year presentation as explained in the financial statements.
Operating Revenue
[RM Million] 12,000 11,796.4
2,000
8,000 7,833.0
6,000
1,530.4
4,000 500
1,017.0
1,000
2,000
0 2002 1999 2000 2001 2003 2003 0.7 0.5 2002 2001 0.5 2003 11,708.4 8,059.5 8,481.0 1999 2000 2001 7,081.7 0.7 1999 2000 0.7 2002 7,676.5
Total Assets
[RM Million] 40,000 36,040.3 35,000
Total Borrowings
[RM Million] 12,000
16,782.4
9,600
10,000
11,566.8
12,345.1
7,200
4,800
5,000
2,400 5,000 0 1999 2000 2001 2002 2003 0 1999 2000 2001 2002 2003 0
12
12.7
0.8 5
9 7.7 8.3
0.6
2.1
3.0
0.4
0.2
578.7
500
1,444.2
Operating Revenue
[%] 40 3 30.6% 32 24 16 8 0 Cellular Fixed Line Fixed Line Business Residential Data Services Internet Other Nonand Telecommu- TelecommuMultimedia nication nication Related Related Services Services 8.0% 29.2% 9
23.9%
3.4% %
2.8% %
010
Distribution of Income
[%] 52.8%
50 40 30 20 10 0 28.9%
11.8% %
3.5% %
Operating Costs
Depreciation
Taxation
3.0% %
2.1%
Segment Operating Revenue for the year ended 31 December 2003 [%]
By Business By Geographical Location
100 80 60 40 20 0 Fixed Cellular Others Line, Data, Internet and Multimedia 30.6% 0 67.3% 3
93 2% 3 3.2
2.1%
Malaysia Overseas
100 80 60 21.3% % 40 20 0 Fixed Cellular Others Line, Data, Internet and Multimedia 7 74.6%
91.6 1 6%
100 80 60 40 8.4% %
59.4%
4.1% %
0 Malaysia Overseas Fixed Cellular Others Line, Data, Internet and Multimedia Malaysia Overseas
3.9% %
5.4% %
20
3 36.7%
94. 9 .6%
By Geographical Location
011
6.8% %
Year ended 31 December CUSTOMER BASE TM TelCo 1. 2. 3. 4. 5. 6. 7. 8. 9. Residential telephone Business telephone Public telephone Leased circuits Other services Toll Free (1-300 and 1-800) ISDN Total access lines Total access lines per 100 population
1999
2000
2001
2002
2003
012
TM Net Sdn. Bhd. 1. 2. 3. Access Services Application Services Content Services 405,330 855,495 1,610* 1,271,038 621 253,413 1,480,327 7,937 380,884 1,741,108 9,158 480,290
NETWORK CAPACITY TM TelCo (000) 1. 2. 3. 4. Cable pair (kilometers) Fibre (kilometers) Exchange lines International gateway exchange 30,069 172 7,337 33.0 30,404 245 7,970 34.5 30,724 295 8,528 40.3 30,850 326 8,656 45.7 31,040 472 8,679 45.7
Celcom (M) Berhad 1. 2. 3. No. of BTS (000) Network Switching System (NSS) capacity (000) Coverage populated area (%) 5,322 5,046,517 95%
Year ended 31 December PRODUCTIVITY TM TelCo 1. 2. Number of employees Number of access lines per employee
1999
2000
2001
2002
2003
25,442 174
24,789 187
21,237 217
20,708 222
18,654 243
Celcom (M) Berhad 1. 2. 3. Number of employees Revenue per employee (RM000) Customer per employee 4,264 858 1,017
TM Net Sdn. Bhd. 1. 2. 3. Number of employees Revenue per employee (RM) Revenue (RM000) 332 437,885 145,378 254** 828,590 210,462 406 743,936 302,038 424 872,641 370,000 510 433,333 221,000***
QUALITY OF SERVICE TM TelCo 1. 2. 3. Faults report per line Complaints per 1000 lines Leased circuits fault restoration within 24 hours (%) 0.5 10.2 97.3 0.4 8.3 100.0 0.4 5.6 85.1 0.4 5.2 96.7 0.3 4.3 97.5
Celcom (M) Berhad 1. 013 Overall Network Availability (%) Accessibility (%) Retainability (%) 019 Overall Network Availability (%) Accessibility (%) Retainability (%) 99.81 98.13 97.37 99.61 89.27 96.50 99.95 95.67 97.27 99.91 96.78 95.11 95.94 97.84 98.35 99.50 96.59 98.19
2.
TM Net Sdn. Bhd.**** 1. 2. Complaints of bills issued (%) Number of complaints per 1,000 customers 0.22 31
Notes: * ** In year 2000, Netmyne offered a one-year free subscription for the service and 1,610 subscribers signed up. However, in 2001, a significant number of these subscribers terminated the service when the free subscription period ended. Significant drop in the number of employees in 2000 as more than half of the non-executives from Internet Data Centre (IDC) were transferred to COINS.
*** This is nett revenue reported in TM Nets 2003 audited report in which the PSTN revenue has been excluded. **** Based on the Mandatory standards for Quality of Service regulated by MCMC.
013
Revenue from fixed line services mainly derived from the Company (Telekom Malaysia). Fixed line services comprise business telephony (which also includes Integrated Services Digital Network (ISDN), payphone, interconnect, international inpayment) and residential telephony recorded slight decrease in revenue of 2.5% (RM161.6 million) from RM6,428.8 million recorded in 2002 to RM6,267.2 million in 2003. Decreased call revenue was the main contributing factor to lower revenue from fixed line services. An upward adjustment of RM3.0 ringgit per month on rental for residential customers since March 2003 contributed higher rental revenue. However, local, long distance and international call revenue declined by 3.1%, 5.7% and 33.0% respectively in comparison to the preceding year. Further more, there was a full year effect of the tariff reduction in 2003 as compared to only 6-9 months effect in 2002. Lower interconnect revenue for fixed line services (net of inter-
014
company transactions) also contributed to the decrease in fixed line revenue. In 2003, RM47.4 million being interconnect revenue earned from Celcom post acquisition was eliminated from call revenue. There was no such elimination in 2002. In addition, the revised interconnection rate in July 2003 further reduced the Companys interconnect revenue. Lower international inpayment also contributed to lower call revenue. All the above factors contributed to the 6.1% (RM295.1 million)
OPERATING REVENUE
For the financial year ended 31 December 2003, Group operating revenue increased by 20.0% (RM1,962.3 million) from RM9,834.1 million recorded in 2002 to RM11,796.4 million in 2003. The encouraging growth in revenue was mainly contributed by Cellular segment due to consolidation of Celcom (Malaysia) Berhad (Celcom), a subsidiary acquired during the year. Revenue from Cellular segment comprises rental, calls charges, short message services and interconnect charges registered significant growth of 127.0% (RM2,017.4 million) from RM1,588.9 million recorded in 2002 to RM3,606.3 million in 2003. The consolidation of 8.5 month results of Celcom contributed RM1,826.0 million to the above increase and the remaining was jointly contributed by overseas subsidiaries namely MTN Networks (Pvt.) Limited, TM International (Bangladesh) Limited (TMIB) and Societe Des Telecommunications De Guinee.
reduction in call revenue. Revenue from data services, which include leased services, Corporate Information Superhighway (COINS) and frame relay and packet services recorded encouraging growth of 15.9% (RM129.2 million) as compared to 2002 mainly due to increase in customers for COINS services as well as introduction of new products such as Asymmetrical Digital Subscriber Line (ADSL). Revenue from internet and multimedia services comprise mainly revenue from internet and other multimedia services, development of education system and software and advertisement charges. TM Net Sdn. Bhd. (TM Net), a wholly owned subsidiary that was corporatised in July 2002 to provide internet and multimedia services registered significant growth of 26.0% in operating revenue as compared to annualised revenue for 2002. This growth was achieved at the back of increase usage on application and content as well as increase in broadband
Operating Revenue
[RM Million]
3,606.3 6
3,450.9 9
4,000
3,607.2 7
2003
2,821.6
2002
3,200
2,400
1,588.9
1,600
2,816.3 6
942.0
394.5 5
334.1
395.4 4
396.5 5
800
812.8
250.3
0
Cellular Fixed Line Business Fixed Line Residential Data Services Internet and Multimedia Other Telecommunication Related Services NonTelecommunication Related Services
213.7
subscribers. However, significantly lower revenue from development of education system and software of Telekom Smart School Sdn. Bhd. due to completion of pilot project off set the increase from TM Net. Consequently, internet and multimedia services only recorded marginal revenue growth of 0.5%. Other telecommunication related services comprise mainly recoverable works order, maintenance, international services, broadcasting, restoration of submarine cable and etc registered 15.5% (RM61.3 million) reduction as compared to the preceding year. Lower revenue from restoration of submarine cable was the main contributing factor. Non-telecommunication related services comprise mainly services from subsidiaries with core business in consultancy, property management, education, trading in consumers premises equipment and etc. This segment recorded 17.1% (RM36.6 million) growth in revenue mainly due to higher contribution from trading in consumers premises equipment and education.
The acquisition of Celcom resulted in significant change in the revenue mix of the Group. In line with the Groups target, Cellular segment contributed 30.6% of Group revenue in 2003 as compared to only 16.1% in 2002. Accordingly, contribution from fixed-line segment reduced to 53.1% from 65.4% recorded in 2002. Contribution from data services, internet and multimedia services and other telecommunication related services maintained at the same level as 2002 i.e. 8.0% (2002: 8.3%), 3.4% (2002: 4.0%) and 2.8% (2002: 4.0%) respectively. Non-telecommunication related services contributed 2.1% (2002: 2.2%) to Group operating revenue.
OPERATING COSTS
For the financial year ended 31 December 2003, Group operating costs increased by 22.9% (RM1,863.4 million) from RM8,154.8 million recorded in 2002 to RM10,018.2 million in 2003 of which RM1,614.1 million was attributed to the consolidation of Celcoms results. All category of expenses have recorded significant increase especially depreciation charge and impairment of property, plant and equipment (PPE), domestic and international outpayment, marketing, advertising and promotion and maintenance which have jointly accounted for 93.0% (RM1,733.4 million) of the total increase in operating costs.
015
Operating Costs
[RM Million]
3,200
2,481.8
1,842.8 8
2,400
3,551.3
4,000
2003
2002
1,464.8
1,351.3 3
1,600
1,209.0 9
1,307.7 0
473.8 3
377.5 5
445.8 .
351.9 9
0
Depreciation Domestic and International Outpayment Staff Costs Marketing, Advertising and Promotion Maintenance Bad and Doubtful Debts Supplies and Inventories Other Operating Costs
016
323.9
Current year Group depreciation charge increased significantly by 43.1% (RM1,069.5 million) to RM3,551.3 million as compared to RM2,481.8 million recorded in 2002. The consolidation of Celcoms results and higher depreciation charge recorded by Telekom Malaysia and TM Cellular Sdn. Bhd. (TM Cellular) arising from higher asset additions in late 2002 and 2003 jointly contributed to the significant increase in depreciation charge. The Group also recorded RM99.2 million impairment of PPE mainly contributed by Celcom and TM Cellular. There was no impairment of PPE in 2002. Domestic and international outpayment increased by 21.2% (RM255.8 million) to RM1,464.8 million. Higher international outpayment was mainly recorded at Telekom Malaysia level resulted from backdated adjustments for volume and traffic discrepancies whereas increased interconnect outpayment was jointly contributed by Telekom Malaysia and the consolidation of Celcom.
Consolidation of Celcoms results also contributed significant increase in marketing, advertising and promotion costs which increased by 42.1% (RM159.0 million) over the preceding year. Celcom contributed RM202.6 million to the increase whereas TM Cellular recorded reduction of RM56.1 million. On merged basis, Celcom and TM Cellular jointly accounted for 92.1% of the increase and TM Net Sdn. Bhd. and TMIB jointly contributed the balance. The Group also recorded significant increase in maintenance cost of 46.3% (RM149.9 million) which was mainly contributed by Celcom and TM Cellular. Despite consolidation of RM130.0 million staff costs of Celcom, Group staff costs only recorded marginal growth of 3.3% (RM43.6 million) due to reduction at Telekom Malaysia level since there was no cost incurred for voluntary separation program in 2003 as compared to RM147.0 million in 2002.
342.7 7
800
536.5 6
564.4 6
1,547.8
Allowance for bad and doubtful debts expense declined significantly by 21.0% (RM118.6 million) mainly due to lower provision at Telekom Malaysia resulting from improved credit control and better collection especially for fixed line services. TM Cellular also recorded lower allowance for bad debt of RM68.0 million but was off set with the post acquisition allowance for bad debt of Celcom of RM51.5 million. Depreciation charge remained the biggest cost component and constituted 35.4% of Group operating costs followed by domestic and international outpayments (14.6%), staff costs (13.5%), marketing, advertising and promotion (5.4%), maintenance (4.7%), allowance for bad and doubtful debt (4.4%), supplies and inventories (3.5%), and etc.
550
330
220
85.7 5 87.1 7 2003
110
389.6
440
2002
Finance Cost
517.1 7
Finance Income
2,500
2 2,443.6
2,000
1,469.2 1,250.8 0 1,395.5 , 1,530.4
1,500
1,017.0
1,810.5 1
1,000
600.1
500
73.5
Group
Company
893.0 9
017
Despite 18.3% increase in PBT, taxation expense for 2003 was 44.5% (RM293.4 million) lower than 2002. This was mainly due to recognition of deferred tax income which relates to previously unrecognised temporary differences of RM160.4 million by a subsidiary. Adjustment for over provision of corporate taxation in respect of prior year at Telekom Malaysia of RM89.9 million also contributed to lower taxation expense.
ASSETS
Total assets for the group increased from RM28,935.4 million in 2002 to RM36,040.3 million in 2003 mainly due to increase in intangible assets, property, plant and equipment (PPE), investments, deferred tax asset, trade and other receivables, cash and bank balances after netting off decrease in associates. During the year, the Group changed its accounting policy with
Consequent from higher PBT and 44.5% decrease in taxation expense, profit for the year attributable to shareholders increase significantly by 64.7% (RM546.1 million) as compared to 2002.
respect to goodwill. In line with the new policy, goodwill on acquisition of Celcom of RM4,022.7 million is now capitalised as intangible asset. In addition, expenditure incurred with respect to acquisition of 3G spectrum licence is also capitalised as intangible asset. These capitalisation increased the total assets by RM4,072.7 million. PPE increased by RM2,039.4 million from RM19,566.5 million in 2002 to RM21,605.9 million in 2003 mainly due to consolidation of Celcoms PPE after netting off reduction at Telekom Malaysia. Higher trade and other receivable and cash and bank balances also mainly contributed by Celcom.
018
The acquisition of Measat Global Berhad increased the total investments to RM384.7 million as at 31 December 2003 and was RM245.1 million higher than the preceding year. Decrease of associates of RM1,246.9 million was mainly due to reversal of Celcoms carrying value to the respective line item of assets under consolidation accounting.
9.3% 3
15 0
Property, Plant and Equipment
10.6% 0
4.2%
Intangible Assets
Associates
1.9%
Other Assets
2.8%
Resulting from higher profit after taxation and increased total assets, the return on total assets increased from 3.0% in 2002 to 4.0% in 2003.
SHAREHOLDERS FUND
The Group shareholders fund increased from RM14,919.6 million recorded in 2002 to RM16,782.4 million in 2003. The increase was mainly attributed to issuance of new shares under the Employees Share Options Scheme and net profit of the year attributable to shareholders after netting off dividend paid during the year. Consequent from significantly higher net profit for the year attributable to shareholders as mentioned earlier, return on shareholders fund increased significantly from 5.7% in 2002 to 8.3% in 2003. Likewise, earnings per share (EPS) also increased from 26.8 sen in 2002 to 43.6 sen in 2003. In line with improved performance in 2003, the proposed dividend for financial year 2003 comprised final dividend of 10.0 28% had doubled up in comparison to final dividend of 10.0 sen less tax at 28% in 2002. Consequently, dividend cover declined from 2.7 in 2002 to 2.1 in 2003. sen less tax at 28% and special dividend of 10.0 sen less tax at
Shareholders Fund
60
56.6 6
EPS (sen)
ROSHF (%)
48
29.5
36
19.1 1
24
7.7 7
0
1999 2000 2001 2002 2003
4.7
5.7
8.3 3
12
12.7
26.8
43.6
019
GROUP STRUCTURE
as at 31 March 2004
CORPORATE CENTRE
>> 100% UNIVERSITI TELEKOM SDN. BHD. 100% UNITELE MULTIMEDIA SDN. BHD. >> 100% TELEKOM RESEARCH & DEVELOPMENT SDN. BHD. >> 100% TELEKOM ENTERPRISE SDN. BHD. >> 100% MEDIATEL (MALAYSIA) SDN. BHD. >> 100% TM INTERNATIONAL (L) LIMITED >> 100% TM INTERNATIONAL LEASING INCORPORATED >> 100% TM GLOBAL INCORPORATED
CELLULAR
>> 100% CELCOM (MALAYSIA) BERHAD** 100% TECHNOLOGY RESOURCES INDUSTRIES BERHAD 100% FREEMANTLE HOLDINGS (M) SDN. BHD. 100% TR COMPONENTS SDN. BHD. 100% REGO MULTI-TRADES SDN. BHD. 100% TR INTERNATIONAL LIMITED 60% TRI TELECOMMUNICATION TANZANIA LIMITED (LIQUIDATORS APPOINTED) 86.4%* SHEBA TELECOM (PVT.) LTD. 49% MOBILE TELECOMMUNICATIONS COMPANY OF ESFAHAN (J.V.-P.J.S.) 100% CELCOM TRANSMISSION (M) SDN. BHD. 41% FIBRECOMM NETWORK (M) SDN. BHD. 100% CELCOM TECHNOLOGY (M) SDN. BHD. 100% CELCOM ACADEMY SDN. BHD. 60% CELCOM TIMUR (SARAWAK) SDN. BHD. 60% CELCOM TIMUR (SABAH) SDN. BHD. 100% TM CELLULAR SDN. BHD. 100% ALPHA CANGGIH SDN. BHD. >> 100% MOBIKOM SDN. BHD.
MULTIMEDIA
>> 100% TM NET SDN. BHD. >> 100% TELEKOM MULTI-MEDIA SDN. BHD. 51% TELEKOM SMART SCHOOL SDN. BHD. 49% MAHIRNET SDN. BHD. 30% MUTIARA.COM SDN. BHD. >> 100% TELEKOM PUBLICATIONS SDN. BHD. 100% CYBERMALL SDN. BHD. >> 70% TELEKOM APPLIED BUSINESS SDN. BHD. >> 70% TELEKOM TECHNOLOGY SDN. BHD.
INTERNATIONAL OPERATIONS
>> 100% TM INTERNATIONAL SDN. BHD. 100% MTN NETWORKS (PRIVATE) LIMITED 100% TM INTERNATIONAL LANKA (PRIVATE) LIMITED 100% TMI MAURITIUS LIMITED 85% G-COM LTD. 51% CAMBODIA SAMART COMMUNICATION CO. LTD. 19.59% SAMART CORPORATION PUBLIC COMPANY LIMITED >> 100% TELEKOM MANAGEMENT SERVICES SDN. BHD. >> 70% TM INTERNATIONAL (BANGLADESH) LIMITED >> 60% SOTELGUI S.A. (Societe Des Telecommunications De Guinee) >> 60% TELEKOM NETWORKS MALAWI LIMITED >> 100% TELEKOM MALAYSIA AFRICA SDN. BHD. 40% THINTANA COMMUNICATIONS LLC 30% TELEKOM SA LIMITED
FACILITIES MANAGEMENT
>> 100% TM FACILITIES SDN. BHD. >> 100% MENARA KUALA LUMPUR SDN. BHD.
Notes: * Pending arbitration proceedings ** Held through Telekom Enterprise Sdn. Bhd. The above structure excludes dormant/inactive companies. The complete list of subsidiaries/associates is shown in notes 43 and 44 to the financial statements
BOARD OF DIRECTORS
Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor
Chairman (Non-Independent Non-Executive Director)
022
CORPORATE INFORMATION
TELEKOM MALAYSIA BERHAD
Annual Report 2003
SECRETARIES
Wang Cheng Yong (MAICSA 0777702) Zaiton Ahmad (MAICSA 7011681)
REGISTERED OFFICE
Level 51, North Wing Menara Telekom Off Jalan Pantai Baharu 50672 Kuala Lumpur Tel No. : 03-2240 1211/1221/1225 Fax No. : 03-2283 2415/2284 8039
REGISTRAR
Tenaga Koperat Sdn. Bhd. 20th Floor, Plaza Permata (formerly known as IGB Plaza) Jalan Kampar Off Jalan Tun Razak 50400 Kuala Lumpur Tel No. : 03-4041 6522 Fax No. : 03-4042 6352
AUDITORS
PricewaterhouseCoopers (Chartered Accountants) 11th Floor, Wisma Sime Darby Jalan Raja Laut 50706 Kuala Lumpur Tel No. : 03-2693 1077 Fax No. : 03-2693 0997
PRINCIPAL BANKERS
Bumiputra-Commerce Bank Berhad Malayan Banking Berhad Affin Bank Berhad
PRINCIPAL SOLICITORS
Zul Rafique & Partners Zain & Co. Nik Saghir & Ismail
023
BOARD OF DIRECTORS
TELEKOM MALAYSIA BERHAD
Rosli bin Man (Director) Tan Poh Keat (Director) Ir. Prabahar N.K. Singam (Director) Y.B. Dato Ir. Haji Mohd Zin bin Mohamed (Director) Y.B. Dato Joseph Salang Gandum (Director) Dato Abdul Majid bin Haji Hussein (Director) Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor (Chairman)
Dato Dr. Md Khir bin Abdul Rahman (Chief Executive) Dato Dr. Abdul Rahim bin Haji Daud
(Deputy Chief Executive/Executive Director)
Datuk Dr. Halim bin Shafie (Director) Dato Dr. Mohd Munir bin Abdul Majid (Director) Dato Lim Kheng Guan (Director) Mohammad Zanudin bin Ahmad Rasidi (Alternate Director) Wang Cheng Yong (Company Secretary) Zaiton binti Ahmad (Joint Secretary)
026
TAN SRI DATO Ir. MUHAMMAD RADZI BIN HAJI MANSOR (62 years of age Malaysian) Chairman Non-Independent Non-Executive Director Tan Sri Dato Ir. Muhammad Radzi was appointed Chairman and Director of Telekom Malaysia on 12 July 1999. He graduated with a Diploma in Electrical Engineering in 1962 from Faraday House Engineering College, London and a Masters in Science (Technological Economics) from the University of Stirling, Scotland in 1975. A Chartered Professional Engineer registered with the Board of Engineers, Malaysia and Engineering Council, United Kingdom; he is a corporate member of the Institution of Engineers, Malaysia, the Institution of Electrical Engineers, United Kingdom and the Institute of Management, United Kingdom. He has been appointed as Board Member, Board of Engineers, Malaysia effective from 23 August 2002. He served in various engineering and management capacities in the former Jabatan Telekom Malaysia (JTM) over a twenty-two year period, including a three-year secondment as Technical Adviser to the Ministry of Energy, Telecommunications and Post. Tan Sri Radzi retired as Director General of Telecommunications upon corporatisation of JTM on 1 January 1987 and was subsequently appointed as Director of Operations of Telekom Malaysia. He served as Director of Marketing and Customer Services from 1989 to 1995. He was then appointed as Director of Regulatory Management and External Affairs, and retired in July 1996. From 1997 to 1999, he was retained as a Consultant/Adviser on multimedia flagship application projects for the Multimedia Development Corporation Sdn. Bhd. (MDC), a company established by the Malaysian Government to oversee the development and implementation of multimedia projects. Tan Sri Radzi currently serves as Chairman of the Board Nominating and Remuneration Committee and Board Employees Share Option Scheme Committee. He is also a Board Member of a number of subsidiaries and associate companies of Telekom Malaysia. He is a Non-Executive Director nominated by the Minister of Finance (Inc), the Special Shareholder of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
DATO DR. MD KHIR BIN ABDUL RAHMAN (56 years of age Malaysian) Chief Executive Non-Independent Executive Director Dato Dr. Md Khir was appointed Chief Executive and a Board Member on 1 May 2000. Prior to this, he was the Deputy Chief Executive/General Manager of Malaysian Electronics Payment System Sdn. Bhd. (MEPs). He holds a Bachelor of Science Degree in Mathematics from University of Malaya, Masters in Agricultural Development and Doctorate of Science in Computing Statistics, from the State University of Ghent, Belgium. Dato Dr. Md Khir started his career in Malaysian Agricultural Research and Development Institute (MARDI) in 1972, before joining Bank Negara Malaysia in 1983. He served the Central Bank in various senior positions before joining the telecommunications sector in 1996 as the Managing Director of Mejati Technologies Group. He is also a Director of VADS Berhad (VADS), MDC, Malaysian Industry-Government Group for High Technology (MIGHT) and SIRIM Berhad. Dato Dr. Md Khir is currently a Member of the Board Employees Share Option Scheme Committee, Board Tender Committee TelCo, Board Re-listing of Celcom Committee and also a Board Member of a number of subsidiaries and associate companies of Telekom Malaysia. He is an Executive Director nominated by the Minister of Finance (Inc), the Special Shareholder of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
027
DATO DR. ABDUL RAHIM BIN HAJI DAUD (55 years of age Malaysian) Deputy Chief Executive/Executive Director Non-Independent Executive Director He was appointed as Deputy Chief Executive of the Company effective from 29 May 2001 and has held the position of Executive Director since 7 July 1998. He obtained a Bachelor of Engineering (Hons.) in Electronics from the University of Liverpool, United Kingdom, Masters in Science (Telecommunications Engineering) from University of Birmingham, United Kingdom and Doctorate in Engineering (Telecommunication) from the University of Bath, United Kingdom. He also obtained a Masters in Business Administration from University of Ohio, USA. He has attended the Harvard Business Schools Advanced Management Program and also the Senior Executive Development Program at the Wharton School of Business, University of Pennsylvania, USA. He is a Member of the Board of Engineers, Malaysia and also a Fellow of the Institution of Engineers, Malaysia.
028
He joined JTM as a Telecommunications Engineer in 1973. He has wide experience in managing operations in relation to Telecommunications and Information Technology. In 1988, he was appointed General Manager, Information Systems and became the Senior General Manager, National Network Operations in 1993. In July 1995, he was made Senior Vice President, Network Services before his appointment to head Telekom Malaysias TelCo as its Chief Operating Officer in 1996. Upon his appointment as Executive Director in July 1998, he remained as the Chief Operating Officer TelCo until 1 February 2001 when he assumed the position of Executive Director, Corporate Strategy and Development. He was the first Malaysian to be elected as Chairman of Commonwealth Telecommunications Organisation (CTO) comprising 35 countries for three terms from September 1999 to November 2002. Dato Dr. Abdul Rahim serves as a Member of Board Employees Share Option Scheme Committee, Board Tender Committee TelCo and also a Board Member of a number of subsidiaries and associate companies of Telekom Malaysia. He is an Executive Director nominated by the Minister of Finance (Inc), the Special Shareholder of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
DATO ABDUL MAJID BIN HAJI HUSSEIN (55 years of age Malaysian) Non-Independent Non-Executive Director Dato Abdul Majid was appointed Director of Telekom Malaysia on 5 December 2000. He obtained his Masters in Business Management from Asian Institute of Management, Manila and has attended the Advanced Management Program at the Harvard Business School, USA in 2000. Upon graduating with a Bachelor of Economics majoring in Accountancy, he served the Accountant Generals Office for two years and later the National Institute of Public Administration (INTAN) for six years as a lecturer and program coordinator. In 1983, he was seconded to the Federal Agricultural Marketing Authority (FAMA) as the Director of Planning and later served as the Deputy Director General in charge of Administration. From 1990 to 1993, he served as the Senior Assistant Director in the Budget Division of the Ministry of Finance. He continued his public service as the State Financial Officer of Negeri Sembilan, Director of Service in the Public Services Department and the State Secretary of Perak prior to being appointed to his present position as Deputy Secretary General Treasury (Operations) in the Ministry of Finance. Dato Abdul Majid currently serves as a Non-Executive Chairman of the Board Tender Committee TelCo and a Member of the Board Employees Share Option Scheme Committee, Board Audit Committee and Board Re-listing of Celcom Committee. He is also a Director of Perusahaan Otomobil Nasional Berhad and Keretapi Tanah Melayu Berhad. He is a Non-Executive Director nominated by the Minister of Finance (Inc), the Special Shareholder of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
DATUK DR. HALIM BIN SHAFIE (55 years of age Malaysian) Non-Independent Non-Executive Director Datuk Dr. Halim was first appointed to the Board on 24 November 2000. He obtained a Bachelor of Economics (Hons.) from the University of Malaya in 1972, Masters in Public and International Affairs from the University of Pittsburgh, USA in 1980 and a Doctorate in Information Transfer from Syracuse University, USA in 1988. He also attended the Advanced Management Program at the Harvard Business School, USA in 2000. He has held several positions in the Government sector, including Assistant Secretary at the Ministry of Education. He served as Program Co-ordinator for the National Computer Training Center at INTAN, and as Director of the Information Technology Division of the Malaysian Administrative Modernisation and Management Planning Unit (MAMPU) in the Prime Ministers Department. He served as the Director of INTAN before becoming Deputy Secretary General, Communications and Multimedia, Ministry of Energy, Communications and Multimedia in 1999. He was appointed as Secretary General of the Ministry from November 2000. Datuk Dr. Halim is currently a member of the Board Employees Share Option Scheme Committee, Board Tender Committee TelCo, Board Re-listing of Celcom Committee and also a Board Member of a number of subsidiaries of Telekom Malaysia. He is also a Director of Tenaga Nasional Berhad and Pos Malaysia Berhad. He is a Non-Executive Director nominated by the Minister of Finance (Inc), the Special Shareholder of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
029
DATO DR. MOHD MUNIR BIN ABDUL MAJID (56 years of age Malaysian) Senior Independent Non-Executive Director Dato Dr. Mohd Munir was appointed to the Board on 22 May 2000. He graduated with a Bachelor of Science (Economics) and Y.B. DATO JOSEPH SALANG GANDUM (54 years of age Malaysian) Non-Independent Non-Executive Director Y.B. Dato Joseph Salang Gandum was first appointed to the Board on 6 January, 1987. He graduated with a Bachelor of Arts (Econs.) in 1974 from Western Maryland College, Maryland, USA and a Masters degree in Business Administration from Iran Center for Management Studies in 1975. He formerly served as Regional Manager (East Malaysia) with Bank Pembangunan Malaysia Berhad (East Malaysia), Trade Manager of MISC Coastal Services Sdn. Bhd., Corporate Manager and Manager of Location (Kuching) of Standard Chartered Bank Malaysia Berhad. Y.B. Dato Joseph is now a businessman and Member of Parliament for Julau Constituency, Sarawak. He is also a Director of Tabak Holdings Berhad and Borneo Securities Holdings Berhad. He currently serves as a Non-Independent Non-Executive Member of the Board Audit Committee and Board Tender Committee TelCo. He is also a Board Member of a number of subsidiaries and associate companies of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company. Note: Directors profiles were based on the Annual Report cut-off date on 19 March 2004. Y.B. Dato Joseph Salang Gandum was appointed as the Deputy Minister of the Foreign Ministry effective from 30 March 2004. He tendered his resignation as a Director of the Company and its Group on 1 April 2004. a Ph.D. in International Relations from the London School of Economics and Political Science (LSE), United Kingdom. He was the First Executive Chairman of the Securities Commission (SC), a position he held for two terms from March 1993 until February 1999. Upon his return from abroad, where he worked at the LSE and for Daiwa Europe N.V. in London, he served from 1979 1986 in various positions in the editorial department of the New Straits Times Press Berhad (NSTP) ending up as Group Editor (English) in NSTP. He was the Chief Executive of Commerce International Merchant Bankers Berhad (CIMB) from 1986, and was its Executive Chairman before resigning to become Executive Chairman of the SC. He has also served as Director and Chairman of several other companies and council member of government agencies during his career. Some of the prominent ones include the Association of Merchant Banks, KLOFFE Sdn. Bhd., the Kuala Lumpur Stock Exchange (now known as the Malaysia Securities Exchange Berhad), the Council of Malaysian Industrial Development Authority (MIDA) and the Foreign Investment Committee (FIC) of the Prime Ministers Department. He is the Chairman of Celcom (Malaysia) Berhad (Celcom) and also a Director of Saujana Resorts (Malaysia) Berhad and Technology Resources Industries Berhad (TRI). Dato Dr. Mohd Munir currently serves as the Independent Non-Executive Chairman of the Board Audit Committee and a Member of the Board Nominating and Remuneration Committee. He is also a member of the Board Re-Listing of Celcom Committee and a Board Member of a number of subsidiaries of Telekom Malaysia. He has never been charged for any offence and has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
030
Y.B. DATO Ir. HAJI MOHD ZIN BIN MOHAMED (49 years of age Malaysian) Independent Non-Executive Director Y.B. Dato Ir. Haji Mohd Zin was appointed to the Board on 22 May 2000. He is a civil engineer by profession, having obtained his Bachelor and Masters degrees from Bradley University, USA. As a professional, he owns a Consultancy firm in Civil and Engineering works. He has served various government bodies and is currently on the Board of Universiti Technologi Mara (UiTM) and Universiti Telekom Sdn. Bhd. (Multimedia University). He is also a Director of Kumpulan Hartanah Selangor Berhad, a member of the Institution of Engineers, Malaysia and the Board of Engineers, Malaysia. He is also an experienced politician having been involved in Malaysian politics for almost 21 years. Y.B. Dato Ir. Haji Mohd Zin currently is a Member of Parliament for Shah Alam constituency, Deputy Head of the UMNO Shah Alam Division, Deputy Chairman of Selangors Council of Culture & Tourism, a Board Member of FAMA, a Board Member of Yayasan Selangor, a Counselor of the Municipal Council of Shah Alam, Selangor State assemblyman and the President of Malaysian Parliament Government Backbencher Club. Y.B. Dato Ir. Haji Mohd Zin is a member of Board Tender Committee TelCo and a Board Member of a number of subsidiaries of Telekom Malaysia. He has never been charged for any offence and has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company. Note: Directors profiles were based on the Annual Report cut-off date on 19 March 2004. Y.B. Dato Ir. Haji Mohd Zin bin Mohamed was appointed a Member of Parliament for Sepang on 21 March 2004 and the Deputy Minister of the Works Ministry effective from 30 March 2004. He tendered his resignation as a Director of the Company and its Group on 1 April 2004.
031
DATO LIM KHENG GUAN (61 years of age Malaysian) Independent Non-Executive Director Dato Lim Kheng Guan was appointed to the Board of Telekom Malaysia on 23 June 2000. He is a Chartered Accountant by profession and an Associate Member of the Malaysian Institute of Accountants, Associate of the Malaysian Institute of Certified Public Accountants, Fellow of Australian Society of Certified Practicing Accountants, Associate of the Australian Institute of Bankers and a Member of the Malaysian Institute of Management. He has also attended Advanced Management Programs at Manchester Business School, INSEAD and London Business School. He has more than 30 years of experience in accounting, management consulting and senior managerial positions in local and multinational public listed companies. Currently, he is the Executive Director of Malaysian Management Consultants Sdn. Bhd. and a Director of Celcom and TRI. Dato Lim Kheng Guan currently serves as an Independent NonExecutive Chairman of the Board Commercial Dispute Resolution Committee and a Member of the Nominating and Remuneration Committee and Board Audit Committee of Telekom Malaysia. He is also a Board Member of a number of subsidiaries and associate companies of Telekom Malaysia. He has never been charged for any offence and has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
032
ROSLI BIN MAN (50 years of age Malaysian) Non-Independent Non-Executive Director Rosli bin Man was appointed to the Board on 15 July 2000. He has more than 26 years of experience in the telecommunications industry. Rosli holds a Bachelor in Science in Electrical and Electronic Engineering (Electrical Design and Instrumentation) from University of Glasgow, United Kingdom and a Diploma in Electrical and Electronic Engineering (Communications) from Technical College, Kuala Lumpur. Ir. PRABAHAR N.K. SINGAM (42 years of age Malaysian) Independent Non-Executive Director Ir. Prabahar was appointed Director of Telekom Malaysia on 23 June 2000. He is an engineer by profession and has a Bachelor of Science (Civil Engineering) degree from Portsmouth Polytechnic, United Kingdom in 1985. A member of the Board of Engineers, Malaysia, the Institution of Engineers, Malaysia and Environmental and Research Association, Malaysia (ENSEARCH). He is a professional engineer who has wide experience in the civil engineering sector, especially in the areas of consultancy, contracting, project management and project financing. Ir. Prabahar currently serves as an Independent Non-Executive Member of the Board Audit Committee and Board Nominating and Remuneration Committee. He is also a Board Member of a number of subsidiaries and associate companies of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company. He joined JTM in 1976 as Assistant Controller where he gained wide exposure in telecommunication services including the task to implement the countrys first mobile telecommunication service i.e. ATUR 450. In 1985, he made a career move to the private sector by joining the Fleet group as its Group Manager, Technical Services where he was part of the team responsible in overseeing the roll-out and operations of the nations first privately operated terrestrial television station namely Sistem Television Malaysia Berhad (TV3). From 1988 to 1996, he was instrumental in setting Malaysia i.e. Celcom (M) Sdn. Bhd., catering for the cellular mobile telecommunication business. He left Celcom (M) Sdn. Bhd. as its President in 1996 to join Prismanet Sdn. Bhd. as Managing Director and held the position until November 1998. In July 2000, he joined Natrindo Telpon Sellular (NTS), the GSM 1800 cellular operator in East Java, Indonesia. As the Chief Operating Officer, he was responsible for the planning, development, successful roll-out of the network and the day-to-day operations of the business. He was then appointed as Deputy Chief Operating Officer of Lippo Telecom to oversee NTS planning, roll-out and operation of NTS National Cellular Operation. He left NTS in January 2002. Rosli is also a director of Celcom and TRI. He currently serves as a member of the Board Commercial Dispute Resolution Committee and a Board member of a number of subsidiaries of Telekom Malaysia. He is a Non-Executive Director nominated by the Companys Substantial Shareholder, Khazanah Nasional Berhad and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
033
TAN POH KEAT (67 years of age Malaysian) Non-Independent Non-Executive Director Tan Poh Keat was appointed Director of Telekom Malaysia on 29 August 2000. He graduated with a Bachelor of Engineering (Electrical) degree and Masters of Engineering Degree, both from Auckland University, New Zealand under the Colombo Plan Scholarship. He joined JTM in 1962 as an engineer and has served in various appointments, the last being Deputy Director General. Subsequently, he joined Telekom Malaysia as Director, Networks
034
Service and retired at the end of 1991. Currently, he is an independent consultant to a number of local and international companies. Tan Poh Keat is also a Director of VADS, Celcom, TRI and Measat Global Berhad. He currently serves as a Member of the Board Tender Committee TelCo and a Board Member of a number of subsidiaries and associate companies of Telekom Malaysia. He is a Non-Executive
Director nominated by the Minister of Finance (Inc), the Special Shareholder of Telekom Malaysia and has never been charged for any offence. He has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company.
MOHAMMAD ZANUDIN BIN AHMAD RASIDI (50 years of age Malaysian) Alternate Director to Dato Abdul Majid bin Haji Hussein Non-Independent Non-Executive Director Mohammad Zanudin was appointed as Alternate Director to Dato Abdul Majid bin Haji Hussein on 12 December 2000. He has a Bachelor of Economics from Universiti Kebangsaan Malaysia and a Master Degree in Public Management from Carnegie-Mellon University, USA. He has also completed the Harvard International Tax Program at the Harvard University in 1992. He began his career with the Treasury in 1984 as Assistant Secretary in the Economic and International Division. After four years, he was assigned to the Tax Analysis Division where he was directly involved in formulating policies and strategies for budget proposals. He was then promoted to be Principal Assistant Secretary in 1998. Subsequently, he was transferred to the Public Enterprises, Privatisation and Minister of Finance Incorporated Coordination Division as Principal Assistant Secretary in November 2000, a position he holds until today. Mohammad Zanudin is also the Alternate Member/Director to Dato Abdul Majid on the Board Employees Share Option Scheme Committee, Board Tender Committee TelCo and Board Re-listing of Celcom Committee where Dato Abdul Majid has been appointed as a member. He has never been charged for any offence and has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company. DATO SURIAH BINTI ABD RAHMAN (54 years of age Malaysian) Alternate Director to Datuk Dr. Halim bin Shafie Non-Independent Non-Executive Director Dato Suriah was appointed to the Board on 24 November 2000 as Alternate Director to Datuk Dr. Halim bin Shafie. She holds a Bachelor of Arts (Hons.) from University of Malaya and a Master of Arts from the University of Leeds, United Kingdom. She began her career in the public service as an Assistant Secretary in in the Government Procurement Management Division. She then served various Ministries and Government Agencies including the Social Economic Research Unit, Prime Ministers Department, Ministry of Housing and Local Government, Malaysian Institute of Maritime Affairs, Public Service Department and Implementation Coordination Unit of the Prime Ministers Department before assuming her current position as Deputy Secretary General 1, Ministry of Energy, Communications and Multimedia on 1 November 2000. Dato Suriah is the Alternate Member/Director to Datuk Dr. Halim on the Board Employees Share Option Scheme Committee, Board Tender Committee TelCo, Board Re-listing of Celcom Committee and all the subsidiaries of Telekom Malaysia, where Datuk Dr. Halim has been appointed as a member. She has never been charged for any offence and has no family relationship with any Director or major shareholder of the Company nor any conflict of interest with the Company. Treasury and rose to the position of Principal Assistant Secretary
035
DATO RAMLI BIN ABBAS DATO DR. MD KHIR BIN ABDUL RAHMAN
Chief Executive, Telekom Malaysia Berhad Chief Executive Officer, Celcom (Malaysia) Berhad
expertise and perspectives to the leadership of a highly regulated telecommunication business. Directors profiles, appearing on pages 26 to 35 inclusive, illustrate an impressive spectrum of experiences vital to the direction and management of a telecommunication company.
MANAGING WITH INTEGRITY, TRANSPARENCY AND ACCOUNTABILITY INTRINSIC COMPONENTS IN THE PRESERVATION OF SHAREHOLDER VALUE
CORPORATE GOVERNANCE STATEMENT
TELEKOM MALAYSIA BERHAD
Annual Report 2003
During the year, fourteen (14) board Meetings were held and the attendance of individual Directors is recorded in the Statement accompanying the Notice of the Annual General Meeting.
Board Composition and Balance The total of twelve (12) Directors of the Board consist of a NonExecutive Chairman, two (2) Executive Directors designated as the Chief Executive and Deputy Chief Executive/Executive Director, five (5) Non-Executive Directors and four (4) Independent NonExecutive Directors representing one third of the Board. The roles of the Non-Executive Chairman and the Chief Executive are separate with clear distinction of responsibilities between them. Dato Dr. Mohd. Munir Abdul Majid is the Senior Independent Non-Executive Director, called for in the Code and to whom concerns pertaining to the Group may be conveyed by shareholders and the public. The Boards principal focus is the overall strategic direction, development and control of the Group. In support of this focus, the Board approves the Groups strategic plan and its annual budget and throughout the year, reviews the performance of the operating subsidiaries against their budgets and targets. The Executive Directors are responsible for the implementation of broad policies approved by the Board and they are obliged to report and discuss at board meetings all material matters currently or potentially affecting the Group and its performance, including all strategic projects and regulatory developments. The Chairman is responsible in ensuring the integrity and effectiveness of the relationship between the Non-Executive and Executive Directors. The Non-Executive Directors provide considerable depth of knowledge collectively gained from experiences in a variety of public and private companies. The Independent Non-Executive Directors are independent of management and free from any business or other relationship, which could materially interfere with the exercise of their independent judgement. They provide unbiased and independent views in ensuring that the strategies proposed by the management are fully deliberated and examined, in the interest of shareholders, employees, customers, and the many communities in which the Group conducts its business.
038
The Company is committed to achieving high standards of corporate governance and the effective application of the principles and best practices as set out in the Malaysian Code on Corporate Governance (the Code) throughout its Group. The Board will continue to play an active role in improving governance practices to ensure that the best interests of shareholders and other stakeholders are served by transparent disclosure policies. The Board considers that the Company has fully complied with Part I of the Code. This Statement, together with other statements, such as the Statement on Internal Control, sets out the manner in which the Company has applied the principles and best practices of the Code.
BOARD OF DIRECTORS
An experienced Board consisting of Members with a wide range of business, financial, technical and public service background leads and controls the Group. This brings depth and diversity in
Independence and Conflict of interest The Independence of the Non-Executive Directors is under constant review against best practices and regulatory provisions. The Directors have a continuing responsibility to determine whether they have a potential or actual conflict of interest in relation to any matter, which comes before the Board. The Company and Group has adopted a process whereby each Director is required to make written declarations whether they have any interest in transactions tabled at every board meeting of the Group.
The re-election of Directors ensures that shareholders have a regular opportunity to reassess the composition of the Board. Particulars of Directors submitted to shareholders for re-election are disclosed in the Statement accompanying the Notice of Annual General Meeting (AGM) with references to other sections of this Annual Report.
Board Appointment Process The Company has in place formal and transparent procedures for the appointment of new Directors. These procedures ensure that all nominees to the Board, are first considered by the Nominating and Remuneration Committee taking into account the required mix of skills and experience and other qualities, before making a recommendation to the Board.
Directors Training The Board acknowledged the importance of continuous education and training to enable effective discharge of their responsibilities. All the Directors have successfully completed the Mandatory Accreditation Programme. During the year, the Directors have also attended various seminars and international conventions to gain insight into the state of the economy as well as latest regulatory and technological developments in relation to the Groups business. Following the introduction of the mandatory Continuing Education Programme (CEP) by MSEB in July 2003, the Directors have also actively pursued relevant courses and seminars recognised under the CEP.
Re-Election In accordance with the Listing Requirements of the Malaysia Securities Exchange Berhad (MSEB) and the Companys Articles of Association, all Directors are subject to re-election by rotation once at least every three (3) years and a re-election of Directors shall take place at each Annual General Meeting. Executive Directors also rank for re-election by rotation.
Directors Remuneration The Nominating and Remuneration Committee has recommended to the Board a framework for the remuneration of the Executive and Non-Executive Directors. The Executive Directors remuneration comprises a salary, allowances, bonuses and other customary benefits as appropriate. Salary reviews take into account market rates and the performance of the individual and the Group. Remuneration of Non-Executive Directors is based on a standard fixed fee. Additional allowances are also paid in accordance with the number of meetings attended during the year.
039
Details of the remuneration of each Director of the Company, categorised into appropriate components for the financial period ended 31 December 2003, are as follows: FEES & SALARY ALLOWANCES (RM) (RM) BENEFIT IN KIND (RM)
NAME OF DIRECTORS
EX-GRATIA (RM)
TOTAL (RM)
Executive Dato Dr. Md Khir bin Abdul Rahman Dato Dr. Abdul Rahim bin Haji Daud Non-Executive Tan Sri Dato Ir. Muhammad Radzi bin Hj Mansor Datuk Dr. Halim bin Shafie Dato Abdul Majid bin Haji Hussein Y.B. Dato Joseph Salang Gandum Y.B. Dato Ir. Haji Mohd Zin bin Mohamed Dato Dr. Mohd Munir bin Abdul Majid Ir. Prabahar N.K. Singam Dato Lim Kheng Guan Rosli bin Man Tan Poh Keat
264,000 264,000
76,125 47,010
96,000* 60,000*
93,023 10,649
529,148 381,659
154,320 38,900 37,200 146,188 108,858 210,700 60,280 110,170 113,500 108,325
9,100 1,500 1,500 48,125 48,125 138,330 1,500 38,150 4,672 3,690
163,420 40,400 38,700 194,313 156,983 349,030 61,780 148,320 118,172 112,015
040
Alternate Directors Mohammad Zanudin bin Ahmad Rasidi (Alternate to Dato Abdul Majid bin Haji Hussein) Dato Suriah binti Abd Rahman (Alternate to Datuk Dr. Halim bin Shafie) TOTAL Note: * Ex-Gratia provided for 2002 paid in 2003
528,000
156,000
Access to Information The Board and its Committees are supplied with an agenda and relevant up-to-date information for review in good time prior to each meeting to enable them to make informed decisions. The process of Board papers approval, compilation and dissemination is expedited via an efficient and secure electronic Board Document Management System to facilitate an informed decision-making process within the Group. The Board has full and timely access to all relevant information to discharge its duties effectively. All Directors have access to the advice and services of the company secretary. The Board is constantly advised and updated on statutory and regulatory requirements pertaining to their duties and responsibilities. Procedures are in place for Directors and board committees to seek independent professional advice in the course of fulfilling their responsibilities, at the Companys expense.
BOARD COMMITTEES
The Board delegates certain responsibilities to Board Committees, namely, the Audit Committee, Nominating and Remuneration Committee, Tender Committee TelCo, Employee Share Option Scheme (ESOS) Committee, Re-Listing of Celcom Committee (RLCC) and the Commercial Dispute Resolution Committee (CDRC). All committees have written terms of reference and operating procedures and the Board receives reports of their proceedings and deliberations. The Chairmen of the various committees report the outcome of the committee meetings to the Board and relevant decisions are incorporated in the minutes of the full Board meeting.
for directorship in its Group of companies as proposed by the Chief Executive; Examine the size of the Board with a view to determine the number of Directors on the Board in relation to its effectiveness and review its required mix of skills and experience and other qualities; Recommend suitable orientation, educational and training programmes to continuously train and equip existing and new Directors; Set, review, recommend and advise the policy framework on all elements of the remuneration such as reward structure, fringe benefits and other terms of employment of the Executive Directors having regard to the overall Group policy guidelines and framework; Advise the Board on the performance of the Executive Directors and an assessment of their entitlement to performance related pay and advise the Executive Directors on the remuneration terms and conditions of senior management; Establish and recommend a formal and transparent procedure Executive Chairman, Non-Executive Directors and Board Committees, which recommendation shall be decided by the Board of Directors as a whole. The Nominating and Remuneration Committee has the authority to examine a particular issue and report back to the Board with recommendations. The determination of remuneration packages of Directors is a matter for the Board as a whole and individuals are required to abstain from discussion on their own remuneration. The Committee met seven (7) times during the year.
Audit Committee A full Audit Committee report enumerating its membership, its role and its activities during the year is set out on pages 48 to 51 inclusive.
Nominating and Remuneration Committee Membership: Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor (Chairman Non-Executive) Dato Dr. Mohd. Munir bin Abdul Majid (Independent Non-Executive) Ir. Prabahar N.K. Singam (Independent Non-Executive) Dato Lim Kheng Guan (Independent Non-Executive) Objectives: The main objectives of the Nominating and Remuneration Committee are: to ensure that the Directors of the Board bring characteristics to the Board, which provide a required mix of responsibilities, skills and experience. to set the policy framework and to make recommendations to the Board on all elements of the remuneration, terms of employment, reward structure and fringe benefits for Executive Directors and other top selected management positions with the aim to attract, retain and motivate individuals of the highest quality. Principal Duties and Responsibilities: Recommend to the Board, candidates for directorship on the Board of the Company and its Group as well as membership of all other Board Committees. In making its recommendations, the Committee considers candidates from the Management
Tender Committee TelCo Membership: Dato Abdul Majid bin Haji Hussein (Chairman Non-Executive) Dato Dr. Md Khir bin Abdul Rahman (Chief Executive) Dato Dr. Abdul Rahim bin Haji Daud (Deputy Chief Executive/ Executive Director) Datuk Dr. Halim bin Shafie (Non-Executive) Y.B. Dato Joseph Salang Gandum (Non-Executive) Y.B. Dato Ir. Mohd. Zin bin Mohamed (Independent Non-Executive) Tan Poh Keat (Non-Executive) Mohammad Zanudin bin Ahmad Rasidi (Alternate to Dato Abdul Majid bin Haji Hussein) Dato Suriah binti Abd Rahman (Alternate to Datuk Dr. Halim bin Shafie)
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The principal duties and responsibilities of the Tender Committee TelCo are to ensure that the procurement process complies with the relevant policies and requirements and to consider, evaluate and approve or recommend awards which are beneficial to the Company taking into consideration various factors such as price, usage of product and services, its quantity, duration of service and other relevant factors. The Committee met seven (7) times during the year.
In addition to quarterly financial reports, the Company communicates with shareholders and investors through its annual report, with comprehensive and sufficient details about financial results and activities of the Group. The annual report published in English language, is despatched to shareholders who are also given the option to receive the annual reports in Bahasa Malaysia (the national language) upon request. Established procedures are in place to ensure the timely public release of share price sensitive information.
ESOS Committee Membership: Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor (Chairman Non-Executive) Dato Dr. Md Khir bin Abdul Rahman (Chief Executive) Dato Dr. Abdul Rahim bin Haji Daud (Deputy Chief Executive/ Executive Director) Dato Abdul Majid bin Haji Hussein (Non-Executive) Datuk Dr. Halim bin Shafie (Non-Executive) Mohammad Zanudin bin Ahmad Rasidi (Alternate to Dato Abdul
The AGM provides an open forum at which shareholders and investors are informed of current developments and where ample time is allowed for questions to be raised to Board members and Committees Chairmen. The Company supports the Codes principle to encourage shareholder participation. The Companys Articles of Association allow a member entitled to attend and vote to appoint a proxy to attend and vote instead of the member and also provide that a proxy need not be a member of the Company. A press conference is held immediately after the AGM where the Chairman, Executive Directors and Chief Financial Officer are present to clarify and explain issues raised by the media. To ensure easy and convenient access to the Groups financial
042
Majid bin Haji Hussein) Dato Suriah binti Abd Rahman (Alternate to Datuk Dr. Halim bin bin Shafie) The principal duties and responsibilities of the ESOS Committee are to construe and interpret the Employee Share Option Scheme (ESOS) and options granted under it, to define the terms therein and to recommend to the Board to establish, amend and resolve rules and regulations relating to the scheme and its administration. The Committee only meets as and when required. information by shareholders and investors, press releases, annual reports and other corporate information, a website is maintained at www.telekom.com.my. The MSEB also provides for the Company to electronically publish all its announcements including its quarterly results and Annual Report through MSEB internet website at www.announcements.klse.com.my.
INVESTOR RELATIONS
In line with good corporate governance practices, the Companys Investor Relations (IR) unit proactively and actively disseminates
Ad-Hoc Committee Apart from the above, specific and ad-hoc Board Committees, such as the RLCC and CDRC have been established during the year on need basis to deliberate and expedite decision-making processes on specific aspects of the business and corporate exercises.
relevant information about the Group to the investment community, specifically the institutional fund managers and analysts. Telekom Malaysia is one of the most actively covered companies in the Kuala Lumpur Stock Exchange Composite Index with regular tracking by more than 18 research brokers, 3 rating agencies and over 200 domestic and foreign institutional investors, both in the equity and debt markets. The IR unit maintains very close contact with them, to ensure that the Groups strategies, operational activities and financial performance are well understood and that such information is made available to them in a timely manner.
Regular contacts to provide accurate and timely information are established through road shows, company visits, and one on one meetings, teleconferences and e-mails. Telekom Malaysia participated actively in more than 10 local and overseas investor conferences in New York, London, Hong Kong and Singapore, in the year 2003 including the MSEB Investor Week 2003. Telekom Malaysia is one of the few corporations in Malaysia that conducts teleconferences every quarter to brief analysts on its quarterly results. At these sessions, analysts are not only given a comprehensive review of the Groups financial performance but are also given the opportunity to clarify whatever queries they may have in question and answer sessions. The content of these briefings is posted on the Companys website. The senior management of the Group, the Chief Executive, Deputy Chief Executive/Executive Director, Chief Financial Officer, Vice Presidents and Heads of the operating companies are actively involved in IR activities, meeting fund managers and analysts regularly.
consider that in presenting these financial statements, the Group has used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates. The Directors have a general responsibility for ensuring that the Company and the Group keep accounting records and financial statements, which disclose with reasonable accuracy the financial position of the Company and the Group. Due care and reasonable steps are taken by the Directors to ensure that such financial statements comply with the Companies Act, 1965, approved accounting standards in Malaysia and other regulatory provisions.
Internal controls The Board acknowledges its overall responsibility for maintaining a sound system of internal controls to safeguard shareholders investment and Groups assets. The Statement on Internal Control is set out on pages 52 to 53 of the annual report providing an overview of the state of internal controls within the Group.
conforms to MSEB disclosure rules and regulations. Care has been taken to ensure that no market sensitive information such as corporate proposals, financial results and other material information is disseminated to any party without first making an official announcement to the MSEB.
An appropriate relationship is maintained with the Companys Auditors through the Audit Committee. The Audit Committee has been explicitly accorded the power to communicate directly with both the external Auditors and internal Auditors. The role of the Audit Committee in relation to the Auditors is set out in the Terms of Reference on page 51.
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Risk Management
Telekom Malaysia recognises the importance of sound internal controls and risk management practices to good corporate governance. It is for this reason that it continues to embed risk-based systems of internal controls to provide reasonable assurance of achieving the Groups business objectives while at the same time safeguarding and enhancing shareholder investment and the companys assets.
The Group has put in place a Risk and Internal Control Policy and an Enterprise Risk Management (ERM) Framework. The Board is following through the process of identifying, evaluating and managing significant risks that affect the achievement of business objectives using the approved ERM process and the Risk Control & Reporting platform, as illustrated below:
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6. Response to Risk
4. Analyse Risks
5. Assess Risks
Management Committees
External Auditors
CONCLUSION
Given that the Group would need to adapt to the ever-changing business environment in the shortest possible time in order to uphold its business objectives, risk management has become an essential tool to ensure risks and rewards are duly balanced. The challenge ahead, is to ensure everybody in the Group understands the risk and internal control policy and objectives and to embed the ERM process in all their decision-making processes. The following plans to further enhance risk management practices in the Group has been drawn up for year 2004: To intensify risk identification and evaluation programmes through second-phase ERM workshops
Considering the size of the Group, it is more efficient for the inventory of risk profiles to be automated. Hence, the Group has invested in an inventory system using Risk Information Management System (RiMS) software that allows risk owners to capture their risks, tabulate action plans, track the implementation of the assurance plans and constantly review and update their risk profiles at their own work stations. The Risk Management Unit remains the key controller of the risk profiles inventory.
2003 To encourage further participation of senior management in the Group Risk Management Committee To establish an ERM communication channel to increase awareness among all staff.
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The following information is provided in compliance with the Listing Requirements of Malaysia Securities Exchange Berhad (MSEB) for financial year ended 31 December 2003:
1. SHARE BUYBACKS
The Company did not enter into any share buyback transactions during the financial year.
3. IMPOSITION OF SANCTIONS/PENALTIES
There were no public sanctions and/or penalties imposed on the Company and its subsidiaries, directors or management by the relevant regulatory bodies during the financial year, save for a public reprimand on Technology Resources Industries Berhad (TRI), a subsidiary company of Celcom (Malaysia) Berhad by the MSEB and Securities Commission (SC) on 9 August 2003. The public reprimand was in respect of breaches of regulatory guidelines by TRI prior to TRI becoming a subsidiary of Telekom Malaysia. The public reprimand can be accessed from MSEBs website at www.klse.com.my.
046
4. NON-AUDIT FEES
The amount of non-audit fees paid and payable to the external auditors and their affiliated companies by the Group for the financial year ended 31 December 2003 is as follows: RM a) b) c) PricewaterhouseCoopers, Malaysia PricewaterhouseCoopers Taxation Services Sdn. Bhd. Overseas Firm affiliated to PricewaterhouseCoopers, Malaysia Total 725,000 537,000 1,244,500 2,506,500
6. VARIATION IN RESULTS
There was no profit estimation, forecast or projection made or released by the Company during the financial year under review.
7. PROFIT GUARANTEE
There was no profit guarantees given by the Company during the financial year under review.
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01
02
03
048
04
05
06
1. MEMBERSHIP
The Audit Committee comprises three Independent NonExecutive Directors and two Non-Independent Non-Executive Directors of the Board as follows: Dato Dr. Mohd Munir bin Abdul Majid (Chairman) Independent Non-Executive Director Dato Abdul Majid bin Haji Hussein Non-Independent Non-Executive Director Y.B. Dato Joseph Salang Gandum Non-Independent Non-Executive Director Dato Lim Kheng Guan Independent Non-Executive Director Ir. Prabahar N.K. Singam Independent Non-Executive Director Hashim bin Mohammed Group Chief Auditor/Secretary to Audit Committee Members of the Audit Committee shall not have a relationship which in the opinion of the Board of Directors, would interfere with the exercise of independent judgement in carrying out the functions of the Audit Committee. Members of the Audit Committee shall possess wisdom, sound judgement, objectivity, independent attitude, management experience and knowledge of the industry. Dato Lim Kheng Guan who is an independent non-executive director is a member of the Malaysian Institute of Accountants (MIA).
2. MEETINGS
The Committee had four (4) meetings in the financial year 2003. Dato Dr. Mohd Munir bin Abdul Majid, Dato Lim Kheng Guan and Ir. Prabahar N.K. Singam attended all four (4) meetings, whilst Dato Abdul Majid bin Haji Hussein and Y.B. Dato Joseph Salang Gandum attended three (3) out of the four (4) meetings. The Groups Deputy Chief Executive attended three (3) meetings, the Group Chief Financial Officer (CFO) and Acting Group CFO attended two (2) meetings each respectively whilst the General Manager, Group Finance representing management attended all of the four (4) meetings upon invitation by the Chairman of the Committee during the course of those meetings. The Group Internal Auditors attended all these meetings whilst the External Auditor, PricewaterhouseCoopers (PwC) attended the meetings upon invitation by the Chairman of the Committee. Prior to the meetings, the Group Chief Auditor and PwC auditors met with the Chairman of the Audit Committee in private without the executive directors presence.
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Monitoring and coordinating reviews on the effectiveness of the Groups system of internal controls, through reports furnished by the Group Internal Auditor, the External Auditor and the Management.
The implementation of the Enhanced Telecom Operation Maps (ETOM) as the telecommunication industry business framework and best practices to be used for reference by management and the internal auditor to benchmark against the industry standard.
b)
The Management Audit Action Committee which was established by the Audit Committee in year 2002 to update the Audit Committee on progress of: Management actions to resolve significant internal controls and accounting issues as highlighted by the Internal and External auditors. Any other recommendations made by the Audit Committee for management actions.
050
c)
The Internal Control Incident (ICI) Committee which was established in year 2003 to deliberate alleged major control incidents or failures based on reports submitted from management or special investigation/ audits conducted and to propose next line of actions. The reports are summarised by the Group Chief Auditor and updated to the Audit Committee at least on a quarterly basis describing the following: the nature and root causes of control failures which have financial impact and affecting the image and reputation of the Group. lateral learning to prevent recurrence of similar incidents within the Group. status of actions taken by management to remedy the control weaknesses and appropriate disciplinary actions.
iv.
Review the scope of internal and external auditors' assessments of internal controls over financial reporting and obtain reports on significant findings and recommendations, together with managements responses; Consider the appointment of a suitable accounting firm to act as external auditor and amongst the factors to be considered for the appointment are the adequacy of the experience and resources of the firm and the persons assigned to the audit, to consider any question of resignation or dismissal and to recommend the audit fee payable thereof; Discuss with the external auditor before the audit commences, the nature, approach and scope of the audit and ensure co-ordination where more than one audit firm will be involved; Review the quarterly interim financial results, half-year and annual financial statements of the Board;
v.
vi.
vii.
2. MEETINGS
The Committee shall meet not less than four (4) times a year and reports to the Board of Directors. The quorum of the Committee meetings, shall consist of at least two thirds of the members, with Independent Non-Executive Directors forming the majority. All committee members are expected to attend each meeting in person. Meeting agendas and briefing materials will be prepared and provided in advance to members. Minutes will be prepared.
viii. Review with the external auditors the financial statements for the purpose of approval before the audited financial statements are presented to the Board for adoption; ix. Discuss problems and reservations arising from the interim and final audits and any matter the auditor may wish to discuss in the absence of the management where necessary; Review the integrity and adequacy of the Groups internal control systems and management information systems, including systems for compliance with applicable laws, rules, directives and guidelines; Review the follow-up actions by management on the weaknesses of internal accounting procedures and controls as highlighted by the external and internal auditors; Review the assistance and co-operation given by the Company and its officers to the external and internal auditors;
x.
xi.
3. AUTHORITY
The Audit Committee has unrestricted access to information, records, properties and personnel of the Group. It also has direct communication channels with the external and internal auditors. The Committee is also authorised by the Board to obtain external independent professional advice as necessary.
xii.
xiii. Propose best practices on disclosure in financial results and annual reports of the Company in line with the principles set out in the Malaysian Code of Corporate Governance, Malaysia Accounting Standards Board (MASB) and other applicable laws, rules, directives and guidelines; xiv. Propose, monitor and ensure an adequate system of risk management for management to safeguard the Groups assets and business sustainability; Consider, review and disclose when required any significant transactions which are not within the normal course of business and any related party transactions (RPT) that may arise within the Company and the Group;
ii.
xv.
iii.
xvi. Advise the Board of Directors with respect to the Companys policies and procedures regarding compliance with applicable laws and regulations with the Company code of business ethics; and xvii. Consider other topics as defined by the Board.
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systems for compliance with applicable laws, rules, directives, guidelines, and risk management. The Board is informed of all major control issues encompassing internal controls, regulatory compliance and risk taking. The system of internal controls includes governance, management controls, financial controls, operational efficiency and effectiveness, compliance monitoring, information technology systems, process improvement, selfassessment and risk management. This system of internal controls can only provide reasonable but not absolute assurance against material misstatement or loss.
RISK MANAGEMENT
The Risk and Internal Control Policy and Enterprise Risk Management Framework are in place. The Board is following through the process for identifying, evaluating and managing significant risks that affect the achievement of the Groups business objectives. During the year under review, management with assistance of Group Internal Audit had conducted 20
052
Enterprise Risk Management Workshops with key business units and subsidiaries of the Group, which includes Group Finance, TM TelCo Network Operations, Group Marketing, TM Facilities, TM Net, Multimedia University, MTN Networks Sri Lanka and the TM TelCo Information Technology Division. An Enterprise Risk Management Reference booklet has been produced to assist all employees to understand and practice the standard risk management process, methodology and language adopted by the Group.
INTRODUCTION
As stated in the Malaysian Code on Corporate Governance, the Board of Directors should maintain a sound system of internal controls including the review of its effectiveness, to safeguard shareholders investment and Groups assets. Set out below is the Board Statement on Internal Control in compliance with the MSEBs Listing Requirements and the Statement on Internal Control: Guidance for Directors of Public Listed Companies. The Board continues with its commitment to ensure the smooth implementation of an integrated risk management framework and programme throughout the Group.
CONTROL SELF-ASSESSMENT
The Board places importance on the implementation of the Control Self-Assessment (CSA) process as a paradigm shift towards management self-assessment as compared to compliance based auditing. The Group internal auditors role is more like a business process facilitator, since CSA is a process where business units at operational levels are required to identify risks that prevent the achievement of their business objectives. Management has been very receptive of CSA and feedback indicates that CSA has made an impact with management awareness and understanding of risks and linkages to the
RESPONSIBILITY
The Board strives to maintain a sound system of internal controls and effective risk management practices to ensure long-term sustainability of the Group. The Board reaffirms its responsibility to review the integrity and effectiveness of the Groups system of internal control and management information systems, including
business objectives. Throughout 2003, a total of 42 CSAs were performed involving more than 1,000 employees in various operating units within the Group.
9.
Regular monitoring of external and internal audit control issues to ensure completion through the Management Audit Action Committee to ensure actions are taken by management to resolve the issues effectively.
10.
A Special Affairs Unit has been set up to review and monitor the ethical conducts and practices of all employees including the senior management and Board. Investigations reports are tabled to a newly set up Internal Control Incident Committee and updates are reported to the Audit Committee and the Board.
11.
Implementation and internalisation of the three corporate core values (KRISTAL), Total Commitment to Customers, Uncompromising Integrity, Respect and Care. These corporate values form the set of guiding principles for the new Group culture.
The statement does not include the state of internal controls in material joint ventures and associated companies, which have not been dealt with as part of the Group. There was no material loss incurred as a result of internal control
4.
Self-assessment and disclosures by all the Groups companies with management control, the Internal Control Incidents and Controls Assurance Letter on an annual basis affirming the effectiveness, reliability and adequacy of systems of internal controls.
weaknesses.
5.
Documented policies, procedures and guidelines with respect to Financial Controls, Procurement, Network Operations, Information Technology, Marketing, Human Resources and Health and Safety.
6.
Detailed budgeting process, which is in place, is reviewed at the operating company levels and approved by the Board.
7.
Performance reports on financial performance and business objectives are regularly provided to operating companies management and Boards, to enable them to review the Groups progress against its goals.
8.
Monitoring of regulatory and statutory compliance to support the Board on proper management of effective corporate governance practices and requirements. The Technical Compliance Division has been set up to report and update the Board and the Group on proper practices and compliance to these requirements.
053
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CHAIRMANS STATEMENT
TELEKOM MALAYSIA BERHAD
Annual Report 2003
Dear Shareholders,
On behalf of the Board of Directors and the management of Telekom Malaysia it is my pleasure to present the Annual Report and Accounts for the financial year ended 31 December 2003.
As we entered the fourth year of the new Millennium, Malaysians have just gone to the Polls to elect the Government of their democratic choice. And choose they did with a thumping majority to the ruling Party. It is a propitious time, heralding a new leadership and a new national agenda. Telekom Malaysia congratulates the Government on its resounding victory, constituting as it does a massive vote of confidence and an unequivable endorsement of the reform initiatives upon which it has embarked. Following the smooth transition in leadership change, the Elections reaffirmed the continuity and stability that have been the enduring hallmarks of Malaysias political culture. We pledge our full support. The feel good factor manifested in the ballot boxes is all pervasive. Economic recovery is also convincingly under way. The global scene is sending messages of recovery, with broad-based growth in major industrial countries and reinforced by strong growth in the Asian region. Consumer and investor confidence are returning. GDP achieved a respectable growth of 5.2% for 2003 and is expected to grow by 6% to 6.5% this year. External reserves were and continue to be at an all time high with productivity rising and interest rates, inflation and unemployment kept at low levels. Malaysia is well to the fore. Given this favourable environment, we are glad to report that your Company has recorded strong financial performance for 2003 with revenue and profit before tax increasing by 20.0% or RM1,962.3 million and 18.3% or RM280.1 million respectively. We remain committed to the creation of shareholder value. 2003 was a year of consolidation and rationalisation thus putting us in a better shape to face increasing competition. The most major feature in 2003 was the merger of TM Cellular Sdn. Bhd. with Celcom (Malaysia) Berhad (Celcom). It was a necessarily long and careful negotiation but Telekom Malaysia has emerged not only the undisputed leader of the industry in terms of size and capability but, thanks to the potential for synergy, more versatile and resourceful. We are ready to fulfil and make the most of the leadership role bestowed on us. Under the buoyant economic environment, the Group is optimistic that the momentum will continue in 2004 driven by more robust revenue growth from stronger demand for mobile, broadband and data services, complemented by the benefits derived from the completion of the TM Cellular/Celcom merger later in the year. The 21st Century is a fast paced world with escalating competition in the telecommunications industry. We need to be agile and responsive. We need to manage change that can be only more rapid and profound than ever before but sometimes unexpected. In a high technology industry like ours we need to keep pace with the relentless advance of technology whilst keeping up at the other end of the scale with developments in the market place, the fast evolving composition of our clientele and equally the fast evolving criteria of customer preferences.
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We believe in enriching lives of our customers and those of all Malaysian consumers. Science is placed at the service of mankind to improve lives and lifestyles. We in particular are one of the life technologies bringing a higher standard of living to the people and with the special capability of reaching the remotest corners of the land that otherwise might be left behind in the march of progress. The ultimate test of what we bring to the community is enhanced quality of life. Hence the theme of this years Annual Report is New Possibilities Enriching Lives. Last year we imposed a necessary discipline upon expansion given the troubled international environment. Telekom Malaysias strategy was to focus more on domestic operations, concentrating on enhancing customer service and creating value for our shareholders. We have also created the environment to revitalise the company. We continued to streamline our operations in order to be more efficient and cost effective with judicious right sizing through further restructuring of our core business into wholesale and retail activities for sharper focus. We are more service and market oriented to the point of being customer obsessed. We continue to aspire to our vision of becoming the communications
new and complex disciplines of a technology that is still developing, often at an accelerating pace. The parameters of the professionalism relating to our business have been greatly extended, including Marketing, Accounting & Finance and Risk Management that have become an integral part of our business strategy. Life in other words has become immeasurably complicated. Telekom Malaysias empowerment programme based on performance measurement through KPIs for senior managers to top executives is not only strategic but also our way of enriching the lives of our own people. It is an ongoing process. Telekom Malaysia accepts the obligation to foster a culture of excellence in all we do and therefore to provide the individual with the means and the opportunity to excel. The events on the world stage be it hostility, physical threat, or financial scandals have made us all the more conscious of moral issues. We hail the outright war on corruption the Government has declared, and pledge our support to the noble ideals it espouses. Much is talked today about corporate governance and transparency as prime judgemental factors in evaluating a modern corporation. There is nothing new in this. Telekom Malaysia has practised these virtues from day one as can be seen from our high rating in corporate governance over the years. We have as a company always subscribed to the highest standards of integrity and have no difficulty in complying with the prescribed ethics of contemporary business. Corporate citizenship also takes on an even greater significance. Telekom Malaysia last year continued to give back to society through our participation in numerous charitable, sporting, social and cultural activities. This is in line with the caring society we are striving for as one of the important goals of Vision 2020. Special mention goes to our role in accelerating communications to the countryside and the less developed rural areas, always associated with Telekom Malaysia more than any other telecommunications provider. We have been proactive in these efforts in consonance with the priority currently accorded to this particular sector. When more development is brought to these otherwise unserved areas the existing telecommunications infrastructure will already be in place to facilitate it.
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company of choice. Our international outreach was also prudently restricted mainly to markets nearer home like Sri Lanka and Bangladesh, Thailand and Cambodia. The relative proximity and in most cases a cultural affinity provides some comfort. The only exception was our continued profitable experience in Telkom SA in South Africa, our single largest investment overseas. Last year this highly successful venture was listed, with better than expected results, a real jewel for Telekom Malaysias growth. In fact, excellent performances were registered not only in South Africa but in Sri Lanka and Bangladesh. Overall our international operations have contributed some 26% to the Group Profit After Tax in 2003. With the present new mood of opening up to new possibilities, it is not too farfetched to see ourselves becoming a regional telecommunications player. Ultimately we put our faith in our people. Human capital in the knowledge society is one of the key drivers of business. The stakes have been enormously raised. The basic requirement of an industry like ours is both technical and marketing know how. Our technical training effort is unremitting. Beyond the core competencies, however, there is today the need to master the
If 2003 was a year we consolidated not just our organisation but our identity we now have to address ourselves as to how we should be positioned in the evolving world of 2004. Here we find ourselves occupying a unique niche. Malaysia is increasingly recognised as a role model of moderate and progressive Islamic country. We like to think that we also exemplify the spirit of Islamic justice and brotherhood in this multiracial and multireligious society, demonstrating that modernisation and technology are not incompatible with Islam. Our own highly technological industry becomes a showcase in this regard. I wish to thank fellow members of the Board of Directors, the Chief Executive, Management and staff of Telekom Malaysia for all the support they have given us. I also like to welcome "home" our colleagues in Celcom with the new partnership and the extended client base they have brought with them. May we also congratulate our two former Directors, Y.B. Dato Joseph Salang Gandum and Y.B. Dato Ir. Haji Mohd Zin bin Mohamed who have been appointed Deputy Ministers in the new Government and resigned as Directors of the Company and the Group with effect from 1 April 2004. We wish to express our
gratitude and appreciation for their invaluable contributions during their tenure as Directors of Telekom Malaysia. On behalf of the Telekom Malaysia Group, may I extend our best wishes to Y.Bhg. Datuk Amar Leo Moggie who has retired as our longest serving Minister. His first portfolio was the newly created Ministry of Energy, Telecommunications and Post in 1978. The next 27 years, except for the brief sabbatical in the Works Ministry, were devoted to our Ministry with full dedication to enriching lives and lifestyles. We benefit tremendously from his wise guidance to which we here pay tribute and thank him for all he did for us. It is also timely for me on behalf of the Board of Directors, management and staff to bid a very warm welcome to Y.B. Dato Seri Dr. Lim Keng Yaik, our new Minister for the renamed Ministry of Energy, Water and Communications and the Deputy Minister Y.B. Dato Shaziman Abu Mansor. Telekom Malaysia stands committed to give our full support for the efforts to bring the industry to greater levels of service efficiency for the benefit of all consumers.
continued faith in us as well as the professional fraternity with whom we have had cordial relations over the year. To all our customers we pledge renewed efforts to provide the quality and variety of services they have a right to expect, thereby enriching their lives.
Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor Chairman
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060
OPENING REMARKS
The past adversities of recent years should be put firmly behind us now and we are to look forward once again to a new era of growth and a brighter future. Telekom Malaysia is moving with vigour towards its transformation into a fully integrated communications company of choice for the new millennium. We are charting a new course together as a Group. The seeds of change, which were sown in 2000, continue to be nurtured and we are beginning to see signs of fruition in a number of key strategic areas such as in our cellular, broadband, data and Internet Protocol (IP) related businesses; of positive mindset change in our organisational culture and a fresh approach in our interaction with customers.
The information age is opening up new possibilities for all of us, for our children and for the entire nation
BILL GATES
Telekom Malaysia has undergone significant realignments in structures to better suit our future businesses such as the reorganisation into the five operating companies and the acquisition of Celcom (Malaysia) Berhad (Celcom). This is all a part of the change process and is necessary for the sustainability and creation of further shareholder value in the next era of growth. This year we will put in place the blueprint for TM Telcos transformation into TM Wholesale and TM Retail, in line with our strategic plan to consolidate our networks across the Group and doubling our efforts on customer relationship management. This transformation goes beyond us as a Group, indeed the nation itself shows full commitment in moving towards a Knowledge Economy and Society. Telekom Malaysia is pleased to be able to continue to support Malaysias Vision and in helping to create new possibilities for us and for the nation, with the main objective of enriching lives.
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The environment will undoubtedly become more complex as multiple vendors in an increasingly international operating environment will offer multiple services. This will have global regulatory impact as boundaries become less clear, thus affecting accountability for service performance and consumer rights to recourse. The challenges for an incumbent player are indeed formidable but tremendous opportunities abound too.
Malaysia The significantly improved external environment will reinforce stronger domestic demand in Malaysia. Higher consumer and business confidence is expected to support the stronger momentum of growth in private consumption and investment while the public sector gradually consolidates. The combination of stronger domestic demand and rising exports resulted in a stronger-than-expected GDP growth of 5.2% for the whole of 2003. Further, the 6.4% GDP growth in the 4th quarter 2003 promises a strong economic outlook for 2004, which the government projects to grow by between 5.5% and 6%. This augurs well for the local telecommunications industry. Improving economic conditions over the short-term will help to stimulate traffic volumes in voice and data, as business activity picks up and making consumers feel more confident in spending. Indeed 2004 should see further commitments in new growth areas especially mobile services, data services and broadband.
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traditional business models to be reinvented. Non-traditional competitors, such as power utilities and niche players continue to emerge adding to the already fierce competitive landscape. Certainly, the defining element of new technologies has arguably been IP based networking but in broad terms, these products are creating increasing market demand: VOIP with increasingly quality of service will grow in consumer and business markets Enterprise managed services to deliver dynamic customized services on a wide scale Broadband initiatives to move value beyond access Wireless/wireline integration to address basic access issues and introduce more value-add in areas previously underserved In Asia particularly, mobile services will continue to surpass fixed in terms of lines and revenue growth.
The future of the fixed-line industry, in Asia as anywhere else, depends upon carriers redefining their access markets. There is a need to move away from just voice connections to higherbandwidth access, which can offer improved services and applications. This is an important part of not just finding new growth in this segment, but in differentiating the fixed offering from that of mobile. The national agenda is still very much on Bridging the Digital Divide and it is also one of Telekom Malaysias priorities as a responsible corporate citizen. We echo this sentiment with this years annual report theme of New Possibilities, Enriching Lives which is very much a Telekom Malaysia agenda, as we strive to better Malaysian lives through new offerings in mobile, data, internet and even enhanced basic voice services via our wired and wireless access options. It is against this more upbeat environmental backdrop that I am pleased to announce Telekom Malaysias 2003 performance and future prospects. Our fixed line voice and data services charted moderate performance in the year 2003 with data experiencing a 12.6% growth despite a highly competitive market. Fixed line voice services remains the main revenue contributor providing stable cash flows with better collection and lower bad debts. Intensive product promotion and competitive pricing have also increased network utilization.
Performance Review Telekom Malaysia is happy to report a strong 2003 financial performance despite the setbacks of recent times. We have seen good revenue and profit growth, with improving EBITDA margins and EPS. Capital expenditure has also stabilized at under RM2 billion. For the financial year under review, the Group revenue increased by 20.0% (RM1,962.3 million), driven primarily by cellular segment, data and non telecommunication services. Significant increase in cellular revenue is mainly due to consolidation of Celcom, acquired during the second quarter 2003. Celcom also largely contributed to the growth in Group profit before taxation for the financial year under review, which increased by 18.3% (RM280.1 million). Post-merger, Celcom was the first mobile network operator in the country to offer domestic roaming over its dual-band network. Currently, 4.3 million Celcom 019 and 013 customers are enjoying greater connectivity and domestic roaming at no extra cost. Celcom customers can also enjoy international roaming in 86 countries over 200 networks worldwide. At the network level, the sharing of infrastructure has increased Celcoms capacity and capability to support a greater number of concurrent users at any given geographical location.
high speed internet access, where revenue increased four-fold in the last year with aggressive broadband expansion TMnet Streamyx subscribers increased by more than 5 times to over 111,000 customers. In our international operations, we have also enjoyed better EBITDA and bottom line contribution. The average EBITDA margin achieved by overseas subsidiaries for 2003 was 48.7% with average PAT margin from overseas subsidiaries at 33.7%. This resulted in an aggregate profit contribution of 26% to Group PAT. EPS for the year 2003 was 43.6 sen, a tremendous improvement over 2002 EPS of 26.8 sen. On the basis of the overall stronger 2003 financial performance of Telekom Malaysia Bhd, the Board is pleased to recommend a final dividend of 10.0 sen per share less tax at 28% and a special dividend of 10.0 sen per share less tax at 28% for the shareholders approval at the forthcoming Annual General Meeting of the Company.
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Key Initiatives The following key initiatives are a culmination of efforts since 2000, and part of the transformation roadmap of Telekom Malaysia towards becoming the Communications Company of Choice whilst simultaneously supporting Malaysia towards Vision 2020. In the mobile space, the merger of TM Cellular and Celcom has propelled the new Celcom to the forefront of the Malaysian mobile communications industry in terms of network coverage, capacity and customer base. The integration exercise has been implemented in stages and is expected to be completed by end 2004. It is aimed at presenting a single integrated view and experience to customers, repositioning market offerings and consolidating the new brand position. Groundwork is still being laid for general deployment and marketing of 3G services at the end of 2004 and early 2005. However, we will monitor 3G developments in the region very closely together with other operators and market analysts whom are not expecting rapid adoption before 2006. Thus, the focus will be on delivering 3G-like services on current networks whist
Data Services, we continue to introduce state-of-the-art technology such as VSAT, MyLoca Disaster Recovery Call Centre and enhanced COINS to meet the changing needs of our customers. We have also established TM Representative Offices (TMRO) in the UK, US, Hong Kong, Singapore and India to capture a share of the data markets abroad. TM is committed to its objective of turning Malaysia into a regional telecommunications hub by continuously developing and expanding its hubbing business. The company plans to introduce a Next Generation Network (NGN), the implementation of which will involve migration towards packet-based data networks. The IP-based NGN is capable of handling data, voice and video communications simultaneously and can also offer flexible valueadded services. Telekom Malaysia has always taken great pride in our contributions to national development towards a Knowledge Economy. Our latest initiative in this arena is in leading the SchoolNet project, which provides broadband connection to all schools in Malaysia. This is a government project handled by GITN Sdn Bhd a whollyowned subsidiary of Telekom Malaysia, where about 10,000 schools will be provided with broadband Internet Access, part of which will be connected with DSL (Digital Subscriber Line) using the COINS x-link. Be it via our training and human resource development programs, or our educational and academic endeavours such as the Multimedia University, Telekom Training Colleges, TM Research and Development, the Smart School and SchoolNet projects as well as our Scholarship Foundation; we hope to help prepare Malaysia and ourselves for a better future.
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PROSPECTS
The continuing increase in demand for mobile services, wireless access, bandwidth and data services will drive stronger revenue TM Net will expand its applications, contents and services. In addition to being a content aggregator for online and cellular, TM Net will continue to increase high speed internet availability and introduce other services such as multimedia messaging services (MMS), video-on demand (VOD), interactive video streaming and other value added services; be it for consumer or the businesses. Telekom Malaysias strategic direction for 2004 centres around Throughout 2003, TM Telco has been putting itself more closely in touch with the needs of its customers by reviewing product lines and bundling strategies. Some of these exciting new products for fixed line services include TMHome Prepaid, Fixed SMS and Ria Residen, Business Plus and SMI/SME Packages. In these 5 pillars: Stakeholder value creation Leadership in key customer segments Solutions valued by customers Improved quality and customer service Optimal operating cost structure growth for the year. The Group is optimistic that this growth momentum will be further complemented by benefits derived from the completion of Celcom/TM Cellular integration later in the year. Meanwhile, the Group will continuously intensify efforts to achieve improved cost and operational efficiency.
In particular the Group will focus on rationalising network assets, implementing CRM, optimising Group product packaging and in improving our procurement process whilst continuing to uphold best practice Corporate Governance. TM Telco will concentrate on defending voice revenues and growing the SME data markets. Celcom will place great emphasis on increasing quality, subscribers and ARPU as well as mobile data revenues. TM Net will continue to sustain the quality of service to our narrow band customer base whilst expanding our broadband efforts. TM International will continue to look for investment opportunities in Asian emerging market. One of the initiatives that will radically change the way Telekom Malaysia operates in face of global challenges is our strategic attention to Wholesale Business. The impending split of the current TM Telco into two effective operating units; TM Wholesale and TM Retail will be implemented to allow more focus on each respective core businesses and customers, where Wholesale will concentrate on infrastructure service offerings to its customers, and Retail will concentrate in selling end user services without having to maintain the vast networks. This approach will impose a greater responsibility and accountability in ensuring the best of service offerings to customers, which eventually will be reflected via their separate profit and loss accounts. Significant benefits from this strategic move are in terms of improved customer focus, cost efficiency, increase in revenue, growth in product offerings, improved asset utilization, widening of business opportunity, first mover advantage as well as in addressing the regulators agenda.
CLOSING REMARKS
The greatest visionaries see things others dont new routes to success, (Leslie Kossoff, author of Executive Thinking: The Dream, The Vision, The Mission Achieved) We at Telekom Malaysia have set a vision for ourselves; and in doing so are firmly committed to making it a reality. The transformation roadmap towards that vision is a progressive workplan of firm actions designed to produce results. Execution and implementation will be critical but we must be flexible enough to face whatever challenges that lie ahead. 2003 has been a good year with which to launch us forward and upward. There will always be new possibilities for Telekom Malaysia. With that, I would like to express my gratitude to the management and staff of the Group for their hard work in 2003 and to offer continual encouragement for their ongoing efforts in Telekom Malaysia. On behalf of the group, let me also thank the Board of Directors and our shareholders for their invaluable support and guidance through all of our endeavours. Let us move forward together to build new possibilities and enrich lives. new ways of enriching lives, new possibilities of what can be
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Be it five metres or 5,000 kilometres, we make it easy for you to say Hello.
Hello
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OPERATIONS REVIEW
TELEKOM MALAYSIA BERHAD
Annual Report 2003
PERFORMANCE
TM TELCO, WHICH MANAGES AND OPERATES TELEKOM MALAYSIAS FIXED LINE TELEPHONY AND DATA-BASED PRODUCTS AND SERVICES, CHARTED MODERATE PERFORMANCE IN THE YEAR 2003. THE COMPANY REGISTERED A REDUCTION IN REVENUE OF 0.4%, VALUED AT RM7,943.7 MILLION. PROFIT BEFORE INTEREST AND TAX, DROPPED BY 15.8% TO RM1,749 MILLION ATTRIBUTED TO HIGHER TOTAL COSTS AND DEPRECIATION. THE HIGHER COST OF INTERNATIONAL OUT-PAYMENTS AS WELL AS CHANGES AFFECTING DOMESTIC INTERCONNECT CHARGES HAD CONTRIBUTED TO THE TOTAL COSTS INCREASE. THE EBITDA MARGIN STOOD AT 53.3%, WHILE EBITDA INCREASED BY RM24.4 MILLION FROM THE PREVIOUS YEAR.
The data business registered a positive increase with 203,418 64kbps-equivalent circuits sold compared to only 99,210 in 2002. Despite price reductions in the highly competitive market, data revenue experienced a remarkable 12.6% growth. Revenue from the traditional Voice Sector decreased
DEL Cummulative shows a downward trend due to reduced intake from the residential sector 4,000,000 0
by 0.5%, as a result of lower revenue from international operations. Nevertheless, voice minutes, especially in long distance calls grew from an average of 720 million in the first quarter of 2003 to 760 million in the last quarter of the year. Non-payment of bills and the migration to mobile reduced the number of telephones sold by 61,638 lines. As at end December 2003, TM TelCo had 4,531,662 registered telephone accounts.
3,200,000 2
4 2,400,000
1,600,000 6
800,000
1000 telephones per year) measuring 0.22 compared to 0.25 in 2002. Above all, TM TelCo achieved the the Malaysian Communications and Multimedia Commission (MCMC). The improved quality of service and TM TelCos commitment to maintaining quality customers had further contributed to a
Business
Residential
reduction in telephony bad debts over sales of 2.75% from 2.96% in 2002. Overall, TM TelCos Customer Satisfaction Index (CSI) has been positive. The MCMC Wave 5 Study for Fixed Lines gave TM TelCos individual customers segment a 7.93 ranking and the commercial segment 7.57, both rankings being above the industry standard. Improvements in the installation process, network quality and ease of making and receiving calls were key to the improved customer satisfaction index.
620,000
560,000
500,000
440,000
The future of telecommunications is shaped by the convergence of voice and data. Customers are demanding cheaper but more reliable products. While the voice business is expected to grow at 2.2% per year, the data business is envisaged to register a double growth rate. Realising this trend over the last five years, TM TelCo has been repositioning its
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business towards data. Moving forward, TM TelCo is planning a more advanced network configuration to support the various aspects of future customer demand.
OPERATIONS
NEW PRODUCTS INTRODUCED IN 2003 Enhanced Voice Products To retain customers and stimulate Direct Exchange Line (DEL) usage and sales, several new products were introduced in 2003, including: TM Home Prepaid: targeted at low-income customers. Rental is free and calls are made through the Ring Ring card. As at end December 2003, there were 24,168 customers and the number is growing. Fixed SMS: launched in November 2003, it provides the popular mobile SMS to fixed line customers using the PSTN network.
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Three promotional packages that provided attractive discounts and bundled competitive products were also introduced. Ria Residen Package and Package Business Plus: these offer simple solutions for services such as DEL, enhanced facilities, CLIP (Caller Line Identifier) and fixed SMS. Package SMI/SME: offers more extensive solutions for the small/medium business community in the form of basic services and up-market products such as tmnet streamyx and tmnet prepaid cards. EzeePhone: offers a prepaid service to public dwellings such as hostels and apartments.
Value-Added Data Products The following data products in step with the fast moving technology were introduced to meet the changing needs of customers.
VSAT (Very Small Aperture Terminal) DialNet Multi User: launched in October 2003, this enhanced VSAT service uses a satellite network and is fully compatible with multiple communication protocols. Along with TM Net access, the price is expected to become extremely competitive, especially in comparison with the current VSAT price.
iii.
Project 100+ Initiative A commercial alliance with strategic partners is being formed to plan and identify new services and market segments that would enable Telekom Malaysia to generate at least RM100 million over the next two years.
iv. MYLOCA (Telekom Malaysias total Data hosting and Recovery Solution) Disaster Recovery Call Centre (DRCC): launched on 5 March 2003 in Cyberjaya, the centre offers total business continuity and recovery solutions. The first company to subscribe to this service was American Express, Malaysia. v. COINS x-link single user and COINS x-link multiusers: launched in January and April 2003 respectively, these services allow for more value added services that can be tailor-made to suit customers requirements. The following Special Projects were introduced in 2003 to meet specific business objectives.
Data Customer Service Customer Services Management (CSM) was formed to oversee Data after-sales service. The key objective of CSM is to establish a dedicated and professional One Stop Data Customer Service Management Centre to provide total customer satisfaction. Product Revenue Assurance Over RM122 million in new revenue was realised as a result of improvements in the billing process and integrity of customer data. Agreements were also scrutinised to ensure accuracy and completeness, as part of the product revenue assurance focus.
Customer Network Operation (CNO) Outsourcing i. SchoolNet The SchoolNet project provides broadband connection to 10,000 schools in Malaysia. It is a government project handled by GITN Sdn. Bhd., a wholly-owned subsidiary of Telekom Malaysia. The schools will be connected with broadband Internet access. ii. Telekom Malaysia Representative Office (TMRO) Telekom Malaysias Global ATM/Frame Relay/IPVPN nodes were established in the UK, US, Hong Kong and Singapore. IPLC cost and pricing development guidelines for each TMRO (except Singapore) was handed over to the respective office heads to allow for flexibility in sales and marketing in the individual TMROs. The main objective of CNO outsourcing is to improve the quality and productivity of service delivery and maintenance of the current telephony and broadband circuits. CNO has a total of 595 contractors, of whom 318 are telephony contractors, 150 broadband contractors and 127 contractors focusing on maintenance on access network.
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With this programme, CNO telephony service delivery achieved the national target of meeting all customer appointments set by Telekom Malaysia. For maintenance on access network, CNO achieved a reduced fault rate of 0.05 (Data) and 0.15 (Telephony).
HR Business Strategy for 2004 And Beyond Communication has played a key role in ensuring effectiveness of HR practices, particularly in giving the HR department the perceived image as being fair in tackling internal equity. The department plans to increase and improve its communication to staff on policies, benefits and rewards.
e-CNO: Electronic Customer Network Operation e-CNO is an effective solution for nationwide management and enhancement of information systems used by CNO personnel. Currently used systems include the Order Management System (OMS), Restoration Management System (RMS), Maintenance Management System (MMS), Workforce Management System (WFMS), Finance Management System, Project Management System, Inventory Management System and Alarm Management System.
PROSPECTS
Advanced Future Infrastructure 1. International Market Telekom Malaysias mostly fibre optics-based international network currently has the capability to provide high capacity and quality global connections for Internet and other broadband services. The C7 links established with most countries provide a fast and quality call set-up.
Telekom Malaysia has also introduced VSAT services for both domestic and international private network applications, international gateway projects bridging the digital divide in rural and remote areas. Telekom Malaysia has, since July 2003, served 10 sites in Julau, Sarawak, and another 10 sites in Kinabatangan, Sabah. With the SAT-3/WASC/SAFE (South Atlantic/ West Atlantic Submarine Cable/South Asia Far East Cable) upgrade fully completed on 11 June 2003, Telekom Malaysia has become the sole landing country in the Far East providing direct connectivity via fibre optics to reach new
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TM TelCo has, since 2001, adopted the use of key performance indicators to drive its business. A balanced scorecard (BSC) approach was introduced in the middle of 2003 to enhance the business planning and development process. BSC focuses on four areas in its appraisal: Finance, Customers, Operations and Learning and Growth. A strategy map was developed to cater for the next three years planning and, from that, objectives, measures and key initiatives were aligned to TM TelCos overall strategic direction.
Staff Leadership & New Skills The human resource department strives to provide excellent service to TM TelCos employees as well as its customers. It is committed to developing leadership skills among staff and retaining them by providing personal, technical and professional learning opportunities. New skills have been identified to propel TM TelCo into the world of data, apart from traditional voice technologies.
destinations in the African continent at a cheaper cost per circuit. It also provides Telekom Malaysia with a route to Europe. Two new international submarine cable systems are being planned to connect at the Submarine Cable Station (SKDL) in Melaka, namely the 320 Gbps DMCS (Dumai-Melaka Cable System) and the 1.28 Terrabits (Tbps) SEA-ME-WE4 (South East Asia Middle East West Europe Cable System). The DMCS is being jointly developed by Telekom Malaysia and PT Telkom of Indonesia to connect Melaka with Dumai,
Indonesia. Estimated to cost USD15 million (RM57 million), it is expected to be operational in September 2004. The SEA-ME-WE4 project, meanwhile, will use Dense Wavelength Division Multiplexing million (RM2,774 million). It should be operational by June 2005. 2. Local Market a. Hyperband Leased Line Hyperband Leased Line is a Gigabit optical networking solution offering highspeed connectivity up to 2.5Gbps for customers who need real-time applications such as Storage Area Network (SAN), Disaster Recovery service and imaging applications. It will be made available in 2004. b. Digital Leased Line This is a key product including Digitaline II and Broadband Leased Line. It is expected to contribute to the high growth of leased services in 2004, and will be made available to retailers in the form of wholesale services. d. CDMA The objective of the Code Division Multiple Access (CDMA) project is to provide Fixed Wireless Access (FWA) services to cater for rural, suburban and urban subscribers. Services offered are Fixed Wireless Voice and Fixed Wireless Data Applications. technology, and is estimated to cost USD730
BFWA (Broadband Fixed Wireless Access) is a wireless point to multipoint communication system. Telekom Malaysia has been granted licenses in the 3.5GHz and 10.5Ghz bands. The system is used to provide two-way high speed data services. Wireless Leased Line and Wholesale Wireless Leased Line will be introduced in year 2004 to complement DSL, Digitaline I (DG) and Digitaline II (DQ).
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c.
Infrastructure with 1X upgrading and peak data speeds of 144kbs has been installed and completed for all core network elements (MSC and BCS). For Base Transmission Station (BTS), a total of 37 sites have been installed with 1X protocol, upgraded from IS-95B. e. ADSL In order to support Telekom Malaysia and the Malaysian broadband strategy, an Asymmetrical Digital Subscriber Line (ADSL) has been rolled out throughout the country. It is estimated that 2.5 million ADSL users will be connected by 2008. f. Digitaline II Digitaline II is a service that provides narrowband and broadband leased circuits and access circuits for other service providers including COINS, BT Concert, Infonet, TM Net and others.
Gearing Technology And Networks Towards Data Business TM TelCo is committed to its objective of turning Malaysia into a regional telecommunications hub by continuously developing and expanding its hubbing business. The Company plans to introduce a Next Generation Network (NGN), which involves migrating towards packet-based networks. NGN is capable of handling data, voice and video communications simultaneously and can also offer flexible valueadded services. 1. Next Generation Network (NGN) NGN will be implemented to face future challenges and, in so doing, fulfil customer and business requirements. This network will be developed on IP-based switching systems. The implementation of NGN will be driven primarily by economic and technology factors. A "live" technical trial was conducted with four vendors from February to June 2003, during which some technical capabilities were tested and verified. A commercial trial is expected to be held in May 2004.
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2.
Multiservice Access Node (MSAN) MSAN is a technology migration for CAN (Customer Access Network) equipment to provide narrowband and broadband services from a single integrated access node. Currently, narrowband services are provided by DLC (Digital Line Concentrator), broadband services via RDSLAM/DSLAM (Remote Digital Subscriber Line Access Multiplexer/Digital Subscriber Line Multiplexer), and MLCN (Managed Leased Circuit Network) services are provided by DDN (Digital Data Network) equipment. MSAN is the next generation DLC to provide ATM and IP services. It will also be used to replace existing local switches. The MSAN system is currently being tested and is expected to roll out by mid-2004. being conducted to enable the provisioning of a robust platform of high-valued products and services with Internet capabilities and webbased technology. TM TelCo is also looking into the bundling of value added fixed, data and mobile networks.
3.
IP VPN (Internet Protocol Virtual Private Network) IP VPN, being the technology for the future, is being planned to cater for the SMI/SME market segment. The infrastructure is expected to be ready by the second half of 2004. Five main key initiatives to grow IP VPN services have been outlined for year 2004, namely: Classes of IP VPN services with end-to-end SLA (Service Level agreement) IP delivery model for SMEs Product bundling packages, eg IP VPN & hosting services Introduction of Metro Ethernet International roaming as new value added services to IP VPN
4.
Technology Testing/Trials In line with Telekom Malaysias objective of migrating towards next generation telecommunications and becoming a low-cost infrastructure provider, continuous research is
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Were pioneering cellular technologies to surround your world with the rich experience of multimedia.
UMTS
MMS
Cellular
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OPERATIONS REVIEW
TELEKOM MALAYSIA BERHAD
Annual Report 2003
PERFORMANCE
ON 17 APRIL 2003, CELCOM (MALAYSIA) BERHAD (CELCOM) BECAME A SUBSIDIARY OF TELEKOM MALAYSIA WHEN THE FORMER TOOK OVER OWNERSHIP OF TM CELLULAR SDN. BHD. THE MERGER PROPELLED CELCOM TO THE FOREFRONT OF THE MOBILE COMMUNICATIONS INDUSTRY IN TERMS OF NETWORK COVERAGE, CAPACITY AND CUSTOMER BASE. THE INTEGRATION EXERCISE IS IMPLEMENTED IN STAGES AND EXPECTED TO BE COMPLETED BY END 2004. IT IS AIMED AT PRESENTING A SINGLE INTEGRATED VIEW AND EXPERIENCE TO CUSTOMERS, REPOSITIONING MARKET OFFERINGS AND CONSOLIDATING THE NEW BRAND POSITION.
Financially, for the first time in five years, Celcom made profits before and after tax with revenue, EBITDA and the EBITDA margin increasing to a record high of RM3.6 billion, RM1.5 billion and 42% respectively. Revenue for the year grew by 51% from RM2.4 billion the previous year, due primarily to growth in prepaid customers from 1.2 million pre-merger to 3.2 million at the end of 2003. Although revenue from postpaid remained fairly stagnant, Celcom expects to see 10-15% growth in the coming years from new packages introduced. Revenue growth came primarily from mobile data solutions, which more than doubled during the year. The launch of its Multimedia Messaging Service (MMS) attracted 18,000 subscribers initially and the number is expected to be more than double in 2004. This trend is expected to continue in the year ahead with data and mobile solutions targeted to contribute approximately 15% to Celcom Groups total revenue. In the post-merger period, Celcom has focused on cost containment efforts such as streamlining dealers incentives, rationalising advertising and brand promotion exercises, diversion of TM Cellulars traffic via the Celcom backbone and infrastructure, sharing of network sites, negotiation with foreign carriers for bulk discounts as well as revisiting and streamlining all product pricing and packages. These efforts have resulted in an approximate savings of RM151 million in the 2003 Groups operating costs. Hence at the operational level, the Group managed to increase its EBITDA margin from a low of 32% (at acquisition) back to its original pre-merger level of 43% in December 2003. On the whole, the cost containment measures have managed to reduce the Groups operating cost, as a percentage of revenue from an average of 76% in 2002 to 58% in 2003.
In view of the integration, the Group incurred a capital expenditure of RM365 million during the year, a savings of approximately RM484 million as compared to the initial combined budget had the two companies not merged. In 2004, the Groups capital expenditure, including that for integration purposes, is expected to be not more than RM590 million. When fully integrated, Celcom is expected to reap further synergistic benefits from the merger. During the year, for the first time ever, the earnings per share of the Celcom Group touched double digits of 13 sen as compared to 1.66 sen in 2002.
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OPERATIONS
Post-merger, Celcom was the first mobile network operator in the country to offer domestic roaming over its dual-band network. Currently, 4.3 million Celcom 019 and 013 customers are enjoying greater connectivity and domestic roaming at no extra cost. Celcom customers can also enjoy international roaming in 101 countries over 232 networks worldwide. The sharing of network infrastructure has increased Celcoms capacity and capability to support a greater number of concurrent users at any given geographical location. In November 2003, Celcom completed the first phase of its dual-band network integration in Kelantan and Perlis, a precursor to a fully integrated network. Upon completion of this exercise in October 2004, Celcom is expected to achieve total national coverage which, coupled with further improvements to its network capacity and quality, will make it the leading cellular service provider in the country.
At the same time, Celcoms customised prepaid packs of Xcel, Xceed and Xplore were further enhanced with improved international roaming experience to Indonesia, Singapore, Thailand, the Philippines, Hong Kong, Brunei, Taiwan, Australia, the Netherlands, Cambodia and Vietnam. Better customer loyalty programmes were also introduced, such as airtime bonuses and free bonus SMS. In keeping with the growth of the mobile data business, Celcom launched its MMS via the General Packet Radio Services (GPRS) platform in August 2003 which attracted an initial registration of 18,000 customers. Offering more than just a broadening of message content, MMS is a logical extension of SMS and is set to enhance the possibilities of mobile data solutions for customers.
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Year 2003 also saw a visual identity change when the Company launched its new unified logo in October. The revitalised logo reflects a symbiosis of both tradition and the corporations new direction. The bird in full flight symbolises the timeless spirit of freedom and aspiration. The new brand promise is about constantly delighting customers and exceeding their expectations. The tagline Its In Your Hands is about empowering customers with endless choice and possibilities to enhance their lifestyles. To build and enhance the Companys brand equity, several brand sponsorships under the banner of Celcom In-Play and In-Showbiz were introduced to communicate the compelling reasons that make Celcom a preferred brand. In view of the maturing mobile industry in Malaysia, Celcom is placing emphasis on enhancing the quality of its customer service and the revenue derived from it. Aimed at matching the needs and aspirations of its customers, Celcom introduced a new range of consolidated postpaid plans, EZY, CHAT, BIZ, SALAM, IMPERIAL and AURUM, which are carefully segmented to specific target markets and more competitively positioned.
During the year, Celcom introduced a series of new value-added SMS services through several strategic partnerships, such as Celcom Bernama News on Demand, Al-Jazeera News Services, a Prepaid Recharge facility via AmBank and the KRU Celebrity Portal. SMS traffic showed a significant increase of 35% in the year ended 2003, in tandem with growth in mobile data revenue. The year was also significant in that Celcom scored the highest among telcos in a Customer Satisfaction Survey commissioned by the Malaysian Communications and Multimedia Commission. Celcoms Jalan Ampang Branch was also awarded the Anugerah Kualiti Y.B. Menteri Tenaga, Komunikasi dan Multimedia for providing the best customer service in 2003.
PROSPECTS
In the year ahead, Celcom will continue to focus on the following key areas: i) Building a strong brand and powerful market position from which to expand domestic and international access, hence achieve economies of scale, boost revenue and compete effectively in its chosen markets. ii) Deploying a stronger and more focused marketing and sales strategy to promote its full range of products and services. iii) Instilling total dedication to customer care and service at all customer touch points. iv) Empowering its employees and developing a spirit of shared values that will ultimately create a culture of excellence. In addition, to further support the mobile solutions business strategy, future development will concentrate on enhancing the mobile network via GPRS and on preparing for the impending 3G services. Celcoms long-term strategy is to expand its business beyond mobile voice communications into new market segments to access additional revenue streams. It will continue to introduce innovative and pragmatic mobile data services and solutions to keep people connected anywhere, anytime.
Celcoms new logo was launched amidst much fanfare marking the dawn of a new era.
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Mobility Solutions
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TELEKOM MALAYSIA BERHAD
Annual Report 2003
While the mobile industry is expanding worldwide, its growth is fastest in Asia, where the rapidly increasing number of mobile converts is expected to spur mobile technology and solutions to greater heights in the coming years. According to findings from IDCs Asia/Pacific Wireless Enterprise User Survey 2003, wireless technology will contribute significantly to a renewal in IT spending in 2004, and will present excellent opportunities for providers of enterprise solutions, telecommunications services and personal wireless devices.
or GPRS) was born. This meant higher data rates as well as an increase in mobile consumers globally. Leveraging on the 2G-network system, 2.5G has taken a step forward in creating the right ecosystem for mobile data services for the upcoming third-generation mobile system (3G), which promises to satisfy consumers hunger for ever higher speeds of Internet access, richer multimedia content and services, and enhanced capabilities to further improve their lifestyle and quality of life. Taking this step into the wireless world, however, necessitates the
WHERE IT BEGAN
In early 1990s, second-generation (2G) mobile systems were introduced around the world to ensure global interoperability. Since then, 2G has developed to provide consumers with roaming capabilities, enhanced non-voice services such as Short Message Service (SMS) and better quality voice services. However, with increasing demand to be able to do more with the phone than just make a call or send an SMS, a new generation of mobile systems 2.5G (better known as General Packet Radio Service,
deployment of infrastructure such as WCDMA and CDMA2000 and an integration of world standards, so that mobile consumers will indeed be able to communicate anywhere and anytime, using any mobile device.
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Celcom (Malaysia) Berhad is no exception. Upon integration with TM Cellular Sdn. Bhd. on 17 April 2003, Celcom introduced many firsts within Malaysia, setting milestones in SMS offerings such as the Al-Jazeera Package, Bernama News On Demand service and Mobile Karaoke. Through these offerings Celcom, has been able to capture a wide range of customers with diverse lifestyles, from those within the corporate world to those who just enjoyed singing. And this is just the beginning. Celcom has plans to introduce many more exciting services that will enable consumers to conduct various transactions over their mobiles, such as buying canned drinks via SMS or even confirming if they are on the Jabatan Pengangkutan Jalans (JPJ) blacklist. Creating further personalised products and services, consumers will also soon be able to download images to send to friends or to display on the phone, as well as download ringtones, picture greetings and animations to add pizzazz to their messages. Business professionals, meanwhile, can use their mobiles to receive SMS alerts on stock prices; and corporations may use it as an additional platform to conduct marketing promotions. The list of possible SMS usage is endless.
Mobility Solutions
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TELEKOM MALAYSIA BERHAD
Annual Report 2003
Multimedia messaging reshapes the landscape of mobile communications, making it more personal, more versatile and more expressive than ever before. It can, for example, send a photo or picture postcard annotated with text and/or an audio clip, a synchronised playback of audio, text, photo or, in the near future, a video emulating a free-running presentation or a video clip. A mobile phone that supports MMS is an amazingly versatile device. The ability to take, edit and send images empowers mobile phone users in all areas of life, by enhancing personal connectivity and efficiency. In the workplace, it will be used as a powerful tool for both conveying and responding to ideas and, coupled with Internet capabilities, serve as a virtual meeting room. Although MMS encompasses a wide range of content types, it is a logical extension of SMS, making it easily adoptable by todays generation of mobile users. Another advantage of MMS is that the message is a multimedia presentation in a single entry, not a text file with attachments, making it much simpler and user-friendly. For example, photos taken on MMS camera phones can be sent instantly to a web album on the Internet to be shared by family and friends. Like SMS, MMS is an open industry standard and MMS messages can be delivered using such JPEG, GIF, text and AMR voice.
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existing networks and protocols. The MMS standard supports various multimedia formats
We make your business our business except when its personal business.
Deadlines
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OPERATIONS REVIEW
TELEKOM MALAYSIA BERHAD
Annual Report 2003
PERFORMANCE
2003 WAS A CHALLENGING YEAR FOR TM NET SDN. BHD. (TM NET), ON THE BACK OF ITS STELLAR PERFORMANCE IN 2002, WHEN IT OUTPERFORMED ALL EXPECTATIONS BY CHALKING UP PROFITS WITHIN JUST SIX MONTHS OF OPERATIONS. NEVERTHELESS, TM NET CONTINUED TO CHART ITS GROWTH IN 2003. THANKS TO THE BROADBAND SERVICE, TM NET HAD RAKED IN RM290 MILLION, IN TOTAL REVENUE FOR 2003.
TM Nets other areas of business also registered growth. The applications, content and prepaid sectors grew by 99%, 405% and 133% respectively. This augurs well for the coming year in terms of broadening TM Nets sources of revenue. In 2003, TM Nets subscriber base stood at 2.2 million. Of this, 1.7 million were from access services, while application and content services accounted for 9,158 and 480,290 subscribers respectively. Subscribers enjoyed the privilege of accessing some 303,817 contents via 20 channels on www.bluehyppo.com and the variety of applications introduced in 2003 such as e-Surveillance, e-Supplychain and e-Voice. In 2003, with operating costs contained at RM288 million, the Company had registered a profit after tax of RM7.7 million (profit before tax of RM7.4 million) out of which RM5.4 million originated from nonoperating sources.
OPERATIONS
Since launching its broadband tmnet streamyx in 2002, TM Net has built on this by enabling 221 exchanges, mostly in urban areas. More exchanges are expected to be commissioned. Initial delivery constraints have been rectified by correcting measures including the development and deployment of pizzaboxes (a technology that enables broadband) for those with fibre optic lines and wireless solutions in areas exceeding the 5km coverage radius. As of December 2003, TM Net through Telekom Malaysia had successfully deployed 200,000 broadband ports throughout Malaysia. In 2003, TM Net had launched several initiatives to increase Internet usage among the Malaysian public. This included educational advertorials placed in local main newspapers and prime time broadcast programmes like Jom Internet and Lets Click on local TV Stations, and more product information on its website as well as on its bills. TM Net had also participated in activities involving the public to provide first-hand information on its services and products to customers.
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Of significance was, TM Nets response to the call by the Government to further reduce the price of broadband service. The 30% reduction, which was implemented on 1 November 2003, made TM Nets offerings among the most competitive in the world.
Broadband The number of TM Nets broadband subscribers surged from 18,200 in 2002 to 101,107 in 2003. On average, more than 20,000 streamyx applications were received every month. With the advent of radio frequency technology, TM Net moved one step ahead in enabling broadband service anywhere, anytime. TM Net launched its wireless Internet broadband connection facility, tmnet hotspot in February 2003. tmnet hotspot is available at popular F&B outlets where Internet users can surf at speeds of up to 384kbps for as long as they want, provided they are within 300m of an access point. To support the traveling subscribers, TM Net launched the wireless broadband Internet access through wireless local area network (WLAN) at various hotels nationwide. The hotel broadband solution (HBS) offers hotel guests broadband wireless in guestrooms and common areas as well as function rooms and the ballroom. Pan Pacific was the first hotel in the Klang Valley to make use of the service which enables guests to secure Internet connectivity at speeds up to 50 times faster than dial-up connection. At end-2003, nine hotels nationwide had taken up the HBS. To expand its customer outreach, TM Net launched Clickers, a one-stop service centre where customers can access Internet, register for services and purchase merchandise such as prepaid cards. All this is done within a young, vibrant and dynamic caf-like atmosphere. The first Clickers was opened in July 2003 in Kelana Jaya, at the former House of Internet. Following the success of tmnet Clickers, a second outlet was opened in Pulau Pinang. TM Net intends to introduce the concept to other major cities, namely Johor Bahru, Kota Kinabalu, Kuching, Ipoh and Kuantan. For the jetsetting customer, TM Net offers tmnet global roaming, which provides broadband Internet at over 3,000 hotspots in airports, hotels, convention centres and cafs around the world via wired or wireless connection. This service is available to all tmnet 1515, 1525 and streamyx customers.
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At the end of 2003, TM Net had expanded its hotspot coverage to 164 locations nationwide, mainly in the Klang Valley, Penang, Johor Bahru and Malacca. In the next phase of expansion, TM Net plans to cover banks, shopping malls, libraries, universities and colleges.
tmnet hotspot keeps you connected anytime from any location.
To further improve its customer service, TM Net produced a self-installation CD that helps customers to install the software for tmnet streamyx themselves, without having to rely on technicians. TM Net also implemented a tmnet streamyx reseller programme by appointing 104 companies as resellers nationwide. These contributed to about 95% of total streamyx registrations. In addition, TM Net also introduced online applications. TM Nets broadband attractions lie not only in ease of access, but also from the content available on the Internet portal BlueHyppo (www.bluehyppo.com) which offers 21 information-rich channels and 18 services. It even has a service that allows Malaysians to enjoy real-time, on-demand video streaming services from more than 10 channels ranging from comedy, sports, news, lifestyle, religious, documentaries from local television stations and two subscription based channels known as e-l@ne and Jadelane. To meet increasing demand, TM Net upgraded its capacity for international transit with a total capacity of 20 STM1 (Synchronous Transport Module 1); (20x155Mbps) by year-end 2003. Increments in this additional capacity is based on performance tracking, as this is to ensure efficient surfing experience. For this, TM Net has procured a network monitoring system, which also enables it to detect any network problems in real time. The network monitoring system will be fully operational by mid 2004. In addition, TM Net and Maybank worked together to allow customers to reload their prepaid Internet access online. Reloading prepaid accounts via Maybank2u.com.my or Maybank KawanKu ATM machines is another means of reloading tmnet prepaid cards. Prior to this initiative, TM Net had already provided more reload centres via partnerships with, for example, Pos Malaysia, petrol stations, 7-Eleven outlets, Kedai Telekom, Easyway kiosks and Clickers. Service As part of its after sales service, TM Net has created a flying squad of technical experts tasked with resolving any service related issue from hardware maintenance to faulty equipment. The flying squad is dispatched upon receiving complaints only to those related to TM Net services. The creation of the flying squad has greatly enhanced TM Nets after sales service and its ability to respond to customer-related problems speedily, while the service contractors help ease the customers access to technical experts whenever they have problems with their hardware. TM Net has also commenced its online billing, e-Bill, beginning with its tmnet 1515 service. e-Bill is not only sent to customers immediately via e-mail, it also provides them with more detailed information about their accounts, such as the date, time and duration of their Internet connections and total call charges for every successful connection made. To excite prepaid service subscribers, TM Net is scheduled to offer an amalgamated prepaid service for tmnet hotspot, tmnet prepaid and Voice over Internet Protocol (VoIP) in 2004. In 2003, TM Net continued to promote the value of Internet access by making its prepaid products widely available and easy to reload. By the end of 2003, TM Net had appointed 12 master resellers, which established a nationwide network of agents, hence, ensuring the accessibility and availability of the prepaid products in the market. The inception of the resellers programme resulted in the sales of
Keep in touch via tmnet hotspot.
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e-Learning content at their convenience from anywhere in the world. Similarly, TM Net has moved into other education facilities. In 2003, TM Net promoted its communication services in all sectors including voice over broadband (Netmyne e-Voice), IP VPN (Internet Protocol Virtual Private Network) and e-Surveillance. Netmyne e-Voice offers reduced call rates on domestic long distance (STD) calls, international (IDD) calls, and long distance mobile calls to corporate organisations. The IP VPN solution enables customers to access remote sites over their corporate networks with appropriate security policies, while Netmyne e-Surveillance
Broadband solutions for hotels launched by Tan Sri Nuraizah, Chairman MCMC.
enables customers to get real-time video surveillance by using broadband Internet access and the web browser. Netmyne e-Surveillance was first launched Serving Businesses and Organisations To keep up with globalisation, high-speed Internet connectivity has become a necessity for business users. Realising that, TM Net offers broadband to in Malacca, with the State Government as the first customer. As a strong supporter of growing a knowledge society (K-Society), TM Net is honoured by its appointment as one of the two operators for the Malaysian Internet Exchange (MIX), a governmentinitiated project led by the Ministry of Energy, Communications and Multimedia that aims to connect all Internet service providers in Malaysia through a common local backbone. With the exchange, users will enjoy faster access to local content, higher security and better quality and performance of local content. Most importantly, MIX will significantly reduce leased line costs and the need for excessive international bandwidth. TM Net includes all its strengths in providing the best data centre service in the nation. As such, TM Net had launched two new data centres in Penang and Johor Bahru in addition to the existing five data centres in the Klang Valley. The new data centres offer customers of the northern and southern regions the physical and technical environment affording the reliability and flexibility necessary to outsource their mission-critical Internet operations.
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businesses and organisations and develops affordable broadband applications to support the growth of SMEs. TM Net has even created specific solutions for manufacturers, such as e-Supplychain which combines its expertise with that of partners DELL and B-Global to manage the entire supply chain of business transactions from manufacturers to the community of vendors, logistics partners and other SMEs. The service was jointly marketed as a packaged service of TM Net to Dell suppliers within Malaysia and its neighbouring countries but is expected soon to include suppliers of other manufacturers. Another TM Net initiative in 2003 was to promote broadband service in the education sector. In March 2003, TM Net and Inti Universal Holdings Bhd. signed a deal to provide high-speed Internet access to students and staff of Intis Group of colleges. The deal included unified communication services and campus short messaging services. Such facilities create an e-Community that improves communication and interaction as well as enables students to access
TM Net had taken the opportunity to work with TV3 in the 2003 Sure Heboh Carnival, which was first introduced to the public by TV3. Through this ground activity, TM Net managed to reach out to more than two million visitors and gave first hand information and demonstrations on its products and services while enhancing its brand image.
the Cyber School project. In addition to that, a portion of the proceeds, raised from the charity golf series was channeled to Majlis Kanser Nasional (MAKNA) to support treatment for patients suffering from cancer.
PROSPECTS
Having introduced attractive cost-effective and Social Responsibility While growing its business, TM Net does not forget the less fortunate members of the society such as schools without access to Internet and those suffering from cancer. TM Net initiated a project to raise funds for the needy. In this regard, TM Net initiated its inaugural TM Net Charity Golf Classic. In March 2003, TM Net started the first leg of the TM Net Charity Golf Classic series at Kelab Golf Sultan Abdul Aziz Shah, Shah Alam. The remaining 6 legs took place in Kulim, Nilai, Johor Bahru, Kuala Terengganu, Kota Kinabalu and Subang Jaya. The golf series raised funds for the Cyber School community project the adoption of needy schools from every state nationwide, especially from rural areas, to be equipped with computers connected via tmnet streamyx. The Charity Golf Classic was successful and it enabled TM Net to contribute computers with broadband connectivity to Given that TM Net has seen 19% growth for 2003, we are bullish for year 2004 based on the demand for broadband, cheaper access services and greater acceptance of new services. In the coming year, TM Net will expand its applications, contents and services. In addition to being a content aggregator for online and cellular, TM Net will continue to increase tmnet streamyx availability and introduce other services such as multimedia messaging services (MMS), video-on demand (VOD), interactive video streaming and other businesses. efficient services such as broadband, VoIP and IP VPN, TM Net is confident the Malaysian public will appreciate that the Internet is quickly becoming a major communication tool of the future.
INTI College goes broadband with TM Nets Total Integrated Broadband Internet Solutions.
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Malaysian broadband is currently defined as Internet access of more than 128 kbps, with 512 kbps fast becoming popular. 384 kbps is about seven times faster than the old dial-up Internet connection. This means that a music file that used to take two hours to download will now take only about 15-20 minutes. Broadband brings to people more sophisticated and bandwidthhungry applications of the Internet. This includes video, multimedia applications, games, entertainment and the transmission of large files. By and large, the high demand for broadband is due to two principle features: high-speed and constant (i.e. always-on) connection. These, coupled with flat rate offerings by services such as tmnet streamyx, enable Internet users to access richer interactive content and applications online. While the majority of households with broadband are currently higher-income urbanites, this does not skew the demographics of Malaysian broadband users towards people over 40. Experience has shown that more than half of all Malaysian Internet users are below 25, and this appears to be true for broadband as well. Children of these households are also heavy users of broadband.
This is most significant because, eventually, an entire generation of people will grow up with broadband access, much like the generation of people who grew up with the Internet and mobile phones; the generation who grew up with colour TV; and the generation who grew up with telephones. Broadband access will then become a commodity, a necessary tool for fast, convenient communications, entertainment and work. It is not too far fetched to expect all Internet access of the near future to be via broadband. Broadband will be something people can take for granted. In the past year, Malaysian broadband experienced tremendous growth. TM Net alone installed more than 100,000 broadband connections under its Digital Subscriber Lines (DSL) service. Complementing these fixed line services, more than 200 locations were enabled with wireless Internet access via Wi-Fi. On the back of this high-speed connectivity, content and application providers have been producing increasingly sophisticated and rich content and applications to fit the demands of the broadband Internet user.
Massive Multiplayer Online Games (MMOG) blossomed worldwide with unprecedented growth, attracting millions of users. It is no secret that broadband fuelled this growth, as these impressive games are rich in audio and graphics and are thus bandwidthhungry. South Korea, which emerged as the worlds number one MMOG market, also has the worlds number one broadband penetration rate. Video applications such as video-on-demand and video monitoring are also growing rapidly. At Bluehyppo.com, TM Nets portal, users can access 15 different video channels covering various topics from sitcoms to fashion to sports. In fact, Bluehyppo.com is in the midst of transforming into a true broadband portal. While the needs of narrowband users must still be met, Bluehyppo is ready for the eventual migration of all Internet users to broadband. Having just finished a tough video meeting with partners in five countries, you check on your daughter at home. She is down with the flu and you are glad to see that she is resting well in her room, with her favourite blue teddy bear wrapped in her arms. At any rate, you can be quickly in touch with the doctor via video phone at any time. Globally, it is proven that Internet users will spend more time doing more things online with faster access speed. This positive correlation between bandwidth and usage is also true in Malaysia. The key factor here is time spent online. Experience shows that an Internet user who would normally be online for one hour a day on the old dial-up narrowband connection will spend 50% more time online with broadband. With the decrease in broadband prices, this online time is likely to increase even further, and average usage would probably be more than double that of dial-up. What is significant is that broadband access engenders the habit to be online. Eventually, it will become second nature, and going online will be as commonplace as making a phone call. This is significant because it would make the more serious and powerful online applications more readily acceptable to users. This includes e-commerce, e-banking, e-learning and other such classes of applications. One of the most important measures of (indeed, a prerequisite for) success for any of these applications is a certain critical mass of people using them. The natural progression of heavier usage encouraged by broadband would likely lead to this critical mass. In this sense, the proliferation of broadband directly contributes to the acceptance of online tools necessary to make the e-government ideal a reality. This in turn will boost the countrys aspiration of becoming a wired knowledge economy.
Indeed, given the relatively short duration from now to year 2020, the proliferation of broadband can be seen as a necessary prerequisite for realising Vision 2020. The possibilities are as exciting as they are promising. Fixed broadband connectivity will be even more pervasive as networks stabilise and technology extends the range and capacity of networks. Wireless broadband will become truly viable, providing always-on high-speed connectivity for people on the move. The proliferation of IPv6 and MPEG4 standards will allow even richer content and applications to be delivered via broadband. These new standards effectively help deliver multiple-folds of content over the same bandwidth, enabling content and application developers to deliver highly sophisticated offerings online. And all this is within reach in the near future with broadband. On the way back from work, you receive a call from your cousin, who is a farmer. He is inviting you to his graduation ceremony. He has been studying for a degree in agriculture management with an accredited university, which he performed online, attending virtual classes and doing assignments even while out on the field! He had discovered this educational opportunity while video chatting on the Malaysian farmers e-community portal. Now, he happily tells you, other than receiving valuable information and buying and selling over the portal, it has actually led him to a degree. Internet = broadband. That is the future. And that future is not far off. Worldwide, it is expected that the majority of Internet users will be on dial-up until 2006. After which most will switch to broadband. The switch in Malaysia is expected to happen soon after in fact, anytime before 2008. However, considering that Malaysian demand could be as high as 50% of Internet subscribers, the switch is likely to happen sooner rather than later. This switch to broadband, wired or wireless, will be a milestone in the annals of Malaysian history. Because, soon after, the critical mass of powerful e-government, education and other key applications will be achieved. And the vision of a connected knowledge society will become a virtual reality. At TM Net, we are now crafting this milestone. After dinner, you order the latest movie featuring your favourite star. As you watch the movie, you are able to discover some interesting background details by calling up the interactive information blurbs. Before you go to bed, you double-check tomorrows schedule on your online diary, just to make sure. You settle into bed with a starry night sky mosaic on your ceiling, the video fed live from the National Park. Another day done good, another day of opportunities tomorrow.
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OPERATIONS REVIEW
TELEKOM MALAYSIA BERHAD
Annual Report 2003
PERFORMANCE
AS TELEKOM MALAYSIAS VEHICLE OVERSEEING AND MANAGING ITS FOREIGN VENTURES, TM INTERNATIONAL SDN. BHD. (TM INTERNATIONAL) ASPIRES TO BE AN ESTABLISHED, WELL-RECOGNISED, SELF-SUPPORTING AND PROFITABLE COMPANY THAT SERVES AS THE FLAGSHIP FOR THE GROUPS INTERNATIONAL INVESTMENTS.
In the financial year ended 31 December 2003, Telekom Malaysias overseas investments contributed approximately 28.76% to the Groups profit after tax or RM399.85 million, compared to RM137 million the previous year. This is an increase of 192%, compared to 73% the previous year. With cellular services serving as the cornerstone of its investments, TM Internationals presence in South Africa, Guinea, Malawi, Bangladesh, Sri Lanka and Cambodia provided access to a cellular subscriber base of some 11 million as at end 2003. Having had its origins in the International Ventures Division, TM International has today made the successful transition from an operating division to a wholly-owned subsidiary of Telekom Malaysia. In this regard, the restructuring exercise undertaken the previous year aimed at consolidating all international ventures under TM International continued unabated into 2003.
International Direct Dialling (IDD) calls. A direct consequence of this has been the award of an international gateway operator licence to MTN, thereby facilitating Dialogs IDD services through its own gateway. Apart from the launch of international services, 2003 also witnessed MTN building on its unassailable competitive advantage with respect to product and service delivery. Numerous new value-added services for existing customers such as GPRS roaming (in 18 countries covering 25 operators), video streaming and dual SIM (prepaid and postpaid) Information On Demand were offered. At the same time, the Company also enhanced its service levels using various tools, such as automated service registration (using SMA and IVR) and Dialog Buzz, the mobile customer service centre. MTN also successfully garnered the international GSM Award for a record third consecutive year in
OPERATIONS
MTN NETWORKS (PRIVATE) LIMITED (MTN) As Telekom Malaysias pioneer international investment, MTN was initially set up in Sri Lanka in 1995 to provide GSM cellular service on the 900 Mhz frequency band, under an 18-year licence valid until 2013. Under the brand name Dialog GSM, the network is also Sri Lankas pioneer digital cellular network. As at end 2003, it had a subscriber base in excess of 830,000 involving investments of some US$72.6 million (some RM257 million) to date. This subscriber base is supported by over 370 base stations and international roaming facilities with 302 operators in 177 countries. A key development on the cellular side of MTNs business in 2003 has been the roll-out of the GSM dual band network on the 1800 frequency band. Yet another key development in the Sri Lankan market in 2003 has been its liberalisation, marking the end of incumbent Sri Lanka Telecoms monopoly on
Situations. In 2003, the Company also established two new branches in the North and East, previously strife-torn areas.
TM INTERNATIONAL (BANGLADESH) LIMITED (TMIB) TMIB was established in 1997 as a joint venture company between AK Khan & Co (a leading Bangladesh business group) and Telekom Malaysia. The Company operates a GSM cellular service on the 900 Mhz frequency band, under a 15-year licence. As at end 2003, the net customer base stood at 401,680 subscribers, representing a market share of 22%. This comprises some 144,151 postpaid and 257,529 prepaid customers.
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A major milestone of 2003 was the addition of some 245,670 customers to the subscriber base, an increase of 192% over the previous year. TMIBs network coverage, has also been progressively growing and as at end December 2003, 53 out of 64 districts in Bangladesh have been covered, involving a total of 369 base stations. Customer acquisition and network expansion aside, the product and service delivery aspects of the Company have also seen active inroads in 2003. Various packages for both prepaid and postpaid continued to be rolled out. Two key developments, namely the acquisition of a nationwide ISP licence, as well the Bangladeshi Governments decision to liberalise the provision of VoIP services, have opened up possibilities for TMIBs future operations. TMIB is exploring the possibility of maximising both these opportunities in the coming years.
TELKOM SA LIMITED (TSA) Telekom Malaysias 12% effective holding in TSA is by far its largest foreign investment. The stake is held via Thintana Communications LLC, a partnership between Telekom Malaysia and US-based SBC International Inc. As strategic equity partners, the two companies jointly hold a 30% stake in TSA. TSA also owns 50% of Vodacom, the leading cellular operator in South Africa. The ending of TSAs five-year exclusivity in May 2002 was preceded by a single-minded pursuit of an extensive business transformation process in strategic preparation for competition. This culminated in TSAs listing on both the Johannesburg Stock Exchange (JSE) and New York Stock Exchange (NYSE) in March 2003. As a result of the IPO, the current shareholding structure is made up of 39.3% with the Government of South Africa, 30% with Thintana and a free float of 30.7%. The share price has performed impressively well, with the original listing price of ZAR28 per share rising to a high of ZAR72.9 at end 2003.
Overall, 2003 was a good year for TSA in terms of financial performance despite the global and South African economic environment. Group revenue, operating profit and operating cash flow saw strong growth. A positive albeit smaller growth in the core fixed line revenue was matched by significant cost savings in the fixed line business and a strong contribution from the Vodacom mobile business. TSA and the market as a whole had responded to certain key developments designed to meet the Governments aspiration for increased liberalisation and competition in the industry. These include the call for bids for a second network operator (SNO) licence for under service area licences (USAL) as well as the initiation of convergence policy development. Despite these challenges, the Company fared well in a 2003 Top Brand Survey. It was voted the top telecommunications provider, the second-most admired company in South Africa (after Coca Cola), and the company which has done the most to uplift the lives of South Africans.
Samart I-Mobile, a 68.5% subsidiary of SAMART, underwent a successful IPO exercise in December 2003, with listing on the Stock Exchange of Thailand. A total of 110 million ordinary shares of par value Baht 1 were sold at an initial price of Baht 11 per share.
TELEKOM NETWORKS MALAWI LIMITED (TNM) TNM was established in 1996 as a joint venture between Telekom Malaysia and Malawi Telecommunications Ltd. (MTL), the Governmentowned incumbent, with Telekom Malaysia holding 60% equity and MTL the other 40%. TNM operates a GSM service under a licence valid until 2014. After eight years of operations, TNM has emerged as the leading cellular service provider in Malawi, with a customer base of 62,000 as at end 2003, an increase of some 80% over the previous year. The Company has commanded a 57% market share since 2001 in what has become an increasingly competitive market.
SAMART CORPORATION PUBLIC COMPANY LTD. (SAMART) Public-listed SAMART, in which Telekom Malaysia has a 19.59% stake as at end 2003, provides a wide range of value-added telecommunications services including the manufacture and distribution of telecommunications equipment such as TV antennas and satellite dishes in Thailand. In end September 2003, the Company successfully completed its debt restructuring exercise under which debts, obligations and commitments estimated at Baht 6.5 billion were reduced to some Baht 2.35 billion. This generated a gain on debt restructuring amounting to Baht 1.65 billion plus removal of all obligations and commitments. Other key developments in 2003 saw the whollyowned subsidiary Samart Comtech participating as a key member of the consortium ASIS, which won the Airport Information Management System (AIMS) project for the new Bangkok airport. The project is valued at some Baht 2.3 billion.
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The growing subscriber base is supported by a new prepaid intelligent network system successfully migrated in October 2003. Apart from new capabilities, the new prepaid system has an increased capacity able to cater for 100,000 subscribers from the present 45,000. The TNM network is currently supported by some 58 base stations and in July 2003, an additional international link was established via Very Small Aperture Terminal (VSAT) through Telekom Malaysia to harvest calls from the Asian region.
Consumers benefited from some key pricing decisions taken during 2003 which included a 50% discount on the subscription and rental fee for Internet service, a lowering to GNF 25,000. The timing of GSM usage was also changed from oneminute blocks to 30-second blocks.
CAMBODIA SAMART COMMUNICATION CO. LTD. (CASACOM) CASACOM which started commercial operations in 1999 is the latest among Telekom Malaysias foreign
SOCIETE DES TELECOMMUNICATIONS DE GUINEE (SOTELGUI s.a.) Sotelgui s.a., formed out of a strategic partnership with the Government of Guinea provides both fixed and cellular services in this West Africa country. Telekom Malaysia holds a 60% stake in Sotelgui s.a. while the Guinea Government owns the remaining 40%. For Sotelgui s.a., 2003 was marked by important infrastructural achievements, with GSM being deployed in 19 towns in the provinces. The overall customer base (fixed and cellular) at end 2003 stood at 111,004. New projects in Internet and prepaid fixed (Ezeephone) were also initiated, while rehabilitation and extension of the cable network continued to be a high priority for the Company.
investments, providing services on the GSM 900 and NMT 900 Mhz frequency bands in Cambodia. Telekom Malaysia holds a 51% stake in the venture while the remaining 49% is held by SAMART Corp. CASACOM operates under a 35-year cellular concession commencing 1996 from the Ministry of Posts and Telecommunications. It is currently the second largest cellular operator in Cambodia.
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Operating under the brand name Hello, CASACOM enjoyed first mover advantage in 2003 on new services such as General Packet Radio Services (GPRS), Multimedia Messaging Service (MMS) and various content services. With a base of 85,339 GSM subscribers, the Company marked 2003 with a marketing strategy that emphasised a good quality network, nationwide coverage, competitive pricing, extensive international roaming and the establishment of a one-stop centre for telecommunications services.
Another strategic thrust for TM International is to assist in creating value for the Telekom Malaysia Group. In this regard, the Company plans to identify and deploy products already available within the Group to be used in various ventures abroad. With its established presence in Asia and Africa, TM International is well positioned to bring business back to the Group through its hubbing activities and usage of its global infrastructure. Plans are also afoot for TM International to be the international retail and marketing agent for home-grown products and services.
PROSPECTS
Going forward, TM International plans to adopt strategies and initiatives which mitigate the downward profit pressure in the domestic market as well as increase Telekom Malaysias profile in the regional marketplace. In this regard, strengthening its core business becomes a key strategic thrust and TM International aims to secure three new core investments over the next three years. In addition, emphasis will Sri Lanka and Bangladesh through rapid network expansion and enhanced service offerings. TM International will also seek to integrate the licences and operations owned by Celcom in Bangladesh. be given on growing the existing businesses in TM International also intends to pursue cost efficiency in procurement. Its Global Procurement initiative is aimed at standardising network equipment and systems, so as to ensure cost efficiency over the long run and to offer value services to customers.
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Were upgrading our customer service and infrastructure. So you have less worry, less stress and more zen.
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Facilities Management
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OPERATIONS REVIEW
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Annual Report 2003
PERFORMANCE
SINCE ITS INCEPTION IN JANUARY 2002, TM FACILITIES SDN. BHD. (TM FACILITIES) HAS MANAGED THE NONCORE BUSINESSES OF TELEKOM MALAYSIA, NAMELY ITS STRATEGIC BUSINESS UNITS (TELEKOM MALAYSIA SBUs) OF MALAYSIAN LOGISTICS, MALAYSIAN SECURITY, FACILITIES MANAGEMENT & INFRASTRUCTURE DEVELOPMENT, PROPERTY DEVELOPMENT & CONSULTANCY AND FLEET MANAGEMENT. TM FACILITIES CONTINUOUSLY EXPLORES NEW BUSINESS MODELS AND OPTIONS TO ENHANCE THE NICHE AREAS OF EXPERTISE OF EACH SBU IN ORDER TO TRANSFORM IT INTO A FULL-FLEDGED BUSINESS ENTITY.
In 2003, the five Telekom Malaysia SBUs generated a total revenue of RM355.5 million from both internal and external sources, an increase of 2% over the previous year. Profit before interest and taxation was at RM34.6 million. This is the second successive year, Telekom Malaysia SBUs had recorded profits. As a countermeasure against economic uncertainties, concerted efforts were made to retain businesses while costs were managed and contained.
added service are Shapadu Linfox and Shell Gas. For the past few years, Shell Gas has stationed its central LPG storage facilities in ML warehouses in Prai, Melaka, Kuantan and Alor Star. The partnership with Shell Gas has been so successful that the petroleum company is very keen to open up new storage centres at ML sites in Johor Bahru and Sandakan, Sabah. ML intends to diversify its business by introducing new services such as document storage and retrieval as well as public warehousing.
OPERATIONS
Malaysian Logistics Malaysian Logistics (ML) provides total logistics and related support services to Telekom Malaysia and its subsidiaries. Its services comprise mainly of traffic and transportation, warehousing, scrap management, contracts management and liaison with the Customs Department. With a network of warehouses located around the nation, ML has the capacity and economies of scale to take on the role of a total logistics solution provider for Telekom Malaysia as well as external customers. Apart from Telekom Malaysia, ML rents out idle land or extra space in warehouses to external customers in its efforts to generate additional income. Among the external parties that have made use of this value
Looking out from Menara Telekoms spacious and gleaming lobby.
Malaysian Security Malaysian Security (MS) is responsible for safeguarding Telekom Malaysias assets, resources and personnel. This role has assumed greater importance today with the ever-increasing challenges faced by security and safety services. MS main activity is to provide armed and unarmed earth satellite stations, submarine cables stations, hill stations, office buildings, business centres and other government gazetted key installations that fall under Arahan Tetap Sasaran Penting Negara.
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MS also provides value added services such as investigation, security for cash-in-transit, crime prevention patrol, night vaulting and patrolling of optical fibre routes as well as overhead and underground cables. Due to the prevalent threat of terrorism, MS also provides specialised security audits and conducts security awareness and preventive programmes. To reduce its overheads, a pilot study was undertaken on remote surveillance systems which can be managed from a centralised control unit hence reducing the need for security personnel onsite. better serve Telekom Malaysia as well as to capture more external business. A pilot study on property management as well as operations and maintenance Facilities Management and Infrastructure Development Facilities Management & Infrastructure Development (FMID) is responsible for the management, operations and maintenance of all Telekom Malaysia buildings, facilities and installations. It provides electrical, mechanical and civil engineering services as well as commercial building maintenance to the Group. Besides internal revenue from Telekom Malaysia, While it has previously outsourced some of its key functions to third parties, FMID has made its mission to be more self-reliant either by teaming up with a reputable international Comprehensive Facilities Management (CFM) company or by becoming a CFM contractor itself. This approach is to enable it to FMID expects to generate external cash revenue from Celcom through the provision of mechanical & electrical and battery rectifiers maintenance services as well as infrastructure development. To enhance quality and accountability, FMID is making an effort to save on energy by retrofitting certain systems. Meanwhile, a Customer Service Management System was introduced to reduce the time between receiving a docket/work order and delivery of the product or service by vendors/contractors. functions will be carried out on a model building, such as Menara Telekom, with the objective of acquiring world-class standards. For benchmarking purposes, a visit to Telkom SA was made recently to experience firsthand the high standard of building management practised by the company.
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Property Development and Consultancy Property Development & Consultancy (PDC) is responsible for identifying and unlocking the value of idle land banks belonging to Telekom Malaysia. PDC hopes to develop these plots of land via joint ventures or by appointing a joint land development partner. PDC is also responsible for managing TM TelCos infrastructure projects and for property land administration of all Telekom Malaysia assets.
Fleet Management The Fleet Management (FM) unit oversees the entire Telekom Malaysia fleet of about 7,000 vehicles. It is the only entity in the country that manages such a large number of utility vehicles. FMs principal activities include vehicle maintenance and repair, licensing and permits, insurance and claims as well as the purchase of new vehicles and sale of used vehicles. In year 2003, RM35 million was allocated to procure new utility vehicles and cars to replace those which are beyond economic maintenance of which more than half are above 10 years old. Although the allocation is not sufficient to replace all the vehicles that merit replacement, the new vehicles will shore up the overall quality of the fleet and reduce maintenance costs. FM managed to secure RM5.6 million in revenue from the sale of scrap vehicles. As part of its value added services, FM has successfully installed custom-designed vans Payphone division; and also provided a canopy for vehicles under the Customer Network Operations (CNO) group. In addition to its maiden development project in Ijok, Kuala Selangor, PDC is also embarking on projects in other parts of the Klang Valley. PDC expects to generate RM3.50 million in revenue, or 1% of the total sales development value of RM357 million for the land bank earmarked for development over the next five years. In another positive development, Telekom Malaysias decision to transfer additional land to TM Facilities will give PDCs development efforts a boost. Apart from being the custodian of all Telekom Malaysia assets, the Property Land Administration unit under PDC also acts as an intermediary with all land offices and local authorities, collecting rental and managing the payment of property taxes (leased rentals, quit rent and assessment fees). For its role in overseeing and managing the five SBUs, TM Facilities received RM6.8 million in management fees from Telekom Malaysia. Profit after tax was at RM2.6 million. The management has proposed that FM continues to serve Telekom Malaysia as an SBU under TM Facilities. However, to further tap external business opportunities, it is proposed that the company could become a Telekom Malaysia subsidiary by entering into a joint venture or smart partnership with a third party. complete with coin collection boxes for the
PROSPECTS
In the year 2004, TM Facilities hopes to evolve some of the five SBUs into business entities via joint ventures or smart partnerships with third parties. This would help further develop Telekom Malaysias non-core businesses with the view of enhancing shareholder value.
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VADS BERHAD
VADS Berhad (VADS), a company listed in the Malaysia Securities Exchange Berhad (MSEB), has, for the past 12 years, shown a track record of continued revenue growth. In 2003, VADS achieved a full years revenue of RM151.3 million and a 12month profit before tax of RM14.7 million, 8% higher than the preceding years profit before tax of RM13.6 million. This was the direct result of our consistent and uncompromising focus on achieving profitable growth through a value proposition of quality in terms of our brand, network, customer services, products and services, distribution, financial management and workforce. VADS e-Services Sdn. Bhd. VADS e-Services Sdn. Bhd. (e-Services) will focus on Contact Centre Services (CCS) provisioning in both customer implementation and outsourcing projects. e-Services is committed to provide end-to-end Managed Network Services (MNS) The Groups principal activity lies in the provision of international and national managed network services to businesses and organisations. Revenue from the MNS division was evenly spread across the international and national sales network, contributing 85% to the Groups total turnover. With the proceeds from the Initial Public Offering (IPO), VADS continued to invest in the state-of-theart IP VPN service branded as VADS PREMIER. In the year under review, VADS signed an agreement with AT&T Global Network (AGN) to deliver Multiprotocol Label Switching (MPLS) networking services to companies internationally. Under this agreement, VADS is appointed as AGNs managed service provider in Malaysia to deliver AGNs portfolio of global managed networking services. The collaboration enables VADS to become part of AT&Ts world class state-of-the-art global network. VADS e-Services will continue to develop comprehensive solutions encompassing technology, process management and innovative resource management to add value to our customer offerings as more corporations and enterprises are realising The CCS facilities and infrastructure are built according to International Asia Call Center Industry (ACCI) standards with CSR workstations, Quality assurance rooms: conference rooms, training rooms, meeting rooms, client rooms, staff facilities, 24x7 Security, Data center: racks, generators, UPS and Internet Security features. Partnering with Teletech, a leading global provider of CRM services and solutions, e-Services is equipped with the means of providing world-standard customer care services and technical support for the customer management centres of large companies here in Malaysia. outsourcing for CCS via total management and customer care for corporations and enterprises. VADS has always strived for the highest levels of professionalism in meeting global service standards. The Company is optimistic of the growth potential in this business and one of the commitments is to achieve Ciscos Silver Partner Certification Program in 2004. This achievement would reflect a milestone of the years of dedication and sacrifices in putting in place the right resources and infrastructure to support the business.
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the benefits of outsourcing their contact centres. With the two-pronged objective of maintaining focus on their core business and improving customer relations, e-Services CCS is set to carve a niche in Malaysias IT outsourcing market.
VADS Solutions Sdn. Bhd. VADS Solutions Sdn. Bhd., a wholly owned subsidiary of VADS specializes in IT systems integration. VADS Solutions main business focus is in the software development turnkey projects, where applications are customized to meet particular requirements. Some of the projects undertaken by VADS Solutions include billing and customer care applications; project management systems; messaging and collaboration; and business intelligence systems. Under its knowledge management services, VADS Solutions offers Business Intelligence or Data Warehousing solutions, Groupware solutions, Project and Document Management solutions. The Company also provides IT infrastructure support, management services and other e-related services through our highly skilled professionals using proven methodologies. Maintaining its leadership position in the digital telecommunications business, Fiberail has completed the installation of a 22-station microwave link network for Celcom and will complete the installation of a second fibre cable system by the end of 2004. In the third quarter of 2003, Fiberail embarked on a restructuring campaign to achieve business excellence and to sustain a competitive edge while facing the challenges of globalisation. Its successful migration to ISO9001:2001 has motivated the company to expand its services and to venture outside the KTMB corridor, targeting in particular,
Total Integrated Software, Turnkey and Business Application Solutions from VADS.
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Year 2003 saw the commencement and completion of Phase 1 of the Telekom Malaysia National Operations Centre project with a value at RM12 million. Meganet has also completed installing the IT infrastructure (campus network & ICT peripherals) for the Polytechnic Port Dickson, Polytechnic Sabak Bernam and UiTM Seberang Prai. The combined value of the three projects was more than RM15 million. Since commencing business operations in 1997, Meganet has executed a string of IBS and ICT related projects with a total cumulative revenue in access of RM300 million. Revenue for 2003 amounted to RM33.3 million with
Meganet Communications bringing you integrated telecommunication and IT Solutions.
a net profit of RM1.9 million. With zeal and enthusiasm derived from the companys vision and mission, Meganet will utilise and deploy all its resources to penetrate deeper into the IBS and ICT markets. Given the profound knowledge and expertise of its professionals and the skills and capability of all its employees, the company is confident of generating greater revenue in the near future.
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with equity holdings of 70% and 30% respectively. Meganet was established to cater to the needs of a diverse and multi-faceted IT-based industry, focusing on intelligent building systems (IBS) consultancy, integrated telecommunications and information technology solutions as well as multimedia applications. Meganet has diversified its expertise in related businesses within the ICT spectrum, providing solutions for integrated building management systems, security management systems (i.e. card access control systems and digital closed circuit TV) and IT infrastructure (networking systems, structured cabling systems, smart card multi-application systems, and audio visual multimedia and telecommunication systems). To further strengthen its position in the ICT industry in the country, Meganet is shoring up its capability to provide value-added services to premium and demanding customers with niche packages such as network management systems, intelligent building electrical systems, IT migration services and building automation systems.
Currently TSSSB has 95 ISO certified Kedai Telekom outlets which serves as a primary channel in providing Telekom Malaysias services such as service provisioning, bill payment collection, inquiries and bureau services. TSSSB provides a host of Information and Communication Technology (ICT) products and Customers Premises Equipment (CPE) to its customers through the Kedai Telekom outlets, corporate sales division and its network of dealers and agents. The Company works very closely with Telekom Malaysias product marketing division, TM Net Sdn. Bhd., vendors, suppliers and business partners in providing key products such as prepaid calling cards and feature phones to Telekom Malaysias group of customers. For the Financial Year ended 31 December 2003 the total revenue for the Company recorded a slight audited) to RM154.47 million. For 2004, TSSSBs focus is on Customer Service Excellence. Working together with the Customer Relationship Management (CRM) group and Change Management Office (CMO), TSSSB is taking steps in increasing the customer service level and increasing the Customer Satisfaction Index (CSI) via several key initiatives. The Company continues to be committed to serving Telekom Malaysias 4.6 million direct exchange line customers and more than 200 corporate organizations. increase from RM154.43 million in Year 2002 (un-
The Ezeephone system was deployed in Malaysia in 2002 with one node with a capacity to support 50,000 users. In December 2003, two more nodes were installed to cover Sabah and Sarawak as well as the northern regions of Peninsular Malaysia, bringing the total capacity to 150,000 users. TAB has also successfully introduced a popular Fixed Short Message Service (FSMS) to Telekom Malaysias fixed line customers.
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For the year 2003 TAB registered a net profit of RM3.04 million. TAB aspires to become a active player in the ICT industry by diversifying its product portfolio. Products which have been successfully launched, such as VCS and Ezeephone, shall be replicated and marketed to other countries. TAB is also looking into business opportunities in the prepaid market both locally and abroad. In this regard, it is considering partnerships with foreign telcos and resellers, as a way to ease its entry into the international market.
Damansara and Subang; the Malaysia Tourist Pages, Malaysia Oil & Gas Directory, Halal Pages, Corporate Agriculture Directory, Dining Out and the Malaysia Information Industry Directory. In addition, there is a Malaysian Chinese Yellow Pages catering to the Mandarin-speaking community. TPSB registered a total of RM53.16 million in revenue for the financial year ended 31 December 2003 compared to RM52.90 million in 2002. This is an improvement of 0.49%. Total revenue for Yellow Pages & White Pages is RM48.69 million and RM2.13 million respectively. This represents 96% of the overall revenue for the company. For year 2003, the revenue for the Malaysian Chinese Yellow pages is RM1.39 million and that for Niche Directories is
RM0.95 million. TPSB has extended the reach of its Yellow Pages by making it accessible via the Internet at www.yellowpages.com.my and also through the Short Messaging System (SMS). The Malaysia Internet Yellow Pages (MIYP) was officially launched in October 2000, while TMTOUCH SMS Yellow Pages was a joint venture with TM Cellular Sdn. Bhd., now merged with CELCOM. The product was launched in August 2002, following which TMTOUCH subscribers can access directory information through SMS using the short 200200 code.
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As a member of the Asian Directory Publishers Association Inc. (ADPAI), TPSB has embarked on a cross-selling arrangement with other members of the association, such as the Yellow Pages of the Philippines, Indonesia, Brunei and Myanmar. On August 8, 2003, TPSB entered into a collective agreement with the National Union of Telekom Employees to foster a harmonious working environment and encourage higher productivity. TPSB has been awarded the ISO 9001:2000 certification by SIRIM on management systems, reflecting a high standard of business processes as well as quality products and services.
Learning from this experience, Menara Kuala Lumpur organised a workshop for its staff with the view to formulate a more focused and specific corporate vision and mission. The objective is to make Menara Kuala Lumpur the preferred destination for both local and foreign visitors to Kuala Lumpur by year 2005. To achieve this vision, the corporate mission requires all its staff to strive towards creating a truly enjoyable experience for visitors to Menara Kuala Lumpur through providing good service, innovative products and advanced facilities. Intensive creative promotional activities were held within the country, offering attractive rates to walk-in visitors and better concessions to travel agencies. These initiatives paid off as Menara Kuala Lumpur
achieved its targeted sales figures. New products were also introduced to increase the lure of Menara Kuala Lumpur. For example, the Menara Kuala Lumpur Privilege Card, launched as 2003, enables visitors to register as members and subsequently enjoy numerous privileges and benefits offered by Menara Kuala Lumpur as well as other collaborating organisations. Along with this programme, a Top of the World contest offering a grand prize of an MPV was organized. By end December 2003, Menara Kuala Lumpur Privilege Card had attracted over 12,000 members. Another marketing strategy involved enhancing Menara Kuala Lumpurs business relationship with dealers and collaborating partners. Taxi drivers within the Klang Valley were honoured as ambassadors of the tower during a Taxi Appreciation Day on 12 May 2003. The travel agencies and media were feted at an appreciation get-together for their support in promoting Menara Kuala Lumpur. Travel agencies were encouraged to make sure incoming tourists include Menara Kuala Lumpur on their itineraries. This joint effort also involved associates from the hotel industry and other tourist-related bodies. part of the customer loyalty programme on 15 July
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Menara Kuala Lumpur also welcomed foreign dignitaries attending the 12th NAM Conference and the 10th OIC Summit. Apart from that, Menara Kuala Lumpur increased its public profile by achieving two new records in the Malaysia Book of Records with The Longest Roti Naan in Malaysia and The Most Participants in Malaysian Carom Competition. To make Menara Kuala Lumpur physically more attractive, a new lighting system was installed at the top of the tower and the lobby was renovated to create a livelier atmosphere. The Mega View Banquet Deck at 288m and situated above the Revolving Restoran Seri Angkasa, was given an exclusive touch, allowing customers to enjoy premium facilities in comfort and exclusive privacy in the clouds. In addition, various exciting family-oriented activities which allowed children to get up and close to wild and wonderful animals such as the elephant, tiger cub, albino snake and orang utan were organized at the Observation Deck. Families were also enticed by trishaw rides at the tower as one of the traditional modes of transport brought in specially from Melaka. To give value to families visiting the tower a special Happy Family Package with attractive rates were
Menara KL stands tall as a tourist icon on the KL Skyline.
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offered to Malaysians. To cater specifically to the younger generation, Menara Kuala Lumpur organised a Rentak Merdeka Concert, featuring artists from Akademi Fantasia. Street performances, cultural carnivals, a Childrens Arts Festival and Gerak & Bunyi co-organised by the
State Tourism Exco members officiated several domestic roadshows themed Membawa Menara Kuala Lumpur Kepada Anda in Johor Bahru, Kuantan, Ipoh, Pulau Pinang and Melaka. Menara Kuala Lumpur also collaborated with the State Education Department to promote student tourism. Activities targeted at students included inter-school quizzes, treasure hunts and a competition to replicate Menara Kuala Lumpur using recycled materials.
Ministry of Culture, Art & Tourism gave the younger generation an opportunity to gain a better understanding of traditional Malaysian culture. It was a challenging year, but Menara Kuala Lumpur managed to keep the crowds coming by introducing an array of exciting activities all year round.
Menara Kuala Lumpur is in the business of experience, as such a high standard of customer service is expected from each and every staff. Specific programmes designed to achieve customer delight was carried out for the customer service team. Continuous improvement and efforts are made to build a cohesive team for various staff activities. These served to enhance a spirit of fellowship, instill a harmonious atmosphere at work as well as nurture a culture of excellent service and customer satisfaction at the 4th tallest tower in the world.
GSB achieved gross sales of RM51.7 million in 2003, marking a commendable growth of 70.3% against 2002. The companys revenue was generated by Managed Network Services, EG*Net and Value Added Services. The biggest contribution at 48% of the companys total revenue came from the EG*Net project. At the same time, expenditure increased by 65.7% last year to RM41.8 million due primarily to improve customer service and expansion which would result in better profits. Profit after tax stood at RM5.5 million, as compared to RM1.4 million for the year
2002. This is the second consecutive year GSB recorded a profit since its incorporation in 1996. The prospect for GSB is bright on the back of the governments aggressive efforts to implement EG*Net more extensively. To further improve its services, GSB is seeking a long-term concession with the government which would allow the company to better value to the government. improve its capacity and capability besides offering
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Educational Excellence
PROF. GHAUTH JASMON PRESIDENT UNIVERSITI TELEKOM SDN. BHD. HJ. AHMAD TARMIDI MOHAMAD CHIEF EXECUTIVE OFFICER TELEKOM RESEARCH & DEVELOPMENT SDN. BHD. DR. NAS TAMIMI IBRAHIM ACTING CHIEF EXECUTIVE OFFICER TELEKOM SMART SCHOOL SDN. BHD. DATUK IR. AHMAD ZAINI MOHD AMIN CHIEF EXECUTIVE OFFICER TELEKOM TRAINING COLLEGE
Another attractive programme for the global market is MMUs suite of fully Internet-based degrees which the university is offering to countries like Syria, Thailand and Cambodia. Again, foreign partners have shown much interest in this revolutionary method of teaching and learning, though the programme is still in its infancy. The Syrian Government, for example, is keen on establishing its own virtual university modeled after the Multimedia University. The possible partnership between the two universities would create a truly borderless learning environment. With regards to the student population, the dramatic increase seen over the last few years has stabilised. Another jump in numbers is expected soon with the completion of the Cyberjaya and Melaka campuses. Comprising residential, administrative and academic facilities, the new campuses will bolster the student population from the current figure of 16,000 to 20,000 when completed. The number of courses offered has also increased. In 2003, the Ministry of Education approved eight new courses, bringing the total number of courses offered to 44. The new courses include Masters in Knowledge Management with Multimedia, Masters in Multimedia (e-learning Technologies), Bachelor of Multimedia (Hons) Virtual Reality and Bachelor of Information Technology (Hons) Artificial Intelligence. In 2003, the university recorded a net profit of RM6.7 million on the back of RM132.0 million in revenue. It is envisaged that, with aggressive marketing to increase its international student population and the commercialisation of innovative products through R & D, MMU will be able to sustain its profitability in the years to come. MMU will continue to expand and upgrade its capabilities to better serve not only the nation, but also the global community.
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TMR&DSB has also identified the following Masters and PhD programmes for its staff: MSc & PhD in Engineering Business Management at the Business & Advanced Technology Centre, Universiti Teknologi Malaysia (UTM), Kuala Lumpur, in collaboration with Warwick University, UK. MBA in (a) Techno Entrepreneurship, (b) Strategic Management, or (c) Venture Capital Management at the International Business School, UTM, Kuala Lumpur, in collaboration with Cranfield University, UK. MBA & MSc in IT at the Telekom Training College (TTC), Kuala Lumpur, i.e. a collaboration programme between TTC and Universiti Utara Malaysia (UUM). In an effort to improve the management skills of non-research supporting staff, TMR&DSB has collaborated with Telekom Training College in coming up with a Graduate Diploma in Management. 20 executives are currently pursuing this programme.
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TMR&DSB has encouraged researchers to publish technical papers as to contribute in towards to the enrichment of knowledge. 47 technical papers were published; out of which six were presented at international conferences, one paper presented at a national conference and two published in local technical journals. Practical students from local universities were accepted to undergo intership in TMR&DSB. We see this as an effort to encourage and promote an R&D culture and to spot talents among the potential young researchers. A total of 27 students from KUITTHO, UTM, UPM, MMU and Polytechnics completing their training programme. As its contribution to the promotion of R&D in science and technology, senior members of the TMR&DSB Management Team and Senior Principal Researchers are involved as: Faculty advisors on engineering to several local universities; Fellows at scientific & technological institutes; Panel member of IRPA; Co-supervisor for post graduate students; External examiners of PhD theses.
The year 2003 was spent concluding the proposal for the National Smart School Roll Out Project, which will include enhancements of the Smart School Integrated Solution. TSS also looked at introducing the smart school concept beyond Malaysian shores. Through government-to-government efforts led by the Multimedia Development Corporation (MDC), TSS was actively involved in assisting a few Middle Eastern governments in their quest to smarten their respective education systems. TSS also concentrated on research and development to provide the best solution for the impending rollout of Smart Schools 100 for year 2004 and 200 for year 2005. At the same time, in support of the governments drive to implement the teaching of Mathematics and Science subjects in English, TSS translated the Mathematics and Science components of the Smart School curriculum from Bahasa Melayu to English for Year 1 and Form 1. Two other government projects successfully completed in 2003 included the Malaysian Smart School Pilot Project COINS (Corporate Information Super Highway) extension services and the Helpdesk extension services. All three projects contributed revenue of RM7.4 million, RM4.6 million and RM3.6 million respectively to the company.
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This year, TSS will be translating the Mathematics and Science coursewares for Year 2 and Form 2. At the same time, the COINS extension service is still ongoing and is expected to be completed by the second quarter of 2004. The translation is expected to contribute RM11.2 million in revenue, while the COINS extension will earn the company RM2.3 million this year. TSS has sent a comprehensive proposal to the
The project is set to transform the education system to include a highly advanced technology-based process that will revolutionise the way we learn, think and act and ultimately creating a generation of Malaysian knowledge workers who will lead the nation into the Information Age and beyond.
Ministry of Education to roll out the Smart School Solutions to 300 schools nationwide over the next two years. If secured, the project will generate approximately RM360 million in revenue by the time it concludes in the final quarter of 2005.
Apart from enhancing the current Smart School Integrated Solution, TSS has developed the School Management Applications and Required Tools (SMA*RT) system, a web-based school management solution comprising School Governance Management, Student Affairs Management and Education Resources Management modules. Also in its drive to enhance product and service quality, TSS has started work on a Learning Content Management System (LCMS), an infrastructure that can be used to create, modify and manage content delivery for a wide range of learning needs. Concurrently, TSS has also continued to market its brand of multimedia courseware, BestariEd, and extend its e-education consultancy services to a number of interested parties. Throughout the year, TSS has participated in various exhibitions and outreach programmes either on its own or under the banner of Telekom Malaysia, the Ministry of Education or MDC in order to promote the Smart School Project. More notable among its excursions were the Malaysian Showcase in conjunction with the 2003 NAM Summit, the 2003 MSC exhibition and the Expo OIC 2003.
TSS also provided its courseware for free to various adopted schools as part of its community service. At the same time, TSS has collaborated with a leading IT developer to provide a pre-school IT package which includes a personal computer, childproof IT furniture and educational software to 70 pre-schools under the care of the Ministry of Education and the Ministry of Rural Development. Staying true to its vision of becoming the leading total e-education solutions provider by 2008, TSS has endeavoured to make its mark in the e-education industry by providing the best solutions and consultancy services.
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Organisation (CTO), TTC has loaned its trainers and provided consultancy and course structures to various Commonwealth countries. The College has also sent participants to courses overseas, mainly with British Telecom (BT). Its partnership with CTO has been mutually beneficial. In 2003, TTC participated in 23 CTO projects involving 20 countries such as Bangladesh, Barbados, Fiji, Gambia, Ghana, Malawi, Mauritius, Seychelles, Botswana, Trinidad & Tobago, Malta, Cyprus and Zambia. Under these projects, TTC has sent experts from Telekom Malaysia and the Training College to provide training in various fields such as Information and Communications Technology (ICT), Human Resources, Public Relations, Marketing & Sales and Finance. TTC also supports the Malaysian Technical Cooperation Programme (MTCP), under the purview of the Prime Ministers Department, which encourages IT synergies between developing countries. This has strengthened regional cooperation and nurtures collective self-reliance among members. Last year, in collaboration with the Economic Planning Unit of the Prime Ministers Department, TTC conducted an MTCP programme attended by 60 participants from four countries namely Cambodia, Laos, Myanmar and Vietnam. Riding on the success of the programme, TTC has again been selected to provide training for a fresh batch of MTCP participants this year. The College currently conducts more than 200 courses, seminars and workshops in management, IT and multimedia related subjects, each year. On average more than 40,000 local and international trainees have attended these courses.
TTC has established collaborative links with a number of renowned local and foreign universities, which would enable its students to further their studies to degree programmes. The institutions are: Multimedia University (MMU) Universiti Terbuka Malaysia (Open University) Universiti Malaysia Sarawak (UNIMAS) University of Portsmouth, United Kingdom FTMS De Monfort Malaysia/De Monfort University, United Kingdom University of Curtin, Australia Local IPTA/IPTS
In August 2003, TTC increased its academic partnership network by signing a Memorandum of Understanding with Nilai International College. This arrangement will allow students who have completed any programme, or part of a programme at TTC to continue their studies in an appropriate programme at the Nilai International College. TTC also manages the training and development needs of top-ranking employees of Telekom Malaysia via its Management & Leadership Institute (MLI). Among the courses conducted here are the Top Management Programme, Senior Management A new focus locally is on courses at tertiary level. TTC currently offers a wide selection of courses at Diploma level that meet the requirements of the k-economy. These include: Diploma in Multimedia (Business Computing) Diploma in Multimedia Technology Diploma in Technology (Telecommunications Engineering) Diploma in Computer Science Diploma in Marketing with Multimedia Diploma in Management with Multimedia
TTC meeting the training needs of Telekom Malaysia employees.
Development Programme, Management Leadership Development Programme and the Management Trainee Programme. TTC has plans to expand its operations and be more competitive as a reputable private learning institute.
In 2003, TTC conducted six Diploma programmes over two intakes. The April intake attracted 517 students, of whom 464 were school leavers and 53 were Telekom Malaysias staff. A further 194 students enrolled for the September intake.
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Human Resources
Human Resources (HR) plays a critical role as Telekom Malaysia shapes itself up into an enterprise that will not just survive, but thrive, in the new global economy. Underlying this mission is also Telekom Malaysias aspiration to become an employer of choice one that continuously inspires excellent performance. It was this factor that helped set the priorities in the design and execution of HR programmes and initiatives in 2003. While aiming to improve overall organisational performance, the HR agenda also focused on employee enrichment. This is critical as Telekom Malaysia regards people as its most valuable asset.
One HR initiative that has remained a priority to the organisation over the years is building leadership and managerial skills. Towards this end, a total of 3,552 executives (46.3%) have so far undergone managerial and leadership assessments, such as the Potential M Assessment, Senior Manager Assessment and Top Management Appraisal. By identifying potential areas for the development of its managers, Telekom Malaysia is strengthening the capabilities of its staff, as well as fortifying its own ability to deal with challenges. The organisation is also committed to increasing its leadership pool by 5% of its executive population by year 2006.
employee clocking an average of 40 hours of training. To further promote employees knowledge and capabilities, Telekom Malaysia is one of the major contributors to the Human Resources Development Fund, set up by the Human Resource Development Act 1992. A total of about RM6.04 million is contributed to the fund yearly. Out of this contribution, the Company was reimbursed 83% in 2003. Telekom Malaysias commitment to providing development opportunities extends to the wider Malaysian public through its scholarships and education loans. The Company allocated RM19.8 million towards its scholarships and education loans in 2003. A total of 1,049 students are currently receiving financial aid to pursue their studies, both domestically and abroad. Mindful of the fact that the management of human capital involves much more than retaining staff, Telekom Malaysia continues to motivate and inspire its people to maintain an edge in todays competitive environment. To attain greater insight into the level of employee satisfaction, and in order to build some basis on how this can be improved, the management conducted to gauge employee perceptions on leadership, communication, training and development, career advancement, job tasks, work environment and other HR issues. The survey results are being used to focus on key areas that will have the biggest impact on employee commitment and engagement. an Employee Satisfaction Survey in 2003. It provided an avenue
Telekom Malaysia recognised as one of the best employers in Asia and Malaysia for 2003.
Telekom Malaysia has successfully produced 53 senior executives with Masters degrees through customised Executive Development programmes conducted with renowned international institutions of higher learning. A total of RM2.23 million was invested in the Executive Development programme in 2003. A structured training programme for executives who aspire to move up the managerial ladder has also been put into place. Meanwhile, a minimum measured Competency Level Index (CLI) of 60% has been enforced to improve the general level of competency. This will motivate the workforce to improve their skills, thus improving the organisations overall efficiency. In 2003, the Company spent a total of RM11.14 million on programmes conducted by Telekom Training College, with each
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Enriching peoples lives is synonymous with keeping them connected, involved and empowered. To facilitate this, e-HR, an electronic communications network of fully integrated HR-related data, information, tools and transactions was set up by the Company. e-HR is an enterprise-wide strategy that uses scalable, flexible and integrated technology to link staff to internal processes and the business objectives of the organisation. It allows employees to access and update HR data, thus reducing the cost of data entry and at the same time empowering employees to be in charge of their own profiling. The Company believes that in order to achieve its long-term corporate goals, it needs to be guided by fundamental principles. In this regard, the corporate core values, known as KRISTAL, will form a foundation of its corporate culture. An intensive communication programme has been rolled out to educate employees on the three core values: Total Commitment to Customers; Uncompromising Integrity; and Respect and Care. Employees are to internalise these values in their daily work and interaction. Specific documents were also published to assist both employees and vendors to put these KRISTAL values into practice. In support of the company-wide Culture Transformation initiative and recognising that any move to inculcate organisational behaviour depends on effective management of Human Resources, HR is enhancing its current policies and practices to ensure they are aligned with KRISTAL.
Efforts to ensure employees well-being are also emphasised. In 2003, Telekom Malaysia spent no less than RM417.3 million on healthcare and employee welfare benefits, various Telekom Malaysia clubs, sports and recreational activities as well as the management of daycare centres. Telekom Malaysia looks at the long term benefits as healthy and satisfied employees are likely to be committed, dedicated and productive. With a total staff strength of 31,274 at year end, HR expects to continue facing high expectations and significant challenges. At the same time, the division also sees tremendous opportunity to undertake innovative practices to engage employees and forge links between HR and organisational performance. Telekom Malaysias continuous commitment towards these efforts was duly acknowledged when the Company was recognised as being among the Best Employers in Asia and Malaysia in year 2003. The Award recognises the effectiveness of people practices in optimising organisational performance and its alignment to a companys overall business direction.
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Among the key projects and achievements of the CRM Programme in 2003 were: Human Competency and Cultural Development Through this initiative, which recognises the importance and power of human resources, various cultural and competency training programmes were launched. Studies were also conducted to ensure a good match of right person-right job, while incentives were introduced to the sales group to spur them to higher performance and productivity. SAVE Programme To inculcate customer loyalty and to reduce the churn rate, various nationwide campaigns were held to establish direct contact with customers whose subscriptions to services were pending termination with a view to save and retain them. The initiative was met with encouraging response from customers. In a pilot implementation project conducted in an urban center, a high percentage success rate was recorded on the retention of customers to continue with their Telekom
field force by enabling remote and direct work order, dispatch functions and near real-time updates on the status of work using SMS. The new process creates an immediate impact with reduced number of calls to 1060 call centres, and indirectly improves service provisional/ restoration cycle times as a result of more effective information management. The number of calls to 1060 has reduced by more than 20% and the cycle time rate improved by more than 10%. Customer Service Automation Tools To enhance the effectiveness of sales executives and managers, automated tools and applications were developed and implemented to aid the sales process. High-end computing equipment and network resources were also provided to enable better presentation and access to key information. A key objective of the CRM programme is to offer customers with greater flexibility and access. Towards this end, a project was launched in September 2003 to develop a self-service portal that would allow customers to make contacts and request for new services, report service issues as well as view/analyse and pay their bills online through the Internet. The objective is to enable customers to have as many channels as possible without having to visit Telekom Malaysia offices or calling the contact centres. Customer Friendliness Project This special taskforce was set up to achieve a Customer Satisfaction Index (CSI) rating of 85%. To create a customer-friendly environment at the front end, the project team adopted a holistic approach in its endeavour, from understanding the issues on the ground to strengthening customer relations basics and improving office tools and processes. The programme has managed to raise the Customer Satisfaction level on Kedai Telekom operations by more than 10% from a year ago.
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Malaysia services. Data Services Provisional/Restoration Tracking System (DPTS/DRTS) DPTS/DRTS was launched to demonstrate appreciation of customers need for timely information on the progress of their service installation and restoration requests. It improves communication with the mobile
Many other programmes to raise the CSI beyond the 85% level have also made significant progress in 2003. Staff development plans to equip them with the right soft and hard skills to enable them to build enduring relationships with customers will continue in 2004. As much of the foundation for Telekom Malaysias CRM Programme has already been laid, the focus in 2004 will be to realise the new and better customer experience. The key success factor of any CRM Programme, however, is the adoption of the concept by the common workforce, and its application in their respective work areas. Hence, a large portion of the CRM Programme effort will concentrate on introducing and explaining the new system to staff, who will be trained to use the tools and processes via workshops and dialogue sessions. This is vital to induce the envisaged CRM culture transformation. Success of the whole programme will be measured using pre-determined key performance indicators (KPIs). The CRM initiative to instill a customer-centric culture among the employees is a continuous process within the Company. The role of the employee will change to become one where it will be more relationship oriented.
C. KEDAI TELEKOM
Besides the Projek Mesra Pelanggan, other major changes made by Kedai Telekom in year 2003 include the following: Customer Service Management training Kedai Telekom front-liners were provided with Customer Service Management training by external consultants to increase their level of professionalism and focus. The training included a full-day live module at a Kedai Telekom with actual customer encounters and instant feedback. Most of the customers expressed positive views on the new experience. Systems upgrade All Kedai Telekom frontline PCs were upgraded, and the network connectivity improved from 128kbps to 2MBps. The much-improved system had shortened the processing period, hence reducing the waiting time of customers for counter service. Kedai Telekom is also introducing a new logo and colour scheme at its outlets to portray a more lively and friendly image.
D. CELCOM
As a result of its dedication to customer service improvement, the Jalan Ampang branch of Celcom was
declared winner of the Anugerah Kualiti Y.B. Menteri Tenaga, Komunikasi dan Multimedia 2003. Year 2004 promises to be another exciting year for Telekom Malaysia as the Group continues to strive further to provide better experiences to its valued customers.
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The year 2003 was remarkable for TMR&DSB. Revenue increased by 55.3% to RM69.1 million from RM44.5 million the previous year. R&D revenue itself accounted for 76% of the total i.e. RM52.6 million. A total of 59 research projects were planned and executed in 2003 and 16 projects were completed as planned. Among TMR&DSBs successful products were its Network Forecasting Software (NFS), Traffic Information Planning System (TIPS), SQ2 (Service Quality 2) and CD-R (Call Data Record) Analyser. Thanks to relentless efforts to satisfy customers, the company scored an exceptional Customer Satisfaction Index (CSI) rating of 4.12 out of 5.00. Another big success came in the form of Intellectual Property Rights (IPR) registration. TMR&DSB successfully submitted IPR applications for two patents, 30 copyrights, eight trademarks, five industrial designs and one layout design for integrated circuits.
The year 2003 also saw the birth of a Strategic Research Management unit to streamline the Companys strategies to achieve its vision as well as to strengthen its research project management. TMR&DSBs research activities are focused on four main areas: Network and Wireless Technology Applications and Security Technology Modelling and Simulation Technology Material and Device Technology TMR&DSB has also formed a 3G Task Force and a Next Generation Network (NGN) Task Force to identify key research areas in these fields. Recognising the high risk in R&D investment, TMR&DSB works in close collaboration with various recognised institutions of higher learning and research. It has signed MoUs with the Malaysian Institute of Nuclear Technology (MINT), University Malaya, UiTM and USM. TMR&DSB continuously reviews its business strategies to ensure a high return on investment and long-term competitiveness. With its state-of-the art facilities and knowledge capital, TMR&DSB is well positioned to meet the R&D needs of various Telekom Malaysia divisions and subsidiaries as well as the needs of the ICT industry in general.
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Consultative Arrangement The Safety and Health Committee Regulation 1996 (under the Occupational Safety and Health Act 1994) provides that any company with 40 or more workers is required to set up a safety and health committee. Telekom Malaysia, however, has gone several steps further by establishing multi-tiered safety and health committees. Each premise in the Company has its own Safety and Health Committee which reports to the State Safety and Health Committee which, in turn, is accountable to the Main Safety and Health Committee. This hierarchical system is implemented to ensure the adequate and effective compliance of safety and health regulations and involvement of all employees, trade union representatives and the management in improving the health and safety environment. This multi-tiered system was established in Telekom Malaysia in 2002, and was expanded in 2003 to include subsidiaries such as Fiberail Sdn. Bhd. and TM Net Sdn. Bhd. Meanwhile, plans are in place for similar committees to be set up in other subsidiaries.
While recording the total number of accidents, including lost-time accidents and no lost-time accidents, has its uses, it is not enough to achieve the highest safety standards. Telekom Malaysia is now focusing on more informative indicators based on near-misses, task-based observations, work surveys and follow-ups, leadership visits, training, enhanced reporting of unsafe conditions and a review of the processes that have been implemented to identify hazards and assess risks. Telekom Malaysia has always been a caring corporate citizen, and its efforts to create a safer and healthier work environment is another manifestation of its civic consciousness towards the well-being of its workforce.
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Continuous Awareness Telekom Malaysias Safety and Health Policy Statement reads: Telekom Malaysia is committed to safeguarding and improving its safety and health performance by conducting its business activities in an organised and responsible manner. We will endeavour to see that our activities, services and products do not harm employees, customers and members of the public who may be affected by our activities. . To achieve the high standards of safety, it is imperative that contractors and vendors too need to play their role in rendering quality service and work to the Company in a safe manner. In this regard, Telekom Malaysia has set a condition that a contractor or vendors safety and health track record will be taken into account at the selection stage. To help its existing contractors and vendors achieve standards of safety envisioned, Telekom Malaysia has even organised an OSH Management for Telekom Malaysia Contractors programme in all 14 states nationwide. From the encouraging turnout, Telekom Malaysia is optimistic of better and safer services from its partners in the future.
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Accident Reporting A total of 39 accidents in the workplace was recorded in year 2003. This increase from 27 reported accidents in 2002 was due largely to greater awareness of reporting and an environment that encourages staff to make reports of all work-related accidents and illnesses, including minor injuries and near misses.
Quality Initiatives
STRATEGIES FOR TOTAL QUALITY MANAGEMENT
Organisations today face enormous challenges. The worlds abundant resources are gradually being exhausted; organisations have less time, less money and fewer managers and supervisors to make decisions; plus there will be less room for mistakes, and absolutely no tolerance for waste. Competition will increase a hundredfold; and customers will be difficult to attract and retain.
Innovative companies are nurturing cultures that support commitment to total quality and delighting customers. This is where Total Quality Management (TQM) can play a role. The management tool encourages changes in organisational structure, information management, employee motivation and team building to create tremendous yet sustainable competitive advantage for any company.
The change process is to be driven by top management, who must be proactive and highly visible in supporting this transformation Employees will be trained in quality improvement techniques so that they are empowered to do whatever is necessary to delight the customer
Total Customer Satisfaction (TCS) Telekom Malaysia has adopted a systematic TQM approach known as Total Customer Satisfaction (TCS). It is built on, the following principles: Everyone is responsible for continuous improvement of the organisation, as problem-solving is not the sole responsibility of the management Everything in the organisation is subject to change in the pursuit of excellence There must be no compromise in the search for total quality. The organisation must be best-in-class in every product, service and process Quality is defined by the customer. Hence whatever that does not meet or exceed customer expectations is, by definition, not of quality
These TCS measures will only be successful, however, if diligently complied. There are no short cuts. Indeed, it requires tremendous patience and perseverance to follow in the footsteps of those companies that have succeeded in their TCS efforts and are now reaping the many benefits.
Telekom Malaysias Approach To Quality Management A Quality Improvement and Business Excellence Division (QIBE) was formed in 1999 to spearhead the move towards enhanced quality in Telekom Malaysia. At the official launch of this division, it was announced that the quality movement would be known as Total Customer Satisfaction (TCS). Part of QIBEs responsibilities is to promote TCS principles at all levels company-wide, to support the establishment of a Quality Management System (QMS), and to inculcate a culture that recognises quality in achieving operational and business excellence.
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In such an environment, organisations around the world realise that they need a new way to manage their businesses. Nothing can be taken for granted. Every accepted practice is being closely scrutinised with the view to create a truly efficient and effective workplace where value is always added and quality enhanced.
Significant costs are incurred due to poor quality. Thus concerted efforts must be made to eliminate waste, reduce unnecessary work, inspection and other costs driven by the failure to get it right the first time
Some of the roles entrusted to the QIBE are as follows: Creating a TCS Roadmap in line with Telekom Malaysias vision and mission Implementing a world-class Quality Management System Managing quality standards and certification of the different business units Reducing cycle times to induce better performance and greater cost effectiveness Deploying projects to improve quality, cost effectiveness and productivity Implementing systems that enhance effective and efficient business processes Implementing a quality improvement programme for key suppliers and ensuring best supplier partnerships
In working towards the stated objectives, QIBE has applied the following Business and Operational model: QIBE BUSINESS MODEL
Corporate Quality Council
Direction
Feedback
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Directions Policies
QIBE
Consultancy Support
Corporate Culture
Consultancy
External Organisations
Quality Management System (QMS) Two programmes namely implementation of ISO 9000 certification program and TMBEA review, were conducted by QIBE to ensure TMs focus on Total Customer Satisfaction (TCS) and Quality Management System (QMS).
requirements. Besides serving as a marketing strategy to win customer confidence, ISO 9000 is being sought for the following reasons: To gain third party assessment on Telekom Malaysias quality management systems To create consistency in operations and processes To be more competitive To demonstrate managements total commitment to quality To motivate employees
ISO 9000 certification program In 2003, Telekom Malaysia continued to focus on ISO 9000 certification for its critical and frontline functions in order to meet customer satisfaction. The Group sees the certification as building a basic foundation for quality management. The ISO 9000 quality system complements the basic requirements of TMBEA. While the TMBEA review serves as an overall business assessment, the ISO certification ensures compliance with basic quality system
Business Excellence
The following divisions and subsidiaries have been awarded ISO 9000 Certification: Information Technology Division Telekom Training College Network Management & Operations COINS (Corporate Information Superhighway) Finance Division Specialised Network Services Customer Assistance Services Customer Care Centre Product Marketing Trunk Network Network Centralised Services & Management Network Development Zone Telekom Sales and Services Sdn. Bhd. Government Integrated Telecommunications Network (GITN)
Divisions awarded the ISO 9001 certification would enjoy the following benefits: It provides a framework for establishing and reviewing quality objectives Staff are fully involved, motivated, committed and dedicated to ensuring business goals and objectives are met Effective procedures would ensure all processes are aligned towards achieving the desired results. All Procedures/Work Instructions are documented and can be easily referred to by all relevant personnel Suppliers deliver high quality products and services Areas that require improvement are identified via satisfaction surveys
The units awarded certification in 2003 were audited for compliance with the ISO 9001:2000 Standard. Those awarded certification earlier have undergone the annual surveillance audit, which required compliance to a new version of the Standard.
Telekom Malaysia Business Excellence Assessment (TMBEA) Telekom Malaysia Group has adopted the Telekom Malaysia Business Excellence Assessment (TMBEA) to assess the health of the various systems being put in place to achieve the Companys vision of becoming the communications company of choice one that focussed on delivering exceptional value to customers and other stakeholders. TMBEA sessions also allow for crossfertilisation of ideas, recognition of achievements, identification of shortcomings and recommendations for continuous improvement.
Best Practices
Benchmarking
Communication
System and Equipment Data and Information Management Control of Operations Customer Focus
Leadership and Strategy Process Management and Improvement Prevention and Problem Solving Management Human Resources Development and Involvement New Product/Service Development Supplier Management
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The TMBEA has been designed to help Telekom Malaysia enhance its competitiveness by focusing on two goals namely increasing value to customers and improving overall performance. Among others the key benefits of TMBEA assessment are as follows: Accelerated improvement The assessment accelerates Telekom Malaysias improvement efforts by going beyond the internal self-assessment process and introducing a rigorous, objective and external view of the organisations status quo. Energised employees Organisations that participate in the assessment have reported that pursuing such a common goal increases team motivation and general energy levels among staff. Objective perspective A team of external experts would undertake a minimum of 40 hours of review on each business application. Useful feedback Each area receives a thorough written assessment of its strengths as well as opportunities for improvement. Results oriented The TMBEA scoring system allocates 300 out of 1,000 points to results, the bottom line in the review process. Such focus helps an organisation determine its most critical functions and improve performance in key areas such as finance, customer satisfaction and loyalty, and process outcomes (eg cycle time, serviceability and product quality).
Customer Focus Customer Focus addresses how the organisation seeks to understand the requirements of customers and the marketplace. This subsystem stresses relationships as an important part of an overall listening, learning and performance excellence strategy. Customer satisfaction/ dissatisfaction results provide vital information. Human Resources Development and Involvement Human Resources Development and Involvement addresses key human resources practices those directed towards creating a high performance culture and developing employees to enable them, and the organisation, to adapt to change. It also looks at the work environment, employee support climate and employee satisfaction with the aim of motivating and fostering the well being of all employees. Supplier Management This component focuses on how the organisation manages its suppliers, from defining its requirements and selecting its suppliers to ensuring conformance, evaluating the suppliers performance and formulating strategies for improvement. New Products/Services Development This subsystem focuses on a systematic approach to the development of new products and services. Emphasis is placed on the comprehensiveness of the design input, output and review stages are. Process Management and Improvement This is a focal point within the model for all key work processes. Built into the subsystem are central requirements for efficient and effective process management, based on preventive activities. It focuses on how key business processes are designed and performed, incorporating input from customers and suppliers. It also looks at how key performance measures including customer and supplier feedback are identified to control and improve the business processes. Control of the Operational System and Equipment This subsystem focuses on the maintenance of all operational systems and equipment to ensure total service reliability and serviceability. It also looks at how measuring systems and equipment are managed to ensure reliability and accuracy of measurements taken. Information and Data Management System This subsystem examines the organisations selection, management and use of data and information for performance measurement and analysis. It serves as a central collection and analysis point for financial and non-financial data and information. The objective of measurement and analysis is to steer the organisation towards its business goals.
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TMBEA guidelines The TMBEA framework is made up of 10 interrelated subsystems, with the Leadership and Strategy subsystem acting as the main driver. The subsystems designed to assist an organisation improve its overall performance, are supported by elements that describe in a focused manner the requirements for each area. Detailed requirements for each subsystem and the model works are illustrated below: Leadership and Strategy The Leadership component addresses how the top management guides the organisation in setting values, direction and performance expectations. Attention is given to the way top management communicate with employees, review performance and create an environment that encourages high performance. The Strategy component looks at how the organisation sets strategic directions and develops objectives, guiding and strengthening overall performance and competitiveness. It also looks at how objectives are converted into action plans and how progress is assessed relative to these plans.
Prevention and Problem Solving Management The culture of continuous improvement is practised in this subsystem. It looks at how the organisation encourages its employees to participate in problem solving using data and information analysis. Employees are trained in problem solving methodology and are assessed on how they apply these tools. Finally, this subsystem also assesses how the organisation deploys, communicates and standardises its problem-solving solutions. Business Results The Business Results subsystem computes all the results of the other nine subsystems and classifies these into the following areas: Customer-Focused, Finance and Market, Employee Excellence, Supplier Excellence and Operational Excellence. The results are then compared with those of competitors and with best-in-class standards. Trend analysis is used to show performance sustainability and improvement over the years.
Methodology The review is done on a yearly basis. A team led by a representatives of the management assesses each business area. The team typically spends a few days reviewing systems and processes and interviewing the relevant people in each area before making suggestions and implementing these. Agreement is sought from a representative of the business area on the assessed strengths and opportunities for improvement before a score is given.
Process and Service Improvement In the year 2003, several processes and service improvement programmes were conducted to meet both the organisations and customers needs which resulted in improved process performance. Issues were addressed using improvement teams such as QIT/QCC, task forces and the Six Sigma methodology. Process and Service Improvement programmes are conducted with the following objectives: Improve frontline services such as outlet and operator services Increase the Customer Satisfaction Index (CSI) Reduce customer complaints by 30% Improve core operational processes by focusing on cycle times and cost effectiveness
TMBEA MODEL
CUSTOMER FOCUS
SUPPLIER MANAGEMENT
The improvement projects for the year were targeted at improving cost savings, reducing cycle times and increasing revenue. A total of 199 QCC/QIT teams completed their projects with an estimated savings of RM11.47 million (unaudited). Ten projects were identified for standardisation.
TCS Convention The annual TCS Convention serves to showcase the best improvement teams, allowing them to present their project findings. The convention allows such employees to be rewarded and recognised. It also serves as an avenue for the sharing of experiences and ideas on standards of best practice. The TCS Convention is held at the state and national levels. Best teams from the state level are selected to participate at the national convention. In 2003, 15 state TCS conventions were conducted which involved 202 QCC and QIT teams comprising more than 1,600 employees. The winning teams also participated in the QCC Convention, organized by the National Productivity Corporation (NPC). A total of seven teams participated in the 2003 NPC Convention, of which six were given the Gold rating. One QCC team named Tempow from TM Facilities Eastern Zone had the distinction of being chosen to participate in the International Convention Quality Control Circle (ICQCC) in Tokyo, Japan, October 2003.
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Were bridging the divide. Bringing Malaysia a step closer to the Vision.
ICT
Sports
Community
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SPORTS
Sports plays an important role in every nations holistic development. While intellectual and economic progresses are prerequisites, undoubtedly sports and a generally robust physical make-up go a long way too towards creating a well-balanced and vibrant nation. The spirit of solidarity, patriotism and camaraderie that sporting events could foster is quite likely unsurpassed by any other activity. One only has to witness the excitement and fervour created by events such as the Formula 1 and World Cup to grasp the power of sports. If for only that reason, any effort towards promoting sports at a national level has far-reaching consequences. Telekom Malaysia recognises the importance of sports and has always played an important role in major sporting events in the country. Apart from contributions in monetary terms, the Company also provides top-level telecommunications and broadcasting services for international events such as the SEA Games, held in Malaysia in 2001, and the annual Telekom Malaysia Le Tour de Langkawi. Indeed, its promotion and support for sporting events held in the country is its direct contribution towards making Malaysia the destination on the world tourism and sports calendar. The following were some of Telekom Malaysias more significant contributions to sports in year 2003: Telekom Malaysia Le Tour de Langkawi Since its inception in 1996, the Telekom Malaysia Le Tour de Langkawi (TMLTdL) has gained increasing recognition and prestige to emerge as the premier cycling event outside Europe. The race takes participants across the length and breadth of the country, including the scenic East Coast road. In 2003, the race
attracted 22 teams from all over the world. The event was flagged off on 31 January by Youth & Sports Minister Y.B. Datuk Hishamuddin Tun Hussein in Langkawi. The 10-day race covered Kangar, Butterworth, Kulim, Ipoh, Gerik, Tanah Merah, Kota Bharu, Kuala Terengganu, Marang, Cukai, Kuantan, Bentong, Seremban and Genting Highlands, and finally ended in Kuala Lumpur on 9 February 2003. For the second consecutive year, Telekom Malaysia was the Title Sponsor of the event, and the race was named Telekom Malaysia Le Tour de Langkawi. Title Sponsorship involved a contribution of RM10 million, of which RM6 million was in cash, RM2 million for live telecast and the remaining RM2 million was in kind including telecommunications services. Sponsorship of the event is a Groupwide initiative with TM Cellular Sdn. Bhd. as the Official Cellular Provider and TM Net Sdn. Bhd., the Official Internet Provider. In conjunction with this race, a cycling workshop was held for the children of Sekolah Menengah Kebangsaan Mahsuri in the Langkawi capital of Kuah. Members of Team Telekom Malaysia comprising cyclists from Malaysia, Indonesia, Ireland, Hong Kong, tips. Interesting events for the local community were organised at each stage of the race which included an exhibition, carnival, colouring contests for kindergarten children and stage events. In line with its corporate citizen philosophy, Telekom Malaysia also gave away bicycles to needy primary school students identified with the cooperation of the respective State Education Departments in the States along the race route. Iran and Italy provided useful cycling and bicycle maintenance
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Formula 1 Since 2002, Telekom Malaysia has been sponsoring free tickets to the Formula 1 car race at the Sepang International Circuit including T-shirts, transport and food, for thousands of students. In 2003, some RM470,850 in total was set aside for this purpose, out of which RM388,600 went towards tickets. Apart from the students, tickets were also distributed to Telekom Malaysia corporate customers.
KL Grand Prix International Showjumping The equestrian Grand Prix International Showjumping CSI was held in Malaysia over four days in October 2003. The prestigious showjumping event brought some of the worlds top riders from 20 countries to the Putra Stadium in Bukit Jalil. It was an honour for the country as it was the first time the event was being held in an Asian country. While promoting Malaysia as a suitable destination for yet another world-class sporting event, it was also a boost for the local equestrian scene. Telekom Malaysia, as one of the sponsors of the event, contributed RM500,000.
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Intellectual Development As the country develops, there is a strong necessity to keep in touch with global trends, thoughts, attitudes and opinions. One of the many options at our disposal is to participate in intellectual discourse through international forums, seminars and dialogues as platforms to gain insight into current issues of common interest, trends and to help local enterprises and industries to benchmark themselves against global standards of best practices. Telekom Malaysia itself is an avid participant in telecommunication workshops. Realising the need for other Malaysian organisations to keep up with their respective industries, it also provides sponsorship to various initiatives that promote the exchange of ideas and the networking of companies, both at the national and international levels. Nationwide SMI Roadshow In February 2003, the SMI Association of Malaysia organised a nationwide roadshow on Competitive Positioning Towards AFTA & WTO. The objective was to help small and medium-sized companies prepare themselves for the impending changes and challenges with the advent of AFTA and WTO. Recognising the need for local organisations to be technologically updated to meet such challenges, Telekom Malaysia took up the role as the main sponsor and official telecommunications provider of the event through a contribution of RM300,000. It also took the opportunity to participate in the roadshow to market its own products, particularly those beneficial to the SMEs. Among some of the projects in this area are the following:
Asia Pacific ICT Awards 2003 The Asia Pacific ICT Awards (APICTA) is aimed at providing a platform for ICT innovators and entrepreneurs in the region to mutually benchmark their products. Its other objectives are to stimulate economic and trade relations, sharing of technology and creating business-matching opportunities and to draw the worlds focus to this internationally recognised regional awards programme. Telekom Malaysia contributed RM100,000 in cash to APICTA 2003. In addition, it also sponsored The Prime Ministers Award, conferred to the overall winner, who had been judged as the best among winners of the different categories.
Entrepreneurship Programme Telekom Malaysias Entrepreneurship Programme was introduced in 1994 in collaboration with the Ministry of Finance and Perbadanan Usahawan Nasional Berhad (PUNB). The programme has two main objectives to develop competitive, proactive and resilient Bumiputra entrepreneurs; and to increase their efficiency through cost reduction, increased productivity and improved cycle times. In July 2003, Telekom Malaysia had further enhanced the Entrepreneurship Programme. The revamped programme incorporates activities for Entrepreneur Development and vendors.
Since the introduction of the Entrepreneurship Programme, Telekom Malaysia has provided support and assistance to 45 Bumiputra entrepreneurs who were involved in product development, payphone installation and the selling of scrap material, while 119 others were provided by various other services. Telekom Malaysia works hand-in-hand with TM Research and Development (TMR&D) to help the entrepreneurs with their R&D requirements such as product testing and verification, benchmarking and the transfer of technology. In addition, seminars, workshops, training and industrial visits with the objective of increasing the knowledge and skills of the entrepreneurs were organised.
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Organisation of Islamic Conference (OIC) Expo 2003 The OIC Expo was held from 14-19 October 2003, in conjunction with the Organisation of Islamic Conference (OIC) summit at Putra Jaya. It was held for the first time in Malaysia. The exposition was designed to promote and expand trade and investment opportunities among the 57 OIC member countries, showcasing a combination of business, tourism, culture, entertainment and educational opportunities that OIC nations offer. Telekom Malaysia sponsored RM316,000 in kind to the expo as its official communications provider. This included equipping the press centre and secretariats office with communication facilities including broadcast services. Telekom Malaysia also made use of the opportunity to showcase its own innovative products and services themed Opening Up Possibilities at its exhibition booth.
A Booster for Kuala Lumpur General Hospital Telekom Malaysia contributed RM15,000 to Kuala Lumpur General Hospital (KLGH) for the improvement on its transmission antenna equipment to provide clearer pictures on TV sets in their wards. Part of the contribution also went towards landscaping of the KLGH compound. Telekom Malaysias DUTA (ambassadors) were on hand to take part in the landscaping and gotong-royong activities. While there, the DUTA interacted with the patients and obtained feedback on Telekom Malaysias various products and services.
Assistance to Pilgrims Since 1995, Telekom Malaysia has been providing assistance to Muslims who have been scheduled to perform their pilgrimage. In keeping with this tradition in 2003, the Company donated RM368,600 worth of accessories in the form of 50,000 sling
COMMUNITY WELFARE
As a corporate citizen, mindful of its social responsibility, Telekom Malaysia has been actively involved in activities that contribute towards the general well-being of fellow members of the
bags, 50,000 shoe bags and 120,000 luggage tags to the pilgrims to make their journey more comfortable. In addition, Telekom Malaysia also continues to provide the Malaysia Direct Call service to enable pilgrims to call home with the charges being borne by the number in Malaysia. Pilgrims were also able to call home on their prepaid Ring Ring cards. Pamphlets giving instructions on how to use the Malaysia Direct and card service were distributed to all pilgrims before their journey. Telekom Malaysia also stationed its staff in Mecca and Medinah to provide assistance to the pilgrims when needed.
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community. Among the programmes, were the following: Contribution to the Malaysian AIDS Foundation The Malaysian AIDS Foundation (MAF) was set up with the objective of providing financial assistance and emotional support to Malaysians with AIDS. In 2003, MAF ran a campaign called In the Name of Love, to provide financial assistance to AIDS patients and to create greater awareness of AIDS among the public. Telekom Malaysia contributed RM250,000 to MAF in support of this campaign.
TM Net Golf Series In March 2003, TM Net Sdn. Bhd. kicked off the TM Net Charity Golf Classic series to raise funds for its cyber school community project, a programme to equip needy schools, especially those from rural areas, with computers connected via tmnet streamyx. The Charity Golf Classic enabled TM Net to contribute 17 computers to the cyber school project. In addition, RM20,000 was channeled to Majlis Kanser Nasional (MAKNA) to finance the treatment of cancer patients.
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numerous awards, including the Leader in Telecommunications Sector and Most Improved Company by Absolute Increase in Profit, which had been conferred during the launch of the Malaysian Top Corporate Directory. Another Jasamu Dikenang for the next batch of retirees was held in December 2003.
in recognition of their exceptional academic and extra-curricular and Masters Degrees received RM1,000 in cash, an appreciation certificate and a memento each, while Diploma holders and SPM students received RM500, an appreciation certificate and a memento.
aimed at enhancing relationships between the management and employees. The Company also invited 100 orphaned children of ex-staff to the function. Minister of Energy, Communications and Multimedia Malaysia, Y.B. Datuk Amar Leo Moggie was guest of honour while Chairman, Y.Bhg. Tan Sri Dato Ir. Md. Radzi Mansor and Chief Executive, Y.Bhg. Dato Dr. Md Khir Abdul Rahman played joint hosts.
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50,000 sets of sling bags, punjut kasut and 120,000 sets of luggage tags with a total value of RM368,600 to pilgrims going to Mecca. The Company also provided the pilgrims with Malaysia Direct Service, which would enable them to call home for free with the charges being borne by the local numbers dialed. This service has been provided to pilgrims performing the Haj since 1995.
161
Directors Report Significant Accounting Policies Income Statements Balance Sheets Consolidated Statement of Changes in Equity Company Statement of Changes in Equity Cash Flow Statements Notes to the Financial Statements Statement by Directors Statutory Declaration Report of the Auditors General Information
163 169 177 178 179 180 181 182 249 249 250 251
162
DIRECTORS REPORT
FOR THE YEAR ENDED
31 DECEMBER 2003
1.
The Directors have pleasure in submitting their annual report and the audited financial statements of the Group and of the Company for the year ended 31 December 2003.
PRINCIPAL ACTIVITIES
2. The principal activities of the Company during the year are the establishment, maintenance and provision of telecommunication and related services under the licence issued by the Minister of Energy, Communications and Multimedia. The principal activities of the subsidiaries are set out in note 43 to the financial statements. There was no significant change in the nature of these activities during the year.
RESULTS
3. The results of the operations of the Group and of the Company for the year were as follows: THE GROUP RM million Profit after taxation Minority interests Profit for the year attributable to shareholders 1,444.2 (53.8) 1,390.4 THE COMPANY RM million 529.0 529.0
4.
In the opinion of the Directors, the results of the operations of the Group and of the Company during the year were not substantially affected by any item, transaction or event of a material and unusual nature other than as disclosed in note 42 to the financial statements.
DIVIDENDS
5. Since the end of previous year, the dividends paid, declared or proposed by the Company are as follows: RM million (a) In respect of the year ended 31 December 2002, a final gross dividend of 10.0 sen per share less tax of 28% was paid on 23 June 2003 amount as proposed in the Directors Report for that year increase due to exercise of share options
(b)
The Directors now recommend a final gross dividend of 10.0 sen per share less tax of 28% (2002: 10.0 sen per share less tax of 28%) and a special gross dividend of 10.0 sen per share less tax of 28% (2002: Nil) subject to the shareholders approval at the forthcoming Annual General Meeting of the Company.
163
DIRECTORS REPORT
FOR THE YEAR ENDED
31 DECEMBER 2003
164
Name Dato Dr. Ir. Mohamad Khir Harun Dato Dr. Idris Ibrahim Yusof Ampuan Kechil** Tan Chian Khai Hj. Hamis Hasan Mohd Yahaya Mohd Shariff Towfek Elias Dato Adnan Rofiee Abdul Majid Abdullah Dato Baharum Salleh Hamzah Yacob
Designation Chief, Group Business Restructuring and Coordination, TM Chief Operating Officer, TM TelCo Chief Executive Officer, VADS Berhad Chief Strategy Officer, Telkom SA Limited* Chief Financial Officer, TM TelCo Senior Vice President, Network Services, TM TelCo Vice President, Network Development, TM TelCo Senior Vice President, Major Business & Government, TM TelCo Vice President, Corporate Strategy & Planning, TM Chief Executive Officer, TM Net Sdn. Bhd.* Chief Executive Officer, TM Facilities Sdn. Bhd.*
TM Telekom Malaysia Berhad * Employees of TM, seconded to respective subsidiaries/associate ** This employee had resigned from the Group with effect from 1 January 2004 and hence the remaining unexercised options had lapsed
SHARE CAPITAL
7. On 31 March 2003, the authorised share capital of the Company has been increased to include 1,000 Class A Redeemable Preference Shares of RM0.01 each and 1,000 Class B Redeemable Preference Shares of RM0.01 each. During the year, the issued and fully paid-up share capital of the Company was increased by the issuance of 83,725,000 ordinary shares of RM1 each at the option price of RM7.09 per share for cash under ESOS 3. These shares rank pari-passu in all respects with the existing issued ordinary shares of the Company.
8.
As part of an overall cost efficient funding structure, the funds for the subscription of the Companys RPS and bonds were raised by RUSB vide the issuance of RM2,987.0 million RPS (RUSB RPS) to Tekad Mercu Berhad (Tekad Mercu), another special purpose entity of the Company. Tekad Mercu had, in turn, issued RM2,000.0 million nominal value 10-year redeemable unsecured bonds due 2013 and RM1,000.0 million nominal value 15-year redeemable unsecured bonds due 2018 (collectively referred to as Tekad Mercu bonds) to investors on 30 December 2003 to finance the subscription of the RUSB RPS. Details of TM RPS A, TM RPS B, TM bonds and Tekad Mercu bonds are set out in note 14 to the financial statements.
(b)
12.
At the date of this report, the Directors are not aware of any circumstances which: (a) would render the amounts written off for bad debts or the amount of allowance for doubtful debts in the financial statements of the Group and of the Company inadequate to any substantial extent or the values attributed to current assets in the financial statements of the Group and of the Company misleading; and have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and of the Company misleading or inappropriate.
(b)
165
DIRECTORS REPORT
FOR THE YEAR ENDED
31 DECEMBER 2003
(b)
14.
No contingent or other liability of any company in the Group has become enforceable or is likely to become enforceable within the period of twelve months after the end of the year which, in the opinion of the Directors, will or may affect the ability of the Group or of the Company to meet their obligations when they fall due. At the date of this report, the Directors are not aware of any circumstances not otherwise dealt with in this report or the financial statements of the Group and of the Company, which would render any amount stated in the financial statements misleading.
15.
DIRECTORS
166
16.
The Directors in office since the date of the last report are as follows: Directors Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor Dato Dr. Md Khir bin Abdul Rahman Dato Dr. Abdul Rahim bin Haji Daud Dato Abdul Majid bin Haji Hussein Datuk Dr. Halim bin Shafie Y.B. Dato Joseph Salang Gandum Dato Dr. Mohd Munir bin Abdul Majid Y.B. Dato Ir. Haji Mohd Zin bin Mohamed Ir. Prabahar N. K. Singam Dato Lim Kheng Guan Rosli bin Man Tan Poh Keat Alternate Directors
Mohammad Zanudin bin Ahmad Rasidi Dato Suriah binti Abd Rahman
17.
In accordance with Article 103 of the Company's Articles of Association, the following Directors retire from the Board at the Nineteenth Annual General Meeting and being eligible offer themselves for re-election: Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor Dato Abdul Majid bin Haji Hussein Datuk Dr. Halim bin Shafie Ir. Prabahar N. K. Singam Dato Lim Kheng Guan Rosli bin Man Tan Poh Keat
DIRECTORS INTEREST
18. In accordance with the Register of Directors' Shareholdings, the Directors who held office at the end of the year have interest in shares and options over shares in the Company and subsidiaries are as follows: Number of ordinary shares of RM1 each Interest in the Company Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor Direct Dato Dr. Md Khir bin Abdul Rahman Direct Dato Dr. Abdul Rahim bin Haji Daud Direct Y.B. Dato Joseph Salang Gandum Direct Indirect (shares held by spouse) Tan Poh Keat Direct * Options exercised during the year Number of options over ordinary shares of RM1 each Balance at 1.1.2003 Dato Dr. Md Khir bin Abdul Rahman Dato Dr. Abdul Rahim bin Haji Daud 178,000 171,000 Granted Exercised 70,000 68,000 Balance at 31.12.2003 108,000 103,000 Balance at 1.1.2003 Bought Sold Balance at 31.12.2003
70,000* 68,000*
Number of ordinary shares of RM1 each Interest in VADS Berhad Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor Dato Dr. Abdul Rahim bin Haji Daud Y.B. Dato Joseph Salang Gandum Dato Dr. Mohd Munir bin Abdul Majid Dato Lim Kheng Guan Tan Poh Keat Balance at 1.1.2003 11,000 10,000 10,000 10,000 10,000 10,000 Bought Sold Balance at 31.12.2003 11,000 10,000 10,000 10,000 10,000 10,000
Number of ordinary shares of RM1 each Balance at the date of acquisition 20,000 22,000 Balance at 31.12.2003
Interest in Celcom (Malaysia) Berhad Dato Dr. Abdul Rahim bin Haji Daud Tan Poh Keat
Bought
# Shares sold pursuant to compulsory acquisition undertaken by Telekom Enterprise Sdn. Bhd., details as described in note 2 to the financial statements
167
DIRECTORS REPORT
FOR THE YEAR ENDED
31 DECEMBER 2003
DIRECTORS BENEFITS
20. Since the end of the previous year, none of the Directors have received or become entitled to receive any benefit (except for the Directors fees, remuneration and other emoluments as disclosed in note 4 to the financial statements) by reason of a contract made by the Company or a related corporation with the Director or with a firm of which he is a member or with a company in which he has a substantial financial interest and any benefit that may deemed to have been received by certain Director in respect of the contract referred to in note 33 to the financial statements. Neither during nor at the end of the year was the Company or any of its related corporations, a party to any arrangement with the object(s) of enabling the Directors to acquire benefits by means of the acquisition of shares in, or debentures of the Company or any other body corporate, other than options granted to the Directors pursuant to ESOS 3.
21.
AUDITORS
168
22.
TAN SRI DATO Ir. MUHAMMAD RADZI BIN HAJI MANSOR Chairman
31
DECEMBER
2003
The following accounting policies have been used consistently in dealing with items which are considered material in relation to the financial statements, unless otherwise stated.
In addition to the above, during the year, the Group changed its existing accounting policy with respect to goodwill for fairer presentation in line with current accepted accounting practices, and adopted a new accounting policy with respect to other intangible assets, details of which are described in note 4 of Significant Accounting Policies. Comparative figures have been adjusted or extended to conform with changes in policies and/or presentation in accordance with the requirements of MASB 25 and MASB 29 as shown in note 42 and note 4 to the financial statements. Comparatives have also been adjusted to take into account the effect of the change in accounting policy with respect to goodwill as shown in note 42 to the financial statements. Other than the above, there were no changes in accounting policies that affect net profit and shareholders equity as the Group was already following the recognition and measurement principles in those standards. The preparation of financial statements in conformity with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965 requires the use of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Although these estimates are based on Directors best knowledge of current events and actions, actual results could differ from those estimates.
2. BASIS OF CONSOLIDATION
The consolidated financial statements include the financial statements of the Company and all its subsidiaries made up to the end of the year. Subsidiaries are those corporations or other entities (including special purpose entities) in which the Group has power to exercise control over the financial and operating policies so as to obtain benefits from their activities. Subsidiaries are consolidated using the acquisition method of accounting whereby the results of the subsidiaries acquired or disposed during the year are included in the Consolidated Income Statement from the date of their acquisition or up to the date of their disposal. The cost of acquisition is the amount of cash paid and the fair value of other purchase consideration at the date of acquisition given by the acquirer, together with directly attributable expenses of the acquisition. At the date of acquisition, the fair value of the subsidiarys net assets is determined and these values are reflected in the consolidated financial statements. The difference between the cost of acquisition over the Groups share of the fair value of identifiable net assets of the subsidiary acquired at the date of acquisition is reflected as goodwill. Minority interest is measured at the minorities share of the post acquisition fair values of the identifiable assets and liabilities of the acquiree. Separate disclosure is made of minority interest.
169
31
DECEMBER
2003
3. ASSOCIATES
Associates are corporations or other entities in which the Group exercises significant influence but which it does not control. Significant influence is the power to participate in the financial and operating policy decisions of the associates but not control over those policies. Investments in associates are accounted for in the consolidated financial statements by the equity method of accounting. Equity accounting involves recognising the Groups share of post acquisition results of the associates in the Consolidated Income Statement and its share of post acquisition movements within reserves in reserves of the Group. The cumulative post acquisition movements are adjusted against the cost of investment and include goodwill on acquisition. Equity accounting is discontinued when the carrying amount of the investment in an associate reaches zero, unless the Group has incurred or made payments on behalf of the associate. Where necessary, in applying the equity method, appropriate adjustments are made to the associates financial statements to ensure consistency with the Groups accounting policies.
170
4. INTANGIBLE ASSETS
(i) Goodwill Goodwill represents the excess of the cost of acquisition over the Groups share of the fair value of the identifiable net assets of subsidiaries and associates at the date of acquisition. Goodwill on acquisition occurring on or after 1 January 2002 in respect of a subsidiary is included in the Consolidated Balance Sheet as intangible asset or, if arising in respect of an associate, is included in the cost of investment in associates. Capitalised goodwill is tested for impairment at least annually, or if events or circumstances occur indicating that an impairment may exist. Impairment of goodwill is charged to Consolidated Income Statement as and when it arises. Impairment of goodwill should not be reversed unless its reversal is due to the effect of a specific external event of an exceptional nature. Goodwill on acquisition occurred prior to 1 January 2002 was written off against reserves in the year of acquisition. Such goodwill has not been retrospectively capitalised and subjected to impairment test as it was impractical to reinstate. (ii) Other Intangible Assets On 2 April 2003, the Company incurred expenditure with respect to acquisition of 3G Spectrum licence. The total licence fee payable is capitalised and amortised over the defined period, from the effective date of commercialisation of services, subject to impairment, to the end of the assignment period on a straight line basis, not exceeding a period of 15 years. Intangible assets are not revalued.
(ii)
Depreciation on property, plant and equipment under construction commences when the property, plant and equipment are ready for their intended use. In the case of other land mentioned in note 19(a) to the financial statements, pending finalisation with the relevant authorities as to their tenure, amortisation is provided at an estimated amount of RM0.3 million per annum. (iii) Impairment Where an indication of impairment exists, the carrying amount of property, plant and equipment are assessed and written down immediately to its recoverable amount. See Significant Accounting Policies note 7 on Impairment of Assets. (iv) Gains or Losses on Disposal Gains or losses on disposal are determined by comparing proceeds with carrying amount and are included in Income Statement. (v) Repairs and Maintenance Repairs and maintenance are charged to the Income Statement during the period in which they are incurred. The costs of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. These costs are depreciated over the remaining useful life of the related asset.
171
31
DECEMBER
2003
6. INVESTMENTS
Investments in subsidiaries and associates are stated at cost. Where an indication of impairment exists, the carrying amount of the investment is assessed and written down immediately to its recoverable amount. Investments in International Satellite Organisations, quoted shares within non-current assets and other unquoted shares are stated at cost and allowances for permanent diminution in value is made where, in the opinion of the Directors, there is a decline other than temporary in the value of such investments. Such allowances for permanent diminution in value is recognised as an expense in the period in which the diminution is identified. Investments in quoted shares within current assets are carried at the lower of cost and market value, determined on an aggregate portfolio basis by category of investment. Cost is derived at on the weighted average basis. Market value is calculated by reference to stock exchange quoted selling prices at the close of business on the balance sheet date. Increase/decrease in the carrying amount of marketable securities are credited/charged to the Income Statement.
7. IMPAIRMENT OF ASSETS
Property, plant and equipment and other non-current assets, including intangible assets, are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an assets net selling price and value in use. For the purpose of assessing impairment, assets are grouped at the lowest level for which there is separately identifiable cash flows. The impairment loss is charged to the Income Statement.
172
8. INVENTORIES
Inventories comprise mainly items held for capital projects and maintenance. Inventories are stated at lower of cost and net realisable value. Cost is determined on a weighted average basis. Net realisable value represents the estimated selling price less all estimated costs to completion. In arriving at the net realisable value, due allowance is made for all obsolete and slow moving items.
9. TRADE RECEIVABLES
Trade receivables are carried at anticipated realisable value. Bad debts are written off and specific allowances are made for trade receivables considered to be doubtful of collection. In addition, a general allowance based on a percentage of trade receivables is made to cover possible losses which are not specifically identified.
173
31
DECEMBER
2003
(ii)
174
(iii) Termination Benefits Termination benefits are payable whenever an employees employment is terminated before the normal retirement date or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either terminate the employment of current employees according to a detailed formal plan without possibility of withdrawal or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Benefits falling due more than 12 months after the balance sheet date are discounted to present value. (iv) Equity Compensation Benefits Details of the Companys Employee Share Option Scheme are set out in note 10(e) to the financial statements. The Company does not make a charge to the Income Statement in connection with options granted over the ordinary shares of the Company. When share options are exercised, proceeds received net of any transaction costs, are credited to share capital and share premium.
175
31
DECEMBER
2003
(iii) Financial Instruments Not Recognised on the Balance Sheet The financial derivative hedging instruments are used in the Groups risk management of foreign currency and interest rate exposures of its financial liabilities. Hedge accounting principles are applied for the accounting of the underlying exposures and their hedge instruments. These hedge instruments are not recognised in the financial statements on inception. The underlying foreign currency liabilities are translated at their respective hedged exchange rate, and differential interest receipts and payments arising from interest rate derivative instruments are accrued, so as to match the net differential with the related expenses on the hedged liabilities. Exchange gains and losses relating to hedge instruments are recognised as a component of finance costs in the Income Statement in the same period as the exchange differences on the underlying hedged items. No amounts are recognised in respect of future periods. (iv) Fair Value Estimation for Disclosure Purposes The fair value of publicly traded financial instruments is based on quoted market prices at the balance sheet date.
176
In assessing the fair value of non-traded financial instruments, the Group uses a variety of methods and makes assumptions that are based on market conditions existing at each balance sheet date. Quoted market prices are used if available or other techniques, such as estimated discounted value of future cash flows, are used to determine fair value. In particular, the fair value of financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate available to the Group for similar financial instruments. The carrying value for financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair value. These accounting policies form an integral part of the financial statements set out on pages 177 to 248.
INCOME STATEMENTS
FOR THE YEAR ENDED
31 DECEMBER 2003
THE GROUP All amounts are in millions unless otherwise stated OPERATING REVENUE OPERATING COSTS OPERATING PROFIT OTHER OPERATING INCOME OPERATING PROFIT BEFORE FINANCE COST NET FINANCE COST ASSOCIATES share of profits less losses PROFIT BEFORE TAXATION TAXATION the company and subsidiaries share of taxation of associates PROFIT/(LOSS) AFTER TAXATION MINORITY INTERESTS PROFIT/(LOSS) FOR THE YEAR ATTRIBUTABLE TO SHAREHOLDERS EARNINGS PER SHARE (sen) basic diluted PROPOSED DIVIDENDS PER SHARE (sen) final special 6 5 Note 2003 RM 11,796.4 (10,018.2) 1,778.2 87.1 1,865.3 (430.0) 2002 RM 9,834.1 (8,154.8) 1,679.3 112.5 1,791.8 (303.9)
THE COMPANY 2003 RM 7,943.7 (6,916.8) 1,026.9 289.0 1,315.9 (422.9) 2002 RM 7,977.1 (7,829.7) 147.4 291.4 438.8 (365.3)
3 4
375.2 1,810.5
42.5 1,530.4
893.0
73.5
7 7
(364.0) 529.0
(572.0) (498.5)
1,390.4
844.3
529.0
(498.5)
8 8
43.6 43.2
26.8 26.6
9 9
10.0 10.0
10.0
The above Income Statements are to be read in conjunction with the Significant Accounting Policies on pages 169 to 176 and the Notes to the Financial Statements on pages 182 to 248. Report of the Auditors Page 250.
177
BALANCE SHEETS
AS AT
31
DECEMBER
2003
THE GROUP All amounts are in millions unless otherwise stated SHARE CAPITAL SHARE PREMIUM RESERVES TOTAL CAPITAL AND RESERVES MINORITY INTERESTS Convertible Bonds Borrowings Payable to a subsidiary company Customers deposits Deferred tax liabilities DEFERRED AND LONG TERM LIABILITIES 12 13 14 16 17 Note 2003 RM 3,250.7 3,046.4 10,485.3 16,782.4 245.1 10,830.6 626.9 2,031.5 13,489.0 30,516.5 2002 RM 3,167.0 2,536.5 9,216.1 14,919.6 225.7 1,361.6 4,826.9 625.5 1,590.3 8,404.3 23,549.6
THE COMPANY 2003 RM 3,250.7 3,046.4 9,894.5 16,191.6 6,432.1 2,983.5 614.9 1,694.6 11,725.1 27,916.7 2002 RM 3,167.0 2,536.5 9,593.9 15,297.4 1,361.6 4,997.0 614.4 1,533.6 8,506.6 23,804.0
10 11
178
INTANGIBLE ASSETS PROPERTY, PLANT AND EQUIPMENT SUBSIDIARIES ASSOCIATES INVESTMENTS LONG TERM RECEIVABLES DEFERRED TAX ASSETS Inventories Trade and other receivables Short term investments Cash and bank balances CURRENT ASSETS Trade and other payables Borrowings Taxation CURRENT LIABILITIES NET CURRENT ASSETS 28 13
18 19 20 21 22 23 17 24 25 26 27
4,072.7 21,605.9 1,499.6 384.7 668.9 160.4 203.6 3,835.0 263.4 3,346.1 7,648.1 4,522.0 877.8 124.0 5,523.8 2,124.3 30,516.5
19,566.5 2,746.5 139.6 685.4 172.5 3,592.4 197.7 1,834.8 5,797.4 3,675.7 1,488.0 222.1 5,385.8 411.6 23,549.6
50.0 14,569.4 10,926.2 1.5 338.1 668.8 103.3 3,104.5 260.3 852.0 4,320.1 2,863.1 2.9 91.4 2,957.4 1,362.7 27,916.7
15,251.0 6,993.5 96.0 98.3 684.6 105.7 2,942.6 197.7 1,138.2 4,384.2 2,576.5 920.4 206.7 3,703.6 680.6 23,804.0
The above Balance Sheets are to be read in conjunction with the Significant Accounting Policies on pages 169 to 176 and the Notes to the Financial Statements on pages 182 to 248. Report of the Auditors Page 250.
31
DECEMBER
2003
Issued and Fully Paid of RM1 each Special Share*/ Ordinary Shares Share Capital RM
Non-distributable
Distributable
All amounts are in millions unless otherwise stated At 1 January 2003 as previously reported prior year adjustments as restated Exchange fluctuation not recognised in income statement Profit for the year Dividends paid for year ended 31.12.2002 Issue of shares exercise of share options At 31 December 2003
Note
Share Premium RM
Retained Profits RM
Total RM
42
3,167.0 3,167.0
83.7 3,250.7
At 1 January 2002 as previously reported prior year adjustments as restated Exchange fluctuation not recognised in income statement Profit for the year Dividends paid for year ended 31.12.2001 Issue of shares exercise of share options At 31 December 2002
42
* Issued and fully paid shares include the Special Rights Redeemable Preference Share (Special Share) of RM1. Refer to note 10 to the financial statements for details of the terms and rights attached to Special Share. The above Consolidated Statement of Changes in Equity is to be read in conjunction with the Significant Accounting Policies on pages 169 to 176 and the Notes to the Financial Statements on pages 182 to 248. Report of the Auditors Page 250.
179
31
DECEMBER
2003
Issued and Fully Paid of RM1 each Special Share*/ Ordinary Shares All amounts are in millions unless otherwise stated At 1 January 2003 as previously reported prior year adjustment as restated Profit for the year Dividends paid for year ended 31.12.2002 Issue of shares exercise of share options At 31 December 2003 9 Note Share Capital RM
Nondistributable
Distributable
Share Premium RM
Retained Profits RM
Total RM
42
180
At 1 January 2002 as previously reported prior year adjustment as restated Loss for the year Dividends paid for year ended 31.12.2001 Issue of shares exercise of share options At 31 December 2002
42
* Issued and fully paid shares include the Special Rights Redeemable Preference Share (Special Share) of RM1. Refer to note 10 to the financial statements for details of the terms and rights attached to Special Share.
The above Company Statement of Changes in Equity is to be read in conjunction with the Significant Accounting Policies on pages 169 to 176 and the Notes to the Financial Statements on pages 182 to 248. Report of the Auditors Page 250.
31
DECEMBER
2003
THE GROUP All amounts are in millions unless otherwise stated CASH FLOWS FROM OPERATING ACTIVITIES CASH FLOWS USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS EFFECT OF EXCHANGE RATE CHANGES CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR CASH AND CASH EQUIVALENTS AT END OF THE YEAR 27 Note 2003 RM 4,662.8 (5,618.4) 2,427.3 2002 RM 3,223.4 (4,725.6) 809.8
THE COMPANY 2003 RM 2,937.8 (5,639.4) 2,415.4 2002 RM 2,584.6 (4,095.2) 538.3
29 30 31
1,471.7 (13.4)
(692.4) (6.7)
(286.2)
(972.3)
1,821.0 3,279.3
2,520.1 1,821.0
1,138.2 852.0
2,110.5 1,138.2
The above Cash Flow Statements are to be read in conjunction with the Significant Accounting Policies on pages 169 to 176 and the Notes to the Financial Statements on pages 182 to 248. Report of the Auditors Page 250.
181
31
DECEMBER
2003
1. PRINCIPAL ACTIVITIES
The principal activities of the Company during the year are the establishment, maintenance and provision of telecommunication and related services under the licence issued by the Minister of Energy, Communications and Multimedia. The principal activities of the subsidiaries are set out in note 43 to the financial statements. There was no significant change in the nature of these activities during the year.
2. SIGNIFICANT ACQUISITION
As at 1 January 2003, the Group held a 31.25% equity interest in Celcom (Malaysia) Berhad (Celcom). Following shareholders approval during the Extraordinary General Meeting held on 31 March 2003, the Group acquired additional equity interest of 16.68% in Celcom on 17 April 2003. As a result, Celcom became a subsidiary of the Group with a total shareholding of 47.93%. The Companys 100% interest in TM Cellular Sdn. Bhd. (TM Cellular) is now held via Celcom by way of share swap for a total consideration of RM1,684.0 million which was satisfied by the issuance of 635,471,698 new Celcom ordinary shares of RM1.00 each at RM2.65 per share to Telekom Enterprise Sdn. Bhd. (TESB), a wholly owned subsidiary of the Company.
182
The Group subsequently acquired the remaining 52.07% equity interest in Celcom, making it a wholly owned subsidiary. The cash consideration paid by the Group for the remaining 52.07% in Celcom was undertaken by way of the following transactions: On 22 April 2003, TESB acquired an additional 55,000,000 Celcom ordinary shares of RM1.00 each from open market at RM2.715 per share for a total cash consideration amounting to RM149.5 million being 2.1% equity interest. On 23 May 2003, the Company (via TESB) undertook a Mandatory General Offer (MGO) for the remaining 1,280,136,722 Celcom ordinary shares of RM1.00 each at RM2.75 per share (Offer Shares) not held by TESB and persons acting in concert with TESB (PAC). On 19 June 2003, the Company and TESB announced that acceptances had been received for more than 90% of the Offer Shares and that TESB would invoke Section 34 of the Securities Commission Act, 1993 (SCA) to compulsorily acquire the remaining Celcom ordinary shares of RM1.00 each at RM2.75 per share not held by TESB and the PAC. As at the close of the MGO on 27 June 2003, TESB and PAC held 98.54% of the issued and paid-up share capital of Celcom. During the same period, the PAC disposed its 28,616,100 Celcom ordinary shares of RM1.00 each at RM2.75 per share to TESB. Total cash consideration for the above was RM3,494.5 million. On 1 August 2003, TESB dispatched the notice for the compulsory acquisition of the remaining 38,035,820 Celcom shares under Section 34 of the SCA. As a consequence of the Groups notice for compulsory acquisition, Celcom was delisted from Malaysia Securities Exchange Berhad official list on 15 August 2003. The compulsory acquisition was completed on 29 September 2003. Total cash consideration for the compulsory acquisition was RM104.7 million.
The terms of the conditional Sale and Purchase Agreement in relation to the acquisition of TM Cellular by Celcom included Celcoms agreement and undertaking to pay to the Company, a sum equivalent to any damages or settlement awarded against Celcom in the form of the equivalent number of shares in Celcom, based on a pre-determined formula, limited to a maximum of 100.0 million shares in Celcom.
Goodwill (note 18 to the financial statements) Cost of acquisition (comprising purchase consideration and expenses directly attributable to the acquisition) Purchase consideration discharged by cash Expenses directly attributable to the acquisition, paid by cash Less: Cash and cash equivalents of subsidiary acquired Cash outflow of the Group on acquisition (note 30 to the financial statements) Cash advance of the Company to a subsidiary company for the acquisition (note 30 to the financial statements)
3,793.2
The fair value of the net assets acquired are provisional and subject to the matters indicated below which will be finalised upon completion of a review of the net assets fair values, which is currently in progress. The fair value of Celcoms telecommunication plant and equipment. Taxation liabilities of Celcom had not been agreed with the appropriate tax authorities for many years and work is being carried out to agree on tax assessments prior to the date of acquisition.
183
31
DECEMBER
2003
Total RM 1,862.6 (1,614.1) 248.5 13.9 262.4 (67.3) 52.2 247.3 (60.6) 186.7 (24.9) (88.7) 73.1
184
The effect of this acquisition on the Groups financial position at the year end was as follows: 2003 RM Non-current assets (including goodwill on acquisition of Celcom) Current assets Non-current liabilities Current liabilities Groups share of net assets Less: Amount accounted for as an associate at 16 April 2003 Less: Groups share of profit had the Group not acquired the additional 68.75% interest Increase in Group net assets 5,658.4 1,809.6 (1,852.4) (1,160.0) 4,455.6 (475.4) (44.5) 3,935.7
3. OPERATING REVENUE
THE GROUP 2003 RM Rentals Business Residential Sub total Calls/Usage Business Residential Sub total Others Business Residential Sub total Total Business Residential Total fixed line Data services Internet and multimedia Other telecommunication related services Total fixed line, data, internet and multimedia and other telecommunication related services Cellular Non-telecommunication related services TOTAL OPERATING REVENUE 2002 RM THE COMPANY 2003 RM 2002 RM
185
31
DECEMBER
2003
4. OPERATING COSTS
THE GROUP 2003 RM Allowance for bad and doubtful debts (net of bad debt recoveries) Allowance for diminution in value of long term investments Allowance/(reversal) for diminution in value of quoted investments Allowance for/waiver of amount owing by subsidiaries Charges and agencies commissions Depreciation of property, plant and equipment (PPE) Domestic and international outpayment Impairment of PPE Impairment of goodwill Maintenance Marketing, advertising and promotion Net loss/(gain) on foreign exchange realised Net loss on foreign exchange unrealised Rental land and buildings Rental equipment Rental others Research and development Staff costs Staff costs capitalised in PPE Supplies and inventories Universal Service Provision (USP) Universal Service Obligation (USO) in respect of prior year Utilities Write down of investment in a subsidiary Write off of PPE Other operating costs TOTAL OPERATING COSTS Staff costs include: Salaries, allowances, overtime and bonus Contribution to Employees Provident Fund (EPF) Termination benefits Other employee benefits Remunerations of Directors of the Company fees salaries, allowances and bonus ex-gratia payment contribution to EPF Other operating costs include: Audit fees PricewaterhouseCoopers Malaysia Others 2002 RM THE COMPANY 2003 RM 2002 RM
445.8 (49.7) 74.3 3,551.3 1,464.8 99.2 473.8 536.5 14.7 105.9 151.2 12.1 45.1 1,411.6 (60.3) 351.9 238.7 26.5 200.5 5.8 918.5 10,018.2
564.4 33.7 79.0 2,481.8 1,209.0 39.7 323.9 377.5 (5.6) 102.3 102.3 11.8 79.6 1,375.1 (67.4) 342.7 230.5 164.0 50.9 659.6 8,154.8
189.2 10.3 (47.9) 105.0 114.6 2,490.9 1,419.5 286.5 124.9 14.4 78.5 95.1 27.5 1.6 50.0 943.4 (60.2) 215.0 187.2 26.5 151.1 9.1 4.8 479.8 6,916.8
322.2 33.7 1,074.4 88.9 2,088.3 1,176.4 292.1 133.1 (5.6) 89.8 100.9 23.6 45.8 21.8 1,110.3 (65.9) 237.5 209.2 137.4 316.0 50.9 348.9 7,829.7
186
1.5 0.4
0.9 0.3
0.5
0.4
(b)
The options were given to these Directors on the same terms and conditions as those offered to other employees of the Company and its subsidiaries (note 10(e) to the financial statements). The options were exercised by the Directors on 29 October 2003 and 17 November 2003 respectively. The fair values of shares of the Company at the exercise date was RM9.00 and RM8.40 per share respectively. Exercised options during the year ended 31.12.2003 RM Ordinary share capital at par Share premium Proceeds received on exercise of share options 0.2 0.8 1.0
187
31
DECEMBER
2003
188
Total RM
288.8
70.0
71.2
430.0
319.8
(16.6)
0.7
303.9
7. TAXATION
THE GROUP 2003 RM The taxation charge for the Group and the Company comprise: Malaysia Current year taxation In respect of prior year Deferred taxation net 2002 RM THE COMPANY 2003 RM 2002 RM
417.9 1.2 193.7 612.8 0.9 4.1 8.9 13.9 626.7 33.0 659.7
Overseas Current year taxation In respect of prior year Deferred taxation net
Current taxation: Current year (Over)/Under accrual in prior years (net) Deferred taxation: Origination and reversal of temporary differences Benefit from previously unrecognised deductible temporary differences and tax losses
422.1 (98.2)
451.8 5.3
292.9 (89.9)
399.7
202.6 659.7
161.0 364.0
172.3 572.0
189
31
DECEMBER
2003
7. TAXATION (continued)
The explanation of the relationship between taxation expense and profit before taxation is as follows: THE GROUP 2003 RM Profit Before Taxation Taxation calculated at the applicable Malaysian taxation rate of 28% Tax effects of: Different taxation rates in other countries Expenses not deductible for taxation purposes Income not subject to taxation Expenses allowed for double deduction Previously unrecognised tax deductible temporary differences and tax losses Reversal of previously recognised temporary differences due to tax exempt status being granted (Over)/Under accrual in prior years (net) TOTAL TAXATION 1,810.5 2002 RM 1,530.4 THE COMPANY 2003 RM 893.0 2002 RM 73.5
506.9
428.5
250.0
20.6
190
(b)
Diluted earnings per share For the diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all dilutive potential ordinary shares. For this purpose, the Convertible Eurobonds due 2004 was deemed not dilutive for the year ended 31 December 2002 and up to the date of redemption on 1 August 2003 since the exercise price was higher than the fair value of the Companys shares. For ESOS 3 offered since 2002, a calculation is done to determine the number of shares that could have been acquired at market price (determined as the average annual share price of the Companys shares) based on the monetary value of the subscription rights attached to outstanding share options. This calculation serves to determine the unexercised shares to be added to the ordinary shares outstanding for the purpose of computing the dilution. No adjustment is made to net profit attributable to shareholders for the share options calculation. For details of the Employees Share Option Scheme, please refer to note 10(e) to the financial statements. THE GROUP 2003 Net profit attributable to shareholders (RM million) Weighted average number of ordinary shares in issue (million) Adjustment for ESOS 3 (million) Weighted average number of ordinary shares for diluted earnings per share (million) Diluted earnings per share (sen) 1,390.4 3,188.3 31.0 3,219.3 43.2 2002 844.3 3,155.3 19.5 3,174.8 26.6
Comparative earnings per share information has been restated to take into account the effect of the change in accounting policies on net profit for the year as described in note 42 to the financial statements.
191
31
DECEMBER
2003
10.0 10.0
At the forthcoming Annual General Meeting on 18 May 2004, a final gross dividend of 10.0 sen per share less tax of 28% amounting to RM234.1 million and a special gross dividend of 10.0 sen per share less tax of 28% amounting to RM234.1 million will be proposed for shareholders approval. These financial statements do not reflect this final dividend which will only be accrued as a liability when approved by shareholders.
192
5,000.0
5,000.0
5,000.0
5,000.0
3,250.7
3,250.7
3,167.0
3,167.0
(d)
(iii) No option shall be granted for less than 1,000 shares nor more than 550,000 shares unless so adjusted pursuant to item (vi) below. (iv) The subscription price of each RM1 share shall be the average of the middle market quotation of the shares as shown in the daily official list issued by the Malaysia Securities Exchange Berhad for the five (5) trading days preceding the date of offer with a 10% discount.
193
(c)
31
DECEMBER
2003
* 40% or 20,000 options, whichever is higher ** 30% or the remaining number of options unexercised (vi) In the event of any alteration in capital structure of the Company during the option period which expires on 31 July 2007, such corresponding alterations shall be made in: (i) (ii) the number of new shares in relation to ESOS so far as unexercised; and/or the subscription price.
194
The movement during the year in the number of options over the ordinary shares of RM1 each of the Company are as follows: ESOS 3 2003 Million The Company At 1 January Offered Exercised (sub-note c) Lapsed # At 31 December 2002 Million Phase 2 Million ESOS 2 2002 Phase 1 Million
127.1 (127.1)
# Less than 0.1 million At 31 December 2003, options to subscribe for 170,456,000 ordinary shares of RM1 each at the option price of RM7.09 per share under ESOS 3 remained unexercised. These options remain in force until 31 July 2007. These options granted do not confer any right to participate in any share issue of any other company.
2003 Million January to May 2002 June to August 2002 September to December 2002 January to May 2003 June to July 2003 August to September 2003 October to December 2003 9.15-9.80 8.00-8.25 7.40-7.50 7.30-7.85 7.95-8.05 7.70-7.75 8.25-8.60 8.53 7.09 7.09 7.09 7.09 7.09 7.09 4.8 19.9 9.2 49.8 83.7
Ordinary share capital at par (RM million) Share premium (RM million) Proceeds received on exercise of share options (RM million)
688.2
602.1
The fair value of shares issued on the exercise of options is the mean market price at which the Companys share were traded on the Malaysia Securities Exchange Berhad on the day prior to the exercise of the options.
195
31
DECEMBER
2003
11. RESERVES
THE GROUP 2003 RM Retained Profits Exchange Fluctuation Reserves arising from translation of foreign subsidiaries/associates TOTAL RESERVES 10,685.2 (199.9) 10,485.3 2002 RM 9,523.2 (307.1) 9,216.1 THE COMPANY 2003 RM 9,894.5 9,894.5 2002 RM 9,593.9 9,593.9
Subject to agreement with the Inland Revenue Board, the Company has sufficient tax credit under Section 108 of the Income Tax Act, 1967 and tax exempt income under Section 8 of the Income Tax (Amendment) Act, 1999 at 31 December 2003 to frank the payment of net dividends of approximately RM9,764.8 million (2002: RM9,266.3 million) out of total distributable reserves of RM9,894.5 million (2002: RM9,593.9 million) without incurring additional taxation.
196
(b)
(ii)
(iii)
(iv)
13. BORROWINGS
Weighted Average Rate of Finance 2003 Long Term RM Short Term RM Weighted Average Rate of Finance 2002 Long Term RM Short Term RM
THE GROUP DOMESTIC Secured Cagamas Loans (sub-note a) Borrowings from financial institutions (sub-note b) Borrowings under Islamic facilities (sub-note b)
Total RM
Total RM
6.65% 6.65%
91.7 91.7
3.3 3.3
95.0 95.0
Unsecured Redeemable Bonds (note 14 to the financial statements) Borrowings from financial institutions Borrowings under Islamic Banking facilities Bank overdrafts (sub-note e)
Total Domestic FOREIGN Secured Borrowings from financial institutions (sub-note c) Other borrowings
5.80%
106.4 106.4
Unsecured Notes and Debentures (sub-note d) Borrowings from financial institutions Other borrowings Bank overdrafts (sub-note e)
4.74%
5.35% 10,830.6
877.8 11,708.4
197
31
DECEMBER
2003
THE GROUP The Groups long term borrowings are repayable as follows: After After After After one year and up to five years five years and up to ten years ten years and up to fifteen years fifteen years (sub-note f)
198
Short Term RM
Total RM
Short Term RM
Total RM
6.61% 6.61%
84.7 84.7
1.6 1.6
86.3 86.3
6.65% 6.65%
91.7 91.7
3.3 3.3
95.0 95.0
Unsecured Borrowings from financial institutions Borrowings under Islamic Banking facilities
1.6
Total Domestic FOREIGN Unsecured Notes and Debentures (sub-note d) Borrowings from financial institutions Other borrowings Total Foreign TOTAL BORROWINGS
6.84%
THE COMPANY The Companys long term borrowings are repayable as follows: After After After After one year and up to five years five years and up to ten years ten years and up to fifteen years fifteen years (sub-note f)
The currency exposure profile of borrowings is as follows: THE GROUP 2003 RM Ringgit Malaysia US Dollar Japanese Yen Other currencies 6,705.6 4,021.6 828.4 152.8 11,708.4 2002 RM 2,079.7 3,345.8 757.2 132.2 6,314.9 THE COMPANY 2003 RM 1,775.3 3,817.5 828.4 13.8 6,435.0 2002 RM 1,939.0 3,208.5 757.2 12.7 5,917.4
(a) (b)
Borrowings from Cagamas Berhad secured by way of assignment of the titles of properties relating to staff housing loans. Syndicated term loan facilities and Islamic Private Debt securities issued by Celcom (Malaysia) Berhad (Celcom), a wholly owned subsidiary acquired during the year. The borrowings are secured by deed of assignment over Celcoms key bank collection accounts and designated bank accounts which requires Celcom to deposit a proportion of its excess cashflows into those designated bank accounts for purposes of interest and principal repayments only. The prior security through fixed and floating charge over the assets of Celcom including but not limited to share of its wholly owned subsidiaries of Celcom have been released on 4 February 2004. Secured by way of fixed and floating charge on property, plant and equipment of certain subsidiaries (note 19 to the financial statements). Consists of USD200.0 million 7.125% Notes due 2005, USD300.0 million 7.875% Debentures due 2025 and USD300.0 million 8.0% Guaranteed Notes due 2010.
(c)
(d)
199
31
DECEMBER
2003
200
THE GROUP Redeemable Bonds (Unsecured) by Tekad Mercu 10-year redeemable unsecured bonds due 2013 (Tranche 1) (sub-note c) 15-year redeemable unsecured bonds due 2018 (Tranche 2) (sub-note c)
(ii)
(iii)
(iv)
(v)
(b)
TM Bonds The principal features of the bonds issued by the Company to RUSB are as follows: (i) Unless previously redeemed, purchased and cancelled, the bonds are redeemable by the Company on 30 December 2013 and 28 December 2018 respectively at nominal amount together with accrued and unpaid interest. The bonds may also be redeemed by the Company at any time after the issue date by private arrangement with RUSB. Payment of coupon on the bonds may either be: (a) interest of 6.25% per annum payable semi-annually in arrears on the Tranche 1 bonds, and interest of 5.25% per annum payable semi-annually in arrears on the Tranche 2 bonds, with the option to reset these rates after the fifth year; or (b) net dividends on both TM RPS A and TM RPS B, which shall be equal to the interest on Tranche 1 and Tranche 2 of the bonds less any amounts in the Designated Accounts, being accounts designated to capture all collections of dividends and tax refunds by the authorities, and a nominal interest of 0.005% per annum payable semi-annually. (iii) The bonds will constitute direct, unconditional and unsecured obligations of the Company and will at all times rank pari-passu, without discrimination, preference or priority amongst themselves and at least pari-passu with all other present and future unsecured and unsubordinated obligations of the Company, subject to those preferred by law or the transaction documents. The bonds are not convertible, not transferable and not tradeable.
(ii)
(iv)
201
31
DECEMBER
2003
(ii)
(b)
202
(iii)
The bonds may also be purchased, in whole or in part, by the Company, at any time at any price in the open market or by private treaty. Payment of coupon on the bonds Interest rate of 6.20% per annum payable semi-annually in arrears on the Tranche 1 bonds and interest rate of 5.25% per annum payable semi-annually in arrears on the Tranche 2 bonds with the option of reset these rates after the fifth year. The bonds will constitute direct, unconditional and unsecured obligations of Tekad Mercu and will at all times rank pari passu without discrimination, preference or priority amongst themselves and at least pari-passu with all other present and future unsecured and unsubordinated obligations of Tekad Mercu, subject to those preferred by law or the transaction documents. The bonds are not convertible but transferable, subject to certain selling restrictions.
(iv)
(v)
(vi)
(vii) The Company has granted a Put Option in favour of the security trustee of the bonds for the benefit of the holders of the bonds. The Put Option will allow the holders of the bonds to have direct recourse on the Company for the following circumstances: (a) on a pre-agreed time frame, there is insufficient amounts in the relevant Designated Account to meet coupon payments and/or principal redemption of the bonds on the relevant due date for payment; an event of default has been declared under the bonds; and an event of default has been declared under the Put Option.
(b) (c)
None of the TM RPS, TM bonds and Tekad Mercu bonds have been redeemed, purchased or cancelled during the financial year.
203
31
DECEMBER
2003
204
Telephone customers deposits are subjected to rebate at 5% per annum in accordance with Telephone Regulations, 1996. The comparative figure in respect of customers deposits for Cellular services has been reclassified to other payables primarily to align with the Group business segment following the acquisition of Celcom.
205
31
DECEMBER
2003
206
(b)
Deferred Tax Liabilities At 1 January, as restated (note 42 to the financial statements) Current year charged to Income Statement arising from: property, plant and equipment intangible assets others Total charged to Income Statement Current year charged directly to equity arising from: acquisition of a subsidiary Total charged directly to equity Currency translation differences At 31 December
(0.5) 1,590.3
1,694.6
1,533.6
The deferred tax assets which relate to previously unrecognised temporary differences and tax losses of RM160.4 million of a subsidiary are recognised in the current year as it is probable that there will be future taxable profits available against which such temporary differences and tax losses can be utilised.
Breakdown of cumulative balances by each type of temporary difference: THE GROUP 2003 RM (a) Deferred Tax Assets Property, plant and equipment Tax losses Others 2002 RM THE COMPANY 2003 RM 2002 RM
(b)
Deferred Tax Liabilities Property, plant and equipment Other intangible assets Others
207
31
DECEMBER
2003
THE GROUP Net Book Value At 1.1.2003 Transferred from associates (note 21 to the financial statements) Acquisition of a subsidiary (note 2 to the financial statements) Acquisition of 3G spectrum licence At 31.12.2003
Goodwill RM
Total RM
50.0 50.0
39.7 (39.7)
39.7 (39.7)
208
50.0 50.0
At 31 December 2002 Cost, as restated Accumulated impairment, as restated Net Book Value, as restated
39.7 (39.7)
39.7 (39.7)
THE COMPANY Net Book Value At 1.1.2003 Acquisition of 3G spectrum licence At 31.12.2003
50.0 50.0
50.0 50.0
50.0 50.0
50.0 50.0
THE GROUP Net Book Value At 1.1.2003 Acquisition of a subsidiary Additions Transfer to inventories (note 24 to the financial statements) Disposals Write off Currency translation differences Depreciation Impairment At 31.12.2003 At 31 December 2003 Cost Accumulated depreciation Accumulated impairment Net Book Value
Land (sub-note a) RM
1,635.6
1,635.6 1,635.6
At 1.1.2002 Acquisition of a subsidiary Additions Disposals Write off Currency translation differences Depreciation At 31.12.2002 At 31 December 2002 Cost Accumulated depreciation Accumulated impairment Net Book Value
2,932.9 2,932.9
209
31
DECEMBER
2003
THE COMPANY Net Book Value At 1.1.2003 Additions Disposals Write off Depreciation At 31.12.2003
Telecommunication Network RM
Land (sub-note a) RM
210
1,341.7 1,341.7
9,719.1
172.4
503.7
292.3
2,169.4
2,394.1
15,251.0
* Net of transfer to property, plant and equipment # Included in disposals was RM0.6 million (2002: RM774.3 million) being property, plant and equipment transferred to subsidiaries (a) Details of land (at cost) are as follows: THE GROUP 2003 RM Freehold land Long term leasehold Short term leasehold Other land 256.4 213.2 7.1 94.0 570.7 2002 RM 254.5 130.3 3.3 73.3 461.4 THE COMPANY 2003 RM 92.5 178.8 5.8 93.6 370.7 2002 RM 92.5 130.3 2.0 73.1 297.9
The title deeds pertaining to other land have not yet been registered in the name of the Company and a subsidiary. Pending finalisation with the relevant authorities, these land have not been classified according to their tenure. (b) Included in the capital work-in-progress is finance cost capitalised for the year amounting to RM5.7 million (2002: RM5.2 million) for the Group.
211
26,326.6 (16,607.5)
941.5 (769.1)
2,119.7 (1,616.0)
297.9 (5.6)
3,131.6 (962.2)
2,394.1
35,211.4 (19,960.4)
31
DECEMBER
2003
20. SUBSIDIARIES
Malaysia RM 2003 Overseas RM Total RM Malaysia RM 2002 Overseas RM Total RM
THE COMPANY Investments, at cost: quoted unquoted Investments, at written down value: unquoted (sub-note a)
212
(a)
Investments in certain subsidiaries have been written down to recoverable amount or RM1 each. During the year, TM Cellular Sdn. Bhd., a wholly owned subsidiary was disposed to Celcom for a consideration equivalent to written down value as explained in note 2 to the financial statements. The amount owing by subsidiaries represents shareholder loans and advances for working capital purposes. These loans and advances are unsecured and bear interest ranging from 0% to 4.72% (2002: 0% to 4.88%) with no fixed repayment terms. However, the Company has indicated that it will not demand substantial repayment within the next twelve months. Shareholder loans and advances provided to overseas subsidiaries are in US dollar.
(b)
The Groups equity interest in the subsidiaries, their respective principal activities and countries of incorporation are listed in note 43 to the financial statements.
21. ASSOCIATES
Malaysia RM 2003 Overseas RM Total RM Malaysia RM 2002 Overseas RM Total RM
THE GROUP (i) Quoted Share of net assets other than goodwill of associates on acquisition post acquisition Goodwill on consolidation, as restated (sub-note a)
59.8 (59.8)
(ii)
Unquoted Share of net assets other than goodwill of associates on acquisition associates of a subsidiary acquired during the year post acquisition
76.7
THE COMPANY Investments, at cost: quoted unquoted Total Market value of quoted investments
1.5 1.5
1.5 1.5
10.3 10.3
(a)
In line with the change in accounting policy with respect to goodwill on acquisition, goodwill on acquisition of associates arise on or after 1 January 2002 is reflected as part of the investment in the associates. Goodwill arise from acquisition completed prior to 1 January 2002 was written off against reserves in the year of acquisition. Such goodwill was not restated as it is impractical to do so.
The Groups equity interest in the associates, their respective principal activities and countries of incorporation are listed in note 44 to the financial statements.
213
31
DECEMBER
2003
22. INVESTMENTS
THE GROUP 2003 RM Investments in International Satellite Organisations, at cost Investments in quoted shares, at cost Investments in unquoted shares, at cost Investments in unquoted shares, at written down value (sub-note a) 107.3 264.8 109.9 482.0 (97.3) 384.7 267.4 2002 RM 133.5 96.4 229.9 (90.3) 139.6 THE COMPANY 2003 RM 106.3 264.8 64.3 435.4 (97.3) 338.1 267.4 2002 RM 132.6 56.0 188.6 (90.3) 98.3
Allowance for permanent diminution in value TOTAL INVESTMENTS AFTER ALLOWANCE Market value of quoted investments
214
(a)
The following corporations in which Celcom Group, a subsidiary acquired during the year, owned more than one half of the voting power, which, due to loss of control or significant influence have been accounted as investments. Aseania Plastics Sdn. Bhd. TRI Cellular Communications Cambodia Company TRI Telecommunication Zanzibar Limited Tripoly Communication Technology Corporation Ltd.
Investments in the above corporations have been written down to recoverable amount or RM1 each.
Staff loans amounting to RM82.7 million (2002: RM92.8 million) have been assigned to secure the Companys borrowings from Cagamas Berhad. Other long term receivables of the Company are in respect of education loans provided to undergraduates and are convertible to scholarships if certain performance criteria are met. The loans are interest free and if not converted to scholarship will be repayable over a period of not more than 8 years.
(c)
THE GROUP 2003 RM At cost: Cables and wires Network materials Telecommunication equipment Spares and others 2002 RM
At net realisable value: Telecommunication equipment transferred from property, plant and equipment (note 19 to the financial statements) Spares and others
103.3
105.7
TOTAL INVENTORIES
203.6
215
24. INVENTORIES
31
DECEMBER
2003
Allowance for doubtful debts Total trade receivables after allowance Prepayments Deposit for additional investment (refer to note 36 (a) to the financial statements) Staff loans Other receivables from subsidiaries (sub-note a) Other receivables from associates (sub-note a) Other receivables Allowance for doubtful debts Total other receivables after allowance TOTAL TRADE AND OTHER RECEIVABLES AFTER ALLOWANCE
216
The currency exposure profile of trade and other receivables after allowance is as follows: Ringgit Malaysia US Dollar Special Drawing Rights Gold Franc Currency Guinea Franc Other currencies 2,870.2 560.0 121.5 75.5 94.4 113.4 3,835.0 2,617.2 660.4 83.9 29.9 110.4 90.6 3,592.4 2,506.4 426.6 96.0 75.5 3,104.5 2,262.8 566.0 83.9 29.9 2,942.6
Credit terms of trade receivables range from payment in advance to 90 days in year 2003 and 2002. (a) Other receivables from subsidiaries and associates are unsecured and interest free with no fixed repayment terms.
217
The Group and the Company are not exposed to major concentrations of credit risk due to the diversed customer base. In addition, credit risk is mitigated to a certain extent by cash deposits and bankers guarantee obtained from customers. The Group and the Company consider the allowance for doubtful debts at balance sheet date to be adequate to cover the potential financial loss.
31
DECEMBER
2003
218
(13.8) 1,821.0
852.0
1,138.2
The currency exposure profile of cash and bank balances is as follows: Ringgit Malaysia US Dollar Other currencies 2,451.7 807.0 87.4 3,346.1 975.6 770.8 88.4 1,834.8 249.8 602.2 852.0 466.8 671.4 1,138.2
Included in deposits of the Group is RM60.7 million which are pledged as security for banking facilities granted to associates of Celcom, a wholly owned subsidiary acquired during the year. Deposits of the Group also included RM191.2 million being funds earmarked for principal and interest repayments under terms of borrowings of Celcom as mentioned in note 13(b) to the financial statements. The deposits are placed mainly with a number of creditworthy financial institutions. There is no major concentration of deposits in any single financial institution. Deposits have maturity ranged from overnight to 365 days (2002: from overnight to 182 days) and from overnight to 90 days (2002: from overnight to 94 days) for the Group and the Company respectively. Bank balances are deposits held at call with banks. The weighted average interest rate of deposits (excluding deposits under Islamic principles) as at 31 December 2003 is 2.38% (2002: 2.32%) and 1.62% (2002: 1.94%) for the Group and the Company respectively.
The currency exposure profile of trade and other payables is as follows: Ringgit Malaysia US Dollar Special Drawing Rights Gold Franc Currency Bangladesh Taka Other currencies 3,768.1 300.2 120.1 72.7 85.6 175.3 4,522.0 3,248.1 220.7 7.6 13.4 53.4 132.5 3,675.7 2,390.6 233.7 120.1 72.7 46.0 2,863.1 2,362.5 158.9 7.6 13.4 34.1 2,576.5
Credit terms of trade and other payables vary from 30 to 90 days in year 2003 and 2002 depending on the terms of the contracts. (a) Other payables to subsidiaries and associates are unsecured, interest free and have no fixed terms of repayment.
219
31
DECEMBER
2003
220
On 1 August 2002, a letter of award was issued by a subsidiary to Edward & Sons Sdn. Bhd. (ESSB) on the tender for road rehabilitation and slope stabilisation works at TM Bukit Dabei Microwave Station, Marudi Sarawak at a contract value of approximately RM1.6 millon. Y.B. Dato Joseph Salang Gandum, who is a director of the Company and a shareholder of ESSB is deemed interested in the transaction. Progress billings from ESSB during the year amounted to RM0.9 million (2002: RM0.2 million) of which RM0.2 million remained outstanding as at 31 December 2003.
34. COMMITMENTS
(a) Property, plant and equipment THE GROUP 2003 RM Commitments in respect of expenditure approved and contracted for Commitments in respect of expenditure approved but not contracted for 2002 RM THE COMPANY 2003 RM 2002 RM
2,544.0 126.2
3,065.3 24.4
2,259.3
2,826.5
221
In addition to related party disclosures mentioned elsewhere in the financial statements, set out below is other related party transaction and balance.
31
DECEMBER
2003
222
The above lease payments relate to the non-cancellable operating lease of a telecommunication tower from a wholly owned subsidiary.
(ii)
(iii)
(iv)
223
31
DECEMBER
2003
(g)
224
(i)
225
31
DECEMBER
2003
(iii)
The arbitration hearing proceeded as scheduled from 19 January 2004 to 30 January 2004. Continued hearing has been fixed from 12 May 2004 until 28 May 2004. The directors of Celcom, based on legal opinion received, are of the view that the arbitration is likely to be decided in TRIs favour. As such, no allowance has been made for the amounts claimed by ISL. The carrying value of Celcom groups investment in and advances to Sheba were also not adjusted to reflect the potential exposure in the event of an unfavourable outcome to the arbitration.
226
(k)
On 10 March 2003, Celcom received a letter from DeTeAsia Holding GmbH (DTAH) informing Celcom that it had initiated an arbitration by way of a Request for Arbitration dated 7 March 2003 (Request) which was filed on 10 March 2003 with the Secretariat of the International Court of Arbitration of the International Chamber of Commerce in Paris (ICC) pursuant to Clause 8.6 of the Amended and Restated Supplemental Agreement dated 4 April 2002 between TRI, DTAH, Celcom and TR International Limited (TRIL) (the Amended and Restated Agreement). DTAH is essentially claiming damages for breach of the Amended and Restated Agreement. DTAHs contention is that by entering into the Sale and Purchase Agreement with Telekom Malaysia Berhad for the acquisition of the whole of the issued and paid-up capital of TM Cellular Sdn. Bhd. (TM Cellular) and the subsequent acquisition of TM Cellular without the consent of DTAH, Celcom has acted in breach of the Amended and Restated Agreement. DTAH is seeking damages in an amount to be calculated by reference to the provisions of Schedule 1 of the Amended and Restated Agreement, together with interest at eight percent (8%) per annum from 16 October 2002 and costs. Celcoms contention is essentially that the consent of DTAH was not required for the acquisition of TM Cellular and that such provisions in the Amended and Restated Agreement on which DTAH relies on are either not enforceable or that DTAH is precluded from asserting the validity of the same. Subsequent to the filing of the Request, DTAH has also raised further allegations of breaches against Celcom in the Summary of Case filed by DTAH with the ICC on 1 August 2003. A three-member arbitral tribunal has been constituted and the hearing date has been fixed from 12 July 2004 to 23 July 2004 for the hearing of the arbitration. The directors of Celcom, based on legal opinion received, are of the view that the prospects of successfully defending the arbitration are reasonable. In the event that the arbitral tribunal finds in favour of DTAH, the damages payable by Celcom to DTAH will have to be assessed. It would not be possible, at this stage, to determine with any certainty the quantum of such damages.
(ii)
Since the parties could not reach an amicable settlement, TM through its counsel in London, sent a Notice of Arbitration to the GoG on 10 February 2003 for the commencement of arbitration proceedings under the UNCITRAL Arbitration Rules in accordance with the provisions of the BIT. Subsequently, the arbitral tribunal was constituted in accordance to the provisions of BIT. Based on the preparatory meeting in relation to the arbitration between TM and GoG held on 17 July 2003 at The Hague, it was agreed that the arbitration hearing will start on 5 July 2004 for a period of two (2) weeks. (b) G-Com Limited (G-Com), a subsidiary of TM, filed an application in the High Court of Ghana on 13 June 2002, seeking a declaration that the Extraordinary General Meeting (EGM) held on 3 June 2002 was null and void. On 31 July 2002, the High Court of Ghana dismissed G-Coms application for a declaration to nullify the EGM held on 3 June 2002. On 25 September 2002, G-Com filed an appeal in the Court of Appeal of Ghana against the decision of the High Court dated 31 July 2002. The Court of Appeal has yet to fix the hearing date of the said appeal. Meanwhile, the High Court Judge has provided his written Judgment and TM has been advised that the earliest hearing date of the said appeal will approximately be fixed in the first quarter of 2004. (c) G-Com filed a Writ of Summons and a Statement of Claim at the High Court of Ghana against GT on 24 December 2003 in respect of the EGM and AGM resolutions to approve certain contracts and loans. The hearing date is expected to be in February 2004.
227
31
DECEMBER
2003
(b)
(c)
Segment results represent segment operating revenue less segment expenses. Unallocated income includes interest income, dividend income and gain or loss on disposal of investments. Unallocated costs represent corporate expenses and net foreign exchange differences arising from revaluation of corporate borrowings. The accounting policies used to derive reportable segment results are consistent with those as described in the Significant Accounting Policies.
228
Segment assets disclosed for each segment represent assets directly managed by each segment, primarily include intangibles, receivables, property, plant and equipment, inventories and cash and bank balances. Unallocated corporate assets mainly include staff loans, other long term receivables, investments, deferred tax assets and property, plant and equipment of the Companys training centre. Segment liabilities comprise operating liabilities and exclude corporate borrowings, interest payable on corporate borrowings, current tax and deferred tax liabilities. Segment capital expenditure comprises additions to intangibles, property, plant and equipment, including additions resulting from acquisition of subsidiaries as shown in note 18 and 19 to the financial statements. Significant non-cash expenses comprise mainly allowances and unrealised foreign exchange losses (excluding net foreign exchange differences arising from revaluation of corporate borrowings) as shown in note 4 to the financial statements. Prior years segment data presented for comparative purposes has been adjusted or extended to conform with changes in presentation due to retrospective application of accounting policies as described in note 42 to the financial statements.
Cellular RM
Others RM
Total RM
1,588.6
453.2
86.6
236.2
139.0
At 31 December 2003 Net Assets Segment assets Associates Unallocated corporate assets Total assets Segment liabilities Unallocated liabilities Total liabilities
19,473.1 1,211.8
12,050.6 287.8
1,272.2
3,457.3
4,200.4
114.1
229
31
DECEMBER
2003
Cellular RM
Others RM
Total RM
230
1,851.9
100.5
33.4
1,985.8 85.4 (213.1) (66.3) 1,791.8 (389.6) 85.7 42.5 1,530.4 (659.7) 870.7 (26.4) 844.3
38.5
4.0
Cellular RM
Others RM
Total RM
19,810.3 985.7
3,934.8 1,760.8
1,321.8
Year Ended 31 December 2002 Other Information Capital expenditure additions during the year acquisition of a subsidiary Depreciation Write off of property, plant and equipment Impairment of goodwill Significant non-cash expenses
* Inter-segment operating revenue has been eliminated in arriving at respective segment operating revenue. The inter-segment operating revenue was entered into in the normal course of business and at prices available to third parties or at negotiated terms. By Geographical Location Although the Group operates in many countries as shown in note 43 to the financial statements, the segmentisation of Group operation by geographical location is only segmentised to Malaysia and overseas as no individual overseas country contributed more than 10% of consolidated operating revenue or assets. In presenting information for geographical segments of the Group, sales are based on the country in which the customer is located. There is no sale between the segments. Total assets and capital expenditure are determined based on where the assets are located.
231
13,790.1
31
DECEMBER
2003
232
W.A.R.F.* THE GROUP 2003 Financial Assets Investments Staff Loans and Other Long Term Receivables Trade and Other Receivables (excluding short term staff loans) Short Term Investments Cash and Bank Balances Total
Noninterest sensitive RM
Total RM
233.2 233.2
233
31
DECEMBER
2003
W.A.R.F.* THE GROUP 2003 Financial Liabilities Total Borrowings Customers Deposits Trade and Other Payables Total On-balance-sheet interest sensitivity gap Off-balance-sheet interest sensitivity gap
Total RM
5.03%
9,711.1 9,711.1
1,991.2 1,991.2
234
2002 Financial Assets Investments Staff Loans and Other Long Term Receivables Trade and Other Receivables (excluding short term staff loans) Short Term Investments Cash and Bank Balances Total Financial Liabilities Convertible Bonds Total Borrowings Customers Deposits Trade and Other Payables Total On-balance-sheet interest sensitivity gap Off-balance-sheet interest sensitivity gap Total interest sensitivity gap
12.0 12.0
21.2 21.2
303.8 303.8
4.00% 5.14%
696.3 696.3
THE GROUP Financial Assets Long Term Investment Staff Loans Trade and Other Receivables Cash and Bank Balances Financial Liabilities Convertible Bonds Total Borrowings
USD
RM
USD
RM
4.00% 2.66%
1.73% 1.44%
4.00% 2.92%
5.45%
1.87%
5.80%
4.00% 6.24%
2.09%
4.08%
W.A.R.F.* THE COMPANY 2003 Financial Assets Amount Owing by Subsidiaries net of allowances Investments Staff Loans and Other Long Term Receivables Trade and Other Receivables (excluding short term staff loans) Short Term Investments Cash and Bank Balances Total Financial Liabilities Total Borrowings Payable to a subsidiary Customers Deposits Trade and Other Payables Total On-balance-sheet interest sensitivity gap Off-balance-sheet interest sensitivity gap Total interest sensitivity gap
Fixed interest rate maturing or repriced in 1 year or 1 to 5 More than less years 5 years RM RM RM
Noninterest sensitive RM
Total RM
1,489.4 1,489.4
233.2 233.2
4.91% 5.91%
689.0 689.0
235
31
DECEMBER
2003
W.A.R.F.* THE COMPANY 2002 Financial Assets Amount Owing by Subsidiaries net of allowances Investments Staff Loans and Other Long Term Receivables Trade and Other Receivables (excluding short term staff loans) Short Term Investments Cash and Bank Balances Total Financial Liabilities Convertible Bonds Total Borrowings Customers Deposits Trade and Other Payables Total On-balance-sheet interest sensitivity gap Off-balance-sheet interest sensitivity gap Total interest sensitivity gap
Noninterest sensitive RM
Total RM
1,494.1 1,494.1
303.8 303.8
236
4.00% 5.94%
689.0 689.0
THE COMPANY Financial Assets Amount Owing by Subsidiaries net of allowances Staff Loans Cash and Bank Balances Financial Liabilities Convertible Bonds Total Borrowings
USD
RM
USD
RM
3.99% 1.23%
4.16% 1.46%
5.57%
1.87%
7.89%
4.00% 6.37%
2.09%
7.24%
For on-balance-sheet financial instruments, the main credit risk exposure has been disclosed elsewhere in the financial statements. Off-balance-sheet financial instruments The Group and the Company are exposed to credit risk where the fair value of the contract is favourable, where the counterparty is required to pay the Group or the Company in the event of contract termination. The following table summarises the favourable fair values of the contracts, indicating the credit risk exposure. THE GROUP AND COMPANY 2003 Contract or notional principal Favourable amount fair value RM RM Long dated swap Cross-currency interest rate swap Interest rate swap 750.0 570.0 1,320.0 66.4 1.4 67.8 2002 Contract or notional principal Favourable amount fair value RM RM 750.0 190.0 940.0 47.5 1.8 49.3
237
31
DECEMBER
2003
238
384.7 262.0
458.4 233.8
139.6 331.8
184.9 289.8
338.1 261.5
411.8 233.3
98.3 331.7
143.6 289.7
1,361.6
1,378.0
1,361.6
1,378.0
6,717.2 3,000.0
7,597.0 3,000.0
5,618.6
6,307.8
5,746.0 2,983.5
6,264.0 2,959.9
5,228.4
5,627.0
The above carrying amount and net fair value of total borrowings exclude swaps, which are disclosed in sub-note (b). Financial assets The fair value of long term investments are estimated by reference to market indicative yields or the Group and the Companys share of net tangible assets. Where allowances of permanent diminution in value or impairment, where applicable, is made in respect of any investment, the carrying amount net of allowance made is deemed to be a close approximation of its fair value. The fair value of staff loans have been estimated by discounting the estimated future cash flows using the prevailing market rates for similar credit risks and remaining period to maturity. The fair value of staff loans is significantly lower than carrying amount at the balance sheet date as the Company and its subsidiaries charged interest rates on staff loans at below current market rates. The Directors consider the carrying amount fully recoverable as they do not intend to realise the financial asset via exchange with another counterparty but to hold it to contract maturity. Collaterals are taken for these loans and the Directors are of the opinion that the potential losses in the event of default will be covered by the collateral values on individual loan basis.
66.4 1.4
(95.8)
750.0 760.0
47.5 1.8
(9.8)
Fair values of financial derivative instruments are the present values of their future cash flows and are arrived at based on valuations carried out by the Companys bankers. Favourable fair value indicates amount receivable by the Company if the contracts are terminated as at 31 December 2003 or vice versa.
239
31
DECEMBER
2003
240
THE GROUP Income Statement Operating costs Taxation the company and subsidiaries Profit for the year attributable to shareholders Balance Sheet Reserves, Retained profits at 1 January 2002 at 31 December 2002 Deferred tax at 1 January 2002 at 31 December 2002 at 31 December 2002
As restated RM
(172.3) (172.3)
(39.7) (39.7)
1,207.9 1,207.9
Associates
THE COMPANY Income Statement Taxation Loss for the year Balance Sheet Reserves, Retained profits at 1 January 2002 at 31 December 2002 Deferred tax at 1 January 2002 at 31 December 2002
(399.7) (326.2)
(172.3) (172.3)
(572.0) (498.5)
11,795.3 11,127.5
100 60
100 60
100
100
RM20.0
100
100
RM3.0
Mediatel (Malaysia) Sdn. Bhd. Meganet Communications Sdn. Bhd. Menara Kuala Lumpur Sdn. Bhd.
100 70 100
100 70 100
RM11.0 Provision of interactive multimedia communication services and solution RM91.0 Management and operation of the telecommunication and tourism tower of Menara Kuala Lumpur RM260.0 Provision/transmission of voice and data through the cellular system
100
100
RM260.0
241
31
DECEMBER
2003
Parkside Properties Sdn. Bhd.* Rebung Utama Sdn. Bhd. Societe Des Telecommunications De Guinee** Tekad Mercu Berhad Telekom Applied Business Sdn. Bhd. Telekom Consultancy Sdn. Bhd.* Telekom Enterprise Sdn. Bhd.
100
RM1.6 Provision of software development and sale of software products RM# Dormant RM0.6 Investment holding and provision of services relating to telecommunication, computer, data and information within and outside Malaysia RM0.5 RM0.1 RM# Dormant Investment holding Provision of consultancy and engineering services in telecommunication
242
Telekom Infotech Sdn. Bhd.* Telekom Malaysia-Africa Sdn. Bhd. Telekom Management Services Sdn. Bhd. Telekom Multi-Media Sdn. Bhd.
100
100
RM1.6
RM1.6 Investment holding and provision of interactive multimedia communication services and solutions MKW350.0 Provision of telecommunication and related services in Malawi RM9.0 Investment holding and provision of public telephone services RM6.0 Provision of printing and publications services RM20.0 Provision of research and development activities in the areas of telecommunication and multimedia, hi-tech applications and products and services in related business
Telekom Networks Malawi Limited** Telekom Payphone Sdn. Bhd. Telekom Publications Sdn. Bhd. Telekom Research & Development Sdn. Bhd.
100
100
RM14.5
RM14.5 Trading in customer premises equipment and maintaining telecommunication equipment RM13.0 Development, operation and marketing e-commerce services RM4.0 Dormant SGD# Provision of international telecommunication facilities
Telekom Technology Sdn. Bhd. Telesafe Sdn. Bhd.* Telekom Malaysia (S) Pte. Ltd.**
70 100 100
70 100 100
Telekom Malaysia (UK) Limited** Telekom Malaysia (Hong Kong) Limited** (formerly known as TM (Hong Kong) Limited) TM (USA) Inc.** TM Cellular Sdn. Bhd. TM Cellular (Holdings) Sdn. Bhd.
100 100
100 100
100 100
100 100
USD# RMRM0.1
USD# Provision of international telecommunication facilities RM1,565.00 Provision of mobile telecommunication and related services RM- Market and provide voice, data, video, wireless multimedia & interactive content and application USD# Investment holding RM2.3 Provision of facilities management services TK340.0 USD# USD# Provision of mobile telecommunication services in Bangladesh Investment holding Investment holding
TM Global Incorporated## TM Facilities Sdn. Bhd. TM International (Bangladesh) Limited## TM International (Cayman) Ltd.* TM International Leasing Incorporated## TM International Sdn. Bhd.
RM16.2 Investment holding and provision of telecommunication and consultancy services on an international scale RM180.0 Provision of internet related services RM1.0 Managing and administering a private university known as Multimedia University RM40.0 Provision of international and national managed network services for businesses and organisations
Subsidiaries held through Telekom Enterprise Sdn. Bhd. Celcom (Malaysia) Berhad Mobitel Sdn. Bhd.* Subsidiaries held through Telekom Multi-Media Sdn. Bhd. TM Orion Sdn. Bhd.* Telekom Smart School Sdn. Bhd.
100 55
31.25 55
RM2,619.1 RM8.0
100 51
100 51
RM# RM15.0
RM# Dormant RM15.0 Implementation of government smart school project, provision of multimedia education systems and software, portal services and other related services
243
31
DECEMBER
2003
Subsidiary held through Telekom Publications Sdn. Bhd. Cybermall Sdn. Bhd.
100
100
RM2.7
Subsidiaries held through TM International Sdn. Bhd. MTN Networks (Pvt.) Limited## TM International (L) Limited## TM International Lanka (Pvt.) Limited##
SLR370.0 Provision of mobile telecommunication services in Sri Lanka USD# SLR200.0 USD# CED22.9 USD8.5 Investment holding Investment holding Investment holding Investment holding Provision of mobile telecommunication services in Cambodia
244
TMI Mauritius Limited## G-Com Limited** Cambodia Samart Communication Co. Ltd.** Subsidiary held through TM International (L) Limited ## TESS International Ltd.* Subsidiary held through Universiti Telekom Sdn. Bhd. Unitele Multimedia Sdn. Bhd.
100
100
USD#
USD#
Investment holding
100
100
RM1.0
RM# Adopting research ideas from Multimedia University for further development and prototyping, directing consultancy project to faculties and centres at Multimedia University and collaborating with other business partners in joint exercise
Subsidiaries held through VADS Berhad VADS e-Services Sdn. Bhd. VADS Solutions Sdn. Bhd. Subsidiaries held through Celcom (Malaysia) Berhad Celcom Academy Sdn. Bhd. Celcom Multimedia (Malaysia) Sdn. Bhd.* Celcom Technology (M) Sdn. Bhd.
100 100
100 100
RM1.0 RM1.5
RM1.0 Provision of managed e-services and managed application services RM1.5 Provision of system integration services
RMRM-
RM- Provision of telecommunication value added services through cellular or other forms of telecommunication network
Subsidiaries held through Celcom (Malaysia) Berhad Celcom Timur (Sabah) Sdn. Bhd. Celcom Transmission (M) Sdn. Bhd. Celcom Trunk Radio (M) Sdn. Bhd.* CT Paging Sdn. Bhd.* Technology Resources Industries Berhad TM Cellular Sdn. Bhd. Subsidiary held through Celcom Transmission (M) Sdn. Bhd. Alpha Canggih Sdn. Bhd. Subsidiaries held through Celcom Trunk Radio (M) Sdn. Bhd. CT Communication Sdn. Bhd.*+ Firent Management Services Sdn. Bhd.*+ Subsidiary held through CT Paging Sdn. Bhd. Masterpage Sdn. Bhd.*^ Subsidiaries held through Technology Resources Industries Berhad Alpine Resources Sdn. Bhd.* Freemantle Holdings (M) Sdn. Bhd. Malaysian Motorhomes Sdn. Bhd.* Rego Multi-Trades Sdn. Bhd. Technology Resources Management Services Sdn. Bhd.* Technology Resources Manufacturing Sdn. Bhd.* Technology Resources (Nominees) Sdn. Bhd.* TR Components Sdn. Bhd. TR International Limited**
RM- Provision of fibre optic transmission network RM- Provision of transmission network related services RMRMCeased operations Inactive
RM- Investment holding and provision of management services RM- Provision of mobile telecommunication and related services
100
RM#
RM-
Property investment
100 100
RM# RM#
RMRM-
Dormant Dormant
100
RM#
RM-
Dormant
RMRMRMRMRMRMRMRMHKD-
Inactive Investment holding Ceased operations Dealing in marketable securities Inactive Inactive Dormant Investment holding Investment holding
245
31
DECEMBER
2003
246
Inactive as at 31 December 2003 Amounts less than 0.1 million in their respective currency Audited by a member firm of PricewaterhouseCoopers Not audited by member firms of PricewaterhouseCoopers In the process of being deregistered under Section 308 of the Companies Act, 1965 Undergoing members' voluntary winding up under Section 254 of the Companies Act, 1965 Ghanaian Cedi Guinea Franc Hong Kong Dollar Malawi Kwacha Singapore Dollar Sri Lanka Rupee Pound Sterling Bangladesh Taka US Dollar
Sistem Iridium Malaysia Sdn. Bhd.** Associates held through Telekom Multi-Media Sdn. Bhd. Mahirnet Sdn. Bhd.
40
40
49
49 Development, management and marketing of educational products offered by local and overseas educational institutions electronically 30 Provision of promotion of internet-based communication services
Mutiara.Com Sdn. Bhd. Associates held through TM International Sdn. Bhd. Cambodia National Communication Inc. Samart Corporation Public Company Limited
30
19.59
42
19.73 Design, implementation and installation of telecommunication systems and the sale and distribution of telecommunication equipment
Associate held through Telekom Malaysia-Africa Sdn. Bhd. Thintana Communications Llc. Associate held through Thintana Communications Llc. Telkom SA Limited Associate held through Celcom (Malaysia) Berhad Celcom Timur (Sarawak) Sdn. Bhd. ## Associates held through Technology Resources Industries Berhad Mobile Telecommunications Company of Esfahan (J.V. P.J.S.) Sheba Telecom (Pvt.) Ltd. ## (sub-note a) TRI Telecommunication Tanzania Limited ##/*** Associate held through Celcom Transmission (M) Sdn. Bhd. Fibrecomm Network (M) Sdn. Bhd.
40
40
Investment holding
30
30
60
Telecommunication services
49
Planning, designing, installing, operating and maintaining a GSM cellular telecommunication network to customers in the province of Esfahan, Iran Provision of telecommunication services Provision of telecommunication services
86.4 60
41
247
31
DECEMBER
2003
All associates have co-terminous financial year end with the Company except for mySPEED.COM Sdn. Bhd. and Telkom SA Limited with financial year ends on 31 January and 31 March respectively. * ** *** # ## (a) 29.16% held through Telekom Enterprise Sdn. Bhd. Inactive as at 31 December 2003 Liquidator appointed Treated as long term investment in 2003 due to loss of significant influence Treated as associates due to loss of control while maintaining significant influence On 18 March 1999, the board of directors of Sheba Telecom (Pvt.) Ltd. (Sheba) approved the increase of the companys paid-up share capital from Taka40,204,000 to Taka327,996,000 via capitalisation of advances made by Technology Resources Industries Berhad (TRI). Based on this increase in share capital, TRIs equity interest in Sheba stands at 86.4%. However, capitalisation of the intercompany advances was disputed by the minority shareholders of Sheba and Sheba has yet to lodge a notification of the increase in shareholding with the Registrar of Joint Stock Companies. The outcome of the dispute with Shebas minority shareholders is pending the result of the arbitration proceedings described in note 35(j) to the financial statements.
248
45. COMPARATIVE
As mentioned in the respective notes to the financial statements, certain comparatives have been reclassified and/or expanded to ensure comparability with the current year presentation.
46. CURRENCY
All amounts are expressed in Ringgit Malaysia (RM) unless otherwise stated.
STATEMENT BY DIRECTORS
PURSUANT TO
SECTION 169(15)
OF THE
We, Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor and Dato Dr. Md Khir bin Abdul Rahman being two of the Directors of Telekom Malaysia Berhad, state that, in the opinion of the Directors, the financial statements on pages 169 to 248 are drawn up so as to exhibit a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2003 and of the results and the cash flows of the Group and of the Company for the year ended on that date in accordance with the applicable approved accounting standards in Malaysia and the provisions of the Companies Act, 1965. In accordance with a resolution of the Board of Directors dated 26 February 2004.
TAN SRI DATO Ir. MUHAMMAD RADZI BIN HAJI MANSOR Chairman
STATUTORY DECLARATION
I, Jaffa Sany Md Ariffin, being the Officer primarily responsible for the financial management of Telekom Malaysia Berhad, do solemnly and sincerely declare that to the best of my knowledge and belief, the financial statements set out on pages 169 to 248 are correct, and I make this solemn declaration conscientiously believing the same to be true and by virtue of the provisions of the Statutory Declarations Act, 1960.
Subscribed and solemnly declared at Kuala Lumpur this 26 February 2004 Before me:
) ) )
249
MEMBERS
OF
We have audited the financial statements set out on pages 169 to 248. These financial statements are the responsibility of the Companys Directors. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved Auditing Standards in Malaysia. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Directors, as well as evaluating the overall financial statements presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion: (a) the financial statements have been prepared in accordance with the provisions of the Companies Act, 1965 and applicable approved accounting standards in Malaysia so as to give a true and fair view of: (i) (ii) the matters required by section 169 of the Companies Act, 1965 to be dealt with in the financial statements; and the state of affairs of the Group and Company as at 31 December 2003 and of the results and the cash flows of the Group and Company for the year ended on that date;
and
250
(b)
the accounting and other records and the registers required by the Act to be kept by the Company and by the subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
The names of the subsidiary companies of which we have not acted as auditors are indicated in note 43 to the financial statements. We have considered the financial statements of these subsidiary companies and the auditors reports thereon. We are satisfied that the financial statements of the subsidiary companies that have been consolidated with the Company's financial statements are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes. The auditors' reports on the financial statements of the subsidiary companies were not subject to any material qualification and did not include any comment made under subsection (3) of section 174 of the Act.
PRICEWATERHOUSECOOPERS (AF: 1146) Chartered Accountants Kuala Lumpur Date: 26 February 2004
GENERAL INFORMATION
AS AT
31 DECEMBER 2003
1.
Telekom Malaysia Berhad is a public limited liability Company, incorporated and domiciled in Malaysia, and listed on the main board of the Malaysia Securities Exchange Berhad. The address of the registered office of the Company is: Level 51, North Wing Menara Telekom Off Jalan Pantai Baharu 50672 Kuala Lumpur
2.
3.
The principal office and place of business of the Company is: Company Secretarial Division Level 51, North Wing Menara Telekom Off Jalan Pantai Baharu 50672 Kuala Lumpur
4.
The average number of employees at the end of the financial year amounted to: 2003 Group Company 33,726 22,513 2002 31,940 24,354
251
SHAREHOLDING STATISTICS
AS AT
19 MARCH 2004
ANALYSIS OF SHAREHOLDINGS
Share Capital Authorised Share Capital : RM5,000,000,021 Issued and Fully Paid-up Capital : RM3,325,248,401 Class of Shares : 3,325,248,380 ordinary shares of RM1 each and 1 (one) Special Rights Redeemable Preference Share of RM1 each and fully paid, 1,000 Class A Redeemable Preference Shares of RM0.01 each fully paid and 1,000 Class B Redeemable Preference Shares of RM0.01 each fully paid. Voting Rights : One vote per ordinary share. The Special Share has no voting right other than those referred to in note 10(a) to the financial statements.
DISTRIBUTION OF SHAREHOLDINGS
Size of Shareholdings Shareholders Malaysian Foreign No % No % 317 7,268 14,903 1,066 1.20 27.40 56.19 4.02 18 973 906 362 0.07 3.67 3.42 1.36 Shares Malaysian No % 2,160 6,843,615 53,458,628 28,182,406 0.21 1.61 0.85 Foreign No % 784 636,970 3,182,832 15,683,610 0.02 0.09 0.47
Less than 100 100 1,000 1,001 10,000 10,001 100,000 100,001 166,262,518 (less than 5% of paid-up capital) 166,262,519 and above TOTAL
252
248 4 23,806
456 2,715
1.72 10.24
481,217,841 500,722,037
14.47 15.05
50,000
8.00
10,000
0 0.00
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Volume
Highest
Lowest
19 MARCH 2004
No. Name 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. Khazanah Nasional Berhad Employees Provident Fund Board Bank Negara Malaysia Cimsec Nominees (Tempatan) Sdn. Bhd. Security Trustee (KCW Issue 2) Citicorp Nominees (Asing) Sdn. Bhd. CBSGP GW Spore for Hibiscus Investments Pte Ltd Permodalan Nasional Berhad Minister of Finance Kumpulan Wang Amanah Pencen Amanah Raya Nominees (Tempatan) Sdn. Bhd. Skim Amanah Saham Bumiputera Amanah Raya Nominees (Tempatan) Sdn. Bhd. Amanah Saham Malaysia Valuecap Sdn. Bhd. Lembaga Tabung Haji Malaysia Nominees (Tempatan) Sendirian Berhad Great Eastern Life Assurance (Malaysia) Berhad (PAR 1) Bank Simpanan Nasional Amanah Raya Nominees (Tempatan) Sdn. Bhd. Amanah Saham Wawasan 2020 Amanah Raya Nominees (Tempatan) Sdn. Bhd. Skim Amanah Saham Nasional HSBC Nominees (Asing) Sdn. Bhd. Abu Dhabi Investment Authority Pertubuhan Keselamatan Sosial Malaysia National Insurance Berhad Kumpulan Wang Amanah Pencen Citicorp Nominees (Asing) Sdn. Bhd. American International Assurance Company Limited (P Core) Amanah Raya Nominees (Tempatan) Sdn. Bhd. Public Growth Fund Cartaban Nominees (Asing) Sdn. Bhd. Government of Singapore Investment Corporation Pte Ltd for Government of Singapore (C) Kumpulan Wang Amanah Pencen HSBC Nominees (Asing) Sdn. Bhd. BBH And Co Boston for GMO Emerging Markets Fund Cartaban Nominees (Asing) Sdn. Bhd. Investors Bank and Trust Company for Ishares, Inc.
Shares Held 1,079,524,854 424,960,700 251,680,000 194,000,000 164,000,000 162,759,000 111,901,219 57,551,000 28,688,600 28,217,000 27,000,000 25,019,036 21,171,220 19,822,000 13,701,500 13,353,400 11,539,200 9,511,500 8,959,300 7,466,000 6,413,611 6,213,300 6,111,400 6,105,000 6,092,000 6,084,000
Percentage (%) 32.46 12.78 7.57 5.83 4.93 4.89 3.37 1.73 0.86 0.85 0.81 0.75 0.64 0.60 0.41 0.40 0.35 0.29 0.27 0.22 0.19 0.19 0.18 0.18 0.18 0.18
253
19 MARCH 2004
No. Name 27. 28. 29. 30. Cartaban Nominees (Asing) Sdn. Bhd. State Street London Fund 3ERF for Deutsche Global Emerging Markets Fund (Select) Cartaban Nominees (Asing) Sdn. Bhd. State Street Australia Fund Q3VD for Fullerton (Private) Limited Citicorp Nominees (Tempatan) Sdn. Bhd. Ing Insurance Berhad (Inv-IL Par) Amanah Raya Nominees (Tempatan) Sdn. Bhd. Public Index Fund TOTAL
2,719,113,940
81.76
254
1. 2. 3. 4. 5.
Khazanah Nasional Berhad Employees Provident Fund Board Bank Negara Malaysia Cimsec Nominees (Tempatan) Sdn. Bhd. Temasek Holdings (Private) Limited TOTAL
* Deemed interest by virtue of shares held by corporations related to Temasek Holdings (Private) Limited (Section 6A of the Companies Act, 1965)
DIRECTORS DIRECT AND INDIRECT INTEREST IN THE COMPANY AND ITS RELATED CORPORATION AS AT 19 MARCH 2004
In accordance with the Register of Directors Shareholdings, the directors interest in shares in the Company and its related corporation are as follows:Telekom Malaysia Berhad Direct Indirect % 123,500 110,000 15,000 15,000 1,500*2 *1 *1 *1 *1 VADS Berhad Indirect
Name of Directors Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor Dato Dr. Abdul Rahim bin Haji Daud Y.B. Dato Joseph Salang Gandum Dato Dr. Mohd Munir bin Abdul Majid Dato Lim Kheng Guan Tan Poh Keat
% *1 *1 *1 *1 *1 *1
*1 Less than 0.1% *2 Deemed interest by virtue of shares held by his spouse, Madam Hon Phaik Hong, pursuant to Section 6A of the Companies Act, 1965
LISTING
The Companys shares are listed on the Malaysia Securities Exchange Berhad in Malaysia.
The Annual Report is available to the public who are not shareholders of the Company, by writing to:General Manager Corporate Communications Unit Corporate Affairs Division Telekom Malaysia Berhad Level 8, South Wing, Menara Telekom Off Jalan Pantai Baharu 50672 Kuala Lumpur Fax : 03-7955 2510
255
31 DECEMBER 2003
Net Book Value Freehold No. of Location 1. Federal Territory a. Kuala Lumpur b. Labuan 2. 3. 4. 5. 6. 7. 8. Selangor Perlis Perak Pulau Pinang Kedah Johor Melaka Negeri Sembilan Terengganu Kelantan Pahang Sabah Sarawak Sri Lanka Malawi Republic of Guinea Bangladesh South Africa Cambodia Total 16 9 5 8 9 11 2 20 4 7 4 68 7 3 173 1,192 9,413 61 18 511 148 3 47,593 80 522 89 7,502 90 34 67,256 8 18 4 17 19 14 28 26 9 20 11 44 18 30 18 284 502 25,479 52 679 1,465 1,404 1,302 63,141 321 1,585 463 1,856 351 919 92 99,611 12 5 9 5 16 2 6 4 4 17 6 10 13 109 1,141 710 1,856 297 516 10,318 317 129 173 691 655 468 272 17,543 97 14 119 60 55 138 38 71 41 41 98 76 109 957 16,698 750 7,780 15,431 2,818 14,097 4,457 9,371 6,285 2,234 8,409 26,290 10,284 124,904 145.7 150.5 0.4 58.7 9.2 12.1 4.8 54.7 53.8 2.0 2.4 6.5 12.2 29.6 9.5 0.2 8.3 0.9 2.2 563.7 Lots (000 sq ft) Leasehold Area No. of Lots (000 sq ft) Other Land* Lots (000 sq ft) Excepted Land** Area (000 sq ft) Lots of Land RM (million) Area No. of Area No. of
1,492.0 8.5 704.0 4.3 83.9 77.4 82.8 131.2 128.6 39.0 47.3 28.0 103.4 100.8 116.0 12.1 0.5 13.1 1.3 2.0 1.4 3,177.6
256
9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20.
No revaluation has been made on any of the land and buildings * The title deeds pertaining to other land have not yet been registered in the name of the Company. Pending finalisation with the relevant authorities, the land have not been classified according to their tenure and land areas are based on estimation. ** Excepted land are lands situated outside the Federal Territory which are either alienated land, reserved land owned by the Federal Government or land occupied, used, controlled and managed by the Federal Government for federal purposes (in Melaka, Pulau Pinang, Sabah and Sarawak) as set out in Section 3(2) of the Telecommunication Services (Successor Company) Act, 1985. The Government has agreed to lease these land to Telekom Malaysia Berhad for a term of 60 years with an option to renew, under article 85 and 86 of the Federal Constitution.
USAGE OF PROPERTIES
AS AT
31 DECEMBER 2003
Satellite/ Submarine Transmission Location 1. Federal Territory a. Kuala Lumpur b. Labuan 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. Selangor Perlis Perak Pulau Pinang Kedah Johor Melaka Negeri Sembilan Terengganu Kelantan Pahang Sabah Sarawak Sri Lanka Malawi Republic of Guinea Bangladesh South Africa Cambodia 28 3 85 10 70 29 48 90 18 31 33 23 45 45 72 26 1 6 2 11 22 11 17 2 15 17 6 34 33 43 2 21 133 7 22 1 18 32 18 4 7 5 4 5 7 14 21 24 5 27 28 4 2 81 33 26 51 23 16 15 18 49 22 47 5 12 19 12 41 1 42 23 11 22 6 6 13 17 22 25 2 4 1 2 2 1 2 1 2 3 2 1 1 1 1 2 4 1 Exchanges Stations Office Buildings Residential Stores/ Warehouses Cable Stations Resort
6 1 2 4 2 4 1 1 1 2 3 1
1 1
1 1
257
GROUP DIRECTORY
HEAD OFFICE: Level 51, North Wing, Menara Telekom, Off Jalan Pantai Baharu, 50672 Kuala Lumpur Tel. : 03-2240 9494 Fax : 03-2283 2415 Website : www.telekom.com.my
MUZIUM Ground Floor, Bangunan Muzium Telekom Jalan Raja Chulan, 50200 Kuala Lumpur Tel. : 03-2072 3177 Fax : 03-2070 9393 KOMPLEKS DAMAI 1st Floor, Wisma Kotamas 94, Jalan Dato Hj. Eusoff 50400 Kuala Lumpur Tel. : 03-4041 0289 Fax : 03-4041 1988 MALURI Lot 1 & 2, Block 154 Maluri Business Centre Jalan Jejaka, Taman Maluri 55100 Kuala Lumpur Tel. : 03-9285 9292 Fax : 03-9285 9595 SETAPAK Ground Floor, Bangunan Ibusawat Telekom Setapak 44, Persiaran Kuantan 53200 Kuala Lumpur Tel. : 03-4022 9191 Fax : 03-4022 9292 KEPONG 16, Jalan 54, Desa Jaya, 52100 Kepong Tel. : 03-6276 9191 Fax : 03-6275 0445 SHOWROOM Ground Floor, Wisma Telekom Jalan Pantai Baharu, 59200 Kuala Lumpur Tel. : 03-2020 7712 Fax : 03-7956 4543
258
Kedai Telekom
BUKIT MAHKAMAH 1B Floor, Bangunan Telekom Jalan Raja Chulan, 50200 Kuala Lumpur Tel. : 03-2072 9191 Fax : 03-2031 6730
PEKELILING Pekeliling Business Centre Ground Floor, Pharmacare Building Lot 14(129), Jalan Pahang Barat Off Jalan Pahang, 53000 Kuala Lumpur Tel. : 03-4025 5900 Fax : 03-4025 3900 TAMAN TUN DR. ISMAIL AB 40, Jalan Tun Mohd Fuad Taman Tun Dr. Ismail 60000 Kuala Lumpur Tel. : 03-7726 3900 Fax : 03-7726 4900
Kedai Telekom
PORT KLANG 2-1, 2nd Floor, Bangunan Hentian Pelabuhan Klang 41672 Jalan Perbandaran, Klang Tel. : 03-3166 9191 Fax : 03-3166 9292 AMPANG 42, Jalan Memanda 7 Ampang Point, 68000 Ampang Tel. : 03-4251 9191 Fax : 03-4252 8282 RAWANG Lot 21, Jalan Maxwell, 48000 Rawang Tel. : 03-6091 9191 Fax : 03-6091 8000 KUALA KUBU BARU 1st Floor, Ibusawat Telekom Kuala Kubu Bahru 44000 Kuala Kubu Bahru Tel. : 03-6064 3291 Fax : 03-6064 3700 BUKIT RAJA (KLANG) Jalan Meru, 41050 Kelang Tel. : 03-3341 9191 Fax : 03-3342 9292 SHAH ALAM Bgn. Telekom Shah Alam, Persiaran Damai Seksyen 11, 40150 Shah Alam Tel. : 03-5510 9191 Fax : 03-5510 5500 BANTING Bangunan Ibusawat Telekom Jalan Chempaka, 42400 Banting Tel. : 03-3187 2422 Fax : 03-3187 9791 KUALA SELANGOR Bangunan Telekom Jalan Klinik, 45000 Kuala Selangor Tel. : 03-3289 3030 Fax : 03-3289 3300
SABAK BERNAM 35, Jalan Menteri, 45200 Sabak Bernam Tel. : 03-3216 2716 Fax : 03-3216 2058 DAMANSARA UTAMA 91-93, Jalan SS21/1A Damansara Utama, 47400 Petaling Jaya Tel. : 03-7727 9191 Fax : 03-7726 9292 PETALING JAYA 20, Jalan Yong Shook Lin 46050 Petaling Jaya Tel. : 03-7956 9191 Fax : 03-7954 0326 SUBANG JAYA 85, Jalan SS15/5A, 47500 Subang Jaya Tel. : 03-5631 9191 Fax : 03-5633 6764 KAJANG Ground Floor, Bangunan Ibusawat 1 Telekom Kajang, Bt 14 2, Jalan Cheras 43400 Kajang Tel. : 03-8736 9191 Fax : 03-8733 2000
259
GROUP DIRECTORY
SHAH ALAM No. 1, Jalan Tengku Ampuan Zabedah B 91B, Section 9, 40000 Shah Alam Tel. : 03-5512 2900 Fax : 03-5512 1900 PORT KLANG No. 2, Lorong Cungah 42000 Port Klang Tel. : 03-3166 4900 Fax : 03-3166 5900 KAJANG Lot No. 1, Taman Sri Saga Jalan Sungai Chua 43000 Kajang Selangor Tel. : 03-8737 2900 Fax : 03-8737 3019
Kedai Telekom
KANGAR Jalan Bukit Lagi, 01000 Kangar Tel. : 04-976 2101 Fax : 04-976 4688 ALOR STAR Menara Alor Star, Lebuhraya Darul Aman 05100 Alor Star Tel. : 04-733 9191 Fax : 04-733 2733 JITRA 19A, Jalan PJ 1, Pekan Jitra 06000 Jitra Tel. : 04-918 2043 Fax : 04-917 1210 LANGKAWI Jalan Pandak Mayah 6, 07000 Kuah Tel. : 04-966 7202 Fax : 04-966 7292 SUNGAI PETANI Bgn. Telekom, Jalan Petani 08000 Sungai Petani Tel. : 04-421 9191 Fax : 04-421 9912 KULIM No. 485, Jalan Tunku Asaad 09000 Kulim Tel. : 04-496 1011 Fax : 04-490 1667
260
KEDAH/PERLIS
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD Jalan Kolam Air, 05672 Alor Star Tel. : 04-730 2552 Fax : 04-733 9090
PULAU PINANG
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD 1st Floor, Bangunan ESK 10400 Pulau Pinang Tel. : 04-227 8000 Fax : 04-227 3122
Kedai Telekom
BAYAN BARU No. 68, Ground Floor Jalan Mahsuri, 11950 Bayan Baru Tel. : 04-642 9292 Fax : 04-642 2929 JALAN BURMAH Jalan Burmah, 10050 Pulau Pinang Tel. : 04-220 9191 Fax : 04-228 2929 LEBOH DOWNING Bgn. Tuanku Syed Putra Lebuh Downing, 10300 Pulau Pinang Tel. : 04-220 9321 Fax : 04-262 7500 BUTTERWORTH Wisma Telekom Butterworth Jalan Bagan Luar 12000 Butterworth Tel. : 04-331 9191 Fax : 04-332 3399 BUKIT MERTAJAM Jalan Amurugam Pillai 14000 Bukit Mertajam Tel. : 04-539 9191 Fax : 04-539 9339 SUNGAI BAKAP 1282, Jalan Besar, 14200 Sungai Bakap Tel. : 04-582 4444 Fax : 04-582 2014
BUKIT MERTAJAM No. 22, Tingkat Ciku I Taman Ciku 14000 Bukit Mertajam Tel. : 04-538 0900 Fax : 04-530 3236 JELUTONG No. 354, KLMN, Jalan Jelutong 11600 Jelutong, Pulau Pinang Tel. : 04-282 4941 Fax : 04-281 8501
BATU GAJAH No. 26, Jalan Dewangsa 31672 Batu Gajah Tel. : 05-366 9191 Fax : 05-366 2988 TASEK Jalan Sultan Azlan Shah Utara 31400 Ipoh Tel. : 05-545 9191 Fax : 05-547 2257 KAMPAR Bangunan Telekom Jalan Baru, 31900 Kampar Tel. : 05-466 9191 Fax : 05-466 9393 TAIPING Bangunan Telekom, Jalan Berek 34672 Taiping Tel. : 05-808 5600 Fax : 05-808 4331 TELUK INTAN Bangunan Telekom Jalan Jawa, 36672 Teluk Intan Tel. : 05-625 9221 Fax : 05-621 8453 PARIT BUNTAR 36, Persiaran Perwira Pusat Bandar, 34200 Parit Buntar Tel. : 05-716 9191 Fax : 05-716 9600 KUALA KANGSAR Bangunan Telekom Jalan Raja Chulan, 33000 Kuala Kangsar Tel. : 05-776 9191 Fax : 05-716 1522 GERIK Wisma Kosek, Jalan Takong Datoh 33300 Gerik Tel. : 05-791 1191 Fax : 05-791 1701
PERAK
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD Level 2, Wisma Telekom Jalan Sultan Idris Shah, 30672 Ipoh Tel. : 05-241 2195/249 9121 Fax : 05-241 2185
Kedai Telekom
IPOH Wisma Telekom, Jalan Sultan Idris Shah 30672 Ipoh Tel. : 05-253 7788 Fax : 05-254 8111
261
GROUP DIRECTORY
SUNGAI SIPUT No. 188, Jalan Besar 31000 Sungai Siput Tel. : 05-598 9191 Fax : 05-598 5519 SITIAWAN 179, Taman Sitiawan Maju 32000 Sitiawan Tel. : 05-691 9191 Fax : 05-691 6252 TAPAH Bangunan Telekom Jalan Stesyen, 35672 Tapah Tel. : 05-401 9191 Fax : 05-401 3932 TANJUNG MALIM Jalan Besar, 35900 Tanjung Malim Tel. : 05-459 7210 Fax : 05-459 6633
NEGERI SEMBILAN
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD Jalan Dato Hamzah, 70000 Seremban Tel. : 06-765 1888 Fax : 06-767 7888
262
MELAKA
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD Level 2, Kompleks Kotamas Leboh Ayer Keroh, 75450 Melaka Tel. : 06-252 2366 Fax : 06-230 8220
Kedai Telekom
SEREMBAN Jalan Dato Hamzah, 70000 Seremban Tel. : 06-765 1085 Fax : 06-762 9394 PORT DICKSON Jalan Pantai, Batu 2, 71000 Port Dickson Tel. : 06-647 2191 Fax : 06-647 4200 KUALA PILAH Jalan Bahau, 72000 Kuala Pilah Tel. : 06-481 1191 Fax : 06-481 2000 TAMPIN Jalan Besar, 73000 Tampin Tel. : 06-441 2191 Fax : 06-441 4191
Kedai Telekom
MELAKA 527 & 529 A, Plaza Melaka Jalan Gajah Berang, 75200 Melaka Tel. : 06-292 5801 Fax : 06-281 1000 ALOR GAJAH Batu 1412, Jalan Melaka Kendong 78000 Alor Gajah, Melaka Tel. : 06-556 2292 Fax : 06-556 5724 KOTAMAS Level 2, Kompleks Kotamas Leboh Ayer Keroh 75450 Ayer Keroh, Melaka Tel. : 06-252 2582 Fax : 06-231 7677
MUAR 37A Jalan Ibrahim, 84000 Muar Tel. : 06-952 9595 Fax : 06-951 5916 KOTA TINGGI No. 2-4, Jalan Indah, Taman Medan Indah 81900 Kota Tinggi Tel. : O7-883 5199 Fax : 07-883 4999 KULAI Lot 435, Jalan Kenanga 29/11 Taman Indah Putra 81100 Kulai Tel. : 07-663 9191 Fax : 07-663 5800 PELANGI Pelangi Business Centre, Jalan Kasa Taman Sentosa, 80150 Johor Bahru Tel. : 07-228 1151 Fax : 07-331 9999 MERSING Jalan Dato Timur, 86800 Mersing Tel. : 07-799 5291 Fax : 07-799 5000 YONG PENG Jalan Muar, 83700 Yong Peng Tel. : 07-647 1466 Fax : 07-467 3888 PASIR GUDANG 17 & 19, Jalan 9/7, Jalan Perjiranan 9 81700 Pasir Gudang Tel. : 07-251 9191 Fax : 07-251 4999
Kedai Telekom
JOHOR BAHRU Jalan Abdullah Ibrahim, 80672 Johor Bahru Tel. : 07-228 1128 Fax : 07-222 7171 SKUDAI Ground Floor, Ibusawat Telekom Bt. 912 Jalan Skudai, 81300 Skudai Tel. : 07-222 1167 Fax : 07-557 1999 PONTIAN 1st Floor, Ibusawat Telekom Jalan Alsagoff, 82000 Pontian Tel. : 07-687 9191 Fax : 07-687 3800 KLUANG Jalan Sultanah, 86000 Kluang Tel. : 07-771 9191 Fax : 07-772 9111 SEGAMAT Jalan Pawang, 85000 Segamat Tel. : 07-933 3235 Fax : 07-932 5717 BATU PAHAT 40 & 42, Jalan Rahmat, 83000 Batu Pahat Tel. : 07-435 9292 Fax : 07-431 4888
JOHOR
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD Level 5, Wisma Telekom, Jalan Sutera 3 Taman Sentosa, 80150 Johor Bahru Tel. : 07-228 1001 Fax : 07-339 1919
263
GROUP DIRECTORY
JOHOR BAHRU Lot G-1, Ground & Mezzanine Floor Bangunan Ang, No. 1, Jalan Jeram Taman Tasek, 80200 Johor Bahru Tel. : 07-210 1900 Fax : 07-210 1907 TAMAN PELANGI No. 1, Jalan Kuning 2 Taman Pelangi, 80400 Johor Bahru Tel. : 07-335 3199 Fax : 07-335 3200 TAMAN MOLEK 1-3, Jalan Molek 1/9, Taman Molek 81100 Johor Bahru Tel. : 07-353 9900 Fax : 07-353 3015 SEGAMAT No. 246, Ground & Mezzanine Floor Jalan Genuang, 85000 Segamat Tel. : 07-932 3900 Fax : 07-932 8901 BATU PAHAT No. 22, Jalan Maju, Taman Maju 83000 Batu Pahat Tel. : 07-433 8677 Fax : 07-433 5277 No. 23, Jalan Kundang Taman Bukit Pasir, 83000 Batu Pahat Tel. : 07-432 5900 Fax : 07-432 6900
TEMERLOH No. 62, Jalan Ahmad Shah I 28000 Temerloh Tel. : 09-296 2900 Fax : 09-296 1485
Kedai Telekom
KUANTAN Bangunan Telekom Malaysia No. 168, Jalan Besar 25000 Kuantan Tel. : 09-514 2088 Fax : 09-513 9289 MENTAKAB Jalan Tun Razak, 28400 Mentakab Tel. : 09-270 1164 Fax : 09-277 2191 BENTONG 111, Bgn. Persatuan Bola Sepak Jalan Ah Peng, 28700 Bentong Tel. : 09-222 7978 Fax : 09-222 8050 KUALA LIPIS 10, Jalan Bukit Bius, 27200 Kuala Lipis Tel. : 09-312 2191 Fax : 09-355 5191 RAUB Jalan Kuala Lipis, 27600 Raub Tel. : 09-355 3191 Fax : 09-355 5191
TERENGGANU
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD 4th Floor, Bangunan Telekom Jalan Sultan Ismail 20200 Kuala Terengganu Tel. : 09-620 2525 Fax : 09-624 2727
264
Kedai Telekom
KUALA TERENGGANU Bangunan Telekom, Jalan Sultan Ismail 20200 Kuala Terengganu Tel. : 09-623 2191 Fax : 09-624 5200 KEMAMAN Jalan Masjid, 24000 Kemaman Tel. : 09-859 3191 Fax : 09-859 2411 DUNGUN Jalan Nibong, 23000 Dungun Tel. : 09-845 5354 Fax : 09-844 4111
PAHANG
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD Level 2, Wisma Telekom Mahkota Jalan Mahkota, 25000 Kuantan Tel. : 09-512 9353 Fax : 09-513 6644
JERTIH Upper Floor, Ibusawat Telekom Jertih Jalan Zainal Abidin, 22000 Jertih Tel. : 09-697 9191 Fax : 09-697 3291
Kedai Telekom
KOTA BHARU Jalan Doktor, 15000 Kota Bharu Tel. : 09-744 9191 Fax : 09-743 0778 PASIR MAS 606, Jalan Masjid Lama 17000 Pasir Mas Tel. : 09-790 9191 Fax : 09-790 0427 TANAH MERAH 4088, Jalan Ismail Petra 17500 Tanah Merah Tel. : 09-955 6191 Fax : 09-955 7431 KUALA KRAI Lot 1522, Jalan Tengku Zainal Abidin 18000 Kuala Krai Tel. : 09-966 6191 Fax : 09-966 3228 PASIR PUTEH 258B, Jalan Sekolah Laki-Laki 16800 Pasir Puteh Tel. : 09-786 7191 Fax : 09-786 7313
SABAH
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD Jalan Tunku Abdul Rahman 88672 Kota Kinabalu Tel. : 088-299 888/838 Fax : 088-248 378
Kedai Telekom
SADONG JAYA 3rd Floor, Bangunan Telekom 88100 Sadong Jaya Tel. : 088-299 380 Fax : 088-257 979 L. TERBANG K. KINABALU 88100 Kota Kinabalu Tel. : 088-261 261 Fax : 088-232 311 TAWAU T.B. 307, Block 35, Kompleks Fajar Jalan Perbandaran, 91000 Tawau Tel. : 089-773 131 Fax : 089-761 600 LAHAD DATU MOLD 3307, Ground Floor Kompleks Fajar, Jalan Segama 91100 Lahad Datu Tel. : 089-881 160 Fax : 089-888 500
KELANTAN
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD 1st Floor, Bangunan Pentadbiran Jalan Doktor, 15000 Kota Bharu Tel. : 09-743 4545 Fax : 09-744 3447
265
GROUP DIRECTORY
SANDAKAN Locked Bag 44, 90009 Sandakan Tel. : 089-219 191 Fax : 089-216 000 KENINGAU Commercial Centre, Jalan Arusap Off Jalan Masak, Blok B7 Lot 13 & 14, 89007 Keningau Tel. : 087-333 496 Fax : 087-335 000 BEAUFORT Choong Street, P.O Box 269 89800 Beaufort Tel. : 087-212 292 Fax : 087-211 411 KUDAT Jalan Wak Siak P. O. Box 340, 89058 Kudat Tel. : 088-611 022 Fax : 088-612 690 KOTA KINABALU Ground-3rd Floor, Lot 1, Block B Lorong Singgah Mata, MPKK 1 Asia City, Locked Bag No. 29 88992 Kota Kinabalu Tel. : 010-801 0029 Fax : 088-247 900 Level 2, KKIA, 88200 Kota Kinabalu Tel. : 088-212 870 Fax : 088-212 895 TAWAU TB 309, Ground-3rd Floor Block 36, Jalan Patrick Fajar Complex, 91000 Tawau Tel. : 089-752 458 Fax : 089-752 457
Kedai Telekom
BATU LINTANG Jalan Batu Lintang, 93200 Kuching Tel. : 082-429 191 Fax : 082-243 511 PENDING Jalan Gedong, 93450 Pending Tel. : 082-489 191 Fax : 082-337 797 SRI AMAN Jalan Club, 95000 Sri Aman Tel. : 083-322 125 Fax : 083-321 490 MIRI Jalan Post, 98000 Miri Tel. : 085-429 191 Fax : 085-422 400 LIMBANG Jalan Kubu, 98700 Limbang Tel. : 085-211 334 Fax : 085-212 798 LAWAS Jalan Punang, 98850 Lawas Tel. : 085-285 667 Fax : 085-285 399 BINTULU Jalan Law Gek Soon, 97000 Bintulu Tel. : 086-318 181 Fax : 086-333 222 SIBU Persiaran Brooke, 96000 Sibu Tel. : 084-339 191 Fax : 084-314 708 SARIKEI Jalan Berek, 96100 Sarikei Tel. : 084-655 550 Fax : 084-653 588 KAPIT Jalan Kapit By Pass, 96800 Kapit Tel. : 084-796 991 Fax : 084-796 515
266
SARAWAK
General Manager, State Business Operations TELEKOM MALAYSIA BERHAD 6th Floor, TM 100 Jalan Simpang Tiga, 93672 Kuching Tel. : 082-200 200 Fax : 082-257 505
No. 44, Lot 1557, Jalan Keranji Off Jalan Tuanku Osman, 96000 Sibu Tel. : 084-322 900 Fax : 084-330823 MIRI Lot 935, Ground & 1st Floor Block 9, MCLD Jalan Asmara 98000 Miri Tel. : 085-420 800/429 236 Fax : 085-439 445
State Relations Officer Lot E001, 1st Floor, Podium Level Labuan Financial Park Jalan Merdeka, 87000 WP Labuan Tel. : 087-408 888 Fax : 087-453 899
MTN NETWORKS (PVT.) LTD. No. 475, Union Place Colombo 2 Sri Lanka Tel. : +94-1-678688 Fax : +94-1-678703 SAMART CORPORATION PLC 92, Moo Software Park Chaengwattana Rd. Klong Gluar, Pak-Kred Nonthaburi, 11120 Thailand Tel. : +66-2-5026070 Fax : +66-2-5026072 SOTELGUI s.a. B P 2066, Conakry, Republic of Guinea Tel. : +224-450200 Fax : +224-411535
Kedai Telekom
LABUAN SERVICE CENTRE Lot 8, Lazenda Commercial Centre Jalan Tun Mustapha, Wilayah Persekutuan 87008 Wilayah Persekutuan Labuan Tel. : 087-425 300/100/400 Fax : 087-415 013/425 900
267
GROUP DIRECTORY
TELEKOM NETWORKS MALAWI LIMITED Munif House, Livingstone Avenue Limbe P.O. Box 3039, Blantyre, Malawi Tel. : +265-1-645915 Fax : +265-1-642805 TELKOM SA LIMITED Private Bag 8780 Pretoria 0001, South Arica Tel. : +27-12-3113910 Fax : +37-12-3118302 TM INTERNATIONAL BANGLADESH LIMITED 9th Floor, Brac Centre 75 Mohakhali Commercial Area Dhaka 1212, Bangladesh Tel. : +880-2-9887115 Fax : +880-2-9887112 UNIVERSITY TELEKOM SDN. BHD. Jalan Multimedia, 63100 Cyberjaya Selangor Darul Ehsan Tel. : 03-8312 5000/5020 Fax : 03-8312 5022 TELEKOM APPLIED BUSINESS SDN. BHD. 16th Floor, Menara 2, Faber Towers Jalan Desa Bahagia, Taman Desa Off Jalan Klang Lama, Kuala Lumpur Tel. : 03-7984 4989 Fax : 03-7980 1605 TELEKOM PUBLICATIONS SDN. BHD. 10th Floor, Menara D, Persiaran MPAJ Jalan Pandan Utama, Pandan Indah 55100 Kuala Lumpur Tel. : 03-4292 1111 Fax : 03-4291 9191 TELEKOM RESEARCH & DEVELOPMENT SDN. BHD. Idea Tower, UPM-MTDC Technology Incubation Centre 1 Lebuh Silokon, 43400 Serdang, Selangor Tel. : 03-8933 1820 Fax : 03-8945 1591 TELEKOM SALES & SERVICES SDN. BHD. Menara Mutiara Bangsar Jalan Liku Off Jalan Riong 59100 Bangsar, Kuala Lumpur Tel. : 03-2283 3888 Fax : 03-2282 6184 TELEKOM SMART SCHOOL SDN. BHD. 45-8, Level 3, Block C, Plaza Damansara Jalan Medan Setia 1, Bukit Damansara 50490 Kuala Lumpur Tel. : 03-2092 5252 Fax : 03-2093 4993 TELEKOM TECHNOLOGY SDN. BHD. Level 3, Menara CELCOM No. 82, Jalan Raja Muda Abdul Aziz 50300 Kuala Lumpur Tel. : 03-2681 2681 Fax : 03-2681 2680 CELCOM (M) BERHAD 15th Floor, Menara CELCOM No. 82, Jalan Raja Muda Abdul Aziz 50300 Kuala Lumpur Tel. : 03-2687 3838 Fax : 03-2681 0359 TM FACILITIES SDN. BHD. 27th Floor, Menara Telekom Jalan Pantai Baharu, 50672 Kuala Lumpur Tel. : 03-2240 1004 Fax : 03-2284 1233 TM INTERNATIONAL SDN. BHD. 17th Floor, Menara Telekom Jalan Pantai Baharu, 50672 Kuala Lumpur Tel. : 03-2240 2254 Fax : 03-7956 0266 TM NET SDN. BHD. 3300, Lingkaran Usahawan 1 Timur 63300 Cyberjaya, Selangor Darul Ehsan Tel. : 03-8318 8027 Fax : 03-8318 8077 VADS BERHAD 8th Floor, Plaza IBM No. 1, Jalan Tun Mohd Fuad Taman Tun Dr. Ismail 60000 Kuala Lumpur Tel. : 03-7712 8888 Fax : 03-7728 2584
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LOCAL SUBSIDIARIES
FIBERAIL SDN. BHD. 7th Floor, Wisma Telekom Jalan Desa Utama Pusat Bandar Taman Desa 58100 Kuala Lumpur Tel. : 03-7980 9696 Fax : 03-7980 9900 GITN SDN. BHD. 31st Floor, Menara Telekom Jalan Pantai Baharu, 50672 Kuala Lumpur Tel. : 03-2240 0708 Fax : 03-2240 0709 MEGANET COMMUNICATIONS SDN. BHD. Level 14, Wisma Pantai Plaza Pantai, Jalan Pantai Baharu 59200 Kuala Lumpur Tel. : 03-2284 5515 Fax : 03-2284 3464 MENARA KUALA LUMPUR SDN. BHD. Jalan Punchak, Off Jalan P. Ramlee 50250 Kuala Lumpur Tel. : 03-2020 5446 Fax : 03-2034 2609
PROXY FORM
TELEKOM MALAYSIA BERHAD
Annual Report 2003
I/We ______________________________________________________________________________________________________
(Full Name and NRIC/Passport No./Company No.)
of ________________________________________________________________________________________________________ or failing him, the Chairman of the Meeting, as my/our proxy to vote for me/us and my/our behalf at the Nineteenth Annual General Meeting of the Company to be held at the Grand Ballroom, 9th Floor, The Legend Hotel, 100 Jalan Putra, 50350 Kuala Lumpur on Tuesday, 18 May 2004 at 10:00 a.m. and at any adjournment thereof. My/Our proxy is to vote as indicated below:Resolutions 1. 2. To receive the Audited Financial Statements for the financial year ended 31 December 2003 Declaration of a final dividend of 10 sen per share (less 28% Malaysian Income Tax) and special dividend of 10 sen per share (less 28% Malaysian Income Tax) Re-election of Directors under Article 103:(i) Tan Sri Dato Ir. Muhammad Radzi bin Haji Mansor (ii) Ir. Prabahar N.K. Singam (iii) Dato Lim Kheng Guan (iv) Rosli bin Man (v) Tan Poh Keat (vi) Datuk Dr. Halim bin Shafie (vii) Dato Abdul Majid bin Haji Hussein Approval of Directors fees and remuneration Re-appointment of Messrs. PricewaterhouseCoopers as Auditors of the Company Special Business: Section 132D, Companies Act 1965 Issuance of New Shares Ordinary Resolution 1 For Against
Ordinary Resolution 2 Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Ordinary Resolution Resolution Resolution Resolution Resolution Resolution Resolution 3 4 5 6 7 8 9
3.
4. 5. 6.
(Please indicate with an X in the spaces provided how you wish your vote to be cast. If you do not do so, the Proxy will vote or abstain from voting at his/her discretion.) No. of Shares Signed this _________ day of ______________ 2004 CDS Account No.
Notes: 1. A member entitled to attend and vote at the above Meeting is entitled to appoint a proxy to attend and vote in his stead. A Proxy need not be a member of the Company and the provisions of Section 149(1)(b) of the Act shall not apply to the Company. 2. A member shall not be entitled to appoint more than two (2) proxies to attend and vote at the same meeting provided that where a member of the Company is an authorised nominee as defined in accordance with the provisions of the Securities Industry (Central Depositories) Act, 1991, it may appoint at least one (1) proxy in respect of each securities account it holds with ordinary shares of the Company standing to the credit of the said securities account. 3. Where a member appoints two (2) proxies, the appointments shall be invalid unless the proportion of the holding to be represented by each proxy is specified. 4. This instrument appointing a proxy shall be in writing under the hand of the appointer or his attorney duly appointed under a power of attorney or if such appointee is a corporation, either under its common seal or under the hand of an officer or attorney duly appointed under a power of attorney. 5. A corporation which is a member, may by resolution of its Directors or other governing body authorise such person as it thinks fit to act as its representative at the Meeting, in accordance with Article 92 of the Companys Articles of Association. 6. This instrument appointing the proxy must be deposited at the office of the Share Registrar, Tenaga Koperat Sdn. Bhd., 20th Floor, Plaza Permata (formerly known as IGB Plaza), Jalan Kampar, Off Jalan Tun Razak, 50400 Kuala Lumpur not less than 48 hours before the time appointed for holding the Meeting or any adjournment thereof.
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The Share Registrar TENAGA KOPERAT SDN. BHD. 20th Floor, Plaza Permata (formerly known as IGB Plaza) Jalan Kampar, Off Jalan Tun Razak 50400 Kuala Lumpur
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(128740-P)
L a p o r a n Ta h u n a n 2 0 0 3 A n n u a l R e p o r t
New Possibilities...
Enriching Lives
Date : Tarikh :
Please send me/us a copy of the 2003 Annual Report in Bahasa Malaysia : Sila hantar kepada saya/kami senaskhah Laporan Tahunan 2003 dalam Bahasa Malaysia : Name / Nama : Address / Alamat :
TENAGA KOPERAT SDN. BHD. 20th Floor, Plaza Permata (formerly known as /Dahulu dikenali sebagai IGB Plaza) Jalan Kampar, Off Jalan Tun Razak 50400 Kuala Lumpur