 |
Slovenské telekomunikácie, a.s.
Consolidated Financial Statements
Prepared in accordance with International Accounting
Standards
General information
These consolidated financial statements have been prepared
by Slovenské telekomunikácie, a.s. ("the Company")
for Slovenské telekomunikácie, a.s., its subsidiaries RK Tower,
s.r.o. and RK Transmission, s.r.o. and its joint venture EuroTel
Bratislava, a.s., together ("the Group"). The Company
is incorporated as a joint stock company in the Slovak Republic
at 1 April 1999. On 4 August 2000 Deutsche Telekom
AG obtained control of the Company by acquisition of 51% of
shares of Slovenské telekomunikácie, a.s. The transaction
involved a purchase of existing shares from the Slovak Government
as well as issuance of new shares. The Slovak Government
retained 49% of shares in the Company.
The Directors are responsible for establishing the direction
and policies of the Group and are accountable to the owners
of the Group.
The Group had a monopoly position on the provision of basic
voice telephony services in the Slovak Republic until 1 January
2003. It supplies fixed-line telecommunication services in
the Slovak Republic and owns and operates majority of the
telecommunications facilities therein. The Group provides
local, national and international telephony services and a
wide range of other telecommunications services including
leased circuits, data networks and internet access. It also
provides residential and business customers with products
ranging from standard telephones to computer communication
networks. Through its joint venture, EuroTel Bratislava, a.s.,
it operates an analogue technology NMT 450 mobile telephony
network and a DCS technology 900 MHz and 1 800 MHz frequency
mobile telephony network. The Group has a peripheral business
as the owner and operator of radio and television transmission
equipment.
|
2002 |
2001 |
Staff numbers |
Number |
Number |
Average staff numbers employed during the year
|
9,804 |
12,068 |
Reporting currency
The consolidated financial statements are presented in millions
of Slovak crowns ("Sk million").
Registered address
The registered address is: |
Námestie slobody 6
817 62 Bratislava
Slovak Republic |

Mark von Lillienskiold
Chief Financial Officer and Member of the Board of Directors
18 February 2003
Consolidated Income Statement for the year
ended 31 December
(All amounts
are in millions of Slovak crowns) |
|
Notes |
2002 |
2001 |
Revenue |
13 |
18,840 |
20,110 |
|
|
|
|
Operating costs |
14 |
(15,038) |
(16,036) |
Profit on sale of discontinued operations |
15 |
51 |
- |
|
|
|
|
 |
 |
Profit from operations |
|
3,817 |
4,074 |
|
|
|
|
Share of results of joint venture |
2 |
408 |
261 |
Profit on sale of subsidiary |
2 |
54 |
- |
Financial income - ne |
16 |
207 |
164 |
|
|
|
 |
 |
Profit before tax |
|
4,486 |
4,499 |
|
|
|
|
Taxation |
17 |
(1,018) |
(577) |
|
|
|
|
 |
 |
Net profit |
|
3,468 |
3,922 |
The consolidated financial statements on pages 48 to 73
were authorised for issue on behalf of the Board of Directors
on 18 February 2003 by:
 |
 |
Ing. tefan Bugár
Deputy Chairman of the Board of Directors |
Dr. Mark von Lillienskiold
Chief Financial Officer and Member of the Board of Directors
|
Consolidated Balance Sheet at 31 December
(All amounts are in millions
of Slovak crowns) |
|
Notes |
2002 |
2001 |
ASSETS |
|
|
|
Non-current assets |
|
|
|
Property, plant and equipment |
1 |
42,862 |
43,226 |
Investments in joint venture |
2 |
2,044 |
1,745 |
Investments held to maturity |
3 |
- |
737 |
|
|
|
|
 |
 |
Total non-current assets |
|
44,906 |
45,708 |
|
|
|
|
Current assets |
|
|
|
Inventories |
4 |
409 |
396 |
Assets held for sale |
5 |
419 |
- |
Investments held to maturity |
3 |
282 |
- |
Receivables and prepayments |
6 |
3,335 |
3,648 |
Income tax prepayment |
|
157 |
- |
Cash and cash equivalents |
7 |
12,711 |
12,512 |
|
|
|
|
 |
 |
Total current assets |
|
17,313 |
16,556 |
|
|
|
|
 |
 |
Total assets |
|
62,219 |
62,264 |
|
|
|
|
EQUITY AND LIABILITIES |
|
|
|
Share capital and reserves |
|
|
|
Share capital |
|
26,028 |
26,028 |
Share premium |
|
11,632 |
11,632 |
Statutory reserve |
|
517 |
330 |
Retained earnings |
|
8,669 |
7,096 |
|
|
|
|
 |
 |
Total share capital and reserves |
|
46,846 |
45,086 |
|
|
|
|
Non-current liabilities |
|
|
|
Borrowings |
9 |
5,322 |
6,470 |
Deferred tax |
10 |
4,339 |
4,413 |
Other payables |
20 |
352 |
43 |
Provisions |
12 |
50 |
99 |
|
|
|
|
 |
 |
Total non-current liabilities |
|
10,063 |
11,025 |
|
|
|
|
Current liabilities |
|
|
|
Trade and other payables |
11 |
4,243 |
4,476 |
Income tax payable |
|
- |
1,066 |
Borrowings |
9 |
793 |
259 |
Provisions |
12 |
274 |
352 |
|
|
|
|
 |
 |
Total current liabilities |
|
5,310 |
6,153 |
|
|
|
|
 |
 |
Total liabilities |
|
15,373 |
17,178 |
|
|
|
|
 |
 |
Total equity and liabilities |
|
62,219 |
62,264 |
Consolidated Statement of changes in shareholders'
equity
(All amounts are in millions of Slovak crowns) |
|
Notes |
Share
capital |
Share
premium |
Statutory
reserve fund |
Retained
earnings |
Total
Equity |
Year ended 31 December 2001 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2001 |
|
|
|
|
|
|
- as previously reported |
|
26,028 |
11,632 |
292 |
3,321 |
41,273 |
- effect of adopting IAS 39 |
|
- |
- |
- |
(109) |
(109) |
 |
 |
- as restated |
|
26,028 |
11,632 |
292 |
3,212 |
41,164 |
|
|
|
|
|
|
|
Allocation to funds |
|
- |
- |
38 |
(38) |
- |
|
|
|
|
|
|
|
Net profit for the year |
|
- |
- |
- |
3,922 |
3,922 |
|
|
|
|
|
|
|
 |
 |
At 31 December 2001 |
|
26,028 |
11,632 |
330 |
7,096 |
45,086 |
|
|
|
|
|
|
|
Year ended 31 December 2002 |
|
|
|
|
|
|
|
|
|
|
|
|
|
At 1 January 2002 |
|
26,028 |
11,632 |
330 |
7,096 |
45,086 |
|
|
|
|
|
|
|
Dividends |
8 |
- |
- |
- |
(1,708) |
(1,708) |
Allocation to funds |
|
- |
- |
187 |
(187) |
- |
Net profit for the year |
|
- |
- |
- |
3,468 |
3,468 |
|
|
|
|
|
|
|
 |
 |
At 31 December 2002 |
|
26,028 |
11,632 |
517 |
8,669 |
46,846 |
Consolidated Cashflow Statement at 31 December
(All amounts are in millions
of Slovak crowns) |
|
Note |
2002 |
2001 |
Net cash flows from operating activities |
18 |
5,250 |
10,877 |
 |
 |
|
|
|
|
Cash flows from investing activities |
|
|
|
Proceeds from the disposal of subsidiary |
2 |
59 |
2 |
Purchase of property, plant and equipment |
|
(3,915) |
(5,745) |
Proceeds from sale of property, plant and equipment |
|
124 |
48 |
Proceeds from non-current investment settlement |
|
398 |
- |
Investment income |
|
83 |
85 |
Disposal of activity, net of cash disposed |
15 |
139 |
- |
Interest received |
|
644 |
578 |
|
|
|
|
 |
 |
Net cash used in investing activities |
|
(2,468) |
(5,032) |
|
|
|
|
Cash flows from financing activities |
|
|
|
Proceeds from long-term borrowings |
|
- |
439 |
Repayment of loans |
|
(241) |
(1,457) |
Payment of finance lease liabilities |
|
(40) |
(96) |
Interest paid |
|
(594) |
(775) |
Dividends paid to group shareholders |
8 |
(1,708) |
- |
|
|
|
|
 |
 |
Net cash from financing activities |
|
(2,583) |
(1,889) |
|
|
|
|
Net increase in cash and cash equivalents |
|
199 |
3,956 |
|
|
|
|
Cash and cash equivalents at 1 January
|
|
12,512 |
8,556 |
|
|
|
|
 |
 |
Cash and cash equivalents at 31 December |
|
12,711 |
12,512 |
Accounting policies
The principal accounting policies adopted in the preparation
of these consolidated financial statements are set out below:
(a) Basis of preparation
These consolidated financial statements have been prepared
in accordance with and comply with International Accounting
Standards ("IAS") for Slovenské telekomunikácie,
a.s. ("the Company") and its subsidiary undertakings
and joint venture, (together "the Group"). The consolidated
financial statements have been prepared under the historical
cost convention as modified by the revaluation of derivative
financial instruments.
(b) Accounting for subsidiaries, associates
and joint ventures
Investments in associates and jointly controlled entities
are accounted for by the equity method of accounting. Jointly
controlled entities are those in which the Group shares control
of the operations with its joint venture partners. Associate
undertakings are those undertakings in which the Group has
a significant influence, but which it does not control.
Equity accounting involves recognising in the income statement
the Group's share of the associates' or joint ventures' profit
or loss for the year. The Group's interest in such entities
is carried in the balance sheet at an amount that reflects
its share of the net assets and includes goodwill on acquisition.
Unrealised gains on transactions between the Group and its
associates and jointly controlled entities are eliminated
to the extent of the Group's interest in such entities; unrealised
losses are also eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Equity
accounting is discontinued when the carrying amount of the
investment in an associated undertaking reaches zero, unless
the Group has incurred obligations or guaranteed obligations
in respect of the associated undertaking.
Investments in subsidiaries are accounted for by full consolidation.
Subsidiaries are those in which the Group is controlling the
subsidiary in a way, that it has the power to govern the financial
and operating policies of an enterprise so as to obtain benefits
from its activities.
Full consolidation involves the presentation of the consolidated
financial statements in a way as of a single enterprise. All
transactions, balances and unrealised surpluses and deficits
on transactions within the Group have been eliminated in the
consolidation. Where necessary, accounting policies of subsidiaries
have been changed to ensure consistency with the policies
of the Group. Subsidiaries whose assets and activities are
not material either individually, nor in aggregate, are not
consolidated, but are included in the investments at costs.
(c) Property, plant and equipment
(i) Cost
All fixed assets, other than land, are carried at cost less
accumulated depreciation. Land is stated at values attributed
to it in the legislation, which transferred ownership to the
Group. All new purchased land is carried at acquisition cost.
Cost includes all costs directly attributable to bringing
the asset to working condition for its intended use. In the
case of the network this comprises all expenditure up to the
distribution points within customers' premises, and includes
contractors' fees, materials, direct labour and borrowing
costs on loans used to finance capital projects during the
course of construction.
Enhancement costs are capitalised when it is probable that
future economic benefits, in excess of the original assessed
standard of performance of the existing asset, will flow to
the enterprise. Maintenance, repairs and minor renewals are
charged to income as incurred.
Borrowing costs that are attributable to the purchase or
construction of a property, plant and equipment are capitalised,
during the period of time that is required to complete the
asset for its intended use. All other borrowing costs are
expensed as incurred.
Items that are retired or otherwise disposed of are eliminated
from the balance sheet, along with the corresponding accumulated
depreciation. Any gain or loss resulting from such retirement
or disposal is included in other operating costs. Gains and
losses on disposals are determined by comparing proceeds with
carrying amount and are included in operating profit.
(ii) Depreciation
Depreciation is calculated on property, plant and equipment
on a straight-line basis from the time they are available
for use, so as to write down their cost or valuation to their
estimated residual values over their remaining useful lives.
The useful economic lives assigned to the various categories
of property, plant and equipment are:
Freehold buildings |
25 to 50 years |
Duct, cable and other outside plant |
30 years |
Exchange equipment and related equipment
|
4 to 13 years |
Radio and television equipment |
8 to 30 years |
Software |
2 to 5 years |
Other fixed assets |
6 to 25 years |
No depreciation is provided on freehold land.
Management is continuing to assess network development plans.
The effect of any future revisions to expected useful economic
lives as a result of this exercise will be reflected in the
depreciation charge for future periods.
During 2002, the management undertook a review of fixed assets
in connection with restructuring and the re-focus on the core
business. The review resulted in change of economic useful
life of certain radio related equipment and the reclassification
of certain assets from fixed assets to assets held for sale.
Where the carrying amount of an asset is greater than its
recoverable amount, it is written down immediately to its
estimated recoverable amount.
Prior to 1 January 1994, the Group's fixed asset registers
were maintained in accordance with Slovak tax legislation
and therefore in order to calculate the accumulated depreciation,
estimates have been made using the above useful economic lives.
The estimated difference at 31 December 2002 reduced the accumulated
depreciation balance by Sk 1.0 billion (2001: Sk 1.1 billion)
from the values shown in the fixed asset records.
(d) Leased assets
Leases of property, plant and equipment where the Group
has substantially all the benefits and risks of ownership
are classified as finance leases. Finance leases are capitalised
at the inception of the lease at the estimated present value
of the underlying lease payments. Each lease payment
is allocated between the liability and finance charges so
as to achieve a constant rate on the finance balance outstanding.
The corresponding rental obligations, net of finance charges,
are included in debt. The interest element of the finance
charge is charged to the income statement over the lease period.
The property, plant and equipment acquired under finance leasing
contracts is depreciated over the useful life of the asset.
Leases of assets under which all the risks and benefits of
ownership are effectively retained by the lessor are classified
as operating leases. Payments made under operating leases
are charged to the income statement on a straight-line basis
over the period of the lease.
When an operating lease is terminated before the lease period
has expired, any payment required to be made to the lessor
by way of penalty is recognised as an expense in the period
in which termination takes place.
(e) Investments
At 1 January 2001 the Group adopted IAS 39 and classified
its investments into following categories: held-to-maturity,
available-for-sale and trading investments. The classification
is dependent on the purpose for which the investments were
acquired. Investments with fixed maturity that the management
has the intent and ability to hold to maturity are classified
as held-to-maturity and are included in non-current assets.
Investments intended to be held for an indefinite period of
time, which may be sold in response to needs for liquidity
or changes in interest rates, are classified as available-for-sale,
these are included in non-current assets unless management
has the expressed intention of holding the investment for
less than 12 months from the balance sheet date or unless
they will need to be sold to raise operating capital, in which
case they are included in current assets. Investments that
are acquired principally for the purpose of generating a profit
from short term fluctuations in price are classified as trading
investments. Management determines the appropriate classification
of its investments at the time of the purchase and re-evaluates
such designation on a regular basis.
All purchases and sales of investments are recognised on
the trade date, which is the date that the Group commits to purchase
or sell the asset. Cost of purchase includes transaction costs.
Available-for-sale investments and trading investments are
subsequently carried at fair value, whilst held-to-maturity
investments are carried at amortised cost using the effective
yield method. Realised gains and losses arising from changes
in the fair value of available-for-sale investments are included
in the income statement in the period in which they arise.
During the period the Group did not hold any investments
classified as trading investments or available for sale investments.
(f) Inventories
Inventories are stated at the lower of cost and net realisable
value. Cost is calculated on weighted average cost basis.
Net realisable value is the estimated selling price in the
ordinary course of business, less selling expenses. Provision
is made against slow-moving and obsolete inventories.
(g) Trade receivables
Trade receivables are carried at original invoice amount
less provision made for impairment of these receivables. Such
provision for impairment of trade receivables is established
if there is objective evidence that the Group will not be
able to collect all amounts due according to the original
terms of receivables. The amount of the provision is the difference
between the carrying amount and the recoverable amount, being
the present value of expected cash flows, discounted at the
market rate of interest for similar borrowers. Bad debts are
written off during the year in which they are identified.
Amounts payable to and receivable from the same international
operators are shown net in the balance sheet when a right
of set-off exists.
(h) Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet
at cost. For the purpose of the cashflow statement, cash and
cash equivalents comprise cash in hand, deposits held at call
with banks, net of bank overdrafts. In the balance sheet,
bank overdrafts are included in borrowings in current liabilities.
(i) Borrowings
Borrowings are recognised initially at the proceeds received,
net of transaction cost incurred. In subsequent periods, borrowings
are stated at amortised cost using the effective yield method,
any difference between proceeds (net of transaction costs)
and the redemption value is recognised in the income statement
over the period of the borrowings.
(j) Provisions
Provisions are recognised when the Group has a present legal
or constructive obligation as a result of past events, it
is probable that an outflow of resources will be required
to settle the obligation, and a reliable estimate of the amount
can be made. Where the Group expects a provision to be reimbursed,
for example under an insurance contract, the reimbursement
is recognised as a separate asset but only when the reimbursement
is virtually certain. Costs related to the ongoing activities
of the Group are not provided in advance.
Restructuring
Restructuring provisions comprise employee termination payments,
and are recognised in the period in which the Group becomes
legally or constructively committed to payment. Employee termination
benefits are recognised only after either an agreement with
the appropriate employee representative is in place specifying
the terms of redundancy and the numbers of employees
affected or after individual employees have been advised of
the specific terms.
Onerous contracts
The Group recognises a provision for onerous contracts when
the expected benefits to be derived from the contract are
less than the unavoidable costs of meeting the obligation
under the contract. The provision is reversed when the future
benefits exceed the cost of meeting the obligation under the
contract.
(k) Revenue recognition
Revenues are recognised upon delivery of products and customer
acceptance and on the performance of the services.
Installation fees and directly related costs are deferred
over the estimated customer relationship period to achieve
a better allocation of these revenues and costs to the period
they relate to. Carrier Service revenues are derived from
calls and other traffic that originate in the mobile networks
or outside Slovakia but use Group's network. The Group pays
a proportion of the call revenue collected from its customers
to mobile operators and other telecommunication companies
for calls and other traffic that originate in Group's network
but use mobile operators' or international network.
Revenues and costs are shown gross in these consolidated
financial statements.
(l) Operating costs
Operating costs are charged in the accounting period to
which they relate.
(m) Marketing costs
Marketing costs are charged to expense as incurred.
(n) Dividends
Dividends on ordinary shares are recognised in equity in
the period in which they are declared.
(o) Financial instruments
Financial instruments carried on balance sheet include cash,
bank balances, investments, receivables, trade creditors,
leases and borrowings. The particular recognition methods
adopted are disclosed in the individual policy statements
associated with each item.
(p) Foreign currency translation
Transactions denominated in foreign currencies are translated
into Slovak crowns at the date of the transaction. Outstanding
monetary items at the balance sheet date are reported at the
closing rate. Non-monetary items are reported using the exchange
rate at the date of the transaction.
Realised and unrealised exchange differences are recognised
as income or expenses for the accounting period in which they
arise. Where such gains and losses are incurred as part of
the operating activities they are included within operating
costs. Where they arise on foreign currency financing activities
they are included within net interest and other charges.
(q) Deferred income taxes
Deferred income tax is provided, using the liability method,
for all temporary differences arising between the tax bases
of assets and liabilities in the balance sheet and their carrying
values in the consolidated financial statements. Tax rates
enacted or substantively enacted by the balance sheet date
are used to determine deferred income tax. Deferred tax assets
are recognised to the extent that it is probable that future
taxable profit will be available against which the temporary
differences can be utilised.
The Group offsets deferred tax assets and deferred tax liabilities
as the Group has a legally enforceable right to set off current
tax assets against current tax liabilities and where the deferred
tax assets and the deferred tax liabilities relate to income
taxes levied by the same taxation authority.
(r) Social security and pension schemes
The Group makes contributions to the Government's health,
retirement benefit and unemployment schemes at the statutory
rates in force during the year, based on gross salary payments.
Throughout the year, the Group made contributions amounting
to 38% (2001: 38%) of gross salaries up to a monthly salary
between Sk 24,000 to Sk 32,000 to such schemes, together with
contributions by employees of a further 12.8% (2001: 12.8%).
The cost of these payments is charged to the income statement
in the same period as the related salary cost.
The Group has no obligation to contribute to these schemes
beyond these statutory rates. The Group does not participate
in any other schemes.
(s) Employee benefits
In accordance with an annually renegotiated collective labour
agreement, the Group is required to pay on retirement an amount
of between Sk 24,000 and Sk 65,000 depending on the length
of service, starting with at least five years continuous service.
These benefits are restricted to those employees who retire
during the period for which the labour agreement is in place.
The Group is not under a legal or constructive obligation
to continue providing such benefits beyond the period of such
agreement and therefore no provisions beyond the period of
agreement are recognised.
(t) Comparatives
Certain comparatives have been reclassified to conform with
current year presentation.
Financial risk management
(1) Financial risk factors
The Group's activities expose it to a variety of financial
risks, including the effects of: changes in debt and equity
market prices, foreign currency exchange rates and interest
rates. The Group's overall risk management programme focuses
on the unpredictability of financial markets and seeks to
minimise potential adverse effects on the financial performance
of the Group. The Group uses derivative financial instruments
such as foreign exchange contracts and interest rate swaps
to hedge certain exposures.
Risk management is carried out by a treasury sub-unit under
various policies approved by Board of Directors of the Company.
The treasury sub-unit identifies, evaluates and hedges financial
risks in co-operation with the operating units. There are
policies covering specific areas, such as foreign exchange
risk, interest rate risk, credit risk, use of derivative financial
instruments and investing excess liquidity.
(i) Foreign exchange risk
The Group operates internationally and is exposed to foreign
exchange risk arising from various currency exposures primarily
with respect to EUR and USD. The main foreign currency exposures
arise from foreign currency borrowings and contract commitments.
The Group hedges the foreign currency exposure of its contract
commitments to purchase certain production parts mainly from
Germany and Austria. The Group uses foreign currency deposits,
investments, forward contracts and foreign currency swaps
to hedge its exposure to foreign currency risk in the local
reporting currency.
(ii) Interest rate risk
The Group's income and operating cash flows are substantially
independent of changes in market interest rates. The Group
policy is to maintain approximately 70% of its borrowings
in fixed rate instruments. At the year end 2002 88% (2001
88%) was at fixed rates. The Group uses interest rate swaps
to optimise the portion of fixed to floating interest rate
ratio based on current market conditions with the aim to reach
70% ratio. Under the interest rate swaps, the Group agrees
with other parties to exchange, at specified intervals (mainly
semiannually), the difference between fixed contract rates
and floating rate interest amounts calculated by reference
to the agreed notional principal amounts.
(iii) Credit risk
The credit risk policy defines products, maturities of products
and limits for financial counter-party. The Group keeps limit
of credit exposure to any financial institution. These
limits are reviewed on regular basis.
(2) Accounting for derivative financial instruments
and hedging activities
Derivative financial instruments are recognised in the balance
sheet at cost and subsequently are remeasured at their fair
value.
The method of recognising the resulting gain or loss is dependent
on the nature of the item being hedged. On the date a derivative
contract is entered into, the Group designates certain derivatives
as either:
(i) a hedge of the fair value of a recognised asset or liability
(fair value hedge) or
(ii) a hedge of a forecast transaction or of a firm commitment
(cash flow hedge)
The Group does not have any fair value hedges or cash flow
hedges at 31 December 2002, which qualify for hedge accounting
under the rules in IAS 39.
Certain derivative transactions, which provide effective
economic hedges under the Group's risk management policies,
do not qualify for hedge accounting under the rules in
IAS 39. Changes in the fair value of any derivative instruments
that do not qualify for hedge accounting under IAS 39 are
recognised immediately in the income statement. The fair value
is periodically reviewed and any change in fair value is transferred
to the income statement. Upon adoption of IAS 39 at 1 January
2001 the fair value of derivatives is recognised in retained
earnings.
When a hedging instrument expires or is sold, or when a hedge
no longer meets the criteria for hedge accounting under IAS
39, any cumulative gain or loss existing in equity at that
time remains in equity and is recognised, when the committed
or forecast transaction ultimately is recognised in the income
statement. However, if a committed or forecast transaction
is no longer expected to occur, the cumulative gain or loss
that was reported in equity is immediately transferred to
the income statement.
The fair values of various derivative instruments used are
disclosed in Note 20.
(3) Fair value estimation
The fair value of publicly traded derivatives is based on
quoted market prices at the balance sheet date. The fair value
of interest rate swaps is calculated as the present value
of the estimated future cash flows. The fair value of forward
foreign exchange contracts is determined using forward exchange
market rates at the balance sheet date.
In assessing the fair value of non-traded derivatives and
other 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
or dealer quotes for the specific or similar instruments are
used for long-term debt. Other techniques, such as option
pricing models and estimated discounted value of future cash
flows, are used to determine fair value for the remaining
financial instruments.
The face values less any estimated credit adjustments for
financial assets and liabilities with a maturity of less than
one year are assumed to approximate their fair values. The
fair value of financial liabilities for disclosure purposes
is estimated by discounting the future contractual cash flows
at the current market interest rate available to the Group
for similar financial instruments.
Notes to the consolidated financial statements
1 Property, plant and equipment
(All amounts are in millions of Slovak crowns) |
|
Land and Buildings |
Duct, cable and other outside
plant |
Telephone exchanges
and related equipment |
Radio and television equipment |
Other fixed assets |
Capital work in progress
including advances (CIP) |
Total |
At 1 January 2002 |
|
|
|
|
|
|
|
Cost |
7,301 |
24,665 |
32,917 |
4,510 |
5,908 |
461 |
75,762 |
Accumulated depreciation |
(1,663) |
(7,758) |
(16,469) |
(2,978) |
(3,610) |
(58) |
(32,536) |
|
|
|
|
|
|
|
|
 |
 |
Net book value |
5,638 |
16,907 |
16,448 |
1,532 |
2,298 |
403 |
43,226 |
|
|
|
|
|
|
|
|
Opening net book amount |
5,638 |
16,907 |
16,448 |
1,532 |
2,298 |
403 |
43,226 |
|
|
|
|
|
|
|
|
Additions |
- |
- |
- |
- |
- |
5,789 |
5,789 |
Transfer from CIP |
194 |
686 |
2,717 |
191 |
1,095 |
(4,883) |
- |
Disposals |
(87) |
- |
- |
(8) |
(10) |
- |
(105) |
Discontinued operation (Note
15) |
(6) |
(1) |
(21) |
- |
(93) |
- |
(121) |
Transfers to assets held
for sale (Note 5) |
(371) |
- |
(36) |
- |
(12) |
- |
(419) |
Depreciation charge (Note 14) |
(76) |
(765) |
(3,608) |
(435) |
(599) |
(25) |
(5,508) |
|
|
|
|
|
|
|
|
 |
 |
Closing net book value |
5,292 |
16,827 |
15,500 |
1,280 |
2,679 |
1,284 |
42,862 |
|
|
|
|
|
|
|
|
At 31 December 2002 |
|
|
|
|
|
|
|
Cost |
6,891 |
25,306 |
35,072 |
4,588 |
6,279 |
1,324 |
79,460 |
Accumulated depreciation |
(1,599) |
(8,479) |
(19,572) |
(3,308) |
(3,600) |
(40) |
(36,598) |
|
|
|
|
|
|
|
|
 |
 |
Net book value |
5,292 |
16,827 |
15,500 |
1,280 |
2,679 |
1,284 |
42,862 |
During 2002, the management undertook a review of fixed
assets in connection with a re-focus on the core business.
The review resulted in:
(i) the change of economic useful life of certain radio related
equipment. The additional depreciation of Sk 127 million is
included in total depreciation charge
(Note 14);
(ii) the transfer of certain fixed assets to assets held for
sale. (Note 5).
The Group will continue to conduct such reviews.
Assets subject to finance lease with a net book value of
Sk 73 million (2001: Sk 163 million) are included in "other
fixed assets".
No land or buildings were pledged as collateral as of 31
December 2002 and 2001.
2 Investments in subsidiaries and joint ventures
Details of the Group's subsidiaries and joint venture are
given below.
|
Country
of incorporation |
Interest in capital
% |
Activities |
Method of consolidation |
Subsidiaries |
|
|
|
|
RK Tower, s.r.o. |
Slovak Republic |
100% (2001: -) |
Broadcasting |
Full |
RK Transmission |
Slovak Republic |
100% (2001: -) |
Broadcasting |
Full |
|
|
|
|
|
Joint venture |
|
|
|
|
EuroTel Bratislava, a.s. |
Slovak Republic |
53% (2001: 53%) |
Wireless telephony services |
Equity accounting |
In May 2002 the Group sold its share in the subsidiary Telemont
Slovensko, s.r.o. (Note 15).
On 21 February 2002, the Group founded a 100% subsidiary
Nehnutežnosti, s.r.o. with share capital of Sk 0.2 million.
On 5 April 2002, the Group sold Nehnutežnosti, s.r.o.
During 2002, certain assets were transferred to RK Tower,
s.r.o. and the assets related to radio-communication activities
are rented within the Group.
Control of EuroTel is shared between the Group and Atlantic
West B.V. and hence this investment is considered a joint
venture. Neither party has unilateral control over major decisions
affecting the joint venture. Pursuant to EuroTel's Shareholders
Agreement, the Group has a 51% economic interest in the profits
and net assets of the joint venture as shown below:
(All amounts are in millions
of Slovak crowns) |
|
Joint venture |
|
At 1 January 2002 |
|
|
Cost |
1,641 |
|
Share of profit (loss) |
104 |
|
|
|
|
 |
 |
 |
Opening net book value |
1,745 |
|
|
|
|
Share of profit before tax |
408 |
|
Share of income tax (Note 17) |
(109) |
|
|
|
|
 |
 |
 |
Closing net book value |
2,044 |
|
|
|
|
At 31 December 2002 |
|
|
Cost |
1,641 |
|
Share of profit (loss) net |
403 |
|
|
|
|
 |
 |
 |
Closing net book value |
2,044 |
|
The following amounts represent the Group's share of the
assets and liabilities and revenue and expenses of the joint
venture:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Non-current assets |
4,607 |
3,197 |
Current assets |
2,141 |
3,058 |
|
|
|
 |
 |
|
6,748 |
6,255 |
|
|
|
Non-current liabilities |
(3,478) |
(3,389) |
Current liabilities |
(1,146) |
(1,036) |
|
|
|
 |
 |
|
(4,624) |
(4,425) |
|
|
|
 |
 |
Net assets |
2,124 |
1,830 |
|
|
|
Sales |
4,663 |
3,891 |
|
|
|
 |
 |
Income before tax |
408 |
261 |
Income taxes |
(109) |
(104) |
|
|
|
 |
 |
Profit after tax |
299 |
157 |
|
|
|
Proportionate interest in joint venture commitments |
122 |
158 |
The average number of employees in the joint venture in
2002 was 1,060 (2001: 923).
3 Investments held to maturity
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Debt securities |
282 |
737 |
Debt securities amounting to Sk 282 million (2001: Sk 737
million) are U.S. Dollar and SKK denominated Slovak Government
guaranteed bonds maturing within one year from 31 December
2002. The bonds pay interest at a fixed rate of 9.5%
to 12.0% and were purchased at a premium ranging from 0.5%
to 4.9% to their nominal value.
(All amounts
are in millions of Slovak crowns) |
Maturity of bonds is as follows: |
2002 |
2001 |
2002 |
- |
385 |
2003 |
282 |
352 |
|
|
|
 |
 |
|
282 |
737 |
In 2001, the Group classified all investments as non-current
assets. In 2002, investments with maturity of less than one
year were classified as current assets.
|
2002 |
2001 |
Weighted average of interest earned |
10,02% |
9,39% |
4 Inventories
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Cable |
74 |
83 |
Engineering |
285 |
283 |
Other |
50 |
30 |
|
|
|
 |
 |
|
409 |
396 |
The inventory items are shown after slow-moving provision
of Sk 165 million (2001: Sk 214 million).
5 Assets held for sale
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Property - real estate (Note 1) |
371 |
- |
Related equipment (Note 1) |
48 |
- |
|
|
|
 |
 |
|
419 |
- |
As a consequence of the restructuring of the Group (Note
12) certain items of property are no longer required for the
purposes for which they were originally purchased. The assets
held for sale are carried at their recoverable amount.
6 Receivables and prepayments
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Domestic trade receivables |
2,403 |
1,823 |
Foreign trade receivables |
323 |
1,089 |
Amounts due from related parties (Note
21) |
155 |
369 |
Other receivables |
406 |
298 |
Prepayments |
48 |
69 |
|
|
|
 |
 |
|
3,335 |
3,648 |
All receivables fall due within one year. Trade receivable
are shown after a provision for impairment of Sk 757 million
(2001: Sk 1,074 million).
Foreign trade receivables and amounts due from related parties
at 31 December 2002 include amounts due from international
operators providing carrier services after set-offs with accounts
payable to the same operator, in the amount of Sk 355
million and Sk 150 million respectively. The amounts at 31
December 2001 are shown gross. The offsetting would require
adjustment of Sk 601 million and Sk 178 million respectively.
(Note 11)
7 Cash and cash equivalents
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Cash |
11,459 |
12,512 |
Cash equivalents |
1,252 |
- |
|
|
|
 |
 |
|
12,711 |
12,512 |
The cash balance of the Group at 31 December 2002 includes
Sk 11,179 million (2001: Sk 12,199 million) held in interest-bearing
deposits on terms of less than three months. The cash equivalents
contain a short-term security on terms of less than three
months. There was no cash balance with restricted use as at
31 December 2002 and 2001.
8 Capital and reserves
On 1 April 1999 the legal form of the Company was changed
from a state company to a joint stock company. Following the
corporatisation, the share capital of the Company consisted
of 20,717,920 ordinary shares authorised, issued and fully
paid at par value of Sk 1,000 per share.
Pursuant to privatisation agreement effective 4 August 2000
the Company issued 5,309,580 new ordinary shares with par
value of Sk 1,000 per share. The shares were issued at premium
totalling Sk 11,632 million. All newly issued shares were
subscribed and fully paid by Deutsche Telekom AG. The privatisation
transaction also involved a purchase by Deutsche Telekom AG
of 7,964,445 existing ordinary shares from the Slovak Government.
The combined effect of the transaction was an acquisition
of 51% of Slovenské telekomunikácie, a.s. by Deutsche Telekom
AG.
As of 31 December 2002 the Group had authorised 26,027,500
ordinary shares (2001: 26,027,500) with a par value of Sk 1,000
per share. All issued shares were fully paid.
The legal reserve is set up in accordance with Slovak law
and is not distributable. The reserve is created from retained
earnings to cover possible future losses. In 2002, the Group
transferred 5% of prior year statutory profit to the reserve
fund.
On 3 July 2002 a dividend in respect of 2001 of Sk 1,708
million was approved by General meeting. No dividends were
declared in respect of 2002.
9 Interest bearing borrowings
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
International Financial Institution loans |
6,082 |
6,663 |
Finance lease obligations |
33 |
66 |
|
|
|
 |
 |
Total interest bearing borrowings |
6,115 |
6,729 |
|
|
|
Less Current portion of interest bearing borrowings |
(793) |
(259) |
|
|
|
 |
 |
Long term portion of interest bearing
borrowings |
5,322 |
6,470 |
Repayments of the long term portion of interest bearing borrowings
fall due as follows:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Between one and two years |
683 |
781 |
Between two and five years |
2,821 |
2,223 |
After five years |
1,818 |
3,466 |
|
|
|
 |
 |
|
5,322 |
6,470 |
Loans from the World Bank and the European Investment Bank
(together the "IFI's"), are subject to restrictive
covenants which require the Group to achieve minimum ratios
in respect of financial leverage, interest cover and debt
service based on the IAS consolidated financial statements.
The IFI facilities are guaranteed by the Slovak Government
and Syndicated Bank Guarantee. At 18 September 2002 the Group
signed a new Syndicated Bank Guarantee for an amount of EUR
93 million which expires in September 2007.
As of 31 December 2002 and 2001, there are no assets pledged
as collateral for borrowings. At 31 December 2002, the Group
has total undrawn loan facilities available of Sk 200 million
(2001: Sk 502 million). The facility is available for the
period till 31 December 2003.
The carrying amount and fair value of interest bearing borrowings
are as follows:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Carrying amount |
6,115 |
6,729 |
Fair value |
6,387 |
6,906 |
Interest bearing borrowings can be analysed by currency
as follows, after taking into account the impact of the cross
currency interest rate swaps outstanding at 31 December 2002:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Euro and EU member currencies |
5,225 |
4,882 |
Slovak crowns |
890 |
1,847 |
|
|
|
 |
 |
|
6,115 |
6,729 |
The Group is exposed to foreign exchange risk related to
foreign currency debt and foreign exchange payments. Further,
the Group's major financial market risk exposure is interest
rate fluctuations. This is due to changing interest rates
in the U.S. and Western Europe affecting the fair value of
fixed rate debt. To control interest rate and foreign exchange
risk, a combination of fixed and floating rate debt is
used within the foreign currency portfolio and interest rate
and currency derivative instruments are used (Note 20).
Interest bearing borrowings can be analysed into fixed rate
and variable rate debt as follows, after taking into account
the impact of the cross currency interest rate swaps and interest
rate swaps outstanding at 31 December 2002:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Fixed |
5,383 |
5,962 |
Floating |
732 |
767 |
|
|
|
 |
 |
|
6,115 |
6,729 |
The average effective borrowings cost (total interest payable
and other charges for Group's loans and borrowings) for the
year ended 31 December 2002 were 5.2% (2001: 6.4%).
10 Deferred tax
The movement on the deferred income tax account is as follows:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
At beginning of year |
4,413 |
5,188 |
Effect of applying IAS 39 at 1 January 2001 |
- |
(45) |
Capitalised loan to EuroTel |
- |
(39) |
Impact of change in the tax rate from 29% to 25%
(Note 17) |
- |
(706) |
Charge to income for the year |
(74) |
15 |
|
|
|
 |
 |
At end of year |
4,339 |
4,413 |
Deferred income tax (assets) / liabilities and the deferred
tax charge in the income statement are attributable to the
following items:
(All amounts
are in millions of Slovak crowns) |
|
31 December 2001 |
Credited/charged to
income |
31 December
2002 |
Accelerated tax depreciation |
4,736 |
(86) |
4,650 |
Unrealised foreign exchange gains/losses |
(202) |
47 |
(155) |
Bad debt provision |
- |
(59) |
(59) |
Restructuring (Note 12) |
(57) |
(12) |
(69) |
Fair value of swaps (Note 20) |
(14) |
7 |
(7) |
Onerous contract (Note 12) |
(54) |
54 |
- |
Leasing |
11 |
(9) |
2 |
Unpaid cash-based services |
(7) |
(13) |
(20) |
Retirement obligation |
- |
(3) |
(3) |
|
|
|
|
 |
 |
Net deferred tax (asset) liability |
4,413 |
(74) |
4,339 |
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Deferred tax assets to be recovered after more
than one year |
(119) |
(214) |
Deferred tax liabilities to be settled after more
than one year |
4,333 |
4,656 |
|
|
|
 |
 |
|
4,214 |
4,442 |
11 Trade and other payables
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Amounts due within one year |
|
|
Domestic trade payables |
2,867 |
2,201 |
Foreign trade payables |
229 |
715 |
Amounts due to employees |
270 |
403 |
Payables to related parties (Note 21) |
66 |
326 |
Accruals and other payables |
751 |
658 |
Fair value of swaps (Note 20) |
60 |
173 |
|
|
|
 |
 |
|
4,243 |
4,476 |
Foreign trade payables and payables to related parties include
amounts due from international operators providing
carrier services. (Note 6)
12 Provisions
(All amounts are in millions of Slovak crowns) |
|
Onerous contract |
Restructuring |
Legal claims |
2002 Total |
2001Total |
Opening carrying amount |
213 |
238 |
- |
451 |
320 |
Additional provisions (Note 14) |
- |
317 |
50 |
367 |
556 |
Unused amount reversed |
(203) |
- |
- |
(203) |
|
Amount used |
(10) |
(281) |
- |
(291) |
(425) |
|
|
|
|
|
|
 |
 |
Closing carrying amount |
- |
274 |
50 |
324 |
451 |
|
|
|
|
|
|
Non -current liabilities |
- |
- |
50 |
50 |
99 |
Current liabilities |
- |
274 |
- |
274 |
352 |
|
|
|
|
|
|
 |
 |
|
- |
274 |
50 |
324 |
451 |
The Group has signed a business contract for rent of satellite
transponders. Provision was created in 2001 to cover the unavoidable
costs of meeting the obligation under the contract in excess
of the expected benefits. During 2002 the Group has concluded
new business contracts generating additional revenue in the
following years. The provision was reversed accordingly.
The restructuring of the Group's operations will result in
the loss of 1,450 jobs in 2003. An agreement has been reached
with the local union representatives based on a detailed formal
plan that specifies the number of staff involved, location
and function. The amount payable to staff to be made redundant
was calculated using the method agreed with trade unions.
The full amount of these costs to be incurred has been recognised
in the current period. The termination benefits are expected
to be paid within 12 months from 31 December 2002.
The amounts shown include a provision in respect of certain
legal claims brought against the Group. In the opinion of directors,
after taking appropriate legal advice, the outcome of these
legal claims will not result in any significant loss beyond
the amounts provided at 31 December 2002.
13 Revenue
(All amounts
are in millions of Slovak crowns) |
Reporting by product cluster |
2002 |
2001 |
Traffic charges |
9,108 |
10,209 |
Access fees |
3,729 |
3,450 |
 |
 |
Voice total |
12,837 |
13,659 |
Value added services |
555 |
660 |
Data services |
1,637 |
1,522 |
Terminal equipment |
276 |
351 |
 |
 |
Fixed network total |
15,305 |
16,192 |
Carrier Services |
2,321 |
2,693 |
Online |
132 |
72 |
Broadcasting |
810 |
832 |
Other |
272 |
321 |
|
|
|
 |
 |
|
18,840 |
20,110 |
Other revenue includes revenue from construction and rental
activities and other telecom related services. Revenues for
the year ended 31 December 2002 include Sk 862 million of
revenues from the joint-venture company (2001: Sk 756 million).
Revenue from carrier services in 2002 includes Sk 325 million
from other related parties (2001: Sk 524 million).
14 Operating costs
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Staff costs |
3,385 |
4,000 |
Material and equipment |
1,008 |
1,395 |
Depreciation (Note 1) |
5,508 |
5,457 |
Network operators |
3,167 |
3,644 |
Energy costs |
348 |
344 |
Repairs and maintenance |
421 |
388 |
Legal and consulting fees |
277 |
339 |
Value added services |
122 |
98 |
Foreign exchange differences (net) |
(23) |
(7) |
Restructuring costs (Note 12) |
317 |
343 |
Provision for onerous contract (Note 12) |
(203) |
213 |
Provision for bad and doubtful debts and write
offs |
(193) |
130 |
Marketing |
328 |
284 |
Postal expenses |
199 |
191 |
Other costs |
1,309 |
1,415 |
|
|
|
 |
 |
|
15,970 |
18,234 |
|
|
|
Own work capitalised |
(932) |
(2,198) |
|
|
|
 |
 |
|
15,038 |
16,036 |
Costs for network operators services include Sk 933 million
(2001: Sk 1,108 million) of costs incurred to the joint- venture
and costs to international network operators of Sk 261 million
incurred to other related parties (2001: Sk 397 million).
Staff costs include Sk 444 million (2001: Sk 542 million)
of contributions to social security scheme and Sk 3 million
(2001: Sk 5 million) of remuneration of directors.
Own work capitalised comprises direct material and equipment
costs, labour and overheads that are attributable to the construction
of fixed assets.
15 Discontinued operation
In May 2002 the Group sold its share in subsidiary Telemont
Slovensko, s.r.o. Subsequently, on 1 June 2002 the Group sold
the construction activity to Telemont Slovensko, s.r.o. The
sales, results, cash flows and net assets of the construction
activity were as follows:
(All amounts
are in millions of Slovak crowns) |
|
5 months 2002 |
12 months 2001 |
Sales |
35 |
83 |
Operating costs |
(41) |
(120) |
 |
 |
Operating (loss)/profit |
(6) |
(37) |
Finance costs |
- |
- |
 |
 |
(Loss)/profit before tax |
(6) |
(37) |
Tax |
- |
- |
|
|
|
 |
 |
(Loss)/profit after tax |
(6) |
(37) |
|
|
|
Operating cash flows |
88 |
59 |
Investing cash flows |
- |
(4) |
Financing cash flows |
- |
- |
|
|
|
 |
 |
Total cash flows |
88 |
55 |
(All amounts
are in millions of Slovak crowns) |
|
At 1 June 2002 |
At 31 Dec 2001 |
Property, plant and equipment (Note 1) |
121 |
134 |
Current assets |
5 |
138 |
 |
 |
Total assets |
126 |
272 |
Total liabilities |
(2) |
(60) |
|
|
|
 |
 |
Net assets |
124 |
212 |
The loss/profit on disposal was determined as follows:
(All amounts are in millions
of Slovak crowns) |
Net assets sold |
124 |
|
Proceeds from sale |
139 |
|
|
|
|
 |
 |
 |
Profit (Loss) on disposal |
15 |
|
The net cash inflow on sale is determined as follows:
(All amounts are in millions
of Slovak crowns) |
Proceeds from sale |
139 |
|
Less: cash and cash equivalents in activity
sold |
- |
|
|
|
|
 |
 |
 |
Net cash inflow on sale |
139 |
|
16 Financial income - net
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Interest expense |
|
|
International Financial Institutions
loans |
(307) |
(379) |
Foreign supplier loans |
- |
(16) |
Interest payable arising on
interest rate swaps |
(120) |
(287) |
Finance leases |
(7) |
(16) |
Commitment fees and other financial
expense |
(95) |
(56) |
Net foreign exchange gains (losses) |
382 |
25 |
|
|
|
 |
 |
Total interest payable and other
charges |
(147) |
(729) |
Borrowing costs capitalised
|
- |
2 |
|
|
|
 |
 |
Borrowing expense total |
(147) |
(727) |
|
|
|
Change in Fair-value and settlement
impact of swaps (Note 20) |
(183) |
245 |
Interest income on short term
deposits |
644 |
676 |
Interest income from debt securities
held (Note 18) |
73 |
67 |
Net foreign exchange gains (losses) |
(180) |
(97) |
|
|
|
 |
 |
Net financial income
(expense) |
207 |
164 |
17 Taxation
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Current tax charge |
983 |
1,164 |
Deferred tax (income) charge (Note 10) |
(74) |
(691) |
Share of income tax of joint venture (Note 2)
|
4 |
5 |
Share of deferred tax of joint venture (Note 2)
|
105 |
99 |
|
|
|
 |
 |
|
1,018 |
577 |
A reconciliation between the reported income tax expense
and the theoretical amount that would arise using the standard
tax rates is as follows:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Net profit before tax |
4,486 |
4,499 |
|
|
|
Income tax calculated at 25% (2001; 29%) |
1,121 |
1,305 |
Change in tax rate - deferred tax effect (Note
10) |
- |
(706) |
Effect of income not taxable |
(160) |
(269) |
Effect of expenses not deductible for tax purposes |
109 |
253 |
Over-provision in respect of previous years |
(52) |
(6) |
|
|
|
 |
 |
|
1,018 |
577 |
On 4 December 2001 a new Slovak Corporation tax rate of
25% (previously 29%) was enacted effective from 1 January
2002.
18 Net cash flows from operating activities
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Net profit |
3,468 |
3,922 |
Adjustments for: |
|
|
Income tax |
1,018 |
577 |
Depreciation (Note
1,14) |
5,508 |
5,457 |
Investment income
(Note 16) |
(73) |
(67) |
Interest (income)
expense net |
69 |
(173) |
Share of results
of associates and joint ventures (Note 2) |
(408) |
(261) |
(Profit)/loss on
disposals on fixed assets |
(73) |
35 |
(Profit)/loss on
disposal of discontinued operation (Note 15) |
(15) |
- |
Net foreign exchange
(gains) losses |
(351) |
72 |
Provision charge
(Note 12) |
(127) |
131 |
|
|
|
 |
 |
Operating profit before
working capital changes |
9,016 |
9,693 |
|
|
|
Decrease/(increase) in trade
and other receivables |
302 |
(278) |
(Increase)/decrease in inventories |
(15) |
34 |
(Decrease)/increase in trade
and other payables |
(1,846) |
350 |
|
|
|
 |
 |
Cash generated from
operations |
7,457 |
9,799 |
|
|
|
Income taxes (paid)/ received |
(2,207) |
1078 |
|
|
|
 |
 |
Net cash flows from
operating activities |
5,250 |
10,877 |
19 Commitments
Capital commitments
The Group had the following capital commitments at 31 December:
(All amounts
are in millions of Slovak crowns) |
|
2002 |
2001 |
Capital expenditure that has been contracted for
but has not been provided for in the consolidated
financial statements |
1,109 |
959 |
The commitments under contractual arrangements principally
relate to the telecommunications network, with the majority
of payments due within one year.
The shared joint venture commitments are shown in Note 2.
20 Financial instruments
Movements in derivatives during the year ended 31 December
2002.
(All amounts are in millions of Slovak crowns) |
|
Cross currency swap |
Interest rate swap |
Total |
At 1 January 2002 |
|
|
|
Fair value |
221 |
(5) |
216 |
Deferred income tax (Note 10) |
(32) |
18 |
(14) |
|
|
|
|
 |
 |
|
189 |
13 |
202 |
|
|
|
|
Movements during the year: |
|
|
|
Settlement of swaps (Note 16) |
(215) |
18 |
(107) |
Change in fair value (Note 16) |
303 |
(13) |
290 |
Deferred income tax (Note 10) |
25 |
(18) |
7 |
|
|
|
|
 |
 |
Net balance at 31 December 2002 |
392 |
- |
392 |
|
|
|
|
Non current liabilities |
339 |
- |
339 |
Current liabilities (Note 11) |
60 |
- |
60 |
Deferred income tax (Note 10) |
(7) |
- |
(7) |
|
|
|
|
 |
 |
Net balance at 31 December 2002 |
392 |
- |
392 |
Upon the adoption of IAS 39 the Group recognised the above
derivatives as not qualified for hedge accounting and measured
them at fair value.
Interest rate swaps
The Group has entered into interest rate swap contracts that
entitle it to receive interest at fixed rate on notional principal
amounts and oblige it to pay interest at floating rates on
the same amount which equals the outstanding balance of interest
bearing borrowing. Interest rate swaps matured in 2002.
Cross currency swaps
The Group has entered into cross currency interest rate swap
contracts to manage the exposure of the combined effect of fluctuation
in foreign currency exchange rates and fluctuation in interest
rates on specific transactions: repayments of both foreign
currency borrowings and interest charge.
At 31 December 2002 the outstanding principal amounts payable
by the Group under cross currency interest rate swaps were
Sk 857 million and EUR 42 million. The Group expects to receive
the income at variable interest rates and to pay an expense
at fixed and variable interest rates. At 31 December 2002
the interest rates receivable vary from 1.49% to 2.804% and
interest rates payable vary from 3.014% to 9.15%. Cross currency
interest rate swaps mature in 2003 and 2010.
21 Related party transactions
The Group provides services to State departments and related
businesses, in general, on normal commercial terms.
The Group receives revenues from and pays expenses to its
joint venture EuroTel and to its parent company Deutsche Telekom
AG and its subsidiaries, associates and joint ventures, for
calls which access each others network and other services.
These revenues and costs are based on contractual agreements
negotiated on normal commercial terms.
(All amounts are in millions of Slovak crowns) |
|
Receivables |
Payables |
Revenues |
Expenses |
|
2002 |
2001 |
2002 |
2001 |
2002 |
2001 |
2002 |
2001 |
EuroTel |
65 |
66 |
55 |
68 |
862 |
756 |
948 |
1,108 |
Deutsche Telecom |
83 |
258 |
2 |
222 |
243 |
363 |
429 |
436 |
|
|
|
|
|
|
|
|
|
Other |
7 |
45 |
9 |
36 |
82 |
161 |
167 |
106 |
Directors |
- |
- |
- |
- |
- |
- |
3 |
5 |
|
|
|
|
|
|
|
|
|
 |
 |
Total |
155 |
369 |
66 |
326 |
1,187 |
1,280 |
1,547 |
1,655 |
Other includes Deutsche Telecom's subsidiaries, associates
and joint ventures.
22 Contingencies
The Group is in legal proceedings in the normal course of
business and regulatory proceedings initiated by the Anti-Monopoly
office of the Slovak Republic regarding the dominant position
of Slovenské telekomunikácie, a.s. on the telecommunications
market. Management is confident that the Group will suffer
no material loss as a result of such proceedings and therefore
no provision was made in respect of these disputes in excess
of the provision already recorded in the consolidated financial
statements (Note 12).
The Group's joint venture EuroTel is in legal proceedings
in the normal course of business including one administrative
proceedings initiated by the Anti-Monopoly Office of the Slovak
Republic based on a petition of a Voice over IP technology
operator alleging breach of antimonopoly law. The outcome
of the proceedings is subject to a certain degree of uncertainty
due to the anti-monopoly law in Slovakia being in early stage
of development and subject to varying interpretations. Management
does not believe that the outcome will have a material adverse
effect on EuroTel's financial conditions, results of operations
or cash flows.
23 Post balance sheet events
Changes in top management
Mr. Miroslav Majoro became the new Chief Executive Officer
of Slovenské telekomunikácie, a.s. at 1 January 2003. He was
appointed to the position by Board of Directors at the meeting
held on 9 December 2002.
Liberalisation
At 1 January 2003 the voice service monopoly position of Slovenské
telekomunikácie, a.s. in the public fixed telecommunications
network ended on the basis of the Telecommunication Act No.
195/2000 Coll.
At 2 January 2003 the Group has submitted the interconnection
prices proposal and the Reference Interconnection Offer to the
Telecommunications Office of the Slovak Republic. The Reference
Interconnection Offer represents the basis for negotiations
on interconnection with new operators that have been granted
a licence for provisioning of public telephone service after
1 January 2003.
The end of the monopoly position of Slovenské telekomunikácie,
a.s. caused new responsibilities for the Group. One such responsibility
is to provide the access customers with the possibility to
choose their conveyance carrier either by the means of the
carrier pre-selection or by the means of the call-by-call
selection. Slovenské telekomunikácie, a.s. continues to provide
the Universal telecommunications service, i.e. a minimum set
of services, which are available at a specified quality to
all users in the whole territory of the country at an affordable
price.
The price regulation continues to be based on the price basket.
The Group was defined as the operator with the significant
influence on the voice service and the leased line market.
Change of VAT rate
The value added tax rate applicable for telecommunications
services has changed from 23% to 20% according to VAT Act
No. 289/1995 Coll. and Act No. 637/2002 Coll. effective from
1 January 2003.
Introduction of the new technology
At 22 January 2003, Slovenské telekomunikácie, a.s., started
testing of ADSL (Asymetric Digital Subscriber Line) technology
with certain Internet service providers.
|
 |