ptcl accounts 2009 (parent)

8/3/2019 PTCL Accounts 2009 (Parent)

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Financial StatementsFor the year ended June 30, 2009

Pakistan Telecommunication Company Limited


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Annual Report 2009 35

Auditors Report to the Members

We have audited the annexed balance sheet of Pakistan Telecommunication Company Limited as at June 30, 2009 and the related

profit and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof, for the

year then ended and we state that we have obtained all the information and explanations which, to the best of our knowledge and

belief, were necessary for the purposes of our audit.

It is the responsibility of the companys management to establish and maintain a system of internal control, and prepare and present

the above said statements in conformity with the approved accounting standards and the requirements of the Companies Ordinance,

1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we plan and

perform the audit to obtain reasonable assurance about whether the above said statements are free of any material misstatement.

An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above said statements. An

audit also includes assessing the accounting policies and significant estimates made by management, as well as, evaluating the

overall presentation of the above said statements. We believe that our audit provides a reasonable basis for our opinion and, after due

verification, we report that:

(a) In our opinion, proper books of account have been kept by the company as required by the Companies Ordinance, 1984;

(b) In our opinion:

(i) the balance sheet and profit and loss account together with the notes thereon have been drawn up in conformity with

the Companies Ordinance, 1984, and are in agreement with the books of account and are further in accordance with

accounting policies consistently applied;

(ii) the expenditure incurred during the year was for the purpose of the companys business; and

(iii) the business conducted, investments made and the expenditure incurred during the year were in accordance with the

objects of the company;

(c) in our opinion and to the best of our information and according to the explanations given to us, the balance sheet, profit

and loss account, cash flow statement and statement of changes in equity together with the notes forming part thereof

conform with approved accounting standards as applicable in Pakistan, and give the information required by the Companies

Ordinance, 1984, in the manner so required and respectively give a true and fair view of the state of the companys affairs as at

June 30, 2009 and of the profit, its cash flows and changes in equity for the year then ended; and

(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by the

company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.

A. F. Ferguson & Co. Ford Rhodes Sidat Hyder & Co.

Chartered Accountants Chartered Accountants

Lahore. Islamabad.

Name of engagement partner: Name of engagement partner:

Muhammad Masood Sajjad Hussain Gill

Dated

September 29, 2009


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Pakistan Telecommunication Company Limited36

Balance Sheetas at June 30, 2009

Note 2009 2008

(Rupees in thousand)

Equity and liabilitiesShare capital and reserves

Authorized capital

11,100,000,000 A class ordinary shares of Rs 10 each 111,000,000 111,000,000

3,900,000,000 B class ordinary shares of Rs 10 each 39,000,000 39,000,000

150,000,000 150,000,000

Issued, subscribed and paid up capital 5 51,000,000 51,000,000

Revenue reserves

Insurance reserve 6 1,683,074 1,683,074

General reserve 30,500,000 30,500,000

Unappropriated profit 16,206,485 14,705,30099,389,559 97,888,374

Non current liabilities

Payable to PTA against WLL license fee 7 1,768,839

Long term security deposits from

customers non interest bearing 8 990,055 951,618

Deferred taxation 9 2,379,000 590,000

Employees retirement benefits 10 14,142,099 14,240,062

Deferred government grants 11 1,061,044 95,000

18,572,198 17,645,519

Current liabilities

Trade and other payables 12 26,114,171 21,731,667

Current portion of payable to PTA against

WLL license fee 7 1,953,971

Taxation 3

Dividend payable 7,650,000

36,086,322 21,913,959

Contingencies and commitments 13

154,048,079 137,447,852

The annexed notes from 1 to 47 form an integral part of these financial statements.

Chairman


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Note 2009 2008


AssetsNon current assets

Property, plant and equipment 14 77,730,763 82,800,178

Capital workinprogress 15 9,836,588 7,892,823

Intangible assets 16 3,320,670 3,149,063

Long term investments 17 5,607,439 3,607,439

Long term loans 18 3,332,378 394,943

99,827,838 97,844,446

Current assets

Stores and spares 19 5,201,991 4,954,085

Trade debts 20 10,760,974 13,3

Loans and advances 21 590,061 888,309

Accrued interest 22 821,027 315,817

Recoverable from tax authorities 23 1,059,608 1,383,766

Other receivables 24 698,270 1,641,617

Receivable from Government of Pakistan 25 2,164,072 2,164,072

Short term investments 26 21,017,790 10,344,379

Cash and bank balances 27 11,906,448 4,545,145

54,220,241 39,603,406

154,048,079 137,447,852

President & CEO


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Profit and Loss Accountfor the year ended June 30, 2009

Note 2009 2008


Revenue 28 59,239,001 66,336,042Cost of services 29 (37,732,282) (37,346,869)

Gross profit 21,506,719 28,989,173

Administrative and general expenses 30 (8,935,261) (10,823,555)

Selling and marketing expenses 31 (1,817,071) (1,799,946)

Operating profit 10,754,387 16,365,672

Voluntary separation scheme 32 (92,118) (23,937,854)

Other operating income 33 4,267,172 3,957,539

Finance cost 34 (908,524) (847,973)

Profit / (loss) before tax 14,020,917 (4,462,616)

Taxation 35 (4,869,732) 1

Profit / (loss) after tax 9,151,185 (2,824,890)

(Rupees)

Earnings / (loss) per share basic and diluted 41 1.79 (0.55)


Chairman President & CEO


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Cash Flow Statementfor the year ended June 30, 2009

Note 2009 2008


Cash flows from operating activitiesCash generated from operations 38 34,337,391 28,091,249

Long term security deposits 38,437 (244,166)

Employees retirement benefits paid (1,470,335) (17,373,671)

Payment of other VSS components (840,927) (21,444,052)

Received from Government of Pakistan 15,264,928

Finance cost paid (265,232) (360,407)

Income tax paid (2,894,844) (2,833,459)

Net cash inflow from operating activities 28,904,490 1,100,422

Cash flows from investing activities

Capital expenditure (9,455,527) (11,411,216)

Intangible assets (397,979) (109,270)Proceeds from disposal of property, plant and equipment 206,039 19,651

Short term investments other than cash equivalents 26 (1,221,886)

Advance to the wholly owned subsidiary

against issue of ordinary shares (2,000,000)

Long term loansnet 62,565 1,214,991

Loan to the wholly owned subsidiary (3,000,000)

Return on bank placements / loan to subsidiary 2,751,824 2,860,719

Government grants received 966,044 95,000

Dividend income 350,000

Net cash outflow from investing activities (12,088,920) (6,980,125)

Cash flows from financing activities

Repayment of suppliers credit (172,961)

Dividend paid (2,742) (10,195,524)

Net cash outflow from financing activities (2,742) (10,368,485)

Net increase / (decrease) in cash and cash equivalents 16,812,828 (16,248,188)

Cash and cash equivalents at beginning of the year 14,889,524 31,137,712

Cash and cash equivalents at end of the year 39 31,702,352 14,889,524




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Statement of Changes in Equityfor the year ended June 30, 2009

Issued, subscribed and Revenue reserves

paidup capital

Class A Class B Insurance General Unappropriated Totalreserve reserve profit


Balance as at July 01, 2007 37,740,000 13,260,000 1,749,047 30,500,000 27,664,217 110,913,264

Net loss for the year (2,824,890) (2,824,890)

Transfer from insurance reserve (65,973) 65,973

Final dividend for the year ended

June 30, 2007 Rs. 2 per share (10,200,000) (10,200,000)

Balance as at June 30, 2008 37,740,000 13,260,000 1,683,074 30,500,000 14,705,300 97,888,374

Net profit for the year 9,151,185 9,151,185Interim dividend for the year ended

June 30, 2009 Rs. 1.5 per share (7,650,000) (7,650,000)

Balance as at June 30, 2009 37,740,000 13,260,000 1,683,074 30,500,000 16,206,485 99,389,559




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Notes to and forming part of the Financial Statementsfor the year ended June 30, 2009

1. Legal status and nature of business

1.1 Constitution and ownership

Pakistan Telecommunication Company Limited (the Company) was incorporated in Pakistan on December 31, 1995 and

commenced business on January 1, 1996. The Company is listed on Karachi, Lahore and Islamabad stock exchanges. The

Company was established to undertake the telecommunication business formerly carried on by Pakistan Telecommunication

Corporation (PTC). The business was transferred to the Company on January 1, 1996 under the Pakistan Telecommunication

(Reorganization) Act, 1996 at which date the Company took over all the properties, rights, assets, obligations and liabilities of

PTC except those transferred to National Telecommunication Corporation (NTC), Frequency Allocation Board (FAB), Pakistan

Telecommunication Authority (PTA) and Pakistan Telecommunication Employees Trust (PTET). The registered office of the

Company is situated at PTCL Headquarters, G8/4, Islamabad.

1.2 Activities

The Company provides telecommunication services in Pakistan. It owns and operates telecommunication facilities and

provides domestic and international telephone services and other communication facilities throughout Pakistan. The

Company has also been licensed to provide such services to territories in Azad Jammu and Kashmir and Northern Areas.

2. Basis of preparation

2.1 Statement of compliance

These financial statements have been prepared in accordance with approved accounting standards as applicable in Pakistan.

Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International

Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of and directives issued under

the Companies Ordinance, 1984. In case requirements differ, the provisions or directives of the Companies Ordinance, 1984

shall prevail.

2.2 Standards, interpretations and amendments to published approved accounting standards that are effective in

current year

During the year ended June 30, 2009, IFRS 7 Financial Instruments: Disclosures became effective. IFRS 7 has superseded IAS 30

and disclosure requirements of IAS 32. Adoption of this standard has only resulted in additional disclosures which have beenset out in note 42 to these financial statements.

Further, interpretations of accounting standards, namely IFRIC 12 Service Concession Arrangements, IFRIC 13 Customer

Loyalty Programmes and IFRIC 14 IAS 19 The Limit on Defined Benefit Asset, Minimum Funding Requirements and their

Interaction also become effective during the year. However, these interpretations do not affect the Companys financial

statements.

2.3 Amendments and Interpretations to publish standards applicable to the Company not yet effective

The following amendments and interpretations to existing standards have been published and are mandatory for the

Companys accounting periods beginning on or after their respective effective dates:

IAS 1 (Revised), Presentation of financial statements (effective for annual periods beginning on or after July 1, 2009), wasissued in September 2007. The revised standard requires an entity to present, in a statement of changes in equity, all owner

changes in equity. All nonowner changes in equity (i.e. comprehensive income) will be required to be presented separately

from owner changes in equity, either in one statement of comprehensive income or in two statements (a separate income

statement and a statement of comprehensive income). When the entity applies an accounting policy retrospectively or makes

retrospective statement or reclassifies items in the financial statements, they will be required to present a restated financial

position (balance sheet) as at beginning of comparative period in addition to the current requirement to present the balance

sheet as at the end of the current and the comparative period. The adoption of this standard will only impact the presentation

of the financial statements.

IAS 39 (Amendment), Financial Instruments: Recognition and Measurement Reclassification of Financial Assets (effective

from July 1, 2009). This amendment to the Standard permits an entity to reclassify nonderivative financial assets (other than

those designated at fair value through profit or loss by the entity upon initial recognition) out of the fair value through profit

or loss category in particular circumstances. The amendment also permits an entity to transfer from the availableforsalecategory to the loans and receivables category, a financial asset that would have met the definition of loans and receivables

(if the financial asset had not been designated as availableforsale), if the entity has the intention and ability to hold that

financial asset for the foreseeable future. The management is in the process of assessing the impact of its adoption on the

Companys financial statements.


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IFRS 7 (Amendment), Financial Instruments: Disclosure. There are a number of minor amendments to IFRS 7 in respect of

enhanced disclosures about liquidity risk and fair value measurements. These amendments are unlikely to have an impact on

the Companys financial statements and have therefore not been analyzed in detail.

IAS 38 (Amendment), Intangible Assets (effective from July 1, 2009). The amended standard states that a prepayment may

only be recognized in the event that payment has been made in advance of obtaining right of access of goods or receipt of

services. This amendment is not expected to have a significant effect on the Companys financial statements.

2.4 Standards and interpretations to existing standards that are not applicable to the Company and not yet effective

Standards or Interpretation Effective date

(accounting periods

beginning on or after)

IFRS 4 Insurance Contracts January 01, 2009

IFRS 8 Operating Segments January 01, 2009

IFRIC 15 Accounting for Agreements for the Construction of Real Estate January 01, 2009

IFRIC 16 Hedge of Net Investment in a Foreign Operation July 01, 2009IFRIC 17 Distribution of Noncash Assets to Owners July 01, 2009

IAS 23 Borrowing Costs (Revised) January 01, 2009

IAS 27 Consolidated and Separate Financial Statements January 01, 2009

IAS 32 Financial Instruments: Presentation Amendments

regarding puttable Financial Instruments January 01, 2009

IFRS 2 Share Based Payments Amendments Regarding Vesting

Conditions and Cancellation January 01, 2009

IFRS 3 Business Combinations (Revised) July 01, 2009

IFRIC 18 Transfer of Assets of Customers July 01, 2009

IFAS 2 IJARAH January 01, 2009

3. Basis of measurement

These financial statements have been prepared under the historical cost convention, except for revaluation of certain financial

instruments at fair value and recognition of certain employee retirement benefits and license fee payable at present value.

The Companys significant accounting policies are stated in note 4. Not all of these significant policies require the management

to make difficult, subjective or complex judgments or estimates. The following is intended to provide an understanding of the

policies the management considers critical because of their complexity, judgment of estimation involved in their application

and their impact on these financial statements. Estimates and judgments are continually evaluated and are based on historical

experience, including expectations of future events that are believed to be reasonable under the circumstances. These

judgments involve assumptions or estimates in respect of future events and the actual results may differ from these estimates.

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to

the financial statements are as follows:

a) Employees retirement benefitsThe Company uses the valuation performed by an independent actuary as a present value of its retirement benefits obligations.

The valuation is based on assumptions as mentioned in note 4.4.

b) Provision for taxation

The Company takes into account the current income tax law and the decisions taken by appellate authorities. Instances

where the Companys view differs from the view taken by the Income Tax department at the assessment stage and where the

Company considers that its view on items of material nature is in accordance with law, the amounts are shown as contingent

liabilities.

c) Useful life and residual values of property, plant and equipment

The Company reviews the useful lives of property, plant and equipment on regular basis. Any change in estimates in future

years might affect the carrying amounts of the respective items of property, plant and equipment with the correspondingeffect on the depreciation charge and impairment.


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d) Provision for doubtful receivables

Provision against overdue receivable balances is recognized after considering the receipt pattern and the future outlook of the

concerned receivable party. It is reviewed by the management on a regular basis.

4. Significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies

have been consistently applied to all the years presented unless otherwise stated.

4.1 Insurance reserve

The assets of the Company are self insured. The Company has created an insurance reserve. Appropriation out of profits are

made on discretion of the Board of Directors. The reserve is to be utilized to meet any loss resulting from theft, fire or natural

disasters.

4.2 Borrowings

Borrowings are initially recorded at the proceeds received. Finance cost is accounted for on an accrual basis and is either

added to the carrying amount of the instrument or disclosed as interest and markup accrued to the extent of amount

remaining unpaid.

4.3 Taxation

Current

Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for

taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit

for the year if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax

made in previous years arising from assessments framed during the year for such years.

Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from

differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases

used in the computation of taxable profit.

Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to

the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused

tax losses and tax credits can be utilized.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates

that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the income

statement, except in the case of items credited or charged to equity in which case it is included in equity.

4.4 Employees retirement benefits and other obligations

(a) Pension obligations

The Company operates an approved funded pension scheme through a separate trust called the Pakistan Telecommunication

Employees Trust (PTET) for its employees recruited prior to January 1, 1996 when the Company took over the business from

PTC.

The Company also operates an unfunded pension scheme for employees recruited on regular basis after December 31,

1995.

Provisions are made annually to cover the obligations under the schemes on the basis of actuarial valuations and are charged

to profit. The most recent valuation was carried out as at June 30, 2009 using the Projected unit credit method.

The amount recognized in the balance sheet represents the present value of the defined benefit obligations as adjusted

for unrecognized actuarial gains and losses and unrecognized past service cost and as reduced by the fair value of the planassets.


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Cumulative net unrecognized actuarial gains and losses at the end of the previous year which exceed 10% of the greater of the

present value of the Companys pension obligations and the fair value of plan assets are amortized over the expected average

working lives of the participating employees.

The principal actuarial assumptions used in the valuation as at June 30, 2009 were as follows:

Expected rate of return per annum on plan assets 13% (2008: 10%)

Discount rate 12% (2008: 12%)

Indexation of pension 8% (2008: 8%)

Expected increase in salary 9% for first five years

and then 11% (2008: 11%)

Average expected remaining working lives of participating employees funded 13 years (2008: 13 years)

Average expected remaining working lives of participating employees unfunded 17 years (2008: 17 years)

Expected mortality rate EFU 61 66 Mortality Table

adjusted for Companys

experience

Expected withdrawal rate Based on experience

The expected rate of return is based on complex mathematical model which takes into account the maturity of high yielding

DSCs and other investments present at the beginning of the financial year. It considers the expected returns on the re

investments of maturity proceedings in similar instruments up to the life of related obligations. The expected rate of return

also considers the changes of plan assets during the year on account of contributions and benefit payments. The model

results in expected rate of return of 13% (2008: 10%). The rounded expected rate of return used for the Fund Assets is 13%

during 200809 (200708: 10%)

(b) Medical benefits

The Company provides post retirement medical benefits to pensionable employees and their families. Under the unfunded

scheme all such employees, their spouses, children up to the age of 21 and parents residing with and dependent on the

employee are entitled to the benefit. Unmarried daughters are not subject to 21 years age limit. The pensioner and the familyare entitled to the facility up to the life of the pensioner and spouse. There are no annual limits to the cost of drugs, hospital in

patient treatment and consultation fees.

Provisions are made annually to cover the obligations under the scheme on the basis of actuarial valuation and are charged

to profit. The most recent valuation was carried out as at June 30, 2009 using the Projected unit credit method.

The amount recognized in the balance sheet represents the present value of the defined benefit obligations as adjusted for

unrecognized actuarial gains and losses and unrecognized past service cost.

Cumulative net unrecognized actuarial gains and losses at the end of the previous year which exceed 10% of the present value

of the Companys obligations are amortized over a period of fourteen years.

The principal assumptions used in the valuation as at June 30, 2009 were as follows:


Expected rate of increase in medical costs 11% (2008: 11%)

Expected mortality rate EFU 61 66 Mortality Table adjusted for Companys

experience

(c) Accumulating compensated absences

The Company provides a facility to its employees for accumulating their annual earned leave. Under the unfunded scheme,

regular employees are entitled to four days of earned leave per month. Unutilized leave can be accumulated without limit

and can be used at any time subject to the Companys approval up to 120 days in a year without medical certificate, 180

days with medical certificate and 365 days during the entire service of the employee. Up to 180 days of accumulated leave

can be encashed on retirement provided the employee has a minimum leave balance of 365 days. Leaves are encashed atemoluments applicable for monthly pension.


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New Terms and Conditions (NTC) / contractual employees are entitled to 3 days earned leave per month. Unutilized leave

can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed on departure at gross pay. New

Compensation Pay Grade (NCPG) employees are entitled to 20 leaves after completion of one year of service. Leaves can be

accumulated after completion of second year of service, to a maximum of 28 days. Current year was the first year in which,PTCL calculated the obligation for accumulated compensated absences for NTC/contractual and NCPG employees.

Provisions are made annually to cover the obligation for accumulating compensated absences based on actuarial valuation

and are charged to profit. The most recent valuation was carried out as at June 30, 2009 using the Projected unit credit

method.

The amount recognized in the balance sheet represents the present value of the defined benefit obligations.

Actuarial gains and losses are charged to profit immediately in the period when these occur.


Expected increase in salary 9% in first five years and then 11% (2008: 11%)Discount rate 12% (2008: 12%)

Expected mortality rate EFU 61 66 Mortality Table adjusted for Companys

experience

(d) Provident fund

The Company operates approved funded provident fund covering permanent employees. For the purposes of the scheme

a separate trust titled as PTCL Employees GPF Trust has been established. Monthly contributions are deducted from the

salaries of employees and are to be paid to the Trust by the Company. Interest is paid at the rate announced by the Federal

Government. Such rate for the year was 15% (2008: 12.5%) per annum. The Company contributes to the fund the differential,

if any, of the interest charge for the year and the income earned on the investments made by the Trust. The contributions

deducted from the employees during the year and interest payable by the Company for the year, if any, appear as other

liabilities.

(e) Gratuity

The Company operates an unfunded gratuity scheme for its NTC / contractual employees. Provisions are made annually

to cover the obligation under the scheme on the basis of actuarial valuations and are charged to profit. The most recent

valuation was carried out as at June 30, 2009 using the Projected unit credit method.

The amount recognized in balance sheet represents the present value of the defined benefit obligation as on June 30, 2009

as adjusted for unrecognized actuarial gains and losses.

Cumulative net unrecognized actuarial gains and losses at the end of the previous year which exceed 10% of the present value

of the Companys obligations are amortized over the expected average working lives of the participating employees.



Expected increase in salaries 9% for first five years and then 11% (2008: 11%)

Average expected remaining working lifetime of NTC / 6 years (2008: 5 years)

contractual employees

Retirement benefits are payable to staff on completion of prescribed qualifying period of service under these schemes.

4.5 Trade and other payables

Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be paid in

the future for the goods and / or services received, whether or not billed to the Company.

Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events, it isprobable that an outflow of resources embodying economic benefits will be required to settle the obligation and reliable

estimate of the amount can be made. Provisions are reviewed at each balance sheet date and adjusted to reflect the current

best estimate.


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4.6 Property, plant and equipment

Property, plant and equipment, except freehold land are stated at cost less accumulated depreciation and any identified

impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost includes direct cost, related overheads,

mark up and interest referred to in note 4.19.

Depreciation on all property, plant and equipment is charged to profit on the straight line method so as to write off the

depreciable amount of an asset over its estimated useful life at the annual rates mentioned in note 14 after taking into account

their residual values.

Depreciation on additions to property, plant and equipment is charged from the month in which an asset is acquired or

capitalized while no depreciation is charged for the month in which the asset is disposed off. Impairment loss or its reversal,

if any, is also charged to profit. Where an impairment loss is recognized, the depreciation charge is adjusted in future periods

to allocate the assets revised carrying amount over their estimated useful life.

The assets residual values and useful lives are reviewed at each financial year end, and adjusted if impact on depreciation is

significant.

The Company assesses at each balance sheet date whether there is any indication that property, plant and equipment may

be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in

excess of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down

to their recoverable amounts and the resulting impairment loss is recognized in income currently. The recoverable amount is

the higher of an assets fair value less costs to sell and value in use. Where an impairment loss is recognized, the depreciation

charge is adjusted in the future periods to allocate the assets revised carrying amount over its estimated useful life.

Subsequent costs are included in the assets carrying amount or recognized as a separate asset, as appropriate, only when it

is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can

be measured reliably. All other repairs and maintenance costs are charged to income during the period in which they are

incurred.

The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the

carrying amount of the asset is recognized as an income or expense.

4.7 Intangible assets

These are stated at cost less accumulated amortization and any identified impairment loss. Intangible assets are amortized

using the straight line method over the period of the license or useful life of the software.

Amortization on additions to intangible assets is charged from the month in which an asset is acquired or capitalized while no

amortization is charged for the month in which the asset is disposed off.

The Company assesses at each balance sheet date whether there is any indication that intangible asset may be impaired.

If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess

of their recoverable amount. Where carrying values exceed the respective recoverable amount, assets are written down to

their recoverable amounts and the resulting impairment loss is recognized in income currently. The recoverable amount is

the higher of assets fair value less costs to sell and value in use. Where an impairment loss is recognized, the amortization is

adjusted in the future periods to allocate the assets revised carrying amount over its estimated useful life.

4.8 Capital workinprogress

Capital workinprogress is stated at cost less any identified impairment loss.

4.9 Investments

Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating

capital, are included in current assets, all other investments are classified as noncurrent. Management determines the

appropriate classification of its investments at the time of the purchase and reevaluates such designation on a regular

basis.


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4.9.1 Investments in equity instruments of subsidiaries and associated companies

Investments in subsidiaries and associates where the Company has significant influence are measured at cost in the Companys

financial statements. Cost in relation to investments made in foreign currency is determined by translating the considerationpaid in foreign currency into rupees at exchange rates prevailing on the date of transactions.

The Company is required to issue consolidated financial statements along with its separate financial statements, in accordance

with the requirements of IAS 27 Consolidated and Separate Financial Statements. Investments in associated undertakings, in

the consolidated financial statements, are being accounted for using the equity method.

4.9.2 Other investments

The other investments made by the Company are classified for the purpose of measurement into the following category:

4.9.2.1 Available for sale

The financial assets including investments in associated undertakings where the Company does not have significant influence

that are intended to be held for an indefinite period of time or may be sold in response to the need for liquidity are classifiedas available for sale.

Investments classified as available for sale are initially measured at cost, being the fair value of consideration given. At

subsequent reporting dates, these investments are remeasured at fair value (quoted market price), unless fair value cannot be

reliably measured. The investments for which a quoted market price is not available, are measured at cost as it is not possible

to apply any other valuation methodology. Unrealized gains and losses arising from the changes in the fair value are included

in fair value reserves in the period in which they arise.

All purchases and sales of investments are recognized on the trade date which is the date that the Company commits to

purchase or sell the investment. Cost of purchase includes transaction cost.

At each balance sheet date, the Company reviews the carrying amounts of the investments to assess whether there is any

indication that such investments have suffered an impairment loss. If any such indication exists, the recoverable amountis estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognized as expense.

In respect of available for sale financial assets, cumulative impairment loss less any impairment loss on that financial asset

previously recognized in profit and loss account, is removed from equity and recognized in the profit and loss account.

Impairment losses recognized in the profit and loss account on equity instruments are not reversed through the profit and

loss account.

4.9.2.2 Heldtomaturity

Heldtomaturity investments are financial assets with fixed or determinable payments and fixed maturities that management

has the positive intention and ability to hold to maturity. These are recorded at amortized cost using the effective interest rate

method, less any amounts written off to reflect impairment.

4.10 Stores and spares

Usable stores and spares are valued principally at moving average cost, while items considered obsolete are carried at nil

value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon.

4.11 Trade debts

Trade debts are carried at original invoice amount less an estimate made for doubtful debts based on a review of all outstanding

amounts at the year end. Bad debts are written off when identified.

4.12 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement cash and cash

equivalents comprise cash in hand, demand deposits, other short term highly liquid investments that are readily convertible

to known amounts of cash and which are subject to an insignificant risk of change in value and short term borrowings.

4.13 Government grants

Government grants are recognized at their fair value and included in noncurrent liabilities as deferred income when there is

reasonable assurance that the grant will be received and the Company will comply with the conditions associated with the

grant.


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Grants that compensate the Company for expenses incurred are recognized in profit and loss account on a systematic basis

in the same period in which the expenses are recognized. Grants that compensate the Company for the cost of an asset

are recognized in the profit and loss account on a systematic basis over the expected useful life of the related asset upon

capitalization.

4.14 Financial instruments

Financial assets and financial liabilities are recognized at the time when the Company becomes a party to the contractual

provisions of the instrument and derecognized when the Company loses control of contractual rights that comprise the

financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or

expired. Any gain or loss on derecognition of financial assets and financial liabilities is included in the profit and loss account

for the year.

Financial instruments carried on the balance sheet include long term investments, long term loans, trade debts, loans, advances,

deposits and other receivables, cash and bank balances, long term security deposits from customers, trade and other payables

and interest . All financial assets and liabilities are initially measured at cost, which is the fair value of consideration given and

received respectively. These financial assets and liabilities are subsequently measured at fair value or cost as the case may be.

The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

4.15 Offsetting of financial assets and liabilities

Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally

enforceable right to set off the recognized amount and the Company intends either to settle on a net basis or to realize the

assets and to settle the l iabilities simultaneously.

4.16 Derivative financial instruments

These are initially recorded at cost value on the date a derivative contract is entered into and are remeasured to fair value at

subsequent reporting dates.

4.17 Foreign currencies

All monetary assets and liabilities in foreign currencies are translated into Rupees at exchange rates prevailing at the balance

sheet date. Transactions in foreign currencies are translated into Rupees at the spot rate. All nonmonetary items are

translated into Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined.

Exchange differences are included in income currently. Revenue from international calling services and foreign operating cost

is translated into local currency at the month end rate.

The financial statements are presented in Pak Rupees, which is the Companys functional and presentation currency.

4.18 Revenue recognition

Revenue from telecommunication services is recognized when services have been rendered.

Return on deposits is accrued on a time proportion basis with reference to the principal outstanding and the applicable rate

of return.

Dividend income and return from investments are recognized when the Companys right to receive payment has been

established.

4.19 Borrowing costs

Markup and other borrowing costs are capitalized up to the date of commissioning of the respective qualifying asset. All

other markup, interest and other charges are charged to profit.

4.20 Dividend

Dividend distribution to the Companys shareholders is recognized as a liability in the period in which the dividends are

approved.


17/48



5. Issued, subscribed and paid up capital

2009 2008 2009 2008

(Numbers in thousand) (Rupees in thousand)

note 5.1 3,774,000 3,774,000 A class ordinary shares of Rs 10 each 37,740,000 37,740,000

issued as fully paid for consideration

other than cash

note 5.1 1,326,000 1,326,000 B class ordinary shares of Rs 10 each 13,260,000 13,260,000

issued as fully paid for consideration

other than cash

5,100,000 5,100,000 51,000,000 51,000,000

5.1 These shares were initially issued to the Government of Pakistan in consideration for the assets and liabilities transferred from

Pakistan Telecommunication Corporation (PTC) to Pakistan Telecommunication Company Limited (PTCL) under the Pakistan

Telecommunication (Reorganization) Act, 1996 as referred to in note 1.1.

5.2 Except for voting rights the A and B class ordinary shares rank pari passu in all respects. A class ordinary shares carry one

vote and B class ordinary shares carry four votes save for the purposes of election of directors. A class ordinary shares can

not be converted into B class ordinary shares. However, B class ordinary shares may be converted into A class ordinary

shares at the option exercisable in writing submitted to the Company by the holders of three fourths of the B class ordinary

shares. In the event of termination of the license issued to the Company under the provisions of Pakistan Telecommunication

(Reorganization) Act, 1996 or at any time within three years from April 12, 2006, if there is any change of control of any member

holding B class ordinary shares without the prior written approval of Government of Pakistan, the B class ordinary shares

shall be automatically converted into A class ordinary shares.

5.3 The Government of Pakistan through an Offer for Sale document, dated July 30, 1994 issued to domestic investors a first

tranche of vouchers exchangeable for A class ordinary shares of the Company and through an Information Memorandum

dated September 16, 1994 issued a second tranche of vouchers to the international investors also exchangeable, at the optionof voucher holder for A class ordinary shares or Global Depository Receipts ( GDRs ) representing A class ordinary shares of

the Company. Out of 3,774,000 thousand A class ordinary shares, vouchers against 601,084 thousand A class ordinary shares

were issued to general public. Till June 30, 2009, 599,500 thousand (2008: 599,476 thousand) A class ordinary shares had been

exchanged for vouchers.

5.4 In pursuance of the privatization of the Company, a bid was held by the Government of Pakistan on June 8, 2005 for sale of B

class ordinary shares of Rs 10 each along with management control. Emirates Telecommunication Corporation(Etisalat) was

the successful bidder. The shares along with management control were transferred with effect from April 12, 2006 to Etisalat

International Pakistan (EIP), UAE which is a subsidiary of Etisalat.

2009 2008

(Number of shares)

5.5 Ordinary shares of the Company held by the related parties

as at year end are as follows:

Etisalat International Pakistan (LLC) SE (B class ordinary shares) 407,809,524 407,809,524

Etisalat International Pakistan (LLC) (B class ordinary shares) 918,190,476 918,190,476

1,326,000,000 1,326,000,000


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2009 2008


6. Insurance reserve

Balance as at July 01 1,683,074 1,749,047

Utilized during the year (65,973)

Balance as at June 30 1,683,074 1,683,074

7. Payable to PTA against WLL license fee

Payable to PTA against WLL license fee note 7.1 2,105,500 2,105,500

Present value adjustment (631,756) (631,756)

Present value of license fee payable 1,473,744 1,473,744

Imputed interest charged to profit and loss account to date 480,227 295,095

1,953,971 1,768,839

Current portion shown under current liabilities (1,953,971)

1,768,839

7.1 In previous years the Company had paid to PTA Rs 4,278,639 thousand in respect of license to provide Wireless Local Loop

(WLL) services. Previously PTA allowed the Company to adjust Rs 2,105,500 thousand out of Rs. 4,278,639 thousand already

paid against the amount payable to Universal Service Fund (USF). The balance amount of Rs 2,105,500 thousand in respect

of license fee is payable to PTA in March 2010 and carries no interest. The license fee payable has been discounted to present

value of future cash flows using effective interest rate of 10% per annum and the corresponding adjustment was made to

the cost of license included in intangible assets. Difference between the amount payable and the present value of cash

equivalents being recognized as imputed interest over the remaining credit period.

2009 2008


8. Long term security deposits from customers

non interest bearing note 8.1 990,055 951,618

8.1 During the current year, the Company adjusted security deposits amounting to Rs Nil (2008: Rs 40,711 thousand) against

defaulter receivable balances.

2009 2008


9. Deferred taxation

The liability for deferred taxation comprises of timing

differences relating to:Accelerated tax depreciation / amortization 8,719,515 8,322,099

Provision for doubtful trade debts (6,284,901) (5,730,635)

Provision for doubtful advances and receivables (58,720) (8,439)

Available tax losses (1,996,138)

Others 3,106 3,113

2,379,000 590,000

The gross movement in deferred tax liability during

the year is as follows:

Balance as at July 01 590,000 2,373,223

Charge / (reversal) during the year note 35 1,789,000 (1,783,223)

Balance as at June 30 2,379,000 590,000


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10.1 Employees retirement benefits

Pension Gratuity Accumulating Post Total

compensated retirement 2009Funded Unfunded absences medical facility


Present value of defined

benefit obligations note 10.2 53,610,885 932,231 314,871 1,025,164 6,448,686 62,331,837

Fair value of assets note 10.5 (50,096,598) (50,096,598)

3,514,287 932,231 314,871 1,025,164 6,448,686 12,235,239

Unrecognized actuarial gains / (losses) 1,035,921 (90,359) 76,738 884,560 1,906,860

Liability as at June 30 4,550,208 841,872 391,609 1,025,164 7,333,246 14,142,099

Liability as at July 01 5,389,026 630,417 267,106 833,006 7,120,507 14,240,062

Charge for the year

Current service cost 445,896 131,893 108,135 33,234 64,052 783,210

Interest cost 6,012,673 85,125 30,147 117,419 623,452 6,868,816

Expected return on plan assets (6,297,387) (6,297,387)

Actuarial losses / (gains) recognized

during the year 472 (27,825) (100,395) (127,748)

Liability for NCPG / contractual employees 145,482 145,482

161,182 217,490 138,282 268,310 587,109 1,372,373

Contributions (1,000,000) (1,000,000)

Benefits paid during the year (6,035) (13,779) (76,152) (374,370) (470,336)

Liability as at June 30 4,550,208 841,872 391,609 1,025,164 7,333,246 14,142,099

10.1.1 Charge for the year 2008 was as follows (669,566) 232,604 99,286 186,473 282,072 130,869


2009 2008


10. Employees retirement benefits

Liabilities for pension obligations

Funded note 10.1 4,550,208 5,389,026

Unfunded note 10.1 841,872 630,417

5,392,080 6,019,443

Gratuity note 10.1 391,609 267,106

Accumulating compensated absences note 10.1 1,025,164 833,006

Post retirement medical facility note 10.1 7,333,246 7,120,507

14,142,099 14,240,062


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10.2 Changes in the present value of the defined benefit obligations

(Pension Funded)

2009 2008



Current service cost 445,896 1,035,152

Interest cost 6,012,673 3,232,783

Benefits paid (3,906,371) (14,033,816)

Actuarial losses 953,077 778,679

Curtailment / settlement losses 22,563,271


(Pension Unfunded)

2009 2008



Current service cost 131,893 127,477

Interest cost 85,125 102,687

Benefits paid (6,035)

Actuarial losses 11,870 1,764

Curtailment / settlement (gains) (703,320)

Balance as at June 30 932,231 709,378

(Gratuity)

2009 2008


Balance as at July 01 251,226 111,444



Benefits paid (13,779) (9,798)

Actuarial (gains) / losses (60,858) 41,126

Balance as at June 30 314,871 251,226

(Accumulating

Compensated Absences)

2009 2008





Benefits paid (76,152) (1,382,160)

Actuarial (gains) / losses (27,825) 12,990

Curtailment / settlement losses 157,140

Recognition of NCPG / contractual liabilities 145,482




21/48


(Post Retirement

Medical Facility)

2009 2008





Benefits paid (374,369) (2,664,434)

Actuarial losses / (gains) 940,121 (51,761)

Curtailment / Settlement losses 2,562,239



10.3 Historical Information

2009 2008 2007 2006 2005


Defined benefit pension

plan funded

Present value of defined benefit

obligations at year end 53,610,885 50,105,610 36,529,541 31,413,488 28,134,077

Fair value of plan assets at year end (50,096,598) (48,441,436) (45,158,318) (39,243,528) (34,241,407)

Deficit / (Surplus) in the Plan 3,514,287 1,664,174 (8,628,777) (7,830,040) (6,107,330)

Experience adjustment on

plan liabilities losses 953,077 778,679 2,581,597 603,337 2,538,991


plan assets gains / (losses) (1,735,854) (522,664) 3,776,675 2,611,253 2,339,398

Defined benefit pension

plan unfunded


obligations at year end 932,231 709,378 1,180,770 1,050,561 805,823

Experience adjustment

on pension liabilities (gains) / losses 83,101 1,764 (96,454) 47,981 156,338

Defined benefit gratuity plan


obligations at year end 314,871 251,226 111,444 136,265 38,128


gratuity liability (gains) / losses (51,220) 41,126 (77,172) 10,089 909

Accumulating compensated absences


obligations at year end 1,025,164 833,006 1,871,553 1,735,238 2,972,819


accumulating compensated

absences liability (gains) / losses 39,239 12,990 21,748 (235,937) (91,581)

Defined benefit post

retirement medical facility


obligations at year end 6,448,686 5,195,430 4,798,947 4,583,853 4,723,962

Experience adjustment on post retirement

medical liability (gains) / losses 940,121 (51,761) (274,176) (673,407) (890)


22/48


10.4 Major categories of plan assets of defined benefit pension planfunded as percentage of total plan assets are as follows:

2009 2008

(Percentage)

Defence saving certificates 43 71

Term finance and other certificates 47 14

Pakistan investment bonds 6 7

Fixed & other assets 4 8

100 100

2009 2008


10.5 Changes in the fair value of plan assets


Expected return on plan assets 6,297,387 4,515,832Contributions made by the Company during the year 1,000,000 1,569,879

Contributions made by the employees deputationists 6,487

Benefits paid (3,906,371) (2,286,416)

Actuarial (losses) on plan assets (1,735,854) (522,664)


Actual return on plan assets 4,561,533 3,993,168

10.6 Effect of increase / decrease in medical cost trend rate

Effect of 1 % increase in medical cost trend rate in current service cost and interest cost is Rs 18,181 thousand (2008: Rs 44,426

thousand) and effect of 1% decrease is Rs 15,063 thousand (2008: Rs 36,810 thousand).

Effect of 1 % increase in medical cost trend rate in present value of defined benefit obligations for medical cost is Rs 1,892,189thousand (2008: Rs 1,792,423 thousand) and effect of 1% decrease is Rs 1,563,113 thousand (2008: Rs 1,480,697 thousand).

10.7 In the next financial year expected contribution to be paid to the funded pension plan by the Company is Rs 463,242 thousand

(2008: Rs 740,975 thousand).

2009 2008


11. Deferred government grants

Balance as at July 01 95,000

Received during the year note 11.1 966,044 95,000


11.1 These represent grants received from Universal Service Fund ( a government formed agency ) mainly relating to property,

plant and equipment received as assistance towards development of the telecommunication infrastructure in rural areas

and include telecom infrastructure project for (i) basic telecom access in Pishin, Mansehra, Dadu and Larkana; (ii) Optical fibre

extension Baluchistan Package 2; (iii) Broadband projects in Faisalabad, Sargodha Civil Division, Multan, Bahawalpur, Dera

Ghazi Khan Civil Division and Hyderabad Civil Division.



23/48


2009 2008


12. Trade and other payables

Trade creditors note 12.1 5,414,955 5,964,893

Accrued liabilities note 12.2 1,315,240 1,875,019

Receipts against third party works 499,556 617,706

Taxes payable

Income tax collected from subscribers 366,426 498,389

Income tax deducted at source 13,017 24,466

379,443 522,855

Sales tax payable 1,061,915 731,611

Advances from customers 1,856,153 973,204

Technical services fee payable to related party note 30.2 503,467 563,187

Retention money payable to contractors / suppliers 5,914,707 6,540,698

Payable to:

Research and Development Fund note 30.4 2,397,144 1,980,131

Universal Service Fund related party note 12.3 6,122,799 719,263

Pakistan Telecommunication Authority 34,542 20,216

Due to satellite companies 51,703

Unclaimed dividend 120,342 123,084

VSS benefits payable 61,057 729,563

Other liabilities 432,851 318,534

26,114,171 21,731,667

12.1 Included in trade creditors are amounts due to the

following related parties :

Telecom Foundation Pipes Limited 2,232 2,344

Etisalat UAE 170,990Etisalat Afghanistan 81

Thuraya

11,161 201,436

These relate to the normal business of the Company and are interest free.

12.2 This includes Rs. 573,155 thousand (2008: Rs 519,851 thousand) representing provision against EOBI contribution payable

under EOBI Act 1976, for employees hired subsequent to PTCLs incorporation. The Company has withheld the payment of

EOBI pending the settlement of court case as discussed in note 13.7. The amount of provision made during the year is Rs.

53,304 thousand (2008: Rs 59,830 thousand).

12.3 This includes an amount of Rs 3,458,866 thousand (2008: Nil) payable to Universal Service Fund for the period from May 01,2008 to December 31, 2008. As per agreement between the Company and the Pakistan Telecommunication Authority, this

amount is payable in 15 equal monthly installments starting from May 2009.



24/48


13. Contingencies and commitments

Commitments

13.1 Commitments in respect of contracts for capital expenditure amounting to Rs 12,352,378 thousand (2008: Rs 11,026,561

thousand).

Contingencies

13.2 1,850 cases (2008: 1,666 cases) have been filed against the Company primarily by subscribers and employees. Because of the

number of cases involved and their uncertain nature, it is not possible to quantify their financial effect at present. However,

the management and the Companys legal advisor are of the view that the outcome of these cases is expected to be favorable

and a liability, if any, arising on the settlement of these cases is not likely to be material.

13.3 In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the repealed

Income Tax Ordinance 1979 for the assessment years 199697 to 199899 on failure to withhold/deduct tax under section

50(3) while making payments to non resident satellite companies. The Company filed a writ petition before Honourable

Lahore High Court against the said notices which was dismissed. An appeal was filed against the dismissal before Honourable

Supreme Court of Pakistan which was also dismissed and the Company was advised by the Honourable Court to file an appealbefore the Income Tax Appellate Authorities. Subsequently, the Company filed an appeal with the Commissioner Income Tax

(CIT) Appeals who has annulled the order of the Taxation Officer. The department has filed an appeal with the Income Tax

Appellate Tribunal (ITAT) against the order of CIT (Appeals).

Pending final outcome of the appeal, no provision has been made in these financial statements for the demands aggregating

Rs 1,599,557 thousand (2008: Rs 1,599,557 thousand) . The management and the Companys tax advisor are of the view that

the outcome of the appeal is expected to be favourable.

13.4 In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all messages,

inter alia, through card phone services and mobile telephone services within and outside the city of Karachi. Telecard

Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration of its services

and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of Pakistan ordered for

immediate restoration of Pay Card services including rebate relief and discount to all pay phone service providers. In view of

relief and discount offered by the Government, Telecard Limited withheld payments on account of their monthly bills to the

Company and obtained a stay order from the Honourable Sindh High Court for an amount of Rs 110,033 thousand against the

Company.

On the instructions of Honourable Court, external consultants calculated the rebate and discount amounting to Rs 349,953

thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In the suit, final

arguments of the parties are to be reheard. The Company has also filed a claim against Telecard Limited for an amount of Rs

324,683 thousand receivable up to December 31, 2001 and Rs 9,416 thousand rebate refund claim.

In another case, identical to the above matter M/s Telefon has claimed Rs 97,337 thousand from the Company. In the last

hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing. The management

and the Companys tax advisor are of the view that the outcome of the appeal is expected to be favourable.

13.5 M/s Televoice has filed a suit with Honourable Sindh High Court for arbitration claiming Rs 409,125 thousand for breach of

interconnect agreement by the Company. A counter claim for Rs 120,000 thousand has been lodged by the Company in the

same court. The arbitrator announced an award of Rs.115,000 thousand on April 25, 2006 in favour of PTCL for which execution

has been filed by the Company with the court. However, pending the outcome of the execution application, no adjustment

has been made in these financial statements for the above amounts.

13.6 Consequent to an audit of central excise duty collected by the Company from subscribers for the years 199899 and 19992000

the Rawalpindi Collectorate of Central Excise Department raised a demand for excise duty along with additional duties and

penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company with the Federal Board of Revenue

(FBR), Government of Pakistan for resolution. A committee was formed comprising representatives from the Company and

FBR. As a result of the negotiations, the Company deposited an amount of Rs 466,176 thousand on account of central excise

duty.



25/48


It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate forums

and in the event of favourable decision the amount would be refunded to the Company by Collectorate of Central Excise.

The Company has filed an appeal to contest the additional duties and penalties levied by the Collectorate. During the year

ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided by Custom, Central Excise and Sales TaxAppellate Tribunal in favour of PTCL subject to submission of proof. Pending the final outcome, no provision has been made in

these financial statements for the above demand, since the management and the Companys lawyer are of the view that the

outcome of the appeal is expected to be favourable.

13.7 The Employees OldAge Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of Employees

Old Age Benefits (EOBI) Act, 1976 for payment of Companys and employees contribution amounting to Rs 1,496,829

thousand for the period January 1, 1996 to May 31, 2005. The management has filed a writ petition against the demand before

Honourable High Court which is pending for hearing. However, the management and legal advisor are of the view that case

would be decided in the favour of the Company.

13.8 In respect of tax years 2006 and 2007, Additional Commissioner of Income Tax (ACIT) inter alia amended the assessment

on the grounds that Companys claim of concessional rate of tax at 1% of revenues received from international customers,

provided for through Clause 3 of Part II of Second Schedule to the Income Tax Ordinance, 2001 is not in accordance with suchlegal provisions, as underlying telecommunication services have not been rendered outside Pakistan. The overall impact of

this amendment is approximately Rs 2,250,000 thousand. The Commissioner of Income Tax (CIT Appeals) and Income Tax

Appellate Tribunal (ITAT) have endorsed the departmental view and presently Companys reference against the judgment of

ITAT, in this respect, is pending before the Rawalpindi Bench of the Honourable Lahore High Court.

Provision in connection with above amendment of assessment has not been incorporated in these financial statements owing

to the fact that management and the Companys tax advisor consider that underlying legal and factual position favours the

Companys stance and that the litigation would eventually settle in companys favour.

2009 2008


13.9 Bank guarantees and bid bonds issued in favour of:

Universal Service Fund (USF) against Government grants 2,030,337 190,000

Others 5,000

2,035,337 190,000



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14. Property, plant and equipment

2009

Cost as at Additions/ Cost as at Accumulated Depreciation Accumulated Net book Annual

July 1, (deletions) June 30, depreciation for the year/ depreciation value as at rate of2008 2009 as at July 1, (on disposals) as at June 30, June 30, depreciation

2008 2009 2009 %


Land Freehold 1,643,226 555 1,643,781 1,643,781

Leasehold 74,151 3,267 77,418 21,821 1,178 22,999 54,419 1 3.3

Buildings on Freehold land 9,838,254 210,065 10,048,319 2,701,091 247,328 2,948,419 7,099,900 2.5

Leasehold land 1,009,184 1,009,184 351,389 25,230 376,619 632,565 2.5

Lines and wires 102,895,985 1,677,423 104,573,408 71,323,741 4,630,990 75,954,731 28,618,677 7

Apparatus, plant and equipment 118,024,486 5,240,150 123,264,636 80,785,132 6,995,979 87,781,111 35,483,525 10

Office equipment 1,008,318 183,575 1,189,925 518,677 103,480 620,971 568,954 10

(1,968) (1,186)

Furniture and fittings 444,310 15,801 455,345 296,127 24,642 316,003 139,342 10

(4,766) (4,766)

Vehicles 1,566,821 180,926 1,359,277 1,335,671 114,854 1,076,706 282,571 20

(388,470) (373,819)

Submarine cables 5,715,407 5,715,407 2,086,315 422,063 2,508,378 3,207,029 6.67 8.33

Total 242,220,142 7,511,762 249,336,700 159,419,964 12,565,744 171,605,937 77,730,763

(395,204) (379,771)

2008

Cost as at Additions/ Cost as at Accumulated Depreciation Accumulated Net book Annual

July 1, (deletions) June 30, depreciation for the year/ depreciation value as at rate of

2008 2009 as at July 1, (on disposals) as at June 30, June 30, depreciation

2008 2009 2009 %


Land Freehold 1,641,805 1,421 1,643,226 1,643,226

Leasehold 74,114 37 74,151 20,868 953 21,821 52,330 1 3.3

Buildings on Freehold land 9,568,729 286,079 9,838,254 2,463,469 242,575 2,701,091 7,137,163 2.5

(16,554) (4,953)

Leasehold land 1,009,184 1,009,184 326,159 25,230 351,389 657,795 2.5

Lines and wires 98,704,981 4,191,004 102,895,985 66,291,133 5,032,608 71,323,741 31,572,244 7

Apparatus, plant and equipment 108,244,220 10,188,181 118,024,486 74,849,887 6,294,774 80,785,132 37,239,354 10

(407,915) (359,529)

Office equipment 883,871 130,410 1,008,318 430,402 91,553 518,677 489,641 10

(5,963) (3,278)

Furniture and fittings 394,832 52,965 444,310 273,243 26,009 296,127 148,183 10

(3,487) (3,125)

Vehicles 1,590,906 21,270 1,566,821 1,265,600 108,241 1,335,671 231,150 20

(45,355) (38,170)Submarine cables 5,464,910 250,497 5,715,407 1,664,252 422,063 2,086,315 3,629,092 6.67 8.33

Total 227,577,552 15,121,864 242,220,142 147,585,013 12,244,006 159,419,964 82,800,178

(479,274) (409,055)



27/48


2009 2008


14.1 The depreciation charge for the year has

been allocated as follows:

Cost of services note 29 12,314,429 11,999,126

Administrative and general expenses note 30 188,486 183,660

Selling and marketing expenses note 31 62,829 61,220

12,565,744 12,244,006

14.2 As explained in note 1.1 the property and rights in the above assets at January 1, 1996 were transferred to the Company

from Pakistan Telecommunication Corporation under the Pakistan Telecommunication (Reorganization) Act, 1996. However,

the title to such freehold land was not formally transferred in the name of the Company in the land revenue records. The

Company initiated the process of transfer of title of land in its name in previous year which is still ongoing and shall be

completed in due course of time.

14.3 Disposal of property, plant and equipment2009

Particulars Sold to Cost Accumulated Book Sale Mode of

of assets depreciation value proceeds disposal

(Rupees in thousand)Office Equipment

TV Miscellaneous parties 120 54 66 260 Auction

Computer Accessories Miscellaneous parties 151 63 88 38 Auction

Printers, CPUs Miscellaneous parties 847 581 266 275 Auction

ACs Miscellaneous parties 178 51 127 88 Auction

Photocopiers Miscellaneous parties 648 428 220 115 Auction

Miscellaneous items Miscellaneous parties 24 9 15 97 Auction

1,968 1,186 782 873

Furniture & fittings 4,766 4,766 477 Auction

Motor Vehicles

Gul Muhammad 567 453 114 283 Company Policy

M. Iqbal Waseem 887 710 177 169 Company Policy

Syed Abid Hussain 1,314 1,226 88 250 Company Policy

Zubair Assadullah Tunio 880 704 176 167 Company Policy

Nafees Ahmed Siddique 849 679 170 161 Company Policy

Bashir Hussain 759 455 304 304 Company Policy

Nawazish Ali Anjum 866 693 173 173 Company PolicyRizwan Ahamd Bhutto 323 158 165 152 Company Policy

Hussain Ahmad 585 468 117 293 Company Policy

M. Amjad Ali 772 617 155 154 Company Policy

M. Iqbal Siyal 568 454 114 284 Company Policy

Atiq Nawaz 583 466 117 291 Company Policy

Mazhar Amin 570 456 114 285 Company Policy

Ehsan Ul Haq 563 305 258 338 Company Policy

Rao Abdul Raqeeb Khan 563 225 338 321 Company Policy

M. Roshan Awan 563 225 338 338 Company Policy

Sana Ullah Shaikh 563 225 338 321 Company Policy

Dr. Tahir Saeed 563 225 338 338 Company Policy

Zakir Hussain Satti 563 225 338 338 Company Policy

Anwer Jamil 834 333 500 500 Company Policy

Mian Muhammad Bilal 568 454 114 270 Company Policy

Fuad Enver 563 300 263 338 Company Policy



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2009



(Rupees in thousand)Imran Ul Haq 834 333 500 500 Company Policy

Mubashir Naseer Ch. 582 466 116 291 Company Policy

Iftikhar Ahmed Cheema 582 466 116 291 Company Policy

Kanwar Ghulam Mustafa Khan 867 693 174 403 Company Policy

Shakeel Ahmed 585 468 117 293 Company Policy

Aftab Ahmad Chishti 866 693 173 411 Company Policy

Col (Retd) Zamir Hussain Bhatti 567 453 114 283 Company Policy

Zomma Mohiuddin 1,141 913 228 542 Company Policy

Sajjad Ahmad 759 384 375 455 Company Policy

Shahid Ahmad 773 618 155 309 Company Policy

Gohar Malik 563 305 258 338 Company Policy

S. M. Imran Ali 866 693 173 433 Company PolicyM. Amir Hussain 755 604 151 378 Company Policy

Brig (R) Waqar Ahmed Malik 773 618 155 386 Company Policy

Syed Ali Qadir Jillani 955 764 191 454 Company Policy

Noor Ahmed Noor 563 225 338 338 Company Policy

Javed Iqbal 757 606 151 144 Company Policy

Tariq Qamar 759 405 354 432 Company Policy

Sohail Anwar 585 469 116 293 Company Policy

Zia Ud Din Barki 367 220 147 220 Company Policy

Badar Ul Zaman 367 232 135 220 Company Policy

Behram Shahrokh Aslam 404 222 182 283 Company Policy

Shaukat Ali 759 304 455 329 Company Policy

Muhammad Siddique Afridi 562 450 112 281 Company Policy

Faheem Ul Hassan 323 173 150 153 Company Policy

Abrar Ahmed 775 620 155 147 Company Policy

Fazle Mabood 834 413 420 317 Company Policy

Ghulam Shabbir 416 242 173 188 Company Policy

Mehboob Iqbal Qadir 568 454 114 284 Company Policy

Mudassar Hafeez Dar 563 225 338 321 Company Policy

M. Aamir 563 305 258 321 Company Policy

M. Afzal Kharal 563 305 258 338 Company Policy

Muhammad Umar 569 454 115 270 Company Policy

Wajeeh Anwar 563 305 258 321 Company Policy

Muhammad Saleem Akhtar 746 599 147 142 Company Policy

Mushtaq Ahmed Afridi 610 486 124 305 Company Policy

Sardar Ali 640 512 127 304 Company Policy

S. Mazhar Hussain 886 709 177 443 Company Policy

Syed Shafqat Mehdi 597 478 119 298 Company Policy

Zulfiqar Ali Shah 563 225 338 338 Company Policy

Sher Bahader Khan 367 202 165 244 Company Policy

Saleem 367 202 165 209 Company Policy

Mudassar Hafeez Dar 563 390 173 338 Company Policy

Muhammad Azam 759 417 342 455 Company Policy

Mujeeb Ur Rehman 404 222 182 283 Company Policy

Israr Ahmed Abro 626 502 124 250 Company Policy

Muhammad Anwar 568 454 114 284 Company Policy

Tariq Mehmood 604 484 120 229 Company Policy

M. Hatam Shad 344 201 143 202 Auction

Others 342,634 342,577 57 183,330 Company Policy

388,470 373,819 14,651 204,689

Total 395,204 379,771 15,433 206,039

Others represent vehicles disposed off during the year having a book value of less than Rs 50,000.



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2008



(Rupees in thousand)Apparatus, plant and

equipment

Exchanges 394,740 354,248 40,492 Write Off

DRS Links 8,708 3,562 5,146 Write Off

BTS 4,466 1,720 2,746 Write Off

407,914 359,530 48,384

Buildings

Civil Work / Electrification 16,554 4,953 11,601 Write Off

Furniture and fittings

Office furniture & fixture 3,487 3,125 362 Write Off

Office equipment 5,963 3,278 2,685 Write Off

Motor Vehicles 5,950 5,663 287 Write Off

Sher Bahadur Khan 866 520 346 347 Company Policy

Javaid Akhtar 755 466 289 290 Company Policy

Gul Ahmed 759 293 466 472 Company Policy

Pervaiz Akhtar 866 520 346 347 Company Policy

Naveed Iqbal 755 466 289 289 Company Policy

S Ubaid Hussain Shah 894 551 343 343 Company Policy

Naeem Ul Haq 753 464 289 289 Company Policy

Pervaz Ahmed Mehtab 1,168 720 448 448 Company PolicyRehmat Ullah 1,185 711 474 474 Company Policy

Nawab Khan Afridi 759 291 468 468 Company Policy

M Hanif Khan 787 590 197 197 Company Policy

Muhammad Iqbal Bangish 815 611 204 204 Company Policy

5,714 3,062 2,652 Theft

22,026 14,928 7,098 4,168

Others 23,330 23,241 89 15,483

Total 479,274 409,055 70,219 19,651

Others represent property, plant and equipment disposed off during the year having a book value of less than Rs 50,000.

The amounts written off during the year represent the book value of assets that were partially or completely destroyed under the countrywide riots that took place in December 2007.



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2009 2008


15. Capital workinprogress

Buildings 118,413 127,435

Lines and wires 1,589,605 2,245,182

Apparatus, plant and equipment 3,613,242 4,329,873

Intangibles 38,632 68,517

Advances to suppliers note 15.1 4,476,696 1,121,816

note 15.2 9,836,588 7,892,823

15.1 Advances to suppliers include an amount of Rs 1,685,532 thousand (2008: Rs 449,000 thousand) given to Emirates

Telecommunication Corporation, a related party, in respect of a project called India Middle East Western Europe (IMEWE).

15.2 Capital work in progress includes an amount of Rs 443,426 thousand (2008: Rs 704,271 thousand) in respect of overheads

relating to the development regions capitalized during the year.

2009 2008


16. Intangible assets

Cost

Licenses 4,015,397 4,015,397

Softwares 397,979

note 16.1 4,413,376 4,015,397

Accumulated amortization

Licenses (1,062,749) (866,334)

Softwares (29,957)

note 16.2 (1,092,706) (866,334)

3,320,670 3,149,063

16.1 Cost


Additions during the year

Bill printing software 8,201

Billing and automation of broadband 46,065

Enterprise Resource Planning (ERP)SAP system note 16.6 343,713

WLL and LDI License note 16.5 109,270

397,979 109,270


16.2 Accumulated amortization

Balance as at July 01 866,334 675,385

Amortization for the year

Licenses 196,415 190,949

Softwares 29,957

note 29 226,372 190,949


16.3 The Pakistan Telecommunication Authority (PTA) has issued a license to the Company to provide telecommunication services

in Pakistan for a period of 25 years commencing January 1, 1996 for an agreed license fee of Rs 249,344 thousand. In the year

ended June 30, 2005, PTA modified the previously issued license to provide telecommunication services to include spectrumlicense at an agreed license fee of Rs 4,278,639 thousand. This license allowed the Company to provide the Wireless Local Loop

services in Pakistan over a period of 20 years commencing October 2004. The cost of the license is being amortized on straight

line basis over the period of the license.



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16.4 PTCL acquired the IPTV license from PEMRA on October 1, 2006 for the agreed price of Rs. 9,900 thousand. The cost of license

is being amortized on straight line basis over the period of 5 years.

16.5 The Pakistan Telecommunication Authority (PTA) has issued a license under section 5 of the Azad Jammu and KashmirCouncil Adaptation of Pakistan Telecommunication (Reorganization) Act, 1996, Northern Areas Telecommunication (Re

organization) Act, 2005 and Northern Areas Telecommunication (Reorganization) (Adaptation and Enforcement) Order, 2006

to the Company to establish, maintain and operate a telecommunication system in Azad Jammu and Kashmir and Northern

Areas for a period of 20 years commencing May 28, 2008 for an agreed license fee of Rs. 109,270 thousand. The cost of the

license is being amortized on straight line basis over the period of the license.

16.6 This represents Enterprise Resource Planning (ERP) SAP system with a useful life of 10 years.

2009 2008


17. Long term investments at cost

Subsidiaries unquoted

Pak Telecom Mobile Limited

350,000,000 (2008: 350,000,000 ) ordinary shares of Rs 10 each

Ordinary shares held 100% (2008: 100% ) 3,500,000 3,500,000

Paknet Limited

Nil (2008: 20,000,000) ordinary shares of Rs 10 each

Ordinary shares held Nil (2008: 100% ) 200,000

Provision for impairment note 17.1 (200,000)

Associate unquoted

Telecom Foundation Pipes Limited1,658,520 (2008: 1,658,520) ordinary shares of Rs 10 each

Ordinary shares held 40% (2008: 40% )

(MD: Gul Bahadur Yousafzai) 23,539 23,539

3,523,539 3,523,539

Other investments

Available for sale Unquoted

New ICO Global Communications (Holdings) Limited

218,207 (2008: 218,207) ordinary shares of US $ 0.01 per share

(Acting Chief Executive: Mr. Michael P. Corkery) note 17.2

Alcatel Lucent Pakistan Limited2,000,000 (2008: 2,000,000) ordinary shares of Rs 10 each 20,000 20,000

(Chief Executive: Mr. Ben Verwaayen)

Thuraya Satellite Company

3,670,000 (2008: 3,670,000) ordinary shares of 1 Dirham each 63,900 63,900

(Chief Executive: Mr. Yousuf Al Syed)

World Tel Assembly of Governors

Participation Fund investment of US $ 100,000

(2008: US $ 100,000) 6,390 6,390

Provision for impairment (6,390) (6,390)

Advance against purchase of shares note 17.3 2,000,000

5,607,439 3,607,439



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17.1 The investment has been written off during the year upon dissolution of Paknet Limited.

17.2 New ICO Global Communications (Holdings) Limited acquired the assets of ICO Global Communications (Holdings) Limited,

established in January 1995 to provide global mobile personal communication services by satellite. ICO Global Communications(Holdings) Limited was suspended from trading when the Company filed for Chapter 11 protection on August 27, 1999.

The business was renamed New ICO Global Communications (Holdings) Limited following its emergence from Chapter 11

protection on May 16, 2000. According to the reorganization plan, the shareholders of ICO Global Communications (Holdings)

Limited received one class A ordinary shares of US $ 0.01 in New ICO Global Communications (Holdings) Limited for every

103.8 shares and an option to exchange one warrant of US $ 90 for exchange with 13.84 shares at any time on or after May 16,

2000 (the effective date) on which the reorganization plan becomes effective until 5 p.m. New York City time, on May 17, 2006,

which was extended by the Company up to August 3, 2006. The Company did not exercise the option before expiry.

17.3 This represents an advance given to Pakistan Telecom Mobile Limited, the wholly owned subsidiary, for issuance of ordinary

shares.

2009 2008


18. Long term loans considered good

Loan to subsidiary: PTML unsecured note 18.1 3,000,000

Loans to employees secured note 18.2 455,599 524,556

Current portion shown under current assets note 21 (123,421) (129,613)

332,178 394,943

Others 200

3,332,378 394,943

18.1 This represents an unsecured loan given during the year to Pak Telecom Mobile Limited, a wholly owned subsidiary of the

Company, under

ptcl accounts 2009 (parent)

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