ATH - Annual Report 2011

AMALGAMATED TELECOM HOLDINGS LIMITED

AND SUBSIDIARY COMPANIES

An CompanyATH

VISION STATEMENT‘ To be an internationally competitive ICT investment company in the Pacific’

MISSION STATEMENT‘To enhance shareholder value by pursuing areas that leverage off our core investment in ICT’

VALUESATH’s Values are:

IntegrityPractising good corporate governance and being faithful to our stakeholders.

AccountabilityHelping our stakeholders understand how we make decisions; taking ownership and being answerable and responsible for our actions.

InnovationBeing at the forefront of product development and offerings.

EfficiencyDelivering on- time, and getting things right the first time.

EffectivenessEnsuring that our business is aligned with, and ultimately contributes to, the achievement of our Vision.

GOALSATH’s Goals are:

• Enhanceshareholdervalue

• ExploitconvergencebetweentheInformationand Telecommunication sectors to enter new areas of business.

• Acquireexistingbusinessesorcreate and invest in newly established businesses to achieve growth.

• Becomeacompanyoperatinginternationallyand prominent in the Pacific.

• Adoptinternationalbestpractices,standardsand methods of operation.

AMALGAMATED TELECOM HOLDINGS LIMITED AND SUBSIDIARY COMPANIES ANNUAL REPORT-2011

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Chairman’s Report 2

Acting General Manager’s Report 5

The Board of Directors 7

Company Profile 8

Corporate Governance 10

Telecom Fiji Limited 11

Vodafone Fiji Limited 14

Fiji Directories Limited 16

Internet Services Fiji Limited (trading as ‘Connect’) 17

TransTel Limited 19

Xceed Pasifika Limited 20

ATH Call Centre Limited (trading as ‘ATH InTouch’) 21

Pacific Emerging Technologies Limited 22

Vodafone ATH Fiji Foundation 23

Financial Statements 25

CONTENTS


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The Amalgamated Telecom Holdings Limited directors and management predicted that 2011 would be another period of lower-than-usual profit for the ATH Group linked to a continua-tion of the economic and commercial conditions that had such a severe im-pact in the previous 12 months.

For the first six months of the new fi-nancial year there were indications that the result might be broadly in line with 2010.

But the cumulative effects of generally tight and difficult trading hit especially hard in the last half of the year. A weak economy meant consumer spending was again down and demand de-pressed. This led to fiercer-than-usual competition and an overall decline in revenue. There was an increase of more than 38 per cent in fuel and elec-tricity prices. These were more than balanced out, however, by rigorous controls of operating and personnel expenses, creating a saving of $6.2 million.

The exacting market climate drove Group sales revenue down by three per cent – from $254.8 million to $247.1 million. As ATH companies competed for consumer dollars, prices were re-duced on some products and services. Certain prices came down following rulings by the Commerce Commission.

The final result for ATH was a profit of $4.1 million after minority interests, as against the 2010 figure of $15.4 million. To put this in context, however, the sig-nificant decline was related to non-cash items. Tax expenses were recorded at $14.9 million, compared to $3.9 million in the prior year. Included in this was a write-down of a deferred tax asset in the Telecom Fiji Limited (TFL) books of $4 million. The company chose a

Chairman’s Report

conservative approach in recording tax losses available for utilisation. This tax loss credit is available to be brought back when TFL profitability improves.

The items relating to increased de-preciation and amortisation were as-sociated with capital expenditure for future growth. This included improve-ments to overall technical capacity and an investment of $35 million by TFL on its crucial Next Generation Network (NGN).

More significantly, net Group profit before tax came in at $32.6 million, up nine per cent over the previous 12 months. The Group also had strong operating cash flows of $87 million, the same as last year. Group EBITDA (Earnings Before Interest, Taxes, De-preciation and Amortisation) at $94.0 million closed higher than financial year 2010 EBITDA of $80.5 million.

For capital intensive businesses, these fundamental measures continued to indicate robust cash flows. We can be encouraged by these outcomes.

ATH’s management fee from Fiji Inter-national Telecommunications Limited (FINTEL) – based on that company’s profitability – was reduced by $2.5 mil-lion.

The results included a saving of $1.2 million from a new provision reducing corporate tax for SPSE listed compa-nies to 20 per cent from 28 per cent. The provision applied only to the earn-ings of Amalgamated Telecom Hold-ings, which is the Group’s sole listed company.

A very positive aspect of the financial picture was a strong performance by Vodafone Fiji Limited, which returned an operating profit of $27.7 million, an increase of 25.7 percent on 2010. The

company is confident it can sustain, and probably improve, this level of return.

Xceed Pasifika Limited had a very cred-itable outcome and Fiji Directories Limited lifted its result slightly. There were losses from TransTel Limited, In-ternet Services Fiji Limited (Connect), Pacific Emerging Technologies Limited (PET) and ATH Call Centre Limited. These last two however are new com-panies which have not yet reached the profit stage.

As it moves through the present chal-lenging phase of evolution and devel-opment, ATH is buttressed by a sound balance sheet, resulting from prudent financial management.

Although it has gone up from 26 per cent to 30 per cent, the ATH Group debt-equity ratio is still conservative. It provides the Group with sufficient capacity to invest further in network upgrades and take advantage of new opportunities.

Net debt stands at $102.5 million, while total equity is $240.8 million.

Total assets amounted to $504.1 mil-lion and total liabilities were $263.3 million. Retained earnings stood at $93.2 million.

The fundamental point is that ATH has the financial strength to continue ad-vancing towards its goal of becoming an internationally competitive ICT in-vestment company in the Pacific while meeting the expectations of share-holders.

In the 2011 financial year the direc-tors provided for a total dividend of $12.665 million. This was paid on the basis of an interim dividend of $8.443 million (2 cents per share) and a sched-


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uled final payment of $4.222 million (1 cent per share).

There has been much publicity and comment about rulings on telecom-munication prices by the Commerce Commission. We acknowledge that the Commission has an important role in a deregulated market. It must seek to achieve the right balance of inter-ests for society as a whole in a prudent, even-handed manner. The prices it sets should encourage efficiency, in-vestment and competition which give benefits to the consumers.

Its determination on broadband pric-ing and opening of access to the Southern Cross Cable (SCC) was the final milestone in the liberalization of the market. FINTEL previously had ex-clusive control of the “gateway” to the SCC which gives Fiji a strategically im-portant location on one of the world’s leading telecommunication submarine cables.

The Commerce Commission has made it possible for other operators to independently use the cable for international telecommunications and Internet traffic. Telecom Fiji is therefore in the process of arranging its own in-ternational connectivity to lower costs and deliver international services more effectively while capitalising on its net-work infrastructure and customer base.

Substantial decreases in broadband bandwidth prices by the Commerce Commission will be of major benefit to the ATH Group, particularly for Tel-ecom and its companies. Affordable Internet and broadband is crucial to economic growth. It makes it possi-ble to realise opportunities in the ICT development that are beneficial to society as a whole and are therefore important in closing the digital di-vide. The Fijian economy will produce greater wealth and opportunities for all when there is more and better ac-cess to computers, broadband and information technology across every segment of the populace.

Computers in their various forms with their proliferating applications will be increasingly woven into the fabric of life. The expectations and the needs of the public will grow.

The day will arrive when the people will simply expect their homes to be wired for broadband. It will be a basic

utility like power and water. Access technologies – such as wireless, satel-lite and fibre – are already part of the ATH business portfolio.

More business entrepreneurs and investors will respond to the opportu-nities, just as the ATH Group is doing. The aim is a more vibrant, growing and competitive broadband market.

Faster Internet downloads, more tel-evision channels, video on demand, telemedicine, education e-commerce, the acquisition of knowledge, business support, cloud computing-the func-tions, processes and possibilities are almost endless.

ATH is meanwhile continuing to re-search and draft its own broadband policy to complement the Govern-ment’s efforts to facilitate the estab-lishment of a national network.

A new and important player in the regulation of the telecommunication industry is the Telecommunication Authority of Fiji with functions that in-clude implementing policy, mediating in disputes and protecting consumer interests. The Group welcomes the ap-pointment of Mr Ronald Box as Chief Executive Officer of the Authority, and looks forward to working closely with him.

The ATH board has consistently em-phasised that the Group can never unlock its full potential by restricting its activities to the small Fiji market. The key to long-term success lies with our Pacific Strategy of extending opera-tions and investments overseas.

There is some progress to report.

The new ATH In Touch call centre, which is a partnership with the success-ful Indian operator In Touch Solutions, opened its doors on February 1st with a staff of 49.

It will move progressively towards establishing itself in the Pacific and beyond. The first priority is to build up a local clientele. Then it plans to be-come an international centre offering comprehensive services and concen-trating initially on winning customers in Australia and New Zealand.

As an inaugural step ATH In Touch took over the call centre of Telecom Fiji. It will next concentrate on consolidating in its business the call centre opera-tions of Connect, TransTel, Xceed Pasi-

fika, Fiji Directories and Vodafone Fiji. Following this it will win customers in the wider Fijian commercial sector. By year three it should be ready to serve overseas markets.

The project, which required a total ATH investment of $2.5 million, is structured to be low risk. It is expected to produce good returns and steady dividends. Financial projections envis-age an operational profit in year two and an overall profit in the third year.

In Touch Solutions is providing at its own cost personnel for business development, management support and training at the early stages. The expenses involved are to be converted into equity of up to 25 per cent.

In an economy where jobs are in short supply, this new enterprise has special value for Fiji as it is relatively manpower intensive. In just over two years it could be employing up to 400 local people.

Pacific Emerging Technologies (PET) focuses on electronic payment systems in Fiji and neighbouring countries. It is under close review to ensure it meets ATH expectations for providing a re-turn on investment.

The World Bank-supported submarine cable schemes for Pacific Island na-tions remain of high interest to ATH in the context of strategic partnerships, including equity investments. ATH participation will reinforce Fiji’s status as the regional telecommunications hub, a core concept driving our Pacific expansion. We will capitalize on our direct link to the Southern Cross Ca-ble, a crucial part of a communication network circling the globe. Equally as important, we will contribute to the improved connectivity which will spur development in the Island states.

We understand that the Tonga section of the World Bank project is progress-ing and is now in the financial planning stage. A new Tonga Cable Company is expected to construct a cable to Fiji. Traffic on this will earn revenue for FIN-TEL, with a flow-on effect for ATH.

A proposed optical fibre cable from Vanuatu to Fiji is also to be linked to the Southern Cross Cable. Studies indicate attractive returns and ATH is examining the investment options. The Fiji Government has expressed support in principle for the venture to the Vanuatu-based promoter.


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ATH is very conscious of being in the vanguard of Fiji’s push to take its place in the world revolution in communica-tion technology and how pivotal this is for our country’s economic future. We have much in our favour, includ-ing geographical location, expanding infrastructure and networks, expertise, and increasing availability of leading edge products and services.

ATH can see great potential for local public-private partnerships to take Fiji into the new digital age of the 21st century.

The rapid pace of change in the ICT industry makes it imperative for the Group to constantly review its strate-gic direction and priorities. In our ap-proach to investment for example, we are looking at becoming more active in the ventures in which we have equi-ty. We will do this by coordinating and leveraging capabilities and strengths across the group.

We will pay special attention to stream-lining the operations of a diverse en-terprise through restructuring where appropriate, controlling and reducing costs and enhancing efficiencies. For

our customers and strategic partners the emphasis will be on adding value and strengthening relationships.

When Fiji is on a path of sustained growth, ATH will fully realize the com-mercial promise inherent in the econo-my for the benefit of its shareholders. Its Pacific Strategy will also produce the returns to underpin long-term profitability.

I am very pleased to express the Group’s gratitude to Mr Tomasi Vakatora, who left ATH at the end of December after serving as company secretary and chief executive officer. Mr Vakatora had played a key role in ATH as company secretary and chief executive officer. He helped guide ATH through the process leading to its listing on the South Pacific Stock Exchange and was at the forefront of the Group’s restructuring and transfor-mation in readiness for a deregulated market. ATH wishes Mr Vakatora well in his future endeavours.

Mr Ivan Fong has been appointed ATH acting general manager and company secretary. Mr Fong will be giving spe-cial attention to strategic issues, es-

pecially the revitalization and reshap-ing of investment policy. He is well equipped for the tasks ahead with 16 years experience at TFL where he has worked in key roles, including corpo-rate planning, regulatory, wholesale, marketing and engineering.

I offer my sincere thanks to manage-ment and employees of our subsidiary companies for their dedication and commitment to ATH and its goals.

Ajith Kodagoda,

Chairman.


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The Group encountered another chal-lenging year marked by a slow busi-ness climate and an economy that has yet to gain enough traction to enter firmly into a new cycle of growth.

Management is confident that recov-ery of the Fiji economy is on the way. It is encouraged by the strong growth in tourism, improved foreign reserves and a pick up in remittances from over-seas. Although national investment levels were again low, ATH continued to commit capital to projects that posi-tion our companies for future growth.

The Group’s total investment spend of $59.4 million in the 2011 year reaf-firmed its place in the front rank of local investors. This role for ATH companies has added importance as broadband and the Internet are now regarded as critical national infrastructure. They are essential for supporting innovation and economic growth, and in securing Fiji’s future in the digital economy,

Telecom Fiji Limited (TFL), with its sub-sidiaries Xceed Pasifika Limited and Transtel Limited, is a large company by Fiji standards. It shares with other fixed line operators the challenge of meet-ing the formidable competition pre-sented by mobile phones and global brands brought about by the phenom-enon of Internet communication.

While TFL reported a loss of $10.7 mil-lion for the financial year, a significant contributor to this result came from non-cash items relating to depre-ciation, amortisation and taxation. The TFL result is much more about the company’s conservative position on the depreciable life of assets and taxation than its future prospects. TFL EBITDA remains robust at $32 million and its fixed-line, optical fiber and transmission infrastructure continues to be central to Fiji’s broadband devel-opment.

Acting General Manager’s Report

Indeed, as the usage of traditional handsets declines, TFL and companies like it must change, innovate, and lift their service and product lines. They must leverage their capabilities and create fresh revenue streams by com-peting in new and adjacent markets.

A centerpiece of the retooling of TFL is an investment of $35 million in a Next Generation Network launched in the third quarter of the year. The NGN is a key enabler for the development of applications that will fundamentally change markets and provide TFL with an opportunity to take advantage of this.

Some of the early NGN benefits in-cluded an increase in revenue from data services. Inauguration of an inter-national private lease circuit service at-tracted interest from major corporate organisations with TFL signing up its first customer. The company is confi-dent others will follow.

TFL entered into a major new phase with the introduction of direct interna-tional connectivity through the South-ern Cross Cable. This represents a significant opportunity to diversify and increase revenue sources. The com-pany negotiated capacity agreements with suppliers to enable it to provide international bandwidth and Internet at lower costs through the Southern Cross Cable.

Personnel costs went down by 16.7 per cent following a redundancy pro-gramme the previous year. The com-pany is expecting to recover the full cost of this within two years.

Marketing strategy was revised to be more target-oriented, while the com-pany’s retail presence was strength-ened and product lines improved.

Vodafone Fiji Limited successfully countered fierce competition to retain

its pre-eminent position in the mobile market. Its profit after tax of $27.7 mil-lion was nearly 26 per cent higher than 2010. Revenue came in at $165 million.

Investment of approximately $32 mil-lion in additional transmission towers and base stations gave the company enlarged capacity and coverage, en-suring that it is well positioned to meet the rapidly growing needs for mobile communications.

In the business market Vodafone led the way with products catering to a full spectrum of needs ranging from home office enterprises, to small-me-dium concerns and larger corporate clients. Together with strong growth in mobile Internet services, the core mobile voice and data aspects stayed on a growth path. Among commercial customers there was noticeable inter-est in converged services and more convenient and easy-to-use business tools that could also be used for social networking.

The Vodafone Fiji M-Paisa product, Fi-ji’s first mobile “wallet”, made its mark internationally in spectacular fashion. Conceptualised, designed and de-veloped by the company with cus-tomization by local staff for the specific requirements of Fiji, it was a winner of the Mobile Money for the Unbanked Award at a ceremony in Barcelona Spain in February. Announced at the Mobile World Congress, the award recognized the mobile money service that had the most significant impact on unbanked customers in developing markets.

All the ATH Group felt common pride in M-Paisa’s global success. It was also an accolade for Fiji.

Over 320,000 customers adopted M-Paisa in its first nine months, un-derscoring hidden market demand


6

Group companies do this in numer-ous ways through sponsorships and contributions to many worthy causes. Telecom Fiji, for instance, maintained its sponsorship of the FTIB/Prime Min-ister’s Exporter of the Year Awards. It provided assistance for tertiary and secondary school programmes and youth development generally.

The ATH flagship for social philan-thropy is the Vodafone ATH Fiji Foun-dation which has made an impact on Fiji through its backing for numerous projects which make a positive differ-ence to the nation. Since its inception the Foundation has invested over $8 million. It has become involved with 300 community projects and partners over 200 charity organisations.

In the year to March it gave grants to nearly 50 organisations covering many issues, including health and hygiene, disaster response, eye treatment and care for the blind and assistance for children from families among the poor-est of the poor. A substantial donation went to the fund-raising appeal for the Christchurch earthquake.

The lengthy litigation in Papua New Guinea over a dispute associated with a breach of contract claim in relation to an ATH bid to acquire a holding in Telikom PNG is still before the courts. Following judgment striking out the PNG State’s defence, we are carefully evaluating the approach we should now take.

The board and shareholders of ATH can be assured that the management and employees of the Group are keenly focused on taking it toward the goals set out in the ATH corporate plan and as determined by the direc-tors. Although market conditions are difficult, we have faith in the Group’s ability to progress, adapt and grow and meet its obligations to sharehold-ers and all stakeholders.

We also believe Fiji has the spirit and will to succeed and that ATH will be a part of that.

Ivan Fong,

Acting General Manager/

Company Secretary

and the value of such a service to the people of Fiji.

M-Paisa was initially designed to be a person-to-person money transfer ser-vice. It quickly widened its options to include bill, loan and salary payments and other customer-to-business and business-to-customer functions. It can truly be said that M-Paisa is funda-mentally changing the nature of the Fiji economy by making transactions easier and enabling many more peo-ple to gain entry into commerce and trade.

Xceed Pasifika Limited, which deals in customer premises equipment like telephone handsets and PABXs, had a good year. It recorded a net profit of $621,395, 49 per cent more than in 2010. Overall revenue went up by 22 percent, while operating expenses came down by 67 per cent, mainly due to a transfer of systems business to Tel-ecom. This was a precursor to Xceed’s absorption into TFL as a business unit.

With the exception of computers, growth was registered for all major product categories. Multimedia and Power Protection Systems accom-plished the highest rates of growth at 308 percent and 130 percent respec-tively.

The year was one of steady progress for Fiji Directories Limited, publisher of Fiji’s telephone directory and Yel-low Pages. The company produced an operating profit of $1,212,082 (2010: $1,133,975). Total income of $4,261,462 was achieved. This was 2.8 percent more than 2010. Sales revenue for print advertising increased by 3.8 per cent to $4,078,500 while the customer base in the 2011 directory grew by 6.6 per cent. The company’s strategy of providing services over the Internet and in new media is showing strong signs of growth. This is particularly encouraging for the future of directory and location services in a market in transition.

TransTel Limited, a marketer and seller of prepaid transaction cards, had a net loss of $461,886. Its parent com-pany, TFL, successfully bid for the Fiji Government’s bus electronic ticketing system. TransTel is managing the sys-tem. Electronic ticket capture consoles will be installed around Fiji and linked to a central database via TFL’s wireless (CDMA network). Fare subsidised stu-dents, and later the general public, are to be issued with Yehdo cards which

will facilitate the payment of bus fares through a cashless mechanism.

The success of this project will open doors to other opportunities related to e-commerce and ‘contactless’ mi-cro payments. TransTel is confident this project will give the Group an improved share of the expanding e-commerce market.

Internet Services Fiji Limited, trading as Connect, moved close to break-even. It had a net loss of $59,287. Within the context of a very competitive and largely unprofitable ISP market, this was a very large improvement over its 2010 loss of $2,668,035.

Operating revenues reduced by 39 per cent over the 2010 figures. However, much of this was due to the transfer of corporate accounts to TFL and lower costs for Internet bandwidth that had been passed on for the benefit of con-sumers. In February 2011, Connect be-came an operational part of Telecom after nine years as a subsidiary. Inte-grated product and service develop-ment, introduction of cost efficiencies and changes in senior management were part of a restructure. This will equip Connect’s parent company, TFL, with more core skills and resources to compete in an increasingly Internet enabled environment.

As the Chairman has pointed out ATH Call Centre Limited and Pacific Emerg-ing Technologies Limited (PET) are still in the establishment stage.

PET was established to provide elec-tronic payment services through its Payecomm system. It made an operat-ing loss of $323,227.

The ATH Call Centre Limited, another major initiative for our international plans, went into operation in February. This company is also performing to expectations outlined in its business plan. The operating loss of $602,011 is the result of start-up expenditures. With 49 seats now in operation, the call centre has been able to demonstrably lift performance and work together to improve processes for TFL. The call centre is now building its business in stages with the goal of entering the international market for business pro-cess outsourcing.

In this day and age it is not enough for commercial concerns to focus only on their profits and balance sheets. They must engage with their local communi-ties as corporate citizens.


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The Board of Directors

Taito Waqa Director

Umarji Musa Director

David Kolitagane Director

Ajith Kodagoda Chairman

Tom Ricketts Director

Ivan Fong Acting General Manager/

Company Secretary

Arun Narsey Director


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Establishment and OwnershipAmalgamated Telecom Holdings Limited (ATH) was incorporated as a public company on 10 March 1998, as a vehicle through which the Fiji Gov-ernment’s investments in the telecom-munications sector was consolidated for the purpose of privatisation under its public sector reform programme.

ATH commenced operations on 16 December 1998, following the sale of a 49 per cent strategic stake in the company to the Fiji National Provident Fund (FNPF) as part of a tender in which a number of international parties participated. The FNPF subsequently consolidated its control of ATH in Sep-tember 1999 after it acquired a further 2 per cent of the issued shares in ac-cordance with contractual obligations. Government’s shareholding as a result, was reduced to 49 per cent.

In February 2002, Government sold a further 9.7 per cent of its shares through a Private Placement with insti-tutional investors, including the FNPF, which acquired further shares. An ad-ditional 4.7 per cent of Government’s shares were sold in a Public Offer a month later. Government is currently ATH’s second largest shareholder with 34.6 per cent interest, while the FNPF is the largest shareholder with 58.2 per cent.

The CompanyATH is Fiji’s principal telecommunica-tions holding company, through its investments and provision of direct services in a broad range of telecom-munications and related services. The principal activities of the ATH Group include:

Provision of voice, Internet and data related services;

Provision of business communications solutions;

Provision of ICT and surveillance products;

Provision of transaction management and prepaid services;

Provision of directory information services;

Provision of Business Processing Out-sourcing (BPO), including call centre services.

In addition, ATH has rights to manage Government’s 51 per cent sharehold-ing in Fiji International Telecommuni-cations Limited (FINTEL), the country’s current sole provider of international telecommunication services.

Group StructureTelecom Fiji Limited (TFL) is a 100 per cent owned subsidiary of ATH, and operates Fiji’s only Public Service Tel-ephone Network (PSTN).

Fiji’s telephone directory is published by Fiji Directories Limited, a joint ven-ture between ATH (90 per cent), and Edward H O Brien (Fiji) Limited (10 per cent).

Vodafone Fiji Limited is the country’s leading provider of mobile telephony service, using the Global System for Mobile (GSM) standard. It is a joint venture between ATH (51 per cent) and Vodafone International Holdings BV (49 per cent). During the year Vodafone launched a mobile phone money transfer service.

Internet Services Fiji Limited, which trades under the “Connect” brand name, was a 100 per cent subsidiary of TFL, and has been reabsorbed back into TFL.

Transtel Limited is a 100 per cent sub-sidiary of TFL. Its principal activities are the marketing and selling of pre-paid transaction cards.

Xceed Pasifika Limited is a 100 per cent subsidiary of TFL, and sells cus-tomer premises equipment such as telephone handsets, PABXs, customer premises cabling, computers, and sur-veillance equipment.

ATH Technology Park Limited is a 100 per cent subsidiary of ATH, and was established as the vehicle through which the proposed ATH Technology Park at Vatuwaqa could be developed, owned and operated.

ATH Call Centre Limited, which trades under the “ATH In Touch” brand name, is a 100 per cent subsidiary of ATH. It was set up and commenced operations on 1 February 2011.

Pacific Emerging Technologies Limited is a joint venture between ATH (51 per cent) and Pacific Electronic Commerce Pty Limited (49 per cent), and provides electronic payments service through its Payecomm system.

Strategic PositioningATH is dedicated to becoming an in-ternationally competitive ICT company in the Pacific. Its mission is to enhance shareholder value by pursuing busi-nesses that leverage off its core invest-ment in ICT. ATH’s values are integrity, accountability, innovation, efficiency and effectiveness.

Business RisksThe ATH Group’s future prospects however are subject to the following risks:

Implementation of telecommunica-tions policy that increases uncertainty, or limit’s the opportunity of operators to earn commensurate returns, thereby hindering innovation and investment;

Company Profile


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Low economic growth due to continu-ing weak macro-economic conditions limiting potential for growth in busi-ness;

Weak foreign currency exchange rates resulting in high costs as telecommuni-cations equipment and support fees, a large portion of costs, have to be paid in foreign currency;

Rapid technological changes that render current technology obsolete sooner than expected. The cost of replacing equipment could be sub-stantial, while new entrants would have the advantage of entering the market with a lower cost structure, and more advanced technology;

Restrictions on foreign investments by Fiji domiciled companies that could affect implementation of ATH’s growth path in the region through its Pacific Strategy.

The Year’s PerformanceATH’s Consolidated Net Operating Profit After Tax and Minority Interest for the year ended 31 March 2011 was $4.1 million, a decrease of $11.3 million from last year’s result. The decline was due to a reduction in sales revenue from lower prices, com-petitive pressure and generally weak trading conditions, compounded by increase in total expenses, particularly de-recognition of deferred tax assets, depreciation and amortisation.

Positive contributions to the Con-solidated Net Operating Profit After Tax and Minority Interests were forth-coming from ATH, Vodafone Fiji, Fiji Directories and Xceed Pasifika. The rest of the companies recorded losses, notably TFL.

Consolidated sales revenue fell by 3 per cent. The decrease in consolidated sales revenue was largely due to de-clines in sales revenue for TFL, Transtel and Internet Services with the excep-tion of Fiji Directories.

The ATH Group’s gearing ratio at year’s end was at 30 per cent compared to 26 per cent last year. Total assets were $504.1 million, a decrease from $508.1 million last year.

The holding company earned $16.2 million in ordinary dividends during the year, compared to $15 million

last year. The increase was the result of favourable performances by Voda-fone Fiji Limited and Fiji Directories. Interest income from the company’s portfolio of fixed income securities, was roughly on par with last year. Man-agement fees associated with rights over Government’s shareholding in FINTEL were $0.82 million, compared with $3.3 million for last year. Operat-ing expenses incurred by the holding company decreased by 25.4%. There were decreases in Directors fees, due to vacant positions on the Board, legal and professional fees, and travel and transportation as a result of reduced overseas travel.

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Lack of skilled personnel due to labour mobility locally and internationally and migration overseas that could disrupt operations and cause significant in-crease in labour costs;


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Committees of the BoardThe Board has formally constituted three committees, the Corporate Gov-ernance Committee, the Audit and Finance Committee, and the Human Resources Committee. The Corporate Governance Committee comprises all of the Directors, and is also chaired by the Board Chairman. The Corporate Governance Committee is responsible for ensuring that the Board operates effectively and efficiently, and that the company has appropriate employ-ment practices.

The Human Resources Committee is responsible for advising the Board on human resources issues including the remuneration and conditions of employments of the General Manager, and senior management, and succes-sion planning.

As at 31 March 2011 the Audit and Finance Committee comprised Messrs Arun Narsey (Chairman), Ajith Koda-goda, Tom Ricketts and Umarji Musa. The Audit and Finance Committee is responsible for monitoring ATH’s financial plans and strategies, monitor-ing the external audit of the company’s affairs, reviewing the quarterly, half-year and annual financial statements, and monitoring the company’s compli-ance with applicable laws and stock exchange requirements. The Commit-tee met four times during the year, and attendance was as follows:

Role of the BoardThe role of the Board is to assume accountability for the success of the company by taking responsibility for its direction and management in order to meet its objective of enhancing corpo-rate profit and shareholder value.

The BoardThere is provision in the company’s Ar-ticles of Association for a Board com-prising seven Non-Executive Directors; four Strategic Investor Directors; and three Fiji Directors.

The Strategic Investor Directors are appointed or removed by the Fiji National Provident Fund (“FNPF”) as the major shareholder and “Strategic Investor”. Written notice to ATH is re-quired in the event of any change to this category, which can be made at any time.

Fiji Directors are elected by sharehold-ers at the Annual General Meeting. One third retire by rotation each year and are eligible for re-election. The FNPF is excluded from participating in this election process.

The Directors in office on 31 March 2011 were Messrs Ajith Kodagoda (Chairman), David Kolitagane (Deputy Chairman), Taito Waqa, Tom Ricketts and Arun Narsey and Umarji Musa.

Mr Umarji Musa was elected at the 12th Annual General Meeting on 9 Au-gust 2010 in place of Mr Arun Narsey. However Mr Narsey was later reap-pointed on 1 September 2010.

Ajith Kodagoda Appointed on 16 July 2009

David Kolitagane Appointed on 20 August 2009

Taito Waqa Appointed on 21 August 2008

Arun Narsey Appointed on 1 September 2010

Tom Ricketts Appointed on 6 August 2009

Umarji Musa Appointed on 23 August 2010

A total fee of $63,541.85 was paid to Directors for their services during the year, in accordance with a sharehold-ers’ resolution at the 12th Annual Gen-eral Meeting. A further sum of $2,400 was paid as allowances for various Committee meetings. The company also met other expenses, mainly for travel and accommodation that were incurred during the course of their duties. Directors were also covered under a Directors and Officers’ Insur-ance Policy, and a Personal Accident Insurance Policy.

Meetings of the BoardThe regular business of the Board during its meetings covers business in-vestments and strategic matters, gov-ernance and compliance, the General Manager’s report, and performance of subsidiary companies.

The Board met 7 times during the financial year ended 31 March 2011. Attendance was as follows:

Corporate Governance

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Ajith Kodagoda 7 4 3

David Kolitagane 7 4 3

Taito Waqa 7 7 0

Arun Narsey 7 7 0

Tom Ricketts 7 6 1

Umarji Musa 3 3 0

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Arun Narsey 4 4 0

Tom Ricketts 4 2 2

Ajith Kodagoda 4 2 2

Umarji Musa 3 2 1


11

Board of Directors

Mr Tom Ricketts Chairman

Mr Daryl Tarte Director

Mr Tevita Kuruvakadua Director

Mr Pratap Singh Director

Mr Arun Narsey Director

Mr Abraham Simpson Director

Mr Samuela Vadei Company Secretary

OverviewWith mobile telephone penetration in Fiji now over 90 per cent of the popu-lation, large competitive pressure and associated revenue reductions for a traditional fixed line operator such as Telecom Fiji Limited (TFL) have been experienced.

Continuing licence restrictions on mobile services mean that TFL faces a challenge in an environment where the fixed line business is in global decline.

However, the opening up of the inter-national telecommunications gateway through the Southern Cross Cable (SCC) presents TFL with an opportu-nity of significantly enhancing its data services and revenue. There is also new scope for launching non-traditional voice products in the future.

TFL’s revenue declined by 13.5 per cent due mainly to a reduction in call charges introduced to counter the increased competition from mobile services. Direct costs, however, fell by 25 per cent. This was mostly related to a drop in interconnection rates for calls terminating on mobile networks as de-termined by the Commerce Commis-sion. Access to the SCC in the latter part of the financial year also aided the cost reductions.

Continuation of reduction in inter-connection rates will again provide a benefit in the next financial year.

The decline in direct costs was signifi-cantly greater than the fall in revenue and this resulted in net sales contri-bution increasing to 75 per cent of revenue against 71.1 per cent in the prior year. Voice revenues decreased

by 20.2 per cent mainly due to a fall in post-paid voice services. On a positive note, however, the drop in revenue for voice service rentals experienced in the previous year has been arrested in the year to March 2011.

Data network revenue, which declined by 30 per cent in 2010, was up by eight per cent. This was attributed to in-novative initiatives and the continued rollout of new products and services. This revenue stream is expected to be a significant driver of revenue and profits in the next financial year owing to the new products that TFL can offer through the deregulated environment. Other revenues were maintained at levels comparable to 2010.

Controllable operating costs de-creased by 12.6 per cent year on year. These costs excluded the expenses

Telecom Fiji Limited


12

related to redundancies in 2011 and previous financial years.

A significant portion of this reduction was achieved in the following areas:

• Personnelcostswentdownby16.7per cent year on year as a result of redundancies. In line with pro-jections, the company is moving towards recovering the full redun-dancy cost incurred over a two-year period.

• Marketing costs declined by 29.5per cent; and

• Operating expenses overall weredown by 5.7 per cent. This reduc-tion was achieved despite a signifi-cant increase in electricity and fuel costs.

Depreciation increased by 28.6 per cent over the previous year. This re-sulted from continuing investments to take advantage of new revenue streams such as international data solutions that can now be provided. The company continues to adopt a conservative depreciation policy on new investment in line with European telecommunication providers.

Therefore, against the 13.5 percent revenue reduction, net profit before depreciation and one-off redundancy costs and bad debt provisions, de-clined by four per cent as falls in rev-enue were mitigated by costs savings.

The increase of financing costs by 78.8 per cent had a significant impact on TFL’s performance. If the cost of financing had been disregarded, profit before financing costs and one-off costs would have increased by three per cent.

MarketingSubstantial headway was made in rea-ligning and further developing TFL’s strategic marketing towards being ap-propriately segmented, targeted and revenue generating. Marketing activity going forward will be more campaign-focused, customer-specific, needs-led and analytically driven. The aim is to deliver a more compelling value prop-osition to the market.

Considerable effort was made to en-hance TFL’s retail presence and prod-uct lines for both the TFL and Connect

brands, including the reorganisation of sales capability aligned around key business segments. Improvement in the important area of customer care and service continuity was a priority. Despite a few unfortunate outages at Connect, significant progress in this area was made.

TFL maintained its support of im-portant social-business partnerships, perhaps most notably its major spon-sorship of the successful FTIB/Prime Minister’s Exporter of the Year Awards event. TFL was also a sponsor of the Melanesian Spearhead Group Lead-ers’ Forum in Suva.

The company’s ongoing commitment to supporting youth development was reflected by its exclusive sponsorship of the resoundingly-popular Tadra Kahani Schools Dance competition. It was also a silver sponsor of Suva’s Hi-biscus Festival, a supporter of the Ca-reers Expo, and host of the Safe Kids Corner at Fiji Showcase, to name a few.

Continued support of education and leadership development was shown through TFL’s sponsorship of High Achiever Awards at both tertiary and secondary school level, in addition to support for Open Days at various tertiary institutions, including the University of the South Pacific and Fiji National University.

New Products Network Roll outNew products rolled out by TFL were mainly in the corporate area. The focus was on capitalising on TFL’s new net-work investment in Next Generation Network (NGN) services launched in the third quarter. A significant number of key customers have been trans-ferred to the NGN and Multi Protocol Label Switching-based services were rolled out to some of these customers. This helped TFL to facilitate increased revenue from data services.

TFL also launched an International pri-vate lease circuit service and acquired its first customer during the year. There was significant interest by major cor-porate operators in acquiring a similar service. This should have beneficial impact on data revenue streams in the future.

Arrangements are being established with service providers to offer trans-parent data services to international destinations in conjunction with the aforementioned service. TFL also now provides its customers direct con-nectivity for IP based services via the Southern Cross Cable Network as a result of the new access to the SCC. This produced significant cost benefit to customers and delivered reductions for Internet and data services ranging from 25 per cent to 75 per cent.

New student and corporate plans for TFL’s mobile broadband service were launched while new ADSL product offerings were finalised. These will sig-nificantly increase the speed of wired ADSL connectivity when introduced in the second quarter of the next finan-cial year.

From the engineering aspect, the company focused on completing cru-cial projects based on network trans-formation. Included in these were the NGN project and a billing and opera-tions support system. The two projects were successfully completed and pro-vide the company with both network resiliency and the ability to monitor the online health of the network. This will reduce network down time and increase customer satisfaction and network utilisation.

Customer ConnectionsThe number of working lines at the end of the year was 129,845, a reduc-tion of over 10 per cent compared with last year’s subscriber figures. Fixed line connections were replaced by wireless in rural areas but local calls and line rentals continued to be subsidised. TFL recently increased its local call charges to reduce this subsidy.

Regulatory FrameworkThe Commerce Commission made a determination in January 2010 with regard to the cost of terminating calls from local mobile networks and from international networks.

While the cost of terminating calls on local mobile networks increased significantly in the January 2010 deter-mination, a reduction in the cost of ter-mination in November 2010, in accord-ance with a gradual reduction of rates


13

provided for, had a positive impact on the direct costs of the company.

There will be similar cost reductions in the next financial year that will have a similar beneficial impact on the com-pany’s financials.

TFL made submissions to the Com-merce Commission that the high termination rates charged by mobile operators effectively stifle competi-tion as the wholesale charges for TFL were higher than the effective retail rates mobile operators charge their

subscribers. TFL is therefore prevent-ed from offering competitive prices against these high direct charges.

Deregulation of the telecommunica-tions industry envisaged a recovery of the access deficit which is the subsidy that TFL provides to its subscribers for domestic telephony services. The de-lay in the inauguration of the Telecom-munication Authority (TAF) worked against the company’s efforts to re-cover the access deficit as it involves substantial economic analysis and a regulatory body to consider TFL‘s

claim. With TAF and the Commerce Commission now fully established, the company intends to progress its submissions on this matter in the next financial year.

Human ResourcesTFL continues to focus on its human resources which are pivotal to the pro-vision of services. Non-core functions such as the TFL call centre were out-sourced, thus significantly impacting on the 8.7 per cent reduction in staff.

50000

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2007 2008 2009 2010 2011

Sales Revenue

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00

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2007 2008 2009 2010 2011

Telephone Working Lines

0

160000


14

Board of Directors

Mr Lionel D S Yee Chairman

Mr Robin Yarrow Director

Mr Isikeli Tikoduadua Director

Mr Russell Hewitt Director

Mr Kursten Shalfoon Director

Mr Greig Wilson Director

Mr Pradeep Lal Company Secretary

A number of subscribers chose not to register by the deadline and were dis-connected from the network in compli-ance, with the Decree.

Despite the decline in net connec-tions, Vodafone maintained its market share, increased its revenues and net profit after tax. Revenues grew by 4.8 per cent and profit after tax went up by 25.7 per cent due to an improvement

Vodafone Fiji continued to lead the mobile communications sector in Fiji, maintaining its market share despite three years of competition. A slight decline in net customer numbers was registered for the financial year, attrib-uted largely to the compulsory Phone Services Decree 2010. The Decree requires all phone users in the country to register with their network provider.

in gross margin and savings in indirect costs. This was a very pleasing result given that the economy remained generally flat.

With over 95 per cent mobile network coverage and close to 100 per cent mobile penetration, the voice market is fiercely competitive.

Increased investment in its network placed the company in a good posi-tion to strengthen and consolidate revenue opportunities through data and voice from increased capacity and coverage.

Corporate BusinessVodafone’s leadership in the business market continued as a result of provid-ing innovative business solutions, val-ue-packed propositions and increased focus on quality customer service. It continues to cater to all business segments, small office-home-office (‘SoHo’), small-medium enterprises (‘SMEs’), corporates and multinational corporations (‘MNCs’). While the core mobile voice and data business con-tinues to grow, Vodafone’s enterprise customers are increasingly requiring converged and integrated voice and data solutions.

In response to a customer need for more reliable and cost-effective solu-tions, Vodafone introduced its Internet Protocol Virtual Private Network (IP-VPN) services which provide data con-nectivity between offices, dedicated Internet services and connectivity between private business communica-tions systems. Customers can now use Vodafone’s IPVPN services for running enterprise and business applications, retail point of sale systems, voice, emails, Internet and video. The chang-

Vodafone Fiji Limited

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60

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2007 2008 2009 2010 2011

Mobile Connections

0

100

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15

ing nature of the telecommunications industry has seen Vodafone evolve into an ICT company working closely with IT vendors and companies to offer customers a complete solution.

The introduction of tablet computers and a greater range of smart phones saw more customers using mobile In-ternet and data services. Customers are looking for more convenient and easy-to-use business tools that also satisfy social networking needs. Sev-eral new BlackBerry models and con-tractual promotions were also intro-duced and this led to a good uptake of BlackBerry smart phones. These have proved to be very popular amongst corporate and business clients.

Products and Services RechargeThe company further extended its distribution and access points for re-charge availability with the launch of two new services. A new “The Trans-fer To” service was introduced with an international recharge distributor. This allows former Fiji nationals in Australia and New Zealand to top-up the accounts of Vodafone Fiji prepaid subscribers back home.

M-PAISAThe launch of M-PAISA, Vodafone Money Transfer Service with its re-charge module, opened a convenient 24 hour channel for prepaid custom-ers to top-up their mobiles directly . This service holds great potential for improving recharge distribution and accessibility in outlying areas and will be further developed in the next finan-cial year. M-PAISA is Fiji and the re-gion’s, first mobile wallet product and was inaugurated in June 2010. When launching the service, the Prime Min-ister acknowledged that M-PAiSA was a landmark achievement that was ex-pected to comprehensively transform the banking and financial landscape in Fiji. It was conceptualized, designed

and developed 100 per cent locally by Vodafone Fiji.

Within its first nine months, M-PAiSA had registered 320,000 customers. The service was initially launched with a person-to-person money transfer service. It now includes bill payment choices and other customer-to-busi-ness and business-to-customer pay-ment options. The product won an international accolade at the Mobile World Congress in Barcelona.

Data Mobile Internet Vodafone Fiji continued to grow the data business. Being the only 3G net-work provider in the country gave the company first-mover advantage.

Data services provided through Mo-bile Internet on handsets and Mobile Broadband Internet (Flashnet) via wireless modems were instrumental in exponentially growing corporate, busi-ness solutions and consumer markets.

A reduction in duty by Government, and corresponding decrease in prices on Internet-enabled smart phones also facilitated the uptake of mobile Inter-net by new users.

Broadband Mobile - Flashnets The 3G network has extended from Suva to Rakiraki covering major towns and cities and hotels and resorts. Ag-gressive campaigns with attractive startup prices on mobile broadband flashnet wireless modems resulted in high acquisition of new users.

Vodafone Retail and Dealers RetailThe Vodafone retail segment grew significantly. It now operates 19 stores Fiji wide. Its retail presence throughout Viti Levu is extensive. There was a new outlet in Korovou. A new outlet was also opened in Savusavu, Vanua Levu.

DealersVodafone maintained strong business relationships with all its dealers and dealer networks. They are vital in the delivery of Vodafone products and srvices to consumers.

Events Sponsorships and Public RelationsVodafone was highly active across a range of events and activities around the country. These produced posi-tive results and increased brand vis-ibility. The company continued its sponsorship of a number of events and sporting bodies, including the FNRL, Fiji FACT, with the Fiji Football Association, Fiji National Swimming Team, with Fiji Swimming Association, and the South Pacific Bowling Carnival.

The Vodafone Cup Secondary Schools Rugby League competition grew as more schools took part and keen in-terest was expressed in extending the competition to the north.

The company took on a new challenge with the sponsorship of the Kula Film Awards for aspiring film makers. It took on tourism award sponsorships in the Prime Minister’s Exporter of the Year Awards. Vodafone continued to give support to the Fiji Institute of Accountants, Head Teachers & Princi-pals Conferences, Local Government meetings and the conference of the Fiji Medical Association.

In art and music Vodafone supported the Malaga Concerts for the enhance-ment of contemporary Pacific cultures. We partnered with the Rescue Mission of Fiji and organised the Hope Char-ity Concert to assist street children. Together with Fiji TV we continued our partnership in the hugely successful Vodafone MiC music talent show.


16

Board of Directors

Mr Aslam Khan

Chairman

Mr Kim Askew

Director

Mrs Titilia Veiogo

Director

Mrs Margaret Peters-Whippy

CEO/Company Secretary

Mr Tomasi Vakatora

(resigned 31.12.2010)

2010/2011 was another year of steady growth for Fiji Directories Limited with the result reflecting a total net profit of 6.9 per cent.

GrowthTotal income overall was $4,261,462, a 2.8 per cent increase over last year.

Growth was demonstrated primarily in the 3.8 per cent increase in sales revenue for print advertising, the pre-dominant source of income. A figure of $4,078,500 was recorded compared to $3,925,093 for 2010.

Another notable achievement was that of the Fiji Business Search product. There was a 93 per cent increase in in-

come from the electronic version of the Fiji Yellow Pages, a service used primarily by companies to build their customer databases.

Online revenue from ad-vertisement placements and enhanced search results for www.yellow-pages.com.fj recorded a rise of 11.4 per cent. With more than 200,000 visits annually, this area of the company’s business is expected to continue to increase, proving its value as the ‘digital real estate’ of this resource.

Customers in the 2011 telephone directory grew by 6.6 per cent compared with the 2010 issue.

New lookThere is now a new look for the directory based

on a redesign that was adopted after extensive research. The Yellow Pages are now immediately accessible at the front of the directory, and handy fold-out tabs make locating sections a lot easier. Apart from its design, the direc-tory’s map section grew by four more glossy pages to accommodate public demand for the areas of Nadi, Lautoka and Savusavu.

Fiji Directories has consistently pro-vided innovative and integrated local search solutions for consumers, as well as important marketing avenues for businesses, via print, online, and voice channels.

Fiji Directories Limited

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17

OverviewConnect faced yet another challeng-ing year. It had to contend with stiff competition among ISP companies.

Operating revenues reduced by 39 per cent on 2010 figures. This was mainly related to the reporting of leased line Internet revenue to Telecom Fiji Lim-ited (TFL) from Connect. A more ag-gressive stance towards bad debt cus-tomers was introduced. This impacted on active Internet access services. The exercise helped in controlling Con-nect’s large bad debt problem.

Wholesale Pricing ChangesWith the reduction in wholesale in-ternational Internet pricing, Connect undertook a major re-pricing of all its post-paid products. This saw the dou-bling of data and cap speeds to exist-ing services with no change in product price. At the same time the reduction saw the introduction of new products from other ISPs in the market. Connect has released its own prepaid product to facilitate usage of Internet services for users who prefer prepaid Internet access to fixed monthly commitments .

OperationsChanges in management roles began to have a positive effect on operations. This was experienced particularly in customer service, contact and tech-nical support. Senior management changes were key to a restructuring programme.

In February Connect was absorbed back into TFL as a business unit after nine years as a subsidiary. By the end of that month the bulk of Connect’s operations were relocated to Ganilau House.

Internet Services Fiji Limited

Board of Directors

Mr Rohan Victor Mail

Chairman

Mr Marika Vada

Director

Mr Kapila Chandrasekera

Director

Mr Eugene Singh

Director

Ms Salaseini Nadakuitavuki

Director

Mr Samuela Vadei

Company Secretary

Mr Sakeasi Seru

(resigned 15.10.2010)


18

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ProductsThe release of NOMAD Scholar in December 2010 has seen this product grow to be the third largest offered by Connect. This convenient wireless product is primarily targeted at the mobile student market.

A Schools Café product was also re-leased targeting schools for internet access. This is in line with the Group strategy to “Broadband Fiji”.

TechnologyChanges to ISP infrastructure gave the ISP network more resiliencies in its infrastructure. In early January work was done to make the ISP backbone redundant. With regard to our mobile sites, a programme to increase capac-ity due to demand from customers has been undertaken. It was almost com-plete at the time of writing.

Business OutlookConnect Prepay shows a lot of promise for the low-end and casual use market. The product team is looking at new post-paid products for residential and corporate sectors.

Streaming trials are on-going with technical teams researching delivery of Internet Television over DSL infra-structure.

Connect has also launched a “safe-Internet” product that allows custom-ers to filter undesirable content on the Internet. It will be targeted at all segments of the ISP market but with emphasis providing a safe online envi-ronment for our schools, children and families.


19

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Board of Directors


Chairman

Mr Marika Vada

Director


Director

Mr Eugene Singh

Director


Director

Mr Samuela Vadei

Company Secretary

Mr Sakeasi Seru

(resigned 15.10.2010)

TransTel Limited

The Fiji Government’s bus electronic ticketing system was bid for and awarded to Telecom Fiji Limited (TFL). It is being managed by TransTel Lim-ited in keeping with its Group role of developing and managing a payment gateway for goods and services in Fiji and later the Pacific.

The ticketing system will be deliv-ered off the TFL Group’s information and communication infrastructure. Electronic ticket consoles are to be installed in buses around Fiji and linked to a central data base via TFL’s wireless (CDMA) network. Students, and later on the general public, will be issued with Yehdo bus cards. These will be used to pay fares by ‘tapping’

them onto the consoles when the us-ers board a bus. Relevant information and/or value will be recorded by the console and relayed to the central database.

Details of all fare transactions will be available on the Internet for customers and authorised stakeholders like the Land Transport Authority, Ministry of Education and Ministry of Transport.

The project is a prime example of pub-lic private partnerships that are grow-ing in importance as stakeholders are compelled to collaborate and cooper-ate to succeed. TransTel is confident that the project will position the Group well in the burgeoning E-commerce market.

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OverviewDespite stiff competition in the IT in-dustry, Xceed managed to retain mar-ket share in the imaging market which accounted for almost 60 per cent of its overall revenue. This was a result of reseller channel model redesign and introduction of a new competitive pric-ing structure.

Xceed registered a 49 per cent in-crease in net profit after tax with overall revenue increasing by 22 per cent. Operating expenses reduced by 67 per cent mainly due to the transfer of systems business to Telecom Fiji Limited (TFL).

Products Compared to the previous year, but with the exception of computers, growth was recorded for all major product lines. Multimedia and Power Protection Systems had the high-est growth of 308 per cent and 130 per cent respectively. The growth in Power Protection Systems was the direct result of securing Emerson net-

work power’s distribution rights. This empowered Xceed to win a number of projects that were focussed on in-creasing the reliability and resilience of business telecommunications. Imag-ing products continue to impress with a 42 per cent growth succeeding a 44 per cent growth in the previous year.

With the growth in mobile and port-able computing market, the company introduced the latest Acer netbooks which were bundled with other Group products. The sales results were im-pressive with great potential forecast for the next financial year.

Service CentresThe company continued to invest in up skilling of staff. Five service centre technicians achieved Microsoft certi-fied technology specialist (MCTS) cre-dentials and one achieved Microsoft certified professional (MCP) status. Apart from industry leading certifica-tions, staff have also gone through various vendor specialized product training to support the latest products.

Xceed Pasifika Limited

Board of Directors


Chairman

Mr Marika Vada

Director


Director

Mr Eugene Singh

Director


Director

Mr Samuela Vadei

Company Secretary

Mr Sakeasi Seru

(resigned 15.10.2010)

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Business outlookIn light of the company’s long-term strategic focus, Xceed has been ab-sorbed back into TFL as a business unit. The new alignment promises to be strategically beneficial to the Group. As a business unit, it will continue to develop IT solutions and support with greater customer value offerings.


21

ATH Call Centre Limited (trading as ATH Intouch) started business in Janu-ary 2011 by outsourcing call centre services for Telecom Fiji Limited (TFL). While some delays were encountered in bringing the $2.5 million operation online, the transitioning of services from TFL into the call centre occurred without a hitch and was a testament to the attention paid to migrating critical processes.

For the year ended 31 March 2011, ATH Intouch recorded a loss of $602,011. However, these expenses were incurred as part of the necessary expenditure to start the new venture. The company is anticipating becoming

operationally profitable in year two.

The call centre has an initial capacity of 150 seats with potential for creation of up to 400 new jobs.

It currently operates 49 seats for TFL on a 24x7 basis. The capabilities provided are a first for Fiji through a single integrated solution for real-time communication services - instant messaging (chat), telephony (including IP), video conferencing, call control, speech recognition together with non-real-time communications - voicemail, e-mail, SMS and fax. This enables the delivery of highest efficiency at lower costs for the benefit of customers and end users.

Through stringent quality assur-ance, international benchmarking of performance, focus on service and operational experience brought by international partners, the operation has already delivered service improve-ments and total ownership cost sav-ings on processes handled by the call centre.

With this initial track record, the ATH call centre will continue its strategy of leveraging the capabilities of the ATH group in successfully outsourcing pro-cesses for businesses within Fiji and subsequently winning business from beyond our shores.

Board of Directors

Mr Arun Narsey Chairman

Mr Ivan Fong Director

Mrs Titilia Veiogo Company Secretary

Mr Tomasi Vakatora (resigned 31.12.2010)

Mr Eric Yee (resigned 19.11.2010)

ATH Call Centre Limited (trading as ‘ATH InTouch’)


22

For Pacific Emerging Technologies Limited (PET) it was a significant year for opening up and developing oppor-tunities for ATH companies through its ICT business relationships with Pacific Islands nations.

The company continued to invest in ex-pansion and infrastructure, while at the same time earning revenue through development of the EPS transaction management system (Payecomm).

Contracts are now in place with TSKL Kiribati, Tonga Communications Corporation, Tonga, Bemobile PNG, Bemobile Solomon Islands, Telikom

PNG, Telekom Solomon Islands and Norfolk Telecom.

The Fiji operation experienced a de-cline in business due to reduction in the recharge market available to PET.

With its expansion into the Pacific, PET is providing a platform for business opportunities for the ATH group.

Importantly, the Fiji Government poli-cy of encouraging export from Fiji will result in much of the revenue gained having major tax benefits.

Other than our growth in Kiribati and, latterly, Norfolk Island, the most pleas-

ing result is our successful partnership with Bemobile and Telikom PNG.

Riding on the back of the resources boom that is expected to treble PNG’s GDP over the next five years, the growth forecast for Papua New Guinea is very positive. PET is well positioned to take advantage of this and has ap-pointed a country manager. While the company’s relationship with the PNG market is new, revenue forecasts and potential developments for PET pre-sent an extraordinary opportunity.

2011/2012 will see a significant im-provement for the company.

Board of Directors

Mr Umarji Musa Chairman

Mr James Calrow Director

Mr Rodney Galloway Director

Mr Ivan Fong Director

Ms Patricia Gock Company Secretary


Mr Eric Yee (resigned 19.11.2010)

Pacific Emerging Technologies Limited

An CompanyATH


23

The year was one of unprecedented innovation and engagement for the Vodafone ATH Fiji Foundation as it continued to enrich the lives of the Fijian people and build stronger, pro-gressive communities.

As a registered charitable trust, the Foundation performs its corporate philanthropic responsibilities with an-nual contributions from Vodafone Fiji Limited, Amalgamated Telecom Hold-ings Limited and the Vodafone UK Foundation.

It works tirelessly towards achieving its aim of becoming the leader in social philanthropy in Fiji by fostering corpo-rate giving and volunteering through numerous foundations that embrace as many individuals as possible to make a “World of Difference”.

Since its inception, the Vodafone ATH Fiji Foundation has invested more than $8million in Fiji. It is presently sup-porting 300 community projects and partnering with over 200 charitable organisations.

The Foundation enables corporate partners, customers and our people to invest passion and a portion of profits back into society by providing grants, offering innovative paid charitable vol-unteerism programmes, and inspiring employees and stakeholders.

The Foundation makes a significant difference at many levels. We have given a chance at life to 50 children living with severe heart ailments, pro-vided water to over 300 communities, prevented blindness in over 10,000 in-dividuals and touched the lives of over 40,000 direct beneficiaries.

Our support for the Fiji Council of Social Services (FCOSS) National

Volunteer Centre has seen: 1000 plus unemployed registered; 14 community groups established; 100 small commu-nity projects undertaken; $1.5 million worth of services provided (according to the National Volunteer Confer-ence of 5th December, 2010 marking International Volunteer Day) and 10 capacity-building training sessions conducted with some 400 youths.

The Foundation’s World of Differ-ence programme is having an impact in a very positive way. At the end of the year, the Foundation engaged 36 candidates with innovative projects at-tached to 24 community-based organi-sations around the country.

The programme empowered people to make a world of difference, satisfied

their aspirations for self-development, partnered positive social change, in-troduced big-concept thinking and reached out to greater numbers of people. It also achieved increased efficiency and value for resources, and released the creativity and potential of our people through their organisation of projects and activities that are mak-ing a real difference in all aspects of life in the community.

Thirty-six innovative projects were initiated to engage young citizens at a deeper level and channel their en-ergies into activities that are building lasting relationships and understand-ing. These include a women’s institute, basic skills institute, virgin coconut oil factory, and the Northern Charity Alli-ance.

Vodafone ATH Fiji Philathropy Model

Board of Directors

Mr Michael Stanley Chairman

Mrs Manorama Singh Director

Mr Antonio Kitione Director

Mr Divik Deo Director

Mr Ateen Kumar Director

Ms Ambalika Kutty Company Secretary


Vodafone ATH Fiji Foundation

VodafoneATH FijiFoundation

Corporate

Philanthropy /

Foundation

State Social

Responsibility

Corporate

Social

Responsibility

Citizen Social

Responsibility

•SustainableCommunityProjects

•WorldofDifference

•Helpingcustomerstohelpothers

•EngagingCharityPartner

•CorporateVolunteerism

•EnvironmentalSustainability

•CorporateGiving

•EngagingState

•MobilizingResources

•Leveraging

•Engagingunemployed

•YouthCommunity

•Volunteerism

•SocialEntrepreneurship


24

Grants approved for the financial year ending 31st March 2011 are as follow: (Unaudited)

Charitable Organisation Description Amount

Mangle Ramayan Mandli

Employee Engagement Programme/Double your $

901.50

Fiji Council of Social Services

World of Difference Programme

346,235.28

Save the Children - Red Alert

Disaster Response Programme

25,000.00

Lions Club of Labasa Disaster Response and Sight First Project

61,000.00

Savusavu Tourism Association

Caring for Children Project 15,000.00

Rishikul Sanatan College

Dramatising Community Issues Project

3,000.00

Rotary Water Pacific for Life

Health and Hygiene Project 50,000.00

WOD Upscaling World of Difference Capacity Building

31,500.00

Vodafone NZ- Red Alert Christchurch Earthquake Appeal

69,000.00

ATH Sports Committee- Red Dust


1,000.00

Vunimoli Secondary School- DYD


1,000.00

ATH Acute Surgical Project

Health Upgrading Project 12,698.95

Rotary Club of Taveuni Eye Project 20,000.00

Computer Projects Bridging Digital Divide 26,703.76

Social Media - WoD World of Difference 30,600.00

Western Disabled Peoples Association

Care for the Blind Computer project

2,684.00

Suva Special School X- Mas Donation 1,000.00

Methodist Veilomani Boys Home

X- Mas Donation 1,000.00

Golden Age Home X- Mas Donation 1,000.00

St Christoper’s Home X- Mas Donation 1,000.00

Babasiga Ashram X- Mas Donation 1,000.00

Vision Fiji Children’s Project 3,818.38

Fenc Fiji Poorest of the Poor Child Project

15,000.00

Children’s Heart Foundation

Treatment of Children with Heart Ailments

200,000.00

Sabeto Kindergarten Kindergarten Project 19,969.75

Grants approved for the financial year ending 31st March 2011 are as follow: (Unaudited)

Charitable Organisation Description [cont’d] Amount

Northern Charity Alliance

Recuperating from Disaster Programme

5,000.00

Nadi College Duke of Edinburgh Awards Programme

1,340.00

Waidamudamu Primary School


1,000.00

Batinikama Ex-Students Association


1,000.00

Naqiqi Primary Employee Engagement Programme/Double your $

640.00

Daku Bhartiya Employee Engagement Programme/Double your $

1,000.00

Labasa Muslim Employee Engagement Programme/Double your $

1,000.00

Vunimanuca Primary Employee Engagement Programme/Double your $

1,000.00

Surti Mothers’ Club Employee Engagement Programme/Double your $

1,000.00

Siberia Anglican Employee Engagement Programme/Double your $

1,000.00

Labasa Special School Employee Engagement Programme/Double your $

1,000.00

Dreketi High School Duke of Edinburgh Awards Programme

2,500.00

Vunisalusalu Primary School


1,000.00

Labasa Arya Secondary Duke of Edinburgh Awards Programme

2,500.00

Labasa Sangam College

Duke of Edinburgh Awards Programme

3,000.00

All Saints’ Secondary School


2,500.00

Labasa College Duke of Edinburgh Awards Programme

3,000.00

Valebasoga Secondary School


2,500.00

Batinikama Secondary Duke of Edinburgh Awards Programme

2,500.00

Waiqelele Secondary Duke of Edinburgh Awards Programme

2,500.00

Holy Family Secondary Duke of Edinburgh Awards Programme

2,500.00

Bulileka Secondary Duke of Edinburgh Awards Programme

3,000.00

World of Difference Upscaling project – WoD awareness and campaigns

58,000.00

National Volunteer Centre

“Igniting passion for social change project”

70,000.00

TOTAL $ 1,110,591.62

The National Volunteer Centre and World of Difference reflected the important and potent relationship that Vodafone ATH Fiji Foundation, together with the International Asso-ciation for Volunteer Effort (IAVE) and Fiji Council of Social Services, have forged for igniting passion for change, promoting volunteerism and making

a world of difference in Fiji. This was captured in the State of World Volun-teerism Report.

The most inspiring aspect of the pro-gramme is that it is engaging numer-ous community-based organisations, individuals, corporate sector organisa-tions and State representatives. The programme aims to build organisa-

tional capacity and effectiveness, pro-mote social leadership and the health and wellbeing of young people.

Year 2010/2011 also saw an increase in volunteer programmes among em-ployees who are passionate about a particular cause and who volunteered to raise funds that were later doubled by the Foundation.

25


CONTENTS PAGE

Directors’ report 26 – 28

Statement by directors 29

Independent audit report 30 – 31

Statement of comprehensive income 32

Statement of movements in equity 33

Statement of financial position 34

Cash flow statement 35

Notes to the financial statements 36 – 68

South Pacific Stock Exchange - Listing Requirements 69 - 71

AMALGAMATED TELECOM HOLDINGS LIMITED AND SUBSIDIARY COMPANIES

FINANCIAL STATEMENTSFOR THE YEAR ENDED 31 MARCH 2011

26


DIRECTORS’ REPORTIn accordance with a resolution of the Board of Directors, the directors herewith submit the statement of financial position of Amalgamated Telecom Holdings Limited (the company) and of the group as at 31 March 2011 and the related statement of comprehensive income, statement of movements in equity and cash flow statement for the year then ended and report as follows:

DirectorsThe names of directors in office at the date of this report are:

Mr Ajith Kodagoda – Chairman Mr Tom Ricketts

Mr David Kolitagane - Deputy Chairman Mr Taito Waqa

Mr Arun Narsey Mr Umarji Musa (appointed 18 August 2010)

Principal ActivitiesThe principal activities of the company during the year were that of investments and provision of management services.

The principal activities of the subsidiary entities during the year were providing telecommunication services and telephone equipment, compilation and publishing of the Fiji telephone directory, provision of Internet connection and Internet related services, operation of a mobile telecommunications network, provision of pre-paid telephony services, provision of mobile phone money transfer service, managing PAYECOMM products, sale of ICT equipment and solutions and development of a technology park including call centres, data warehouse and processing centres.

During the year, a restructuring of the Telecom Fiji Limited group was undertaken and commercial operations from Internet Services Fiji Limited were transferred to the company as of 28 February 2011. As a result, Telecom Fiji Limited acquired from Internet Services Fiji Limited, the existing business of retailing Internet services.

The set-up of the ATH Call Centre was completed on 31 January 2011 and operations commenced on 1 February 2011.

During the year, Vodafone Fiji Limited launched M-PAiSA, a mobile phone money transfer service.

Other than the above, there were no significant changes in the nature of these activities during the financial year.

ResultsThe net profit after income tax of the company for the year was $17,811,000 after providing for income tax expenses of $538,000 (2010: $18,591,000 after providing for income tax expenses of $1,755,000).

The consolidated net profit after income tax attributable to the members of the company for the financial year was $4,142,000 (2010: $15,382,000).

DividendsDividends of $12,665,000 were declared during the year ended 31 March 2011 (2010: $21,105,000).

ReservesIt is proposed that no amounts be transferred to reserves within the meaning of the Seventh Schedule of the Companies Act, 1983 (2010: Nil).

Bad and Doubtful DebtsPrior to the completion of the company’s and group’s financial statements, the directors and management took reasonable steps to ascertain that action has been taken in relation to writing off of bad debts and the making of allowance for impairment. In the opinion of the directors and management, adequate allowance has been made for doubtful debts.

As at the date of this report, the directors and management are not aware of any circumstances, which would render the amount written off for bad debts, or the allowance for impairment in the company or the group, inadequate to any substantial extent.

27


DIRECTORS’ REPORT [CONT’D]Non-Current AssetsPrior to the completion of the financial statements of the company and the group, the directors and management took reasonable steps to ascertain whether any non-current assets were unlikely to be realised in the ordinary course of business compared to their values as shown in the accounting records of the company and of the group. Where necessary, these assets have been written down or adequate allowance has been made to bring the values of such assets to an amount that they might be expected to realise.

As at the date of this report, the directors and management are not aware of any circumstances, which would render the values attributed to non-current assets in the company’s and the group’s financial statements misleading.

Unusual TransactionsIn the opinion of the directors and management, the results of the operations of the group or any company in the group during the financial year were not substantially affected by any item, transaction or event of a material and unusual nature, nor has there arisen between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors and management, to affect substantially the results of the operations of the group or any company in the group in the current financial year.

Significant Events during the YearDuring the year:

(i) The Commerce Commission made a determination with regard to bandwidth pricing and access to the Southern Cross Cable. The determination had a glide path for the reduction in bandwidth pricing over a period of one year with a price reduction in July 2010, January 2011 and July 2011. Immediate price reductions from Fiji International Telecommunication Limited’s (FINTEL) current pricing, range from 11% to 65%, while long-term reductions range from 30% to 73%. The determination also gives licensed operators the ability to purchase capacity direct from the Southern Cross Cable network through the payment of a one off bypass fee to FINTEL together with operational and maintenance charges determined by the Commerce Commission. Bandwidth cost is a significant component of the direct cost for the group. The reduction in bandwidth will result in a reduction in cost especially to the Telecom Fiji group in the future. The group now has the opportunity to increase revenue streams from new products if the company or the group accesses the South Cross Cable directly. Therefore, Telecom Fiji Limited entered into an agreement with Optus Networks Pty Limited for the purchase of Network Capacity via Australia and USA link for a 10 year period;

(ii) A commercial dispute between Digicel (Fiji) Limited (“Digicel”) against one of the subsidiaries, Telecom Fiji Limited which was initiated in the prior year was resolved by the Commerce Commission. As a result, legal proceedings in relation to the winding up proceedings made by Digicel against the Telecom Fiji Limited were dismissed by the High Court;

(iii) A restructuring of Telecom Fiji group was undertaken and commercial operations from Internet Services Fiji Limited were transferred to the company as of 28 February 2011. As a result, Telecom Fiji Limited acquired from Internet Services Fiji Limited, the existing business of retailing Internet services together with business assets and liabilities;

(iv) As a continuing restructuring process of Telecom Fiji group, the company’s Call centre operations was outsourced to ATH Call Centre Limited (ATHCCL). As a result, certain employees were transferred to ATHCCL. Furthermore, a redundancy program was implemented for those employees that could not be transferred which resulted in a redundancy cost;

(v) The set up of the ATH Call Centre was completed in January 2011 and operations commenced on 1 February 2011;

(vi) To facilitate the Fiji Government’s ICT program, the Commerce Commission made a determination on Telecom Interconnection Service rate to charge FJ$0.165 per minute for all inbound traffic which commenced from 17 November 2010 to 16 November 2012; and

(vii) On 27 May 2009, the National High Court of Papua New Guinea issued an order of judgment in favour of the associate entity, Amalgamated Telecom Holdings (PNG) Limited, Steamships Trading Limited and the company. The judgement was against the Independent State of Papua New Guinea.

28


DIRECTORS’ REPORT [CONT’D]Significant Events during the Year [cont’d]The litigation related to the share acquisition agreement entered between the Independent Public Business Corporation of PNG Limited and Amalgamated Telecom Holdings (PNG) Limited. Under the terms of the share acquisition agreement, Amalgamated Telecom Holdings (PNG) Limited was to acquire 50.1% of the shares in Telikom PNG Limited. However, due to the non performance of the contract by the Independent Public Business Corporation of PNG Limited, the sale of Telikom PNG Limited shares to Amalgamated Telecom Holdings (PNG) Limited did not proceed.

At 31 March 2011, no settlement has been received by the company. However, the company received an offer for an out of court settlement for consideration.

Events Subsequent to Balance DateApart from the matter noted above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the group or any company in the group, the results of those operations, or the state of affairs of the group or any company in the group in future financial years.

Basis of AccountingThe directors and management believe that the basis of preparation of the financial statements is appropriate and that the company will be able to continue in operation for at least twelve months from the date of this report. Accordingly, the directors and management believe that the classification and carrying amounts of assets and liabilities as stated in these financial statements to be appropriate.

Directors’ BenefitsSince the end of the previous financial year, no director has received or become entitled to receive a benefit (other than those included in the aggregate amount of emoluments received or due and receivable by directors shown in the financial statements or received as the fixed salary of a full-time employee of any company in the group or of a related corporation) by reason of a contract made by any company in the group or by a related corporation with the director or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

Other CircumstancesAs at the date of this report:

(i) no charge on the assets of any company in the group has been given since the end of the financial year to secure the liabilities of any other person;

(ii) no contingent liabilities have arisen since the end of the financial year for which any company in the group could become liable; and

(iii) no contingent liabilities or other liabilities of any company in the group has become or is likely to become enforceable within the period of twelve months after the end of the financial year which, in the opinion of the directors and management, will or may substantially affect the ability of the company or the group to meet its obligations as and when they fall due.

As at the date of this report, the directors and management are not aware of any circumstances that have arisen, not otherwise dealt with in this report which would make adherence to the existing method of valuation of assets or liabilities of the company and the group misleading or inappropriate.

For and on behalf of the board and in accordance with a resolution of the Board of Directors.

Dated this 30th day of June 2011.

......................................................... .......................................

Director Director

29


STATEMENT BY DIRECTORS In accordance with a resolution of the Board of Directors of Amalgamated Telecom Holdings Limited, we state that in the opinion of the directors:

(i) the accompanying statement of comprehensive income of the company and of the group is drawn up so as to give a true and fair view of the results of the company and of the group for the year ended 31 March 2011;

(ii) the accompanying statement of movements in equity of the company and of the group is drawn up so as to give a true and fair view of the movements in equity of the company and of the group for the year ended 31 March 2011;

(iii) the accompanying statement of financial position of the company and of the group is drawn up so as to give a true and fair view of the state of affairs of the company and of the group as at 31 March 2011;

(iv) the accompanying cash flow statement of the company and of the group is drawn up so as to give a true and fair view of the cash flows of the company and of the group for the year ended 31 March 2011;

(v) at the date of this statement, there are reasonable grounds to believe that the company will be able to pay its debt as and when they fall due; and

(vi) all related party transactions have been adequately recorded in the books of the company.


Dated this 30th day of June 2011.

......................................................... .......................................

Director Director

30


Pacific House Level 7 1 Butt Street Suva Fiji P O Box 1359 Suva Fiji Tel: +679 331 4166 Fax: +679 330 0612 www.ey.com

A member firm of Ernst & Young Global Limited

IN DEP EN DEN T AUDIT REP ORT T o the members o f Amalgamated T elecom Holdings L imited We have audited the accompanying Financial Statements of Amalgamated Telecom Holdings Limited (the company) and of the group, which comprise the statement of financial position as at 31 March 2011, the statement of comprehensive income, the statement of movements in equity and the cash flow statement for the year ended, and a summary of significant accounting policies and other explanatory notes. Directors' and Management's Responsibility for the Financial Statements The Directors and management are responsible for the preparation and fair presentation of these Financial Statements in accordance with International Financial Reporting Standards and the requirements of the Fiji Companies Act, 1983. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making estimates that are reasonable in the circumstances. Auditor's Responsibility Our responsibility is to express an opinion on these Financial Statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the group's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the group's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We have examined the financial statements and the auditors’ report of the subsidiary companies of which we have not acted as auditors as shown in Note 30. The audit reports on the financial statements of the subsidiary companies were not subject to any qualification. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Opin ion In our opinion: (a) proper books of account have been kept by the company and the group, so far as it appears from our

examination of those books; and (b) the accompanying financial statements which have been prepared in accordance with International Financial

Reporting Standards: i) are in agreement with the books of account; ii) to the best of our information and according to the explanations given to us:

31


IN DEP EN DEN T AUDIT REP ORT [CON T ’D]

(a) give a true and fair view of the state of affairs of the company and of the group as at 31 March 2011 and of the results, cash flows and movements in equity of the company and of the group for the year ended on that date; and

(b) give the information required by the Fiji Companies Act, 1983 in the manner so required.

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. SUVA, F IJI ERNST & YOUNG 30th June 2011 CHARTERED ACCOUNTANTS

IN DEP EN DEN T AUDIT REP ORT [CON T ’D]

(a) give a true and fair view of the state of affairs of the company and of the group as at 31 March 2011 and of the results, cash flows and movements in equity of the company and of the group for the year ended on that date; and

(b) give the information required by the Fiji Companies Act, 1983 in the manner so required.

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. SUVA, F IJI ERNST & YOUNG 30th June 2011 CHARTERED ACCOUNTANTS

32


Statement of Comprehensive Income

For the year ended 31 March 2011

Consolidated Company

Notes 2011 2010 2011 2010

$’000 $’000 $’000 $’000

Revenue 5 247,068 254,783 17,016 18,331

Direct costs 6 (66,433) (71,655) - -

Gross profit 180,635 183,128 17,016 18,331

Other income 7 7,315 3,479 14 24

Amortisation and impairment of intangibles 14 (3,099) (2,977) - -

Depreciation 13 (54,149) (45,387) (25) (26)

Marketing and promotion expenses (9,756) (10,824) (46) (53)

Redundancy costs (611) (4,728) - -

Reversal of impairment loss on plant and equipment 845 - - -

Personnel costs 8 (36,237) (39,165) (384) (386)

Operating expenses 9 (48,168) (51,390) (656) (879)

Operating profit 36,775 32,136 15,919 17,011

Finance (cost)/income – net 10 (4,132) (2,121) 2,430 3,335

Profit before income tax 32,643 30,015 18,349 20,346

Income tax expense 11 (14,981) (3,982) (538) (1,755)

Profit after income tax 17,662 26,033 17,811 18,591

Other comprehensive income - - - -

Total comprehensive income for the year, net of tax 17,662 26,033 17,811 18,591

Attributable to:

Equity holders of the company 4,142 15,382 17,811 18,591

Non-controlling interests 13,520 10,651 - -

17,662 26,033 17,811 18,591

Earnings per share for profit attributable to the

equity holders of the company during the year

(expressed in cents per share)

- Basic and diluted 12 1 4

The above Statement of Statement of Comprehensive Income should be read in conjunction with the accompanying notes.

33


Attributable to equity holders of the company

Share Non- Share premium Retained Total controlling capital reserve earnings interest Total

Consolidated $’000 $’000 $’000 $’000 $’000 $’000

Balance as at 31 March 2009 105,526 2,074 107,461 215,061 26,568 241,629

Movements in equity for 2009 - 2010

Profit for the year ended 31 March 2010 - - 15,382 15,382 10,651 26,033

Dividends paid or provided (Note 26) - - (21,105) (21,105) (867) (21,972)



Profit for the year ended 31 March 2011 - - 4,142 4,142 13,520 17,662

Dividends paid or provided (Note 26) - - (12,665) (12,665) (9,910) (22,575)


Company

Balance as at 31 March 2009 105,526 2,074 109,934 217,534


Profit for the year ended 31 March 2010 - - 18,591 18,591

Dividends paid or provided (Note 26) - - (21,105) (21,105)

Balance as at 31 March 2010 105,526 2,074 107,420 215,020

Movements in equity for 2010 – 2011

Profit for the year ended 31 March 2011 - - 17,811 17,811

Dividends paid or provided (Note 26) - - (12,665) (12,665)

Balance at 31 March 2011 105,526 2,074 112,566 220,166

Statements of Movements in Equity

For the year ended 31 March 2011

The above Statement of Movements in Equity should be read in conjunction with the accompanying notes.

34


Statement of Financial Position

as at 31 March 2011

Consolidated Company Notes 2011 2010 2011 2010Assets $’000 $’000 $’000 $’000Non-current assets

Property, plant and equipment 13 347,629 347,059 38 47Intangible assets 14 25,877 10,627 - -Available-for-sale financial assets 15 - - 158,414 158,414Held-to-maturity investments 16 51,660 51,665 51,660 51,665Deferred income tax assets 17 (a) 14,798 19,173 4 5Trade and other receivables 19 4,982 4,982 24,982 24,982 444,946 433,506 235,098 235,113Current assetsDeferred expenses 78 51 - -Held-to-maturity investments 16 1,000 15,848 - -Inventories 18 10,390 10,763 - -Trade and other receivables 19 35,543 40,275 22,406 9,290Cash on hand and at bank 12,097 7,694 979 1,598 59,108 74,631 23,385 10,888

Total assets 504,054 508,137 258,483 246,001

Shareholders’ equity and liabilitiesShareholders’ equity attributable to members of the companyIssued capital 21 105,526 105,526 105,526 105,526Share premium reserve 2,074 2,074 2,074 2,074Retained earnings 93,215 101,738 112,566 107,420Equity attributable to owners of the parent 200,815 209,338 220,166 215,020Non-controlling interests 39,962 36,352 - -Total shareholders’ equity 240,777 245,690 220,166 215,020

LiabilitiesNon-current liabilitiesDeferred income tax liabilities 17 (b) 29,106 27,672 - -Borrowings 22 86,672 80,000 20,000 20,000Provisions 23 249 219 - -Trade and other payables 24 17,341 5,059 - -Deferred income 25 395 449 - - 133,763 113,399 20,000 20,000Current liabilities Borrowings 22 28,918 31,425 12,500 675Provisions 23 25,746 35,989 4,551 9,551Trade and other payables 24 74,850 81,634 1,266 755 129,514 149,048 18,317 10,981Total liabilities 263,277 262,447 38,317 30,981

Total equity and liabilities 504,054 508,137 258,483 246,001

The above Statement of Financial Position should be read in conjunction with the accompanying notes.


......................................................... .......................................

Director Director

35


Cash Flow Statement

for the year ended 31 March 2011

Consolidated Company

Note 2011 2010 2011 2010

$’000 $’000 $’000 $’000

Operating activities

Receipts from customers 260,024 253,789 14 12

Payments to suppliers and employees (172,468) (166,011) (594) (1,766)

Net cash inflows generated from operations 87,556 87,778 (580) (1,754)

Interest received 3,468 4,133 4,588 5,652

Interest paid (7,031) (5,578) (1,590) (1,652)

Dividends received - - 5,990 22,700

Royalty income received - 12 - -

Income taxes paid (7,911) (14,005) (1,297) (1,858)

Net cash inflows from operating activities 76,082 72,340 7,111 23,088

Investing activities

Payments for property, plant and equipment (58,179) (50,706) (15) -

Payments for intangible assets (1,521) (13,214) - -

Proceeds from sale of property, plant and equipment 84 455 - 7

Proceeds from held-to-maturity investments 200 1,206 - -

Investment in subsidiary entity - - - (2,142)

Net cash outflows used in investing activities (59,416) (62,259) (15) (2,135)

Financing activities

Dividends paid to equity holders of the parent (16,885) (26,256) (16,885) (26,256)

Dividends paid to non-controlling interests (14,809) (1,698) - -

Loans and advances to subsidiary - - (3,330) (93)

Proceeds from borrowings 9,000 - 12,500 -

Net cash flows used in financing activities (22,694) (27,954) (7,715) (26,349)

Net decrease in cash and cash equivalents (6,028) (17,873) (619) (5,396)

Effect of exchange rate movement on cash

and cash equivalents (257) (131) - -

Cash and cash equivalents at the beginning

of the financial year 12,792 30,796 1,598 6,994

Cash and cash equivalents at end of year 20 6,507 12,792 979 1,598

The above Cash Flow Statement should be read in conjunction with the accompanying notes.

36


NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2011

NOTE 1. GENERAL INFORMATIONAmalgamated Telecom Holdings Limited (“the company”) and its subsidiaries (together “the group”) provide telecommunication services and related equipment, internet connection and related services, operation of a mobile telecommunications network, compilation and publishing of the Fiji telephone directory, pre-paid telephony services, sale of ICT equipment and solutions, PAYECOMM product management, provision of management services and development of a technology park including call centres, data warehouse and processing centres.

Amalgamated Telecom Holdings Limited is a limited liability company incorporated and domiciled in Fiji. The address of its registered office and principal place of business is Harbour Front Building, Rodwell Road, Suva. The company is listed on the South Pacific Stock Exchange, Suva.

Statement of ComplianceThe financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and the Fiji Companies Act, 1983.

These financial statements were authorised for issue by the directors on 30 June 2011.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESThe principal 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.

2.1 Basis of PreparationThe financial statements of Amalgamated Telecom Holdings Limited and the group have been prepared in accordance with International Financial Reporting Standards (“IFRS”). These financial statements have been prepared under the historical cost convention, as adjusted by the revaluation increments of land and buildings, available-for-sale financial assets, financial assets and financial liabilities at fair value through profit or loss.

In the application of IFRS, management is required to make judgments, estimates and assumptions about carrying values of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstance, the results of which form the basis of making the judgments. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. Judgments made by management in the application of IFRS that have significant effects on the financial statements and estimates with a significant risk of material adjustments in the future periods are disclosed, where applicable, in the relevant notes to the financial statements.

The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are critical to the financial statements are disclosed in Note 4.

Accounting policies are selected and applied in a manner which ensures that the resulting financial information satisfies the concepts of relevance and reliability, thereby ensuring that the substance of the underlying transactions or other events is reported.

Standards, amendments and interpretations issued

The following standards, amendments and interpretations to existing standards were published and are mandatory for the accounting periods beginning on or after 1 January 2010 or later periods. No significant impact arose out of these standards, amendments and interpretations.

• IFRIC19,‘ExtinguishingFinancialLiabilitieswithEquityInstruments’(effectivefrom1July2010);

• IAS24(Amendment),‘RelatedPartyDisclosures’(effectivefrom1January2011);and

• IFRS9,‘FinancialInstruments’(effectivefrom1January2013).IFRS9replacesIAS3.

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NOTES TO THE FINANCIAL STATEMENTS [CONT’D]


NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES [CONT’D]

2.1 Basis of Preparation [cont’d]Subsequently in May 2011, the International Accounting Standards Board (IASB) issued the following standards:

• IFRS10,‘ConsolidatedFinancialStatements’(effectivefrom1January2013);

• IFRS11,‘JointArrangements’(effectivefrom1January2013);

• IFRS12,‘DisclosureofInterestsinOtherEntities’(effectivefrom1January2013);and

• IFRS13,‘FairValueMeasurement’(effectivefrom1January2013).

The company will review the impact of these standards on the group in the next financial year.

2.2 Basis of ConsolidationSubsidiaries

Subsidiaries are all entities over which the group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of the exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interest. The excess of the cost of the acquisition over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the statement of comprehensive income as fair value gain on acquisition.

The consolidated financial statements are prepared by combining the financial statements of all the entities that comprises the group. A list of subsidiaries appears in Note 30 to the financial statements.

Inter-company transactions, balances and unrealised gains or losses on transactions between group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.

The financial statements of Amalgamated Telecom Nominees Limited have not been incorporated in the consolidated financial statements for the reasons stated in Note 30.

Non-Controlling Interest

Non-controlling interest represents that part of the net results of operations and net assets of the subsidiaries, which are not owned, directly or indirectly by the company.

Associates

Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the equity method of accounting and are initially recognised at cost. The group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment loss.

The group’s share of its associates’ post-acquisition profits or losses is recognised in the statement of comprehensive income, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

Unrealised gains on transactions between the group and its associates are eliminated to the extent of the group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

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2.3 BorrowingsBorrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest rate method.

Borrowings are classified as current liabilities unless the group has an unconditional right to defer settlement of the liability for at least 12 months after the balance date.

2.4 Borrowing CostsThe borrowing costs that are directly attributable to the acquisition of the capital assets are capitalised until substantially all the activities necessary to prepare the capital assets for its intended use are complete. Other borrowing costs are recognised as an expense in the year in which they are incurred.

2.5 Cash and Cash EquivalentsFor the purpose of cash flow statement, cash and cash equivalents includes cash on hand, deposits held at call with banks, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities in the statement of financial position.

2.6 ComparativesWhere necessary, amounts relating to prior years have been reclassified to facilitate comparison and achieve consistency in disclosure with current year amounts.

2.7 Dividend DistributionDividend distribution to the company’s shareholders is recognised as a liability in the group’s and company’s financial statements in the period in which the dividends are proposed or declared by the company’s directors.

2.8 Earnings Per ShareBasic earnings per share

Basic earnings per share (EPS) is determined by dividing net profit after income tax attributable to members of the holding company by the weighted average number of ordinary shares during the year.

Diluted earnings per share

Diluted EPS is the same as the basic EPS as there are no ordinary shares which are considered dilutive.

2.9 Employee BenefitsWages, salaries and sick leave

Liabilities for wages and salaries expected to be settled within 12 months of the reporting date are accrued up to the reporting date. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates prevailing at that time.

Annual leave

The liability for annual leave is recognised in the provision for employee benefits and is measured at the rates prevailing at year end.

Long service leave

The liability for long service leave is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

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2.9 Employee Benefits [cont’d]Retirement benefits

The liability for retirement benefits is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services provided by employees up to the reporting date.

Bonus plans

The companies under the group pay bonuses to employees based on performance of the group and achievement of individual objectives by the employees. The group recognises a provision where contractually obliged or where there is a past practice, subject to performance evaluation.

Terminal benefits

The group recognises termination benefits when it is demonstrably committed to either terminating the employment of current employees according to a formal plan without the possibility of withdrawal; or providing termination benefits as a result of an offer made for redundancy. Benefits falling due more than 12 months of the balance date are disclosed at the present value.

Defined contribution plans

Contributions to Fiji National Provident Fund are expensed when incurred.

2.10 Financial AssetsThe group classifies its financial assets in the following categories: loans and receivables, held-to-maturity investments and available-for-sale financial assets. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition.

(a) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balancedate,whichareclassifiedasnon-currentassets.Thegroup’sloansandreceivablescomprise‘tradeandother receivables’ disclosed in the statement of financial position (Note 19).

(b) Held-to-maturity investments

Held-to-maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the Group’s management has the positive intention and ability to hold to maturity.

Held-to-maturity investments are measured at subsequent reporting dates at amortised cost.

Held-to-maturity investments in Fiji Government Registered Stock by the group are recorded at their amortised cost and not remeasured to market values as they are considered likely to be held-to-maturity in line with investment objectives and fixed price nature of the investments.

(c) Available-for-sale financial assets

Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless management intends to dispose of the investment within 12 months of the balance date.

Equity investments in subsidiary companies not held for trading are classified under this category.

Investments in subsidiaries are classified as available-for-sale investments and are accounted for at cost in the individual financial statements of the company.

Available-for-sale financial assets are initially recognised at fair value plus transaction costs. Financial assets are de-recognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has transferred substantially all risks and rewards of ownership.

Available-for-sale financial assets are subsequently carried at fair value. Changes in the fair value of the available-for-sale financial assets are recognised in equity. When financial assets classified as available for sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the statement of comprehensiveincomeas‘gainsandlosses’.

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2.10 Financial Assets [cont’d]Dividends on available-for-sale financial assets are recognised in the statement of comprehensive income as part of revenue when the company’s right to receive payments is established.

The company assesses at each balance date whether there is objective evidence that a financial asset or a group of financial assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is considered as an indicator that the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in the statement of comprehensive income.

2.11 Foreign Currency Translationa) Functional and presentation currency

The group operates in Fiji and hence the financial statements are presented in Fiji dollars, which is the group’s functional and presentation currency.

b) Transactions and balances

Foreign currency transactions are translated into Fiji currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income.

2.12 Government GrantsGovernment grants are recognised in the statement of financial position initially as deferred revenue where there is reasonable assurance that they will be received and that the group will comply with the conditions attached to them. Grants that compensate the group for expenses incurred are recognised as revenue in the statement of comprehensive income on a systematic basis in the same periods in which the expenses are incurred. Grants that compensate the group for the cost of an asset are recognised in the statement of comprehensive income as revenue on a systematic basis over the useful life of the asset.

2.13 Impairment of Non-Financial AssetsAssets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.

2.14 Income TaxThe current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance date. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulations is subject to interpretation and establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects either accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences and the eligible tax losses can be utilised.

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2.14 Income Tax [cont’d]Current and deferred tax for the period

Current and deferred tax is recognised as an expense or income in the statement of comprehensive income, except when it relates to items credited or debited directly to equity, in which case the deferred tax is also recognised directly in equity.

2.15 Intangible Assets(a) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiariesisincludedin‘intangibleassets’.Goodwillonacquisitionsofassociatesisincludedin‘investmentsinassociates’ and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

(b) Computer software

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives (three to five years).

Costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. Costs that are directly associated with the development of identifiable and unique software products controlled by the group, and that will probably generate economic benefits exceeding costs beyond one year, are recognised as intangible assets. Costs include the software development, employee costs and an appropriate portion of relevant overheads.

Computer software development costs recognised as assets are amortised over their estimated useful lives.

(c) Investment in movie productions

Investments in movie productions have been valued at cost and reduced by an impairment charge to arrive at a carrying amount which is an amount the company expects to recover from the exploitation of the copyright in accordance with the Production Investment Agreement.

2.16 InventoriesInventories comprise of merchandise and consumables, and are valued at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated cost of completion and selling expenses.

The cost of inventories has been determined on a weighted average cost basis or first-in-first-out principle and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition.

Provisions for inventory obsolescence are raised based on a review of inventories. Inventories considered obsolete or un-saleable are written off in the year in which they are identified.

2.17 LeasesLeases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the statement of comprehensive income on a straight-line basis over the period of the lease.

Rental income from operating leases is recognised on a straight line basis over the term of the relevant lease.

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2.18 Property, Plant and EquipmentProperty, plant and equipment is stated at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditure that is directly attributable to the acquisition and installation of the items.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of a replaced part is de-recognised. All other repairs and maintenance are charged to the statement of comprehensive income during the financial period in which they are incurred.

Cost of leasehold land includes initial premium payment or price paid to acquire leasehold land including acquisition costs.

Freehold land is not depreciated.

Depreciation on other assets is calculated using the straight-line method to allocate their cost or revalued amounts to their residual values over their estimated useful lives, as follows:

- Leasehold land Term of lease

- Buildings 10 - 40 years

- Exchange plant and telecommunication infrastructure 10 - 15 years

- Subscriber equipment 10 - 20 years

- Trunk network plant 15 years

- Plant and machinery 5 years

- Motor vehicles 5 years

- Furniture, fittings and office equipment 5 years

- Computer equipment and software 3 - 5 years

The asset’s residual values and useful lives are reviewed, and adjusted if appropriate, at each balance date.

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are taken into account in determining the results for the year.

2.19 ProvisionsProvisions 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 the amount can be reliably estimated. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

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2.20 Revenue RecognitionRevenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the group’s activities. Revenue is shown net of value-added tax, returns, rebates, discounts and after eliminating sales within the group.

The group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when specific criteria have been met for each of the group’s activities as described below. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The group bases its estimates on historical results, taking into consideration the type of customer, the type of transaction and the specifics of each arrangement.

The group provides telecommunication and related services which include fixed line, mobile and internet communication services, compilation and publishing of the Fiji Telephone Directory, pre-paid telephony services, sale of telecommunications related office equipment and provision of management and call centre services.

a) Sale of telecommunication and related services

Revenue is recognised based on billing cycles through the month. Unbilled revenue from the billing cycle date to the end of each month is recognised as revenue in the month the service is provided.

Revenue from prepaid products and fixed monthly charges billed in advance is deferred and recognised as revenue either once the related service has been provided or when the product date has expired, whichever falls earlier.

Revenue from the provision of internet services is recognised upon the use of service by its customers.

Revenue from installation, connection and associated costs are recognised upon completion of the installation or connection.

Revenue from publication of telephone directories is recognised upon dispatch of the directories for distribution. Advance billings and monies collected in advance are deferred. Revenue from fixed-priced contracts in relation to on-line directory is recognised over the term of the contract. Revenue earned from publication of the telephone directory is stated net of allowances.

b) Sale of equipment

Sale of equipment is recognised when a group entity sells a product to the customer. Revenue is recognised at the point the product is dispatched from the warehouse or sold at a group retail outlet.

c) Interest Income

Interest income is recognised on a time-proportion basis using the effective interest rate method.

d) Management fees income

Management fees income is recognised on an accrual basis.

e) Dividend income

Dividend income from investments is recognised when the right to receive payment is established.

f) Investment in movie production

Income from exploitation of the copyright in movie production is brought to account when the right to receive royalty income is established.

2.21 Segment ReportingA business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that are subject to risks and return that are different from those of segments operating in other economic environments.

For reporting purposes, the group considers itself to be operating predominantly in the telecommunications industry and revenue from other sources are not material. In addition, the group operates predominantly in Fiji only and hence one geographical segment for reporting purposes. The group has disclosed three reportable operating segments as follows (as outlined in Note 32):

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2.21 Segment Reporting [cont’d]• Fixed line telecommunications (“FLTelecom”)segment includesallfixed linetelecommunicationservices

including the sale or lease of telecommunications related office equipment, accessories and services including prepaid telephony and card services;

• Mobile telecommunications (“MobileTelecom”) segment includesallmobile telecommunication servicesincluding the sale of associated equipment, accessories and services; and

• Othersegmentcomprisesunitswhichcontributelessthan10%ofgrouptotalrevenueandincludeprovisionof internet services, directory services, PAYECOMM products, call centre and management services.

2.22 Share CapitalOrdinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.

2.23 Trade ReceivablesTrade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the group will not be able to collect all amounts due according to the original terms of the receivables. Provision is raised on a specific debtor level as well as on a collective basis. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial re-organisation, and default or delinquency in payments are considered indicators that a specific debtor balance is impaired. Impairment assessed at a collective level is based on past experience and data in relation to actual write-offs. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of comprehensive income. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables.

Subsequent recoveries of amounts previously written off are credited in the statement of comprehensive income.

2.24 Trade PayablesTrade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest rate method.

2.25 Value Added Tax (VAT)Revenues, expenses, assets and liabilities are recognised net of the amount of Value Added Tax (VAT), except where the amount of VAT incurred is not recoverable from the taxable authority, it is recognised as part of the cost of acquisition of an asset or as part of an item of expense, or for trade receivables and trade payables which are recognised inclusive of VAT.

NOTE 3. FINANCIAL RISK MANAGEMENT

3.1 Financial Risk FactorsThe group’s activities expose it to a variety of financial risks: market risk (including foreign exchange risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance.

Risk management is carried out by executive management. Executive management identifies, evaluates and monitors financial risks in close co-operation with the operating units.

(a) Market risk

(i) Foreign exchange risk

The group largely procures most of its telecommunication equipment and supplies from overseas and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US, Australian and NZ dollar. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities.

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NOTE 3. FINANCIAL RISK MANAGEMENT [CONT’D]

3.1 Financial Risk Factors [cont’d]Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency, in this case the Fiji dollar. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are denominated in a currency other than the Fiji Dollar. For significant settlements, the group companies are required to seek quotations from recognised banks and use the most favourable exchange rate for purposes of the settlement.

As at year end, assets and liabilities denominated in foreign currencies are significant and hence changes in the US, Australian and NZ dollars by 10% (increase or decrease) is expected to have a significant impact on the net profit and equity balances currently reflected in the group financial statements.

Further, movements in the value of the Fiji dollar will continue to have a significant impact on the net profit and equity balances in the group’s financial statements in future, primarily in relation to the significant capital expenditure outlays in the next financial year and the consistent procurement of maintenance products and services from overseas.

(ii) Price risk

The group does not have investments in equity securities quoted on stock exchange and hence is not exposed to equity securities price risk. The group is not exposed to commodity price risk.

(iii) Regulatory risk

The group’s profitability can be significantly impacted by regulatory agencies established and to be established which governs the telecommunication sector in Fiji. Specifically retail and wholesale prices are regulated by the Commerce Commission and the group’s operating environment will be regulated by Telecom Authority of Fiji when the Telecom Authority of Fiji is fully operational.

(iv) Cash flow and fair value interest rate risk

The group’s investments are on fixed terms with the group intending to hold these investments until their maturity dates.

The group has significant interest-bearing assets in the form of short-term and long term deposits. These are at fixed interest rates and hence there are no interest rate risks during the period of investment. For re-investment of short and long term deposits, the group negotiates an appropriate interest rate with the banks and invests with the bank which offers the highest interest return.

Given the fixed nature of interest rates described above, the group has a high level of certainty over the impact on cash flows arising from interest income. Accordingly the group does not require simulations to be performed over impact on net profits arising from changes in interest rates.

In relation to borrowings from Fiji National Provident Fund, the group is not exposed to interest rate risk as it borrows funds at fixed interest rates.

In relation to the bank overdraft from bank, the group to a certain extent is exposed to interest rate risk as the bank overdraft is at floating interest rates. The risk is managed closely within the approved policy parameters.

(b) Credit risk

Credit risk is managed at group and at individual entity level. Credit risk arises from cash and cash equivalents, deposits with banks, as well as credit exposures to wholesale and retail customers, including outstanding receivables. For banks, only reputable parties with known sound financial standing are accepted. All new customers undergo a credit check before a credit account is allowed. Individual credit limits are set based on internal ratings in accordance with limits set by the executive management. The utilisation of credit limits is regularly monitored. Sales to retail customers can be on credit depending on whether the customer has a pre-approved credit account or otherwise in cash. The group holds security deposits for a large number of its customers.

(c) Liquidity risk

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities to ensure availability of funding. The group monitors liquidity through rolling forecasts of the group’s cash flow position. Overall the group does not see liquidity risk as high given that a reasonable portion of revenues are billed and collected in advance or generally within 30 days.

The table below analyses the group’s financial liabilities into relevant maturity groupings based on the remaining period at the balance date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.

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NOTE 3. FINANCIAL RISK MANAGEMENT [CONT’D]

3.1 Financial Risk Factors [cont’d]

(c) Liquidity risk [cont’d]

Consolidated

Less than Between 1 Between 3 Over 5 1 year and 2 years and 5 years years

At 31 March 2011 $’000s $’000s $’000s $’000sBorrowings 28,918 16,672 50,000 20,000 Trade and other payables 74,850 17,341 - -

At 31 March 2010Borrowings 31,425 10,000 50,000 20,000Trade and other payables 81,634 5,059 - -

3.2 Capital Risk ManagementThe group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares and/or sell assets to reduce debt. The group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debtiscalculatedastotalborrowings(including‘currentandnon-currentborrowings’asshownintheconsolidatedstatement of financial position) less cash on hand and at bank and short term deposits. Total capital is calculated as ‘equity’asshownintheconsolidatedstatementoffinancialpositionplusnetdebt.

Consolidated

The gearing ratios at 31 March 2011 and 2010 were as follows: 2011 2010

$’000s $’000s

Total borrowings (Note 22) 115,590 111,425

Less: Cash on hand and at bank and short term deposits (Note 20 (a)) (12,097) (7,694)

Less: Short term deposits (Note 20(a)) (1,000) (15,848)

Net debt 102,493 87,883

Total equity 240,777 245,690

Total capital (total equity plus net debt) 343,270 333,573

Gearing ratio (net debt / total capital x 100) 30% 26%

The movement in the gearing ratio during 2011 resulted primarily from the decrease in cash and cash equivalents and term deposits and the increase in borrowings during the financial year.

3.3 Fair Value EstimationThe carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values. The carrying values of financial liabilities are estimated to approximate their fair values.

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NOTE 4. CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTSEstimates and judgments are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

4.1 Critical Accounting Estimates and AssumptionsThe group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

(a) Fair value of equity instruments

Management uses judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at each balance date. Given that the entities subject to these investments are primarily subsidiaries of the holding company, the fair value of the equity instruments is estimated to assume their carrying values.

(b) Estimated impairment of investment in movie productions

The investment in movie productions comprises of a guaranteed and a non-guaranteed portion. The impairment allowance in Note 14 represents the provision based on the management’s assessment of the expected recoveries of the exploitation of the copyright in the movie productions.

4.2 Critical Judgments in Applying the Entity’s Accounting Policies(a) Impairment of accounts receivable

Impairment of accounts receivable balances is assessed at an individual as well as on a collective level. At a collective level all debtors in the 120 days plus category (excluding those covered by a specific impairment provision) are estimated to have been impaired and are accordingly provided for.

(b) Impairment of property, plant and equipment

The group assesses whether there are any indicators of impairment of all property, plant and equipment at each reporting date. Property, plant and equipment are tested for impairment and when there are indicators that the carrying amount may not be recoverable, a reasonable provision for impairment is created. For the year ended 31 March 2010, no additional provision for impairment has been made as the group reasonably believes that no indicators for impairment exist.

(c) Deferred tax assets

Deferred tax assets are recognised for all tax losses to the extent that taxable profits will be available against which the losses can be utilised. Significant management judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely level of future taxable profits together with future planning strategies.

(d) Provision for stock obsolescence

Provision for stock obsolescence is assessed and raised on a specific basis based on a review of inventories. Inventories considered obsolete or un-serviceable are written off in the year in which they are identified.

(e) Printed telephone directory - revenue and expense recognition

Revenue related to printed directories is recognised once the directories have been dispatched for distribution. All advance billings and monies collected in advance are deferred. Costs including overhead expenses incurred in relation to securing advertisements and in the publishing of the directories are also deferred until the associated revenues are recognised.

48




Consolidated Company 2011 2010 2011 2010 $’000 $’000 $’000 $’000

NOTE 5. REVENUE

Access fees 11,251 10,831 - -Call revenue 189,584 189,365 - -Card services 5,685 8,824 - -Data network revenue 17,570 14,482 - -Dividends from subsidiary companies - - 16,200 15,040Directory revenue 4,079 3,925 - -Equipment and ancillaries 6,215 5,502 - -Internet revenue 7,077 11,789 - -Management fees 816 3,291 816 3,291Operator services 148 157 - -Other sales and service 4,643 6,617 - -

247,068 254,783 17,016 18,331

NOTE 6. DIRECT COSTS

Airtime and PSTN charges 34,320 40,380 - -Directory production costs 587 524 - -Equipment and ancillary costs 31,526 30,751 - -

66,433 71,655 - -

NOTE 7. OTHER INCOME

Amortisation of government grant 54 54 - -Bad debts recovered 392 13 - -Exchange gain/(loss):- realized 835 (1,854) - -- unrealized 1,060 267 - 15Gain on sale of property, plant and equipment 64 286 - -Royalty income from movie investment - 12 - -Others 4,910 4,701 14 9

7,315 3,479 14 24

NOTE 8. PERSONNEL COSTS

Wages and salaries, including leave pay and other benefits 29,645 32,035 362 344FNPF and other superannuation contributions 3,248 3,839 22 32Other personnel costs 3,344 3,291 - 10

36,237 39,165 384 386

Number of employees as at balance date (Nos.) 1,047 973 5 6

49





NOTE 9. OPERATING EXPENSES

Auditors’ remuneration- Audit services 137 138 10 10- Other services 78 46 (12) 6Bad debts and impairment of receivables (net) 2,405 5,308 - -Consultancy and contractors fees 1,294 1,990 - -Directors’ remuneration:- Fees and allowances 272 292 64 78Electricity 5,393 3,892 11 8Insurance 3,564 3,741 92 76Legal and professional 321 581 41 238License fees 5,520 14,756 - -Loss on disposal of assets 200 105 - -Operating leases 5,939 4,860 46 42Project cost write-off - 320 - -Provision for stock obsolescence 548 907 - -Repairs and maintenance 3,278 3,084 3 4Tax penalties 157 60 - -Traveling and transportation 1,806 1,266 49 46Others 17,256 10,044 352 371

48,168 51,390 656 879

NOTE 10. FINANCE INCOME - NET

Finance income:- Interest income on held-to-maturity investments 2,998 5,073 2,480 3,072- Interest income on advances to related parties 60 60 1,699 1,792

3,058 5,133 4,179 4,864Interest expense:- Borrowings (7,190) (7,254) (1,749) (1,529) (7,190) (7,254) (1,749) (1,529)

Finance (cost)/income – net (4,132) (2,121) 2,430 3,335

NOTE 11. INCOME TAX EXPENSE

(a) Income tax expenseCurrent tax 9,143 10,992 538 1,725Deferred tax asset 4,389 (11,625) - 45Deferred tax liability 1,444 4,158 - -Under /(over) provided in prior years 5 457 - (15)

14,981 3,982 538 1,755

50





NOTE 11. INCOME TAX EXPENSE [cont’d]

(b) Numerical reconciliation of income tax expense to prima facie tax payable

Profit before income tax expense 32,643 30,015 18,349 20,345Tax at the Fiji tax rate of 28% (company – 20%) (2010: 29%) 9,292 8,705 3,670 5,900Tax effect of amounts which are not deductible (taxable) in calculating taxable income: Export income allowances (326) (212) - -Non deductible expenses 285 256 108 191Dividend income - - (3,240) (4,362)Penalties 43 17 - -Amortisation of government grant (16) (16) - -Investment allowances (9,934) (6,854) - -Temporary differences and tax losses not recognised / de-recognised 15,352 1,769 - -Under/(over) provision in income tax in prior years 317 457 - (15)Under/(over) provision of deferred tax in prior years (30) 4 - 4Effect of change in tax rate - (180) - -Others (2) 36 - 37

Income tax expense 14,981 3,982 538 1,755

(c) Un-recognised deferred income tax asset balances

Un-recognised tax losses 16,217 1,377 - -Un-recognised/de-recognised temporary differences 795 2,365 - -

Un-recognised deferred tax balances 17,012 3,742 - -

NOTE 12. EARNINGS PER SHARE

(a) BasicBasic earnings per share are calculated in accordance with the policy outlined in Note 2.8.

Profit attributable to equity holders ofthecompany($‘000) 4,142 15,382Weighted average number of ordinary shares in issue (nos.) 422,104,868 422,104,868

Basic earnings per share (cents per share) 1 4

(b) Diluted - Diluted earnings per share is same as basic earnings per share.

51


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54



NOTE 14. INTANGIBLE ASSETS

Movie productions

Gross carrying amount:Balance as at 1 April 17,854 21,505 - -Additions/(Disposals) - (3,651) - -

Balance as at 31 March 17,854 17,854 - -

Accumulated impairment allowance:Balance as at 1 April 17,854 21,505 - -Impairment allowance - (3,651) - -


Net book amount - - - -

Computer software costs

Gross carrying amount:Balance as at 1 April 30,527 17,313 - -Additions 1,204 13,214 - -


Accumulated impairment allowance:Balance as at 1 April 19,900 16,923 - -Impairment allowance 2,502 2,977 - -


Net book amount 9,329 10,627 - -

Indefeasible Rights of Use capacity

Gross carrying amount:Balance as at 1 April - - - -Additions 17,145 - - -

Balance as at 31 March 17,145 - - -

Accumulated impairment allowance:Balance as at 1 April - - - -Impairment allowance 597 - - -

Balance as at 31 March 597 - - -

Net book amount 16,548 - - -

Total intangible assets, net 25,877 10,627 - -



55




NOTE 14. INTANGIBLE ASSETS [CONT’D] Investments in movie productions comprise of investments in “Straight Edge”, “Smilodon”, “The Great North Pole Elf Strike” and “Pirate Islands 2” movie projects. All movie projects have been granted F1 Provisional Certificate by the Fiji Audio Visual Commission and thereby incentives by way of 150% tax deductions are available. They have been valued at cost and reduced by an impairment charge to arrive at a carrying amount which is an amount the group expects to recover from the exploitation of the copyright in accordance with the Production Investment Agreement.

Indefeasible Rights of Use (“IRU”) capacity relates to the lease of IRU network capacity by Telecom Fiji Limited for a period of 3 years (for IP Transit) and 10 years (for STM-1 and STM-4) via Australia and USA links. The IRU network capacity is capitalised to intangible assets, and is amortised over the contract periods. Where estimated useful lives or recoverable values have diminished due to technological change or market conditions, amortisation is accelerated.

NOTE 15. AVAILABLE-FOR-SALE FINANCIAL ASSETS

Available-for-sale financial assets consist of equity investments in subsidiary companies, all of which are unlisted and denominated in local currencies and are stated at cost. Carrying values are as follows:

Consolidated Company 2011 2010 2011 2010 $’000 $’000 $’000 $’000Shares in subsidiary companies:

- At cost - - 158,414 158,414

- - 158,414 158,414

NOTE 16. HELD-TO-MATURITY INVESTMENTS

Non-current Fiji Government Registered Stock 51,630 51,630 51,630 51,630Add unamortised premium 30 35 30 35

51,660 51,665 51,660 51,665

Current Short term deposits 1,000 15,848 - -

Total 52,660 67,513 51,660 51,665 The above investments are accounted for as held-to-maturity as they are considered likely to be held-to-maturity in line with investment objectives and fixed price nature of the investments. They are hence stated at amortised cost. The carrying values of the Fiji Government Registered securities are considered to be their reasonable approximation of their fair values.

56


NOTE 17. DEFERRED INCOME TAX

The following provides a breakdown of deferred tax assets and liabilities as at the balance date:


(a) Deferred tax assets

Provision for impairment of trade receivables 2,671 2,713 - -Provision for employee entitlements 1,611 2,260 1 7Provision for stock obsolescence 976 832 - -Tax losses 8,874 12,846 - -Depreciation 2 2 3 2Deferred revenue 119 112 - -Unrealised exchange loss 532 408 - (4)Others 13 - - -

14,798 19,173 4 5

(b) Deferred tax liabilities

Deferred expenses 22 14 - -Depreciation 28,787 27,157 - -Unrealised exchange gain 297 501 - -

29,106 27,672 - -

NOTE 18. INVENTORIES Consumables and finished goods 13,355 13,579 - -Goods in transit 572 174 - - 13,927 13,753 - -

Provision for stock obsolescence (3,537) (2,990) - - 10,390 10,763 - -



57





NOTE 19. TRADE AND OTHER RECEIVABLES

Non-current Advance to Amalgamated Telecom Nominees Limited (a) 4,982 4,982 4,982 4,982Advance to Vodafone Fiji Limited (c) - - 20,000 20,000 4,982 4,982 24,982 24,982

Current Trade receivables (b) 39,452 46,651 - -Less: Unearned income (1,337) (1,238) - -

38,115 45,413 - -Less: Provision for impairment (17,188) (16,512) - -

20,927 28,901 - -Accrued revenue 4,734 3,745 1,535 1,001Dividends receivable - - 16,200 5,990Advance to Vodafone Fiji Limited (c) - - 818 860M-PAiSA trust 1,203 - - -Receivable/(payable) from/(to) related parties 593 (921) 3,601 229Other receivables and advances 8,347 8,550 252 1,210Less: Provision for impairment (261) - - -

35,543 40,275 22,406 9,290

(a) The advance to Amalgamated Telecom Nominees Limited is unsecured and subject to interest at the rate of 1.2% per annum.

(b) The carrying value of the trade and other receivables and receivables from related parties are considered to be reasonable approximation of their fair values.

(a) The company advanced $20 million to Vodafone Fiji Limited, a subsidiary company. This advance is secured by an equitable mortgage debenture over all the assets of the subsidiary company, including called and uncalled capital. The terms of the loan is 3 years with interest only payments at the rate of 8.20% and the principal repayable in full on maturity.

(b) Trade receivables that are less than 3 and 4 months past due are not considered impaired. As at 31 March 2011, trade receivables of $20,927,000 (2010: $28,901,000) were not considered impaired.

As of 31 March 2011, trade receivables of $17,449,000 were impaired and provided for. The individually impaired receivables mainly relates to customers, who have defaulted in payments. It was assessed that a portion of the receivables is expected to be recovered.

58


NOTE 19. TRADE AND OTHER RECEIVABLES [CONT’D]

Movements in the provision for impairment of trade receivables are as follows: Consolidated Company 2011 2010 2011 2010 $’000 $’000 $’000 $’000

As at 1 April 16,512 11,642 - -Provision for impairment of receivables 2,021 5,282 - -Amounts written off during the year - (412) - -Reversals during the year (1,084) - - -

As at 31 March 17,449 16,512 - - The creation and release of provision for impaired receivables have been included in “Operating expenses” and “Other income” in the statement of comprehensive income (Note 9 and Note 7 respectively). Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.

The other classes within trade and other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. The group generally obtains security deposits for all new LAN line and Internet connections. Apart from this, it does not hold any collateral as security. The total carrying amount of security deposits in relation to the above trade receivables carried by the group is $4,879,000 (2010: $5,059,000).

NOTE 20. NOTES TO THE CASH FLOW STATEMENT

(a) Cash And Cash Equivalents

Cash and cash equivalents included in cash flow statement comprise the following amounts:

Cash on hand and at bank 12,097 7,694 979 1,598Bank overdraft (6,590) (10,750) - -Short term deposits 1,000 15,848 - -

6,507 12,792 979 1,598

(b) Non-Cash Financing Activities

In prior year, the company adjusted dividend of $3.29 million payable to the Government of Fiji against management fees receivable from the Government of Fiji. The final dividend of $1.5 million from Telecom Fiji Limited was offset against a loan payable by the holding company to Telecom Fiji Limited.

These transactions are not reflected in the cash flow statement.



59




NOTE 21. SHARE CAPITAL Number of Value of issued shares ordinary shares Total (Nos.) $’000 $’000 As at 31 March 2011 and 2010 422,104,868 105,526 105,526 The total authorised number of ordinary shares of the company is 40,000,000,000 shares (2010: 40,000,000,000 shares) with a par value of $0.25 per share (2010: $0.25 per share). All issued shares are fully paid.

NOTE 22. BORROWINGS Consolidated Company 2011 2010 2011 2010 $’000 $’000 $’000 $’000Non-current Term loans – FNPF (i) 86,672 80,000 20,000 20,000 86,672 80,000 20,000 20,000

Current Term loans – FNPF (i) 22,328 20,675 9,000 675Term loan – TFL (ii) - - 3,500 -Bank overdraft (iii) 6,590 10,750 - - 28,918 31,425 12,500 675

Total borrowings 115,590 111,425 32,500 20,675

Term loans consist of the following: (i) Fiji National Provident Fund – Of the total $109 million, $86.7 million borrowings are secured by 2nd registered

mortgage debenture over all the assets and undertakings of Telecom Fiji Limited. The interest rate on this loan varies from 3.3% to 9% per annum.

The holding company borrowed $20.7 million on behalf of Vodafone Fiji Limited, a subsidiary company. The interest rate on this loan is 7.95% and the borrowing is secured by promissory note given by the subsidiary company.

During the year, the holding company borrowed $9 million from FNPF which is secured by an assignment of Fiji Government Registered Stocks of $9.6 million which will mature between 2012 to 2013.

(ii) The holding company borrowed $3.5 million from its subsidiary Telecom Fiji Limited at the rate of 6.4%. The loan was to have been repaid in December 2010 but this was not met. The holding company is currently negotiating the restructure of this loan with Telecom Fiji Limited.

(iii) The bank overdraft of subsidiary, Vodafone Fiji Limited, is unsecured and repayable on demand and subject to an effective interest rate of 5.96% per annum.

The bank overdraft of subsidiary, Telecom Fiji Limited, is secured by 1st registered mortgage over all assets and undertakings of the company with priority up to $10 million. The facility is subject to interest at the rate of 6.3%.

The fair value of current borrowings and non-current borrowings equals their carrying amount as the impact of discounting is not significant.

60


NOTE 23. PROVISIONS

Directory Employee production Dividends Income tax entitlements costs Total $’000 $’000 $’000 $’000 $’000Consolidated

As at 1 April 2010 23,252 4,736 8,169 51 36,208Additional provisions recognised 22,574 8,992 5,573 47 37,186Paid during the year (31,694) (7,911) (5,098) - (44,703)Utilised - - - (51) (51)Under provision in prior year - 181 (2,826) - (2,645) Carrying amount as at 31 March 2011 14,132 5,998 5,818 47 25,995

Company

As at 1 April 2010 8,442 1,084 25 - 9,551Additional provisions recognised 12,665 538 (5) - 13,198Paid during the year (16,885) (1,296) (14) - (18,195)Over provision in prior year - (3) - - (3) Carrying amount as at 31 March 2011 4,222 323 6 - 4,551

Analysis of total provisions: Consolidated Company 2011 2010 2011 2010 $’000 $’000 $’000 $’000

Non-current 249 219 - -Current 25,746 35,989 4,551 9,551

25,995 36,208 4,551 9,551

(a) Income tax - relates to income tax payable for current financial year. This is expected to be fully settled within six months after the balance date.

(b) Employee entitlements consists of the following:

Annual leave 1,658 1,145 6 25Bonus 3,911 6,805 - -Long service leave 79 106 - -Retirement benefits 170 113 - -

5,818 8,169 6 25



61


NOTE 23. PROVISIONS [CONT’D]

Annual LeaveGenerally annual leave is taken within one year of entitlement and accordingly it is expected that a significant portion of the total annual leave balance will be utilised within the next financial year. Note 2.9 outline the accounting policy and underlying basis for these accruals.

Long service leave and retirement benefitsLong service leave and retirement benefits are accrued for employees entitled to the same under their terms of employment. Note 2.9 outline the accounting policy and underlying basis for these accruals.

BonusBonus provisions are expected to be significantly settled within 12 months after the end of the financial year. Note 2.9 outline the accounting policy and underlying basis for these accruals.


NOTE 24. TRADE AND OTHER PAYABLES

Non-current Trade payables and accruals 12,462 - - -Subscriber deposits 4,879 5,059 - - 17,341 5,059 - -

Current Trade payables and accruals 58,810 62,460 432 755E-value in circulation 1,203 - - -Owing to related parties 3,123 5,569 834 -Deferred revenue 11,714 13,605 - - 74,850 81,634 1,266 755

Total 92,191 86,693 1,266 755 The fair value of current liabilities and non-current liabilities equals their carrying amount, as the impact of discounting is not significant.

NOTE 25. DEFERRED INCOME Non-current Government grant 6,459 6,459 - -Less: Accumulated amortization (6,064) (6,010) - -

395 449 - -

NOTE 26. DIVIDENDS Ordinary shares Final dividend for the year 4,222 8,444 4,222 8,444Interim dividend for the year 8,443 12,661 8,443 12,661

12,665 21,105 12,665 21,105



62



NOTE 27. CONTINGENCIES Following is a summary of estimated contingent liabilities: Performance guarantees 1,720 1,729 - -Letters of credit - 15,627 - -Litigations 730 395 - -Movie investment tax incentive allowance 2,490 2,490 - - 4,940 20,241 - -

Legal claimsVarious claims have been brought against subsidiary companies. The directors have obtained legal advice on these claims and are confident that no significant liability other than those that have been brought to account or have been disclosed will eventuate.

NOTE 28. COMMITMENTS

(a) Capital commitments

Capital expenditure commitments as at balance date are as follows:

Intangible assets 46 - - -Property, plant and equipment 26,944 28,641 49 -

Capital expenditure commitments primarily relate to various capital investment schemes, programs and initiatives approved by the Board.

During the year, Telecom Fiji Limited (subsidiary company) acquired IRU network capacity via Southern Cross Cables after Commerce Commission had made a determination allowing licensed operators the ability to purchase capacity directly from Southern Cross Cable Network through the payment of one off bypass fees to FINTEL. TFL’s management estimates that approximately $2 million will be paid to FINTEL in near future as a one off bypass fee.

(b) Operating leases

The group leases various premises under non-cancellable operating leases. These leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.

Commitments for minimum lease payments in relation to non-cancellable operating leases are payable as follows: Within one year 2,652 2,118 46 24Later than one year but not later than five years 5,083 5,453 46 -Later than five years 21,086 22,689 - - 28,821 30,260 92 24



63




NOTE 29. RELATED-PARTY TRANSACTIONS

(a) Parent entity

The company is a subsidiary of Fiji National Provident Fund.

(b) Directors

The names of persons who were directors of the company at any time during the financial year are as follows:

Mr Ajith Kodagoda - Chairman

Mr David Kolitagane – Deputy Chairman

Mr Arun Narsey

Mr Taito Waqa

Mr Tom Ricketts

Mr Umarji Musa (appointed 18 August 2010)

Director’s remuneration is disclosed under Note 9.

The following transactions were carried out with related parties: Consolidated Company(c) Sales of services and interest 2011 2010 2011 2010 $’000 $’000 $’000 $’000(i) By ATH Interest income from subsidiary company 60 60 1,699 1,792 Management fee income from Government of Fiji (shareholder) 816 3,291 816 3,291 (ii) ATH group - provision of telecommunication related services Roaming call revenue – related entities 15,783 5,044 - -

During the year, the group provided telecommunication related services to the Fiji National Provident Fund, Government of Fiji, other Government owned entities, directors and director related entities and to executives. These services were provided at normal commercial rates, terms and conditions.

(d) Superannuation

Fiji National Provident Fund 3,248 3,839 22 32

64


NOTE 29. RELATED-PARTY TRANSACTIONS [CONT’D]

(e) Purchases of services Following is a summary of different purchase transactions the group has had with the subsidiaries and related entities during the year: Consolidated Company 2011 2010 2011 2010 $’000 $’000 $’000 $’000 Advertising expense 46 120 6 5Billing bureau charges – related entities 1,525 2,022 - -Communications and internet 38 93 20 25Call Centre charges 151 - - -Equipment and ancillaries 1,444 - - -Interest expenses and fees 7,190 7,254 1,749 1,529Isaac support – other related entities 93 92 - -Network support – other related entities 921 938 - -Operating leases – parent entity 657 496 46 42Roaming call charges – related entities 963 1,721 - -Others 318 32 28 32

(f) Other transactions - Dividends from subsidiaries - - 16,200 15,040 All transactions with related parties are conducted on commercial terms and conditions.

(g) Key management compensation Salaries and other short-term employee benefits 4,856 3,810 158 121

(h) Year-end balances arising from sales/purchases of services Receivables from related parties (Note 19):- Dividend receivable from subsidiaries - - 16,200 5,990- subsidiary companies 593 (1,008) 4,419 1,089- related entities - 87 - -- parent entity - - - - Payables to related parties (Note 24): - subsidiary company - - - -- related entities 3,123 5,569 834 -

(i) Loans and advances to/(from) related parties Advance to Vodafone Fiji Limited (Note 19) - - 20,000 20,000Advance from Telecom Fiji - - (3,500) -Advance to Amalgamated Telecom Nominees Limited (Note 19) 4,982 4,982 4,982 4,982 Refer Note 19 for terms underlying the advance to subsidiary.



65


NOTE 29. RELATED-PARTY TRANSACTIONS [CONT’D]

(j) Borrowings from ultimate parent entity Consolidated Company 2011 2010 2011 2010 $’000 $’000 $’000 $’000

Term loans - FNPF (Note 22) 109,000 100,675 29,000 20,675 Refer Note 22 for terms underlying borrowings from ultimate parent entity.

NOTE 30. SUBSIDIARY ENTITIES

The consolidated financial statements incorporate the assets, liabilities and results of the following subsidiaries in accordance with the accounting policy described in Note 2.2:

Immediate Class of Equity holding (%) parent shares 2011 2010 ATH Call Centre Limited ATH Ordinary 100% 100%ATH Technology Park Limited ATH Ordinary 100% 100%Fiji Directories Limited ATH Ordinary 90% 90%Pacific Emerging Technologies Limited ATH Ordinary 51% 51%Vodafone Fiji Limited ATH Ordinary 51% 51%Telecom Fiji Limited ATH Ordinary 100% 100%Internet Services Fiji Limited TFL Ordinary 100% 100%Transtel Limited TFL Ordinary 100% 100%Xceed Pasifika Limited TFL Ordinary 100% 100% All companies are incorporated in Fiji and have the same balance date as the parent entity.

The financial statements of Telecom Fiji Limited are audited by G.Lal + Co whilst the financial statements of Internet Services Fiji Limited, Transtel Limited and Xceed Pasifika Limited are audited by PricewaterhouseCoopers.

The principal activity of Amalgamated Telecom Nominees Limited (ATN) is to hold the shares of Amalgamated Telecom Holdings Limited for the qualifying employees of the ATH Group under Employee Share Option Plan. Accordingly, the financial statements of ATN are not consolidated in the consolidated financial statements. In accordance with the Employee Share Option Plan Trust Deed dated 8 October 2002 and amendments thereto, any surplus balance in the Cash Fund upon liquidation of ATN and after satisfaction of all obligations will be paid to the holding company.

NOTE 31. ASSOCIATED ENTITY

Entity Place of % Investment Book Incorporation Owned Value ($) Amalgamated Telecom Holdings (PNG) Limited(non-operating entity) PNG 50% 1



66


NOTE 32. SEGMENT REPORTING

31 March 2011 Fixed Line Mobile Telecom Telecom Other Elimination Consolidated $’000 $’000 $’000 $’000 $’000Revenue External customer 78,215 153,238 15,615 - 247,068Inter-segment - operating 13,303 11,704 16,922 (41,929) -Other revenue 5,575 1,600 140 - 7,315

Total revenue 97,093 166,542 32,677 (41,929) 254,383

Results Depreciation and amortisation 34,914 21,161 1,174 - 57,249Redundancy costs 611 - - - 611Finance cost/(income) 4,740 1,925 (2,533) - 4,132Direct and other expenditure 56,976 105,459 15,039 (17,726) 159,748

Segment profit before tax (148) 37,997 18,997 (24,203) 32,643

Operating assets 265,360 186,900 272,555 (220,761) 504,054

Operating liabilities 161,492 108,381 50,076 (56,674) 263,277

Other disclosures Capital expenditure 38,957 31,999 2,420 - 73,376

31 March 2010 Fixed Line Mobile Telecom Telecom Other Elimination Consolidated $’000 $’000 $’000 $’000 $’000Revenue External customer 91,961 145,443 17,379 - 254,783Inter-segment - operating 12,099 11,997 15,749 (39,845) -Other revenue 6,564 (3,392) 451 (144) 3,479

Total revenue 110,624 154,048 33,579 (39,989) 258,262

Results Depreciation and amortisation 27,632 19,832 900 - 48,364Redundancy costs 4,728 - - - 4,728Finance cost/(income) 2,651 2,917 (3,447) - 2,121Direct and other expenditure 81,740 100,952 19,183 (28,841) 173,034

Segment profit (6,127) 30,347 16,943 (11,148) 30,015

Operating assets 279,879 174,255 261,806 (207,803) 508,137

Operating liabilities 160,432 103,405 43,511 (44,901) 262,447

Other disclosures Capital expenditure 64,603 17,999 2,736 - 85,338



67




NOTE 33. PRINCIPAL ACTIVITIES

The principal activities of the company during the year were that of investments and provision of management services.

The principal activities of the subsidiary entities during the year were providing telecommunication services and telephone equipment, compilation and publishing of the Fiji telephone directory, provision of internet connection and internet related services, operation of a mobile telecommunications network, provision of pre-paid telephony services, provision of mobile phone money transfer service, managing PAYECOMM products, sale of ICT equipment and solutions, and development of a technology park including call centres, data warehouse and processing centres.

The set-up of the ATH Call Centre was completed on 31 January 2011 and operations commenced on 1 February 2011.

During the year, Vodafone Fiji Limited launched M-PAiSA, a mobile phone money transfer service.

There were no significant changes in the nature of these activities during the financial year.

NOTE 34. SIGNIFICANT EVENTS DURING THE YEAR

During the year:

(i) The Commerce Commission made a determination with regard to bandwidth pricing and access to the Southern Cross Cable. The determination had a glide path for the reduction in bandwidth pricing over a period of one year with a price reduction in July 2010, January 2011 and July 2011. Immediate price reductions from Fiji International Telecommunication Limited’s (FINTEL) current pricing, range from 11% to 65%, while long-term reductions range from 30% to 73%. The determination also gives licensed operators the ability to purchase capacity direct from the Southern Cross Cable network through the payment of a one off bypass fee to FINTEL together with operational and maintenance charges determined by the Commerce Commission. Bandwidth cost is a significant component of the direct cost for the group. The reduction in bandwidth will result in a reduction in cost especially to the Telecom Fiji group in the future. The group now has the opportunity to increase revenue streams from new products if the company or the group accesses the South Cross Cable directly. Therefore, Telecom Fiji Limited entered into an agreement with Optus Networks Pty Limited for the purchase of Network Capacity via Australia and USA link for a 10 year period;

(ii) A commercial dispute between Digicel (Fiji) Limited (“Digicel”) against one of the subsidiaries, Telecom Fiji Limited which was initiated in the prior year was resolved by the Commerce Commission. As a result, legal proceedings in relation to the winding up proceedings made by Digicel against the Telecom Fiji Limited were dismissed by the High Court;

(iii) A restructuring of Telecom Fiji group was undertaken and commercial operations from Internet Services Fiji Limited were transferred to the company as of 28 February 2011. As a result, Telecom Fiji Limited acquired from Internet Services Fiji Limited, the existing business of retailing Internet services together with business assets and liabilities;

(iv) As a continuing restructuring process of Telecom Fiji group, the company’s Call centre operations was outsourced to ATH Call Centre Limited (ATHCCL). As a result, certain employees were transferred to ATHCCL. Furthermore, a redundancy program was implemented for those employees that could not be transferred which resulted in a redundancy cost;

(v) The set up of the ATH Call Centre was completed on 31 January 2011 and operations commenced on 1 February 2011;

(vi) To facilitate the Fiji Government’s ICT program, the Commerce Commission made a determination on Telecom Interconnection Service rate to charge FJ$0.165 per minute for all inbound traffic which commenced from 17 November 2010 to 16 November 2012; and

(vii) On 27 May 2009, the National High Court of Papua New Guinea issued an order of judgment in favour of the associate entity, Amalgamated Telecom Holdings (PNG) Limited, Steamships Trading Limited and the company. The judgment was against the Independent State of Papua New Guinea.

68




NOTE 34. SIGNIFICANT EVENTS DURING THE YEAR [CONT’D] The litigation related to the share acquisition agreement entered between the Independent Public Business

Corporation of PNG Limited and Amalgamated Telecom Holdings (PNG) Limited. Under the terms of the share acquisition agreement, Amalgamated Telecom Holdings (PNG) Limited was to acquire 50.1% of the shares in Telikom PNG Limited. However, due to the non performance of the contract by the Independent Public Business Corporation of PNG Limited, the sale of Telikom PNG Limited shares to Amalgamated Telecom Holdings (PNG) Limited did not proceed.

At 31 March 2011, no settlement has been received by the company. However, the company received an offer for an out of court settlement for consideration.

NOTE 35. EVENTS SUBSEQUENT TO BALANCE DATE

Apart from the matter noted above, no other matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect the operations of the group or any company in the group, the results of those operations, or the state of affairs of the group or any company in the group in future financial years.

69


SOUTH PACIFIC STOCK EXCHANGE - LISTING REQUIREMENTS

1. Statement of interest (direct and indirect) of each director in the share capital of the company as at 31 March 2011:

Directors Direct Interest Indirect Interest (Number of Shares) (Number of Shares) - - -

2. Shareholding of those persons holding the 20 largest blocks of shares:

Shareholders No. Of SharesFiji National Provident Fund 245,960,597Republic of Fiji Islands 145,932,209Unit Trust of Fiji 8,607,085Fijians Trust Fund 5,000,000Amalgamated Telecom Nominees Limited 4,700,193Fiji National Provident Fund Nominees Limited 2,149,497Yasana Holdings Limited 2,077,237Fijian Holdings Limited 1,000,000Guardian Trustees Limited – Fijian Holdings Trust Fund 613,727Kiran Lata Kumar 346,326Banaban Trust Fund board 200,000Colonial Fiji Life Limited 180,324Dominion Insurance Limited 179,814FHL Securities Limited 131,205JP Bayly Trust 111,500RFMF Army Medical Scheme 100,000Nakuruvakarua Company Limited 100,000Yatu Lau Company Limited 100,000Naitasiri Provincial Council 94,350Lomaiviti Provincial Council 94,340

3. Distribution of shareholding under Section 6.31(v):

Holding No. of Holders Total % Holding Less than 500 shares 11 0.00 500 to 5,000 shares 689 0.76 5,001 to 10,000 shares 100 0.21 10,001 to 20,000 shares 42 0.16 20,001 to 30,000 shares 11 0.07 30,001 to 40,000 shares 1 0.01 40,001 to 50,000 shares 15 0.18 50,001 to 100,000 shares 12 0.24 100,001 to 1,000,000 shares 9 0.65 Over 1,000,000 shares 7 97.72 Total 897 100%

4. Mr Ajith Kodagoda has waived emolument due to him on his appointment as Chairman of the Board of Directors on 18 August 2010.

70


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72


Subsidiary Companies

Telecom Fiji LimitedGanilau HouseEdward StreetPrivate Mail BagSuvaPhone (679) 3304019Fax (679) 3301765website: www.TelecomFiji.com.fj

Internet Services Fiji Limited (Connect)Garden City, RaiwaiPO Box 13779SuvaPhone (679) 3300100Fax (679) 3307237website: www.connect.com.fj

Vodafone Fiji Limited168 Princess Road, TamavuaPrivate Mail BagSuvaPhone (679) 3312000Fax (679) 3312007website: www.vodafone.com.fj

Transtel Limited5th Floor, Telecom New Wing BuildingEdward StreetPrivate Mail BagSuvaPhone (679) 3210528, 3210556Fax (679) 310153website: www.transtel.com.fj

Fiji Directories Limited3rd and 4th Floors, Telecom New Wing BuildingEdward StreetPO Box 16059SuvaPhone (679) 3311000Fax (679) 3300004website: yellowpages.com.fj

Xceed Pasifika Limited5th Floor, Telecom New Wing BuildingEdward StreetPrivate Mail BagSuvaPhone (679) 3216000Fax (679) 3216098website: www.xceed.com.fj

ATH Call Centre Limited (ATH InTouch)Garden City, RaiwaiPO Box 5040RaiwaqaPhone (679) 3310333Fax (679) 112244

Pacific Emerging Technologies LimitedLevel 4, General Post Office BuildingEdward StreetSuvaPO Box U43, USP, Suva.Phone (679) 3310025

AMALGAMATED TELECOM HOLDINGS LIMITED. 2nd Floor, Harbour Front, Rodwell Road.

GPO Box 11643, Suva, Fiji Islands. Phone: (679) 330 8700 Fax: (679) 330 8044 E-mail: [email protected]

An CompanyATH

ATH - Annual Report 2011

Documents