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Financial Statements

For the year ended June 30, 2010


36 | Pakistan Telecommunication Company Limited
Annual Report 2010 | 37

Auditors’ Report to the Members

We have audited the annexed statement of financial position of Pakistan Telecommunication Company Limited (“the
Company”) as at June 30, 2010 and the related statement of comprehensive income, statement of cash flows and statement
of changes in equity together with the notes forming part thereof, for the year then ended and we state that we have obtained
all the information and explanations which, to the best of our knowledge and belief, were necessary for the purposes of our
audit.

It is the responsibility of the Company’s management to establish and maintain a system of internal control, and prepare
and present the above said statements in conformity with the approved accounting standards and the requirements of the
Companies Ordinance, 1984. Our responsibility is to express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing standards as applicable in Pakistan. These standards require that we
plan and perform the audit to obtain reasonable assurance about whether the above said statements are free of any material
misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the above
said statements. An audit also includes assessing the accounting policies and significant estimates made by management,
as well as, evaluating the overall presentation of the above said statements. We believe that our audit provides a reasonable
basis for our opinion and, after due verification, we report that:

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

(b) In our opinion:

(i) the statement of financial position and statement of comprehensive income together with the notes thereon have
been drawn up in conformity with the Companies Ordinance, 1984, and are in agreement with the books of accounts
and are further in accordance with accounting policies consistently applied except for the changes as stated in note
2.1 to the financial statements with which we concur;

(ii) the expenditure incurred during the year was for the purpose of the Company’s business; and

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

(c) in our opinion and to the best of our information and according to the explanations given to us, the statement of financial
position, statement of comprehensive income, statement of cash flows and statement of changes in equity together
with the notes forming part thereof conform with approved accounting standards as applicable in Pakistan, and, give
the information required by the Companies Ordinance, 1984, in the manner so required and respectively give a true and
fair view of the state of the Company’s affairs as at June 30, 2010 and of the comprehensive income, its cash flows and
changes in equity for the year then ended; and

(d) in our opinion Zakat deductible at source under the Zakat and Ushr Ordinance, 1980 (XVIII of 1980), was deducted by
the Company and deposited in the Central Zakat Fund established under Section 7 of that Ordinance.

A. F. Ferguson & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
Islamabad. Islamabad.

Audit Engagement Partner’s Name: Audit Engagement Partner’s Name:


M. Imtiaz Aslam Sajjad Hussain Gill

Dated: August 26, 2010


38 | Pakistan Telecommunication Company Limited

Statement of Financial Position


As at June 30, 2010

Note 2010 2009


(Rupees in thousand)

Equity and liabilities


Share capital and reserves

Share capital 6 51,000,000 51,000,000


Revenue reserves
Insurance reserve 2,113,704 1,683,074
General reserve 30,500,000 30,500,000
Unappropriated profit 16,145,007 16,206,485

99,758,711 99,389,559

Non current liabilities

Long term security deposits 7 720,964 990,055
Deferred taxation 8 2,949,770 2,379,000
Employees’ retirement benefits 9 15,512,803 14,142,099
Deferred government grants 10 1,632,701 1,061,044

20,816,238 18,572,198


Current liabilities

Trade and other payables 11 24,922,197 26,114,171
Payable to PTA against WLL license fee 12 1,894,950 1,953,971
Dividend payable 3,375,631 7,650,000
Provision for taxation – 368,180

30,192,778 36,086,322


150,767,727 154,048,079

Contingencies and commitments 13


The annexed notes from 1 to 43 form an integral part of these financial statements.

Chairman
Annual Report 2010 | 39

Note 2010 2009


(Rupees in thousand)

Assets

Non current assets



Fixed assets
Property, plant and equipment 14 88,219,285 87,567,351
Intangible assets 15 3,079,031 3,320,670

91,298,316 90,888,021

Long term investments 16 6,681,965 5,607,439
Long term loans 17 7,337,210 3,332,378

105,317,491 99,827,838

Current assets

Stores, spares and loose tools 18 4,075,863 5,201,991
Trade debts 19 10,171,530 10,760,974
Loans and advances 20 599,031 590,061
Accrued interest income 21 571,127 821,027
Recoverable from tax authorities 22 7,164,971 1,059,608
Receivable from Government of Pakistan 23 2,164,072 2,164,072
Other receivables 24 787,633 698,270
Short term investments 25 13,493,865 21,017,790
Cash and bank balances 26 6,422,144 11,906,448

45,450,236 54,220,241

150,767,727 154,048,079

President & CEO


40 | Pakistan Telecommunication Company Limited

Statement of Comprehensive Income


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

Revenue 27 57,174,527 59,239,001


Cost of services 28 (38,258,711) (37,732,282)

Gross profit 18,915,816 21,506,719

Administrative and general expenses 29 (7,223,780) (8,935,261)


Selling and marketing expenses 30 (2,142,324) (1,817,071)
Other operating income 31 5,134,646 4,267,172

Operating profit 14,684,358 15,021,559

Voluntary separation scheme – (92,118)


Finance cost 32 (403,240) (908,524)

Profit before tax 14,281,118 14,020,917

Taxation 33 (4,986,966) (4,869,732)

Profit after tax 9,294,152 9,151,185


Other comprehensive income for the year – –

Total comprehensive income for the year 9,294,152 9,151,185

Earnings per share – basic and diluted (Rupees) 39 1.82 1.79

The annexed notes from 1 to 43 form an integral part of these financial statements.

Chairman President & CEO


Annual Report 2010 | 41

Statement of Cash Flows


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

Cash flows from operating activities



Cash generated from operations 36 24,899,178 34,337,391
Long term security deposits (269,091) 38,437
Employees’ retirement benefits paid (524,142) (1,470,335)
Payment of other VSS components (5,323) (840,927)
Finance cost paid (223,123) (265,232)
Consideration paid against adjustment of tax losses of PTML (1,198,943) –
Income tax paid (9,648,994) (2,894,844)

Net cash inflow from operating activities 13,029,562 28,904,490


Cash flows from investing activities

Capital expenditure (12,870,439) (9,455,527)
Purchase of intangible assets – (397,979)
Proceeds from disposal of property, plant and equipment 140,578 206,039
Short term investments 1,221,886 (1,221,886)
Increase in long term investments (1,074,526) (2,000,000)
Long term loans – net (53,655) 62,565
PTA WLL license fee (210,550) –
Loan to the wholly owned subsidiary – PTML (4,000,000) (3,000,000)
Return on long term loans and short term investments 3,952,363 2,751,824
Government grants received 571,657 966,044
Dividend income 695,239 –

Net cash outflow from investing activities (11,627,447) (12,088,920)



Cash flows from financing activities

Dividend paid (13,188,458) (2,742)

Net cash outflow from financing activities (13,188,458) (2,742)

Net (decrease) / increase in cash and cash equivalents (11,786,343) 16,812,828


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

Cash and cash equivalents at end of the year 37 19,916,009 31,702,352

The annexed notes from 1 to 43 form an integral part of these financial statements.

Chairman President & CEO


42 | Pakistan Telecommunication Company Limited

Statement of Changes in Equity


For the year ended June 30, 2010

Issued, subscribed and


paid–up capital Revenue reserves

Insurance General Unappropriated


Class “A” Class “B” reserve reserve profit Total

(Rupees in thousand)

Balance as at July 01, 2008 37,740,000 13,260,000 1,683,074 30,500,000 14,705,300 97,888,374

Total comprehensive income


for the year – – – – 9,151,185 9,151,185
Interim dividend for the year ended
June 30, 2009 – Rs. 1.5 per share – – – – (7,650,000) (7,650,000)

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

Total comprehensive income


for the year – – – – 9,294,152 9,294,152
Transfer to insurance reserve – – 430,630 – (430,630) –
Interim dividend for the year ended
June 30, 2010 – Rs. 1.75 per share – – – – (8,925,000) (8,925,000)

Balance as at June 30, 2010 37,740,000 13,260,000 2,113,704 30,500,000 16,145,007 99,758,711

The annexed notes from 1 to 43 form an integral part of these financial statements.

Chairman President & CEO


Annual Report 2010 | 43

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

1. Legal status and nature of business

1.1 Constitution and ownership


Pakistan Telecommunication Company Limited (“the Company”) was incorporated in Pakistan on December 31,
1995 and commenced business on January 01, 1996. The Company is listed on Karachi, Lahore and Islamabad
stock exchanges. The Company was established to undertake the telecommunication business formerly carried on
by Pakistan Telecommunication Corporation (PTC). The business was transferred to the Company on January 01,
1996 under the Pakistan Telecommunication (Re–organization) Act, 1996 at which date the Company took over all the
properties, rights, assets, obligations and liabilities of PTC except those transferred to National Telecommunication
Corporation (NTC), Frequency Allocation Board (FAB), Pakistan Telecommunication Authority (PTA) and Pakistan
Telecommunication Employees Trust (PTET). The registered office of the Company is situated at PTCL Headquarters,
G–8/4, Islamabad.

1.2 Activities
The Company provides telecommunication services in Pakistan. It owns and operates telecommunication facilities and
provides domestic and international telephone services and other communication facilities throughout Pakistan. The
Company has also been licensed to provide such services to territories of Azad Jammu and Kashmir and Gilgit Baltistan.

2. Statement of compliance
These financial statements have been prepared in accordance with the approved accounting standards as applicable in
Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued
by the International Accounting Standards Board as are notified under the Companies Ordinance, 1984, provisions of
and directives issued under the Companies Ordinance, 1984. In case requirements differ, the provisions or directives
of the Companies Ordinance, 1984 shall prevail.

2.1 Adoption of new and revised standards and interpretations


Changes in accounting policies and disclosures:

(i) IAS 1 (Revised), ‘Presentation of financial statements’ (effective for annual periods beginning on or after
January 01, 2009). The revised standard prohibits the presentation of items of income and expenses (that is
non–owner changes in equity) in the statement of changes in equity, requiring ‘non–owners changes in equity’
to be presented separately from owners changes in equity. All ‘non–owners changes in equity’ are required to be
shown in a performance statement. Companies can choose whether to present one performance statement (the
statement of comprehensive income) or two statements (statement of comprehensive income and statement
of other comprehensive income). The Company has preferred to present one statement.

(ii) IFRS 3 (Revised), ‘Business Combinations’ (effective for annual periods beginning on or after July 01, 2009).
The revised standard continues to apply the acquisition method to business combinations, with some significant
changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition
date, with contingent payments classified as debt subsequently remeasured through the income statement.
There is a choice on an acquisition–by–acquisition basis to measure the non–controlling interest in the acquiree
at fair value or at the non–controlling interest’s proportionate share of the acquiree’s net assets. All acquisition–
related costs should be expensed. The Company’s acquisition during the year has been recorded in accordance
with IFRS 3 (Revised).

(iii) IAS 23 (Revised), ‘Borrowing Costs’ (effective for annual periods beginning on or after January 01, 2009). The
revised standard requires capitalization of borrowing costs that are directly attributable to the acquisition,
construction or production of a qualifying asset. The Company’s previous policy was in line with the revision
and therefore the adoption of the revised IAS 23 and the consequent change in accounting policy had no impact
on the earnings of the Company during the year ended June 30, 2010.

(iv) IFRIC 18, ‘Transfer of assets from customers’ (effective for annual periods beginning on or after July 01,
2009). The interpretation clarifies the accounting treatment of consideration received from customers to
construct or acquire an item of property, plant and equipment for provision of services to customers. The
44 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

interpretation requires recognition of property, plant and equipment in accordance with IAS 16 ‘Property, plant
and equipment’ and recognition of income as per IAS 18 ‘Revenue’. The Company’s current accounting policy
is in compliance with this interpretation and therefore there is no effect on the Company’s financial statements.

2.2 Amendments and Interpretations to published accounting standards not effective during the year and not yet adopted
by the Company:
Effective date
(annual periods beginning on or after)

IFRS 2 Share based payments (Amendments) January 01, 2010


IFRS 5 Non current assets held for sale and discontinued operations (Amendments) January 01, 2010
IFRS 8 Operating segments (Amendments) January 01, 2010
IAS 1 Presentation of financial statements (Amendments) January 01, 2010
IAS 7 Statement of cash flows (Amendment) January 01, 2010
IAS 17 Leases (Amendments) January 01, 2010
IAS 24 Related party disclosures (Revised) January 01, 2011
IAS 32 Financial instruments: Presentation (Amendments) February 01, 2010
IAS 36 Impairment of assets (Amendments) January 01, 2010
IAS 39 Financial instruments: Recognition and measurement (Amendments) January 01, 2010
IFRIC 14 “IAS 19” The limit on a defined benefit asset, minimum funding requirements
and their interaction (Amendments) January 01, 2011
IFRIC 19 Extinguishing financial liabilities with equity Instruments July 01, 2010

The management anticipates that except for the effects on the financial statements, of IFRS 2 – Share based payments
(Amendments), if any, adoption of above standards, amendments and interpretations in future periods will have no
material impact on the Company’s financial statements except for additional disclosures. The management is currently
considering the implications of IFRS 2 (Amendments).

3. Basis of preparation
These financial statements have been prepared under the historical cost convention, except for the revaluation of
certain financial instruments at fair value and the recognition of certain employees’ retirement benefits on the basis
of actuarial assumptions.

4. Significant accounting judgement and estimates


The preparation of financial statements in conformity with approved accounting standards requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the process of applying the
Company’s accounting policies. Estimates and judgements are continually evaluated and are based on historic
experience including expectation of future events that are believed to be reasonable under the circumstances. The
areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant
to the financial statements are as follows:

(a) Provision for employees’ retirement benefits


Actuarial valuation of pension, gratuity, medical and compensated leave absences contributions (note 5.21) requires
use of certain assumptions related to future periods including increase in remuneration / medical costs, expected long
term return on plan assets and the discount rate used to convert future cash flows to current values.

(b) Provision for income taxes


The Company recognizes tax provisions using estimates based upon expert opinions of tax / legal advisors. Differences,
if any, between the income tax provision and the tax liability is recorded on final determination of such liability.
Deferred income tax (note 5.20) is calculated at the rates that are expected to apply to the period when the differences
reverse, based on tax rates that have been enacted or substantially enacted by the date of statement of financial
position.
Annual Report 2010 | 45

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

(c) Useful lives and residual values of fixed assets


The Company reviews the useful lives and residual values of fixed assets (note 5.10) on a regular basis. Any change in
estimates may affect the carrying amounts of the respective items of property, plant and equipment and intangible
assets with a corresponding effect on the depreciation / amortization charge.

(d) Provision for doubtful receivables


Provision against overdue receivable balances is recognized after considering the receipt pattern and the future outlook
of the concerned receivable party. It is reviewed by the management on a regular basis.

5. Summary of significant accounting policies


The significant accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented unless otherwise stated.

5.1 Functional and presentation currency


Items included in the financial statements of the Company are measured and presented using the currency of the
primary economic environment in which the entity operates (the functional currency), which is the Pakistan Rupee
(Rs).

5.2 Foreign currency transactions and translation


Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency using the exchange rate prevailing at the date of the statement of financial position. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the translation of monetary items at year end
exchange rates, are charged to income for the year.

5.3 Insurance reserve


The assets of the Company are self insured. The Company has created an insurance reserve. Appropriation out of
profits are made on the discretion of the Board of Directors. The reserve is to be utilized to meet any loss resulting
from theft, fire or natural disasters.

5.4 Government grants


Government grants are recognized at their fair value as deferred income, when there is reasonable assurance that the
grant will be received and the Company will comply with the conditions associated with the grant.

Grants that compensate the Company for expenses incurred are recognized in income for the year on a systematic
basis in the same period in which the related expenses are recognized. Grants that compensate the Company for cost
of an asset are recognized in income for the year on a systematic basis over the expected useful life of the related
asset, upon its capitalization.

5.5 Borrowings and borrowing costs


Borrowings are recognized at the proceeds received. Any difference, between the proceeds (net of transaction costs)
and the redemption value, is recognized in income for the year over the period of the borrowings, using the effective
interest method.

Borrowing costs which are directly attributable to the acquisition and construction of a qualifying asset are capitalized
as part of the cost of that asset. All other borrowing costs are charged to income for the year.

5.6 Trade and other payables


Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be
paid in the future for the goods and / or services received, whether or not billed to the Company.
46 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

5.7 Provisions
Provisions are recognized when the Company has a present legal or constructive obligation as a result of past events,
it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and
the reliable estimate of the amount can be made. Provisions are reviewed at each statement of financial position date
and are adjusted to reflect the current best estimate.

5.8 Dividend distribution


Final dividend distribution to the Company’s shareholders is recognized as a liability in the financial statements, in the
period in which the dividend is approved by the Company’s shareholders; interim dividend distribution is recognized
in the period in which it is declared by the Board of Directors.

5.9 Contingent liabilities


A contingent liability is disclosed when the Company has a possible obligation as a result of past events, whose
existence will be confirmed only by the occurrence or non–occurrence of one or more uncertain future events, not
wholly within the control of the Company; or the Company has a present legal or constructive obligation, that arises
from past events, but it is not probable that an outflow of resources embodying economic benefits will be required to
settle the obligation, or the amount of the obligation cannot be measured with sufficient reliability.

5.10 Fixed assets


(a) Property, plant and equipment
Property, plant and equipment, except freehold land, is stated at cost less accumulated depreciation and any identified
impairment losses; freehold land is stated at cost less identified impairment loss, if any. Cost includes expenditure,
related overheads, mark up and borrowing costs referred to in note 5.5, that is directly attributable to the acquisition
of the asset.

Subsequent costs, if reliably measurable, are included in the assets’ carrying amount, or recognized as a separate
asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to the
Company. The carrying amount of any replaced part as well as other repairs and maintenance costs are charged to
income for the year during the period in which they are incurred.

Depreciation is calculated using the straight–line method to allocate their cost over their estimated useful lives, at the
rates mentioned in note 14, after taking into account their residual values.

Depreciation on additions to property, plant and equipment, is charged from the month in which relevant asset is
acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Any
impairment loss, or its reversal, is also charged to income. Where an impairment loss is recognized, the depreciation
charge is adjusted in future periods to allocate the assets’ revised carrying amount less the residual value over its
estimated useful life.

The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and the carrying
amount of the asset, is recognized in income for the year.

(b) Intangible assets

(i) Licenses

These are stated at cost less accumulated amortization and any identified impairment losses. Amortization is
calculated using the straight–line method to allocate the cost of the license over its estimated useful life, at the
rate specified in note 15, and is charged to income for the year.

The amortization on licenses acquired during the year, is charged from the month in which a license is acquired
/ capitalized, while no amortization is charged in the month of expiry / disposal of the license.

(ii) Computer software

These are carried at cost less accumulated amortization and any identified impairment losses. Amortization is
calculated using the straight–line method to allocate the cost of the software over its estimated useful life, at
Annual Report 2010 | 47

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

the rate specified in note 15, and is charged to income for the year. Costs associated with maintaining computer
software, are recognized as an expense as and when incurred.

Amortization on additions to computer software is charged from the month in which an intangible is acquired
or capitalized, while no amortization is charged for the month in which the intangible is disposed off.

5.11 Investments in subsidiaries and associates


Investments in subsidiaries and associates where the Company has control or significant influence are measured at
cost in the Company’s financial statements. The profits and losses of subsidiaries and associates are carried in the
financial statements of the respective subsidiaries and associates, and are not dealt within the financial statements of
the Company, except to the extent of dividends declared by the subsidiaries and associates.

5.12 Impairment of non–financial assets


Assets that have an indefinite useful life, for example land, are not subject to depreciation and are tested annually for
impairment. Assets that are subject to depreciation are reviewed for impairment at each statement of financial position
date, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount for which the assets’ carrying amount exceeds its recoverable amount.
An asset’s recoverable amount is the higher of its fair value less cost 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. Non–financial assets that suffered an impairment, are reviewed for possible reversal of the impairment at each
statement of financial position date. Reversals of the impairment loss are restricted to the original cost of the asset.
An impairment loss or reversal of impairment loss is recognized in income for the year.

5.13 Stores, spares and loose tools


These are stated at lower of cost and net realizable value. Cost is determined using the moving average method. Items
in transit are valued at cost comprising invoice value and other related charges incurred up to the date of statement
of financial position.

5.14 Trade debts


Trade debts are carried at their original invoice amount less any estimate made for doubtful debts based on a review
of all outstanding amounts at the year end. Bad debts are written off when identified.

5.15 Financial instruments


Financial assets and liabilities are recognized when the Company becomes a party to the contractual provisions of the
instrument, and derecognized when the Company loses control of the contractual rights that comprise the financial
assets, and in case of financial liabilities when the obligation specified in the contract is discharged, cancelled or
expired. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration
given and received respectively. These are subsequently measured at fair value, amortized cost or cost, as the case
may be. Any gain or loss on derecognition of financial assets and financial liabilities is included in income for the year.

5.16 Financial assets


(a) Classification

The Company classifies its financial assets in four categories: held to maturity, loans and receivables, fair value
through profit or loss and available–for–sale. The classification depends on the purpose for which the financial assets
were acquired. Management determines the classification of its financial assets at initial recognition.

(i) Held to maturity

A financial asset is classified in this category if it is acquired by the Company with the intention and ability to
hold it till its maturity.
48 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

(ii) Loans and receivables

Loans and receivables are non–derivative financial assets with fixed or determinable payments that are
not quoted in an active market. The Company’s loans and receivables comprise ‘Trade debts’, ‘Loans and
advances’, ‘Accrued interest income’, ‘Receivable from Government of Pakistan’, ‘Other receivables’, ‘Short
term investments’ and ‘Cash and bank balances’.

(iii) Fair value through profit or loss

Financial assets at fair value through profit or loss, are financial assets held for trading. A financial asset is
classified in this category, if acquired principally for the purpose of selling in the short–term. Assets in this
category are classified as current assets.

(iv) Available–for–sale

Available–for–sale financial assets are non–derivatives, that are either designated in this category or not
classified in any of the other categories. These are included in non–current assets unless management intends
to dispose off these assets within twelve months of the date of statement of financial position.

(b) Recognition and measurement


Regular purchases and sales of financial assets are recognized on the trade date – the date on which the Company
commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all
financial assets. Financial assets carried at fair value through profit or loss, are initially recognized at fair value and the
related transaction costs are charged to income for the year. Investments classified as available–for–sale are initially
measured at cost being the fair value of the consideration given. At subsequent reporting dates, these investments
are remeasured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments
in which a quoted market price is not available, are measured at cost if it is not possible to apply any other valuation
methodology. Unrealised gains and losses arising from the changes in the fair value are included in income for the
year in the period in which they arise. Financial assets at fair value through profit or loss are subsequently carried at
fair value. Loans and receivables and held to maturity financial assets are carried at amortized cost using the effective
interest method.

Financial assets are derecognized, when the rights to receive cash flows from the investments have expired or have
been transferred.

Gains or losses arising from changes in the fair value of the financial assets at fair value through profit or loss category
are recognized as income for the period in which they arise. Dividend income from available–for–sale investments and
financial assets at fair value through profit or loss, is recognized in income for the year, when the Company’s right to
receive dividend is established.

(c) Impairment

The Company assesses at each statement of financial position 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 a security below its cost is considered as an indicator that the
security is impaired. If any such evidence exists for available–for–sale financial assets, the impairment loss is reduced
from value of other comprehensive income and recognized in income for the year. Impairment losses recognized in
income on equity instruments are not reversed.

5.17 Offsetting of financial assets and liabilities


Financial assets and liabilities are offset and the net amount is reported in the statement of financial position if the
Company has a legally enforceable right to set off the recognized amounts and the Company intends to settle on a net
basis or realize the asset and settle the liability simultaneously.

5.18 Cash and cash equivalents


Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash and cash equivalents
comprise cash in hand, other short term highly liquid investments with original maturities of three months or less, that
are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value.
Annual Report 2010 | 49

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

5.19 Revenue recognition


Revenue comprises of the fair value of the consideration received or receivable, for the provision of telecommunication,
broadband and related services in the ordinary course of the Company’s activities.

Revenue is recognized, when it is probable that the economic benefits associated with the transaction will flow to the
Company, and the amount of revenue, and the associated cost incurred or to be incurred, can be measured reliably,
and when specific criteria have been met for each of the Company’s activities as described below:

(i) Rendering of telecommunication services

Revenue from telecommunication services comprises of amounts charged to customers in respect of monthly
line rent, line usage and provision of telecommunication services (including data services). Revenue also
includes the net income received and receivable from revenue sharing arrangements entered into with overseas
and local telecommunication companies.

Revenue is recognized based on the fair value received or receivable for the services rendered, net of services
tax, rebates and discounts. Revenue from fixed line business, mainly in respect of line rent and line usage, is
invoiced and recorded as part of a periodic billing cycle. Revenue from the sale of prepaid credit is deferred
until such time as the customer uses the air time, or the credit expires.

(ii) Income on bank deposits

Return on bank deposits and investments is recognized using the effective interest method.

(iii) Dividend income

Dividend income is recognized when the right to receive payment is established.

5.20 Taxation
The tax expense for the year comprises of current and deferred income tax, and is recognized in income for the year,
except to the extent that it relates to items recognized directly in the statement of other comprehensive income, where
the related tax is also recognized in statement of other comprehensive income.

(a) Current
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
statement of financial position date. Management periodically evaluates positions taken in tax returns, with respect to
situations in which applicable tax regulation is subject to interpretation, and establishes provisions, where appropriate,
on the basis of amounts expected to be paid to the tax authorities.

(b) Deferred
Deferred income tax is accounted for using the balance sheet liability method, in respect of all temporary differences
arising between the carrying amount of assets and liabilities in the financial statement and the corresponding tax base
used in the computation of taxable profit.

Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are
recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary
differences, unused tax losses and tax credits can be utilized.

Deferred income tax is calculated at the rates that are expected to apply to the period when the differences reverse,
based on tax rates that have been enacted or substantially enacted by the statement of financial position date.

5.21 Employees’ retirement benefits


The Company operates various retirement / post retirement benefit schemes. The plans are generally funded through
payments determined by periodic actuarial calculations or up to the limits allowed in the Income Tax Ordinance, 2001.
The Company has constituted both defined contribution and defined benefit plans.
50 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

(a) Defined contribution plan

The Company operates an approved funded provident plan covering permanent employees. For the purposes of the
plan, a separate trust titled the “PTCL Employees’ GPF Trust” (the Trust) has been established. Monthly contributions
are deducted from the salaries of employees, and are paid to the Trust by the Company. Interest is paid at the rate
announced by the Federal Government and this rate for the year was 14% (2009: 15%) per annum. The Company also
contributes to the fund the differential, if any, of the interest paid / credited for the year and the income earned on the
investments made by the Trust.

(b) Defined benefit plans

The Company operates the following defined benefit plans:

(i) Pension plans

The Company operates an approved funded pension plan through a separate trust called the “Pakistan
Telecommunication Employees’ Trust” (PTET) for its employees recruited prior to January 01, 1996 when
the Company took over the business from PTC. The Company also operates an unfunded pension scheme for
employees recruited on a regular basis on or after January 01, 1996.

(ii) Gratuity plan

The Company operates an unfunded and unapproved gratuity plan for its New Terms and Conditions (NTC) /
contractual employees.

(iii) Medical benefits plan

The Company provides post retirement medical facility to pensioners and their families. Under the unfunded
plan, all such ex–employees, their spouses and children up to the age of 21 except unmarried daughters which
are not subject to 21 years age limit and parents residing with and dependent on the employee are entitled to
this benefit. The pensioner and the family are entitled to the facility up to the life of the pensioner and spouse.
There are no annual limits to the cost of drugs, hospitalized treatment and consultation fees.

(iv) Accumulating compensated absences

The Company provides a facility to its employees for accumulating their annual earned leave. Under this plan,
regular employees are entitled to four days of earned leaves per month. Unutilized leave can be accumulated
without limit and can be used at any time, subject to the Company’s approval, up to 120 days in a year without
providing medical certificate, 180 days with medical certificate and 365 days during the entire service of the
employee. Up to 180 days of accumulated leave can be encashed on retirement, provided the employee has
a minimum leave balance of 365 days. Leaves are encashed at latest emoluments applicable for monthly
pension.

New Compensation Pay Grade (NCPG) employees are entitled to 20 leaves after completion of one year of
service. Leaves can be accumulated after completion of the second year of service, to a maximum of 28 days.

New Terms and Conditions (NTC) / contractual employees are entitled to three days earned leave per month.
Unutilized leaves can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed on
departure at gross pay.

The liability recognized in the statement of financial position in respect of defined benefit plans is the present value
of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, if any,
together with adjustments for unrecognized actuarial gains / losses, if any.

The defined benefit obligation is calculated annually, by independent actuary using the projected unit credit method.
The most recent valuations were carried out as at June 30, 2010. The present value of the defined benefit obligation,
is determined by discounting the estimated future cash outflows using interest rates of high–quality corporate bonds,
that are nominated in the currency in which the benefits will be paid, and that have terms to maturity approximating
to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions, in excess of the ‘corridor’ (10% of the higher of the fair value of the plan assets or the present
value of the defined benefit obligation) at the beginning of the current reporting year, are recognized over the expected
average remaining working lives of employees participating in the defined benefit plan. Actuarial gains and losses
arising on compensated absences are recognized immediately.
Annual Report 2010 | 51

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

6. Share capital
6.1 Authorized share capital

2010 2009 2010 2009
(Number of shares in thousand) (Rupees in thousand)

11,100,000 11,100,000 “A” class ordinary shares of Rs 10 each 111,000,000 111,000,000
3,900,000 3,900,000 “B”class ordinary shares of Rs 10 each 39,000,000 39,000,000

15,000,000 15,000,000 150,000,000 150,000,000



6.2 Issued, subscribed and paid up capital

2010 2009 2010 2009
(Number of shares in thousand) (Rupees in thousand)

3,774,000 3,774,000 “A” class ordinary shares of Rs 10 each


issued as fully paid for consideration
other than cash – note 6.3 37,740,000 37,740,000

1,326,000 1,326,000 “B” class ordinary shares of Rs 10 each


issued as fully paid for consideration
other than cash – note 6.3 13,260,000 13,260,000

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



6.3 These shares were initially issued to the Government of Pakistan in consideration for the assets and liabilities
transferred from Pakistan Telecommunication Corporation (PTC) to Pakistan Telecommunication Company Limited
(PTCL) under the Pakistan Telecommunication (Re–organization) Act, 1996 as referred to in note 1.1.

6.4 Except for voting rights, the “A” and “B” class ordinary shares rank pari passu in all respects. “A” class ordinary shares
carry one vote and “B” class ordinary shares carry four votes, save for the purposes of election of directors. “A”
class ordinary shares cannot be converted into “B” class ordinary shares. However, “B” class ordinary shares may be
converted into “A” class ordinary shares at the option, exercisable in writing, submitted to the Company by the holders
of three fourths of the “B” class ordinary shares. In the event of termination of the license issued to the Company
under the provisions of Pakistan Telecommunication (Re–organization) Act, 1996, the “B” class ordinary shares shall
be automatically converted into “A” class ordinary shares.

6.5 The Government of Pakistan through an “Offer for Sale” document, dated July 30, 1994 issued to its domestic
investors a first tranche of vouchers exchangeable for “A” class ordinary shares of the Company; subsequently,
through an Information Memorandum dated September 16, 1994, a second tranche of vouchers was issued to the
international investors, also exchangeable, at the option of voucher holders, for “A” class ordinary shares or Global
Depository Receipts ( GDRs ) representing “A” class ordinary shares of the Company. Out of 3,774,000 thousand “A”
class ordinary shares, vouchers against 601,084 thousand “A” class ordinary shares were issued to the general public.
Till June 30, 2010, 599,506 thousand (2009: 599,500 thousand) “A” class ordinary shares had been exchanged for
such vouchers.

6.6 In pursuance of the privatization of the Company, a bid was held by the Government of Pakistan on June 08, 2005
for sale of “B” class ordinary shares of Rs 10 each, along with management control. Emirates Telecommunication
Corporation (Etisalat), UAE was the successful bidder. The shares, alongwith management control, were transferred
with effect from April 12, 2006 to Etisalat International Pakistan (EIP), UAE which is a subsidiary of Etisalat.
52 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

6.7 Ordinary shares of the Company held by related parties as at the year end are as follows:

2010 2009
(Number of shares)

Etisalat International Pakistan (LLC) SE (“B” class ordinary shares) 407,809,524 407,809,524
Etisalat International Pakistan (LLC) (“B” class ordinary shares) 918,190,476 918,190,476

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

7. Long term security deposits


These represent the security deposits received from customers and are non interest bearing. These include an amount
of Rs 7,354 thousand (2009: Rs Nil) received from Maskatiya Communications (Pvt) Limited (MAXCOM) – a subsidiary
company. The Company has adjusted Rs 222,751 thousand (2009: Rs Nil) during the current year against balances of
customers in default.
Note 2010 2009
(Rupees in thousand)

8. Deferred taxation
The liability for deferred taxation comprises of
timing differences relating to:

Accelerated tax depreciation / amortization 9,803,496 8,719,515


Provision for doubtful trade debts (6,788,892) (6,284,901)
Provision for doubtful advances and receivables (64,834) (58,720)
Others – 3,106

2,949,770 2,379,000

The gross movement in deferred tax liability
during the year is as follows:

Balance as at July 01 2,379,000 590,000


Charge during the year 33 570,770 1,789,000

Balance as at June 30 2,949,770 2,379,000



9. Employees’ retirement benefits
Liabilities for pension obligations
Funded 9.1 5,283,449 4,550,208
Unfunded 9.1 1,086,113 841,872

6,369,562 5,392,080

Gratuity – unfunded 9.1 498,256 391,609
Accumulating compensated absences 9.1 926,338 1,025,164
Post retirement medical facility 9.1 7,718,647 7,333,246

15,512,803 14,142,099
Annual Report 2010 | 53

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

9.1 The latest actuarial valuations of the defined benefit plans were conducted at June 30, 2010 using the projected unit
credit method. Details of these defined benefit plans are as follows:

Pension Gratuity – unfunded Accumulating compensated Post retirement medical Total


Funded Unfunded absences facility
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
(Rupees in thousand)

(a) The amounts recognised


in the statement of financial position:

Present value of defined
benefit obligations 62,752,225 53,610,885 1,139,102 932,231 423,702 314,871 926,338 1,025,164 7,807,167 6,448,686 73,048,534 62,331,837
Fair value of plan assets – note 9.3 (53,521,666) (50,096,598) – – – – – – – – (53,521,666) (50,096,598)

9,230,559 3,514,287 1,139,102 932,231 423,702 314,871 926,338 1,025,164 7,807,167 6,448,686 19,526,868 12,235,239
Unrecognized actuarial gains / (losses) (3,947,110) 1,035,921 (52,989) (90,359) 74,554 76,738 – – (88,520) 884,560 (4,014,065) 1,906,860

Liability as at June 30 5,283,449 4,550,208 1,086,113 841,872 498,256 391,609 926,338 1,025,164 7,718,647 7,333,246 15,512,803 14,142,099

(b) Changes in the present value


of defined benefit obligation:

Balance as at July 01 53,610,885 50,105,610 932,231 709,378 314,871 251,226 1,025,164 833,006 6,448,686 5,195,430 62,331,837 57,094,650
Current service cost 542,494 445,896 137,708 131,893 103,717 108,135 36,900 33,234 64,186 64,052 885,005 783,210
Interest cost 6,433,306 6,012,673 111,868 85,125 37,785 30,147 123,020 117,419 773,842 623,452 7,479,821 6,868,816
Past service cost 270,000 – – – – – – – – – 270,000 –
Actuarial (gains) / losses 6,098,147 953,077 (37,370) 11,870 (5,358) (60,858) (202,585) (27,825) 955,960 940,121 6,808,794 1,816,385
Benefits paid (4,202,607) (3,906,371) (5,335) (6,035) (27,313) (13,779) (56,161) (76,152) (435,507) (374,369) (4,726,923) (4,376,706)
Recognition of contractual liabilities – – – – – – – 145,482 – – – 145,482

Balance as at June 30 62,752,225 53,610,885 1,139,102 932,231 423,702 314,871 926,338 1,025,164 7,807,167 6,448,686 73,048,534 62,331,837

(c) Charge for the year:



Current service cost 542,494 445,896 137,708 131,893 103,717 108,135 36,900 33,234 64,186 64,052 885,005 783,210
Interest cost 6,433,306 6,012,673 111,868 85,125 37,785 30,147 123,020 117,419 773,842 623,452 7,479,821 6,868,816
Past service cost 270,000 – – – – – – – – – 270,000 –
Expected return on plan assets (6,512,558) (6,297,387) – – – – – – – – (6,512,558) (6,297,387)
Actuarial (gains) / losses – – – 472 (7,541) – (202,585) (27,825) (17,121) (100,395) (227,247) (127,748)
Contribution from deputationists (175) (1,022) – – – – – – – – (175) (1,022)
Contractual liabilities – – – – – – – 145,482 – – – 145,482

733,067 160,160 249,576 217,490 133,961 138,282 (42,665) 268,310 820,907 587,109 1,894,846 1,371,351

(d) Significant actuarial assumptions


at the date of statement of
financial position:

Expected rate of return on plan assets 13% 13%
Discount rate 12% 12% 12% 12% 12% 12% 12% 12% 12% 12%
Future salary / medical cost increase 9–11% 9–11% 9–11% 9–11% 9–11% 9–11% 9–11% 9–11% 11% 11%
Future pension increase 8% 8% 8% 8%
Average expected remaining
working lives of participants 13 years 13 years 16 years 17 years 6 years 6 years 14 years 14 years
Expected mortality rate EFU 61–66* EFU 61–66* EFU 61–66* EFU 61–66*
Expected withdrawal rate Based on experience Based on experience Based on experience Based on experience

* Mortality table adjusted for Company’s experience


54 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

9.2 Historical information

2010 2009 2008 2007 2006


(Rupees in thousand)

Defined benefit pension plan – funded


Present value of defined benefit obligations as at June 30 62,752,225 53,610,885 50,105,610 36,529,541 31,413,488
Fair value of plan assets as at June 30 (53,521,666) (50,096,598) (48,441,436) (45,158,318) (39,243,528)
Deficit / (surplus) in the plan 9,230,559 3,514,287 1,664,174 (8,628,777) (7,830,040)

Experience adjustment on plan liabilities losses 6,098,147 953,077 778,679 2,581,597 603,337
Experience adjustment on plan assets – (losses) / gains 1,115,117 (1,735,854) (522,664) 3,776,675 2,611,253

Defined benefit pension plan – unfunded


Present value of defined benefit obligations as at June 30 1,139,102 932,231 709,378 1,180,770 1,050,561
Experience adjustment on plan liabilities – (gains) / losses (37,370) 83,101 1,764 (96,454) 47,981

Defined benefit gratuity plan – unfunded


Present value of defined benefit obligations as at June 30 423,702 314,871 251,226 111,444 136,265
Experience adjustment on plan liabilities – (gains) / losses (5,358) (51,220) 41,126 (77,172) 10,089

Accumulating compensated absences


Present value of defined benefit obligations as at June 30 926,338 1,025,164 833,006 1,871,553 1,735,238
Experience adjustment on plan liabilities – (gains) / losses (202,585) 39,239 12,990 21,748 (235,937)

Defined benefit post retirement medical facility


Present value of defined benefit obligations as at June 30 7,807,167 6,448,686 5,195,430 4,798,947 4,583,853
Experience adjustment on plan liabilities – losses / (gains) 955,960 940,121 (51,761) (274,176) (673,407)

2010 2009
(Rupees in thousand)

9.3 Changes in the fair value of plan assets


Defined benefit pension plan (funded)
Balance as at July 01 50,096,598 48,441,436
Expected return on plan assets 6,512,558 6,297,387
Contributions made by the Company during the year – 1,000,000
Benefits paid (4,202,607) (3,906,371)
Actuarial gains / (losses) on plan assets 1,115,117 (1,735,854)

Balance as at June 30 53,521,666 50,096,598

Actual return on plan assets 7,627,675 4,561,533

9.4 Major categories of plan assets of the defined benefit pension plan (funded) as a percentage of total plan assets are
as follows:
2010 2009

(Percentage)

Defence saving certificates – 43


Special saving certificates 84 47
Pakistan investment bonds 6 6
Fixed and other assets 10 4

Total 100 100


Annual Report 2010 | 55

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

9.5 Effect of increase / decrease in total medical cost trend rate


The effect of 1% increase in the medical cost trend rate in current service cost and interest cost is Rs 22,523 thousand
(2009: Rs 18,181 thousand), and the effect of 1% decrease in the medical cost trend rate in current service cost and
interest cost is Rs 18,691 thousand (2009: Rs 15,063 thousand).

The effect of 1% increase in the medical cost trend rate in the present value of defined benefit obligations for medical
cost is Rs 2,295,307 thousand (2009: Rs 1,892,189 thousand), and the effect of 1% decrease in the medical cost
trend rate in the present value of defined benefit obligations for medical cost is Rs 1,904,949 thousand (2009: Rs
1,563,113 thousand).

9.6
In the next financial year, the expected contribution to be paid to the funded pension plan by the Company is Rs
1,623,346 thousand (2009: Rs 463,242 thousand).

Note 2010 2009
(Rupees in thousand)

10. Deferred government grants


Balance as at July 01 1,061,044 95,000
Received during the year 10.1 571,657 966,044

Balance as at June 30 1,632,701 1,061,044



10.1 This represents the grant from the Universal Service Fund (a Government formed agency) received as assistance
towards development of telecommunication infrastructure in rural areas comprising of telecom infrastructure projects
for basic telecom access, transmission and broad band services spread over the country.

Note 2010 2009
(Rupees in thousand)

11. Trade and other payables


Trade creditors 11.1 6,460,776 5,414,955
Accrued liabilities 11.2 1,799,216 1,315,240
Receipts against third party works 678,439 499,556
Taxes payable
Income tax collected from subscribers 411,635 366,426
Income tax deducted at source 4,669 13,017

416,304 379,443
Sales tax payable 993,095 1,061,915
Advances from customers 1,705,615 1,856,153
Technical services fee payable to related party 29.2 447,441 503,467
Retention money payable to contractors / suppliers 11.1 5,394,281 5,914,707
Payable to
Research and Development Fund 29.4 2,773,454 2,397,144
Universal Service Fund 11.3 3,523,508 6,122,799
Pakistan Telecommunication Authority 6,542 34,542
Unclaimed dividend 131,253 120,342
VSS benefits payable 55,734 61,057
Consideration payable on acquisition of
a subsidiary – MAXCOM 16.3 67,396 –
Other liabilities 469,143 432,851

24,922,197 26,114,171
56 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

2010 2009
(Rupees in thousand)

11.1 Amounts due to related parties


Trade creditors:
TF Pipes Limited 2,621 2,232
Thuraya Satellite Company 1,124 8,929
Telecom Foundation 49,365 –
Pak Telecom Mobile Limited (PTML) 140,436 103,017
Emirates Telecommunication Corporation 197,911 –

391,457 114,178

Retention money payable to contractors / suppliers:


Telecom Foundation 152,248 18,911

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

11.2 This includes Rs 640,711 thousand (2009: Rs 573,155 thousand) representing a provision against EOBI contribution
payable under the EOBI Act 1976, for employees hired subsequent to PTCL’s incorporation. The Company has withheld
payment to EOBI, pending the settlement of the court case, as discussed in note 13.3. The provision made during the
year is Rs 67,556 thousand (2009: Rs 53,304 thousand).

11.3 This includes Rs 230,591 thousand (2009: Rs 3,458,866 thousand) representing the last installment out of total
amount of Rs 3,458,866 thousand payable to Universal Service Fund for the period commencing from May 1, 2008 to
December 31, 2008 in fifteen equal monthly installments.

2010 2009
(Rupees in thousand)

12. Payable to PTA against WLL license fee


Payable to PTA against WLL license fee 2,105,500 2,105,500
Present value adjustment (631,756) (631,756)

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


Imputed interest charged to date 631,756 480,227

2,105,500 1,953,971
Payment made during the year (210,550) –

1,894,950 1,953,971

13. Contingencies and commitments
Contingencies
13.1 1,574 cases (2009: 1,850 cases) have been filed against the Company primarily by subscribers and employees.
Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial impact
at present. However, the management and the Company’s legal advisor are of the view that the outcome of these
cases is expected to be favourable and a liability, if any, arising on the settlement of these cases is not likely to be
material.

13.2 In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all
messages, inter alia, through card phone services and mobile telephone services within and outside the city of Karachi.
Telecard Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration
of its services and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of
Pakistan ordered for immediate restoration of Pay Card services including rebate relief and discount to all pay phone
Annual Report 2010 | 57

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

service providers. In view of relief and discount offered by the Government, Telecard Limited withheld payments on
account of their monthly bills to the Company and obtained a stay order from the Honourable Sindh High Court for
an amount of Rs 110,033 thousand against the Company.

On the instructions of the Honourable Court, external consultants calculated the rebate and discount amounting to Rs
349,953 thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In
the suit, final arguments of the parties are to be reheard. The Company has also filed a claim against Telecard Limited
for aggregate receivables amounting to Rs 334,099 thousand up to December 31, 2001.

In another case, identical to the above matter, M/s Telefon has claimed Rs 97,337 thousand from the Company. In
the last hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing.
The management and the Company’s legal advisor are of the view that the outcome of the appeal is expected to be
favourable.

13.3 The Employees’ Old–Age Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of
Employees’ Old–Age Benefits (EOBI) Act, 1976 for payment of Company’s and employees’ contribution amounting to
Rs 1,496,829 thousand for the period January 01, 1996 to May 31, 2005. The management has filed a writ petition
against the demand before the Honourable High Court, which is pending for hearing. However, the management and
legal advisor are of the view that the case would be decided in the favour of the Company.

13.4 In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the
repealed Income Tax Ordinance, 1979 for the assessment years 1996 – 1997 to 1998 – 1999 on failure to withhold /
deduct tax under section 50(3) while making payments to non resident satellite companies. The Company filed a writ
petition before the Honourable Lahore High Court against the said notices, which was dismissed. An appeal was filed
against the dismissal before the Honourable Supreme Court of Pakistan which was also dismissed and the Company
was advised by the Honourable Court to file an appeal before the Income Tax Appellate Authorities. Subsequently, the
Company filed an appeal with the Commissioner Income Tax (CIT) Appeals who has annulled the order of the Taxation
Officer. The department has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT
(Appeals).

Pending final outcome of the appeal, no provision has been made in these financial statements for the demands
aggregating Rs 1,599,557 thousand (2009: Rs 1,599,557 thousand). The management and the Company’s tax advisor
are of the view that the outcome of the appeal is expected to be favourable.

13.5 Consequent to an audit of Federal Excise Duty (FED) collected by the Company from subscribers for the years 1998 – 99
and 1999 – 2000 the Rawalpindi Collectorate of Federal Excise Department raised a demand for excise duty along
with additional duties and penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company
with the Federal Board of Revenue (FBR), Government of Pakistan for resolution. A committee was formed comprising
representatives from the Company and FBR. As a result of the negotiations, the Company deposited an amount of Rs
466,176 thousand on account of FED.

It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate
forums and, in the event of a favourable decision, the amount would be refunded to the Company by Collectorate
of Federal Excise. The Company has filed an appeal to contest the additional duties and penalties levied by the
Collectorate. During the year ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided
by the Custom, Federal Excise and Sales Tax Appellate Tribunal in favour of PTCL, subject to submission of proof.
Pending the final outcome, no provision has been made in these financial statements for the above demand, since the
management and the Company’s lawyer are of the view that the outcome of the appeal is expected to be favourable.

13.6 In respect of tax years 2006 and 2007, the Additional Commissioner of Income Tax (ACIT) inter alia, amended the
Company’s income tax assessment on the grounds, that the Company’s claim of a concessional rate of tax at 1%
of revenue received from international customers, (provided for through Clause 3 of Part II of Second Schedule to
the Income Tax Ordinance, 2001) is not in accordance with such legal provisions, as underlying telecommunication
58 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

services have not been rendered outside Pakistan, and as a result raised a demand of Rs 1,659,000 thousand. The
Commissioner of Income Tax (CIT Appeals) and Income Tax Appellate Tribunal (ITAT) have endorsed the departmental
view and presently Company’s reference against the judgment of ITAT, in this respect, is pending before the Rawalpindi
Bench of the Honourable Lahore High Court. The management and the Company’s lawyer consider that the litigation
would eventually be settled in the Company’s favour.

13.7 The tax authorities selected tax year 2007 for audit purposes and created additional tax demand of Rs 2,345,628
thousand by disallowing certain expenses citing non–deduction of respective withholding tax as the prime reason. The
Commissioner Income Tax (Appeals) withheld the decision of the taxation officer and the ensuing appeal filed by the
Company is pending before the Income Tax Appellate Tribunal (ITAT). Further, the Company has also challenged the
selection of tax year 2007 for audit by the tax authorities before the Honorable Islamabad High Court (not functional at
present). No provision has been made in these financial statements pending outcome of the appeals which is expected
to be in favour of the Company.

13.8 Based on an audit of Federal Excise Duty (FED) returns submitted for the period from July 2004 to June 2009, the
Deputy Commissioner of Inland Revenue (DCIR) raised a demand of Rs 1,018,568 thousand on the premise that the
Company has claimed total input tax without apportioning the same between allowable and exempt supplies and
the exempt supplies were also not declared in these returns. The Company is in appeal against the said order before
Commissioner Inland Revenue–Appeals (CIR Appeals) and has also challenged the same through a writ petition filed
before Rawalpindi bench of the Honourable Lahore High Court.

No provision on this account has been made in these financial statements as the management and the Company’s tax
advisor consider that based on the underlying legal and factual position, the litigation would eventually settle in the
Company’s favour.

13.9 For tax year 2008, the Taxation Officer (TO) raised a demand of Rs 4,559,208 thousand on the plea that the Company
has erroneously applied average rate of tax while deducting withholding tax from payments made to employees under
the Voluntary Separation Scheme (VSS) as the required options before concerned commissioners of income tax were
not filed by such employees. Commissioner Income Tax (Appeals) upheld the decision of TO and disposing of the
ensuing second appeal, the Income Tax Appellate Tribunal (ITAT) remanded the case back to the TO for verification of
filing of options before concerned commissioners in the light of related law. The Company has also filed a reference
application with the Rawalpindi Bench of the Honorable Lahore High Court which is pending.

The management and the Company’s tax advisor are of the view that the eventual outcome of the case is expected to
be in favour of the Company and, as such, no provision has been made in the financial statements on this account.

2010 2009
(Rupees in thousand)

13.10 Bank guarantees and bid bonds issued in favour of:



Universal Service Fund (USF) against government grants 3,087,311 2,030,337
Others 314,254 5,000

3,401,565 2,035,337

Commitments

13.11 Commitments in respect of contracts for capital expenditure amount to Rs 14,127,643 thousand (2009: Rs 12,352,378
thousand).






Annual Report 2010 | 59

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

14. Property, plant and equipment


Operating assets 14.1 73,960,689 77,730,763
Capital work–in–progress 14.4 14,258,596 9,836,588

88,219,285 87,567,351

14.1 Operating assets

Land Buildings on Lines Apparatus, plant Office Furniture Submarine


Freehold Leasehold Freehold land Leasehold land and wires and equipment equipment and fittings Vehicles cables Total
(Rupees in thousand)

As at July 01, 2008

Cost 1,643,226 74,151 9,838,254 1,009,184 102,895,985 118,024,486 1,008,318 444,310 1,566,821 5,715,407 242,220,142
Accumulated depreciation – (21,821) (2,701,091) (351,389) (71,323,741) (80,785,132) (518,677) (296,127) (1,335,671) (2,086,315) (159,419,964)
Net book value 1,643,226 52,330 7,137,163 657,795 31,572,244 37,239,354 489,641 148,183 231,150 3,629,092 82,800,178

Year ended June 30, 2009


Opening net book value 1,643,226 52,330 7,137,163 657,795 31,572,244 37,239,354 489,641 148,183 231,150 3,629,092 82,800,178
Additions 555 3,267 210,065 – 1,677,423 5,240,150 183,575 15,801 180,926 – 7,511,762
Disposals
Cost – – – – – – (1,968) (4,766) (388,470) – (395,204)
Accumulated depreciation – – – – – – 1,186 4,766 373,819 – 379,771
– – – – – – (782) – (14,651) – (15,433)
Depreciation charge for the year – (1,178) (247,328) (25,230) (4,630,990) (6,995,979) (103,480) (24,642) (114,854) (422,063) (12,565,744)
Net book value 1,643,781 54,419 7,099,900 632,565 28,618,677 35,483,525 568,954 139,342 282,571 3,207,029 77,730,763

As at July 01, 2009


Cost 1,643,781 77,418 10,048,319 1,009,184 104,573,408 123,264,636 1,189,925 455,345 1,359,277 5,715,407 249,336,700
Accumulated depreciation – (22,999) (2,948,419) (376,619) (75,954,731) (87,781,111) (620,971) (316,003) (1,076,706) (2,508,378) (171,605,937)
Net book value 1,643,781 54,419 7,099,900 632,565 28,618,677 35,483,525 568,954 139,342 282,571 3,207,029 77,730,763

Year ended June 30, 2010


Opening net book value 1,643,781 54,419 7,099,900 632,565 28,618,677 35,483,525 568,954 139,342 282,571 3,207,029 77,730,763
Additions 683 – 175,010 – 1,859,648 6,286,613 73,740 8,798 19,391 24,548 8,448,431
Disposals
Cost – – (502) – (144,353) (1,314,549) (11,924) (7,355) (49,832) – (1,528,515)
Accumulated depreciation – – 328 – 144,353 1,314,506 11,503 7,331 47,071 – 1,525,092
– – (174) – – (43) (421) (24) (2,761) – (3,423)
Depreciation charge for the year – (1,277) (251,659) (25,225) (4,355,835) (6,948,690) (122,984) (24,658) (102,208) (382,546) (12,215,082)
Net book value 1,644,464 53,142 7,023,077 607,340 26,122,490 34,821,405 519,289 123,458 196,993 2,849,031 73,960,689

As at June 30, 2010
Cost 1,644,464 77,418 10,222,827 1,009,184 106,288,703 128,236,700 1,251,741 456,788 1,328,836 5,739,955 256,256,616
Accumulated depreciation – (24,276) (3,199,750) (401,844) (80,166,213) (93,415,295) (732,452) (333,330) (1,131,843) (2,890,924) (182,295,927)
Net book Value 1,644,464 53,142 7,023,077 607,340 26,122,490 34,821,405 519,289 123,458 196,993 2,849,031 73,960,689

Annual rate of depreciation (%) 1 to 3.3 2.5 2.5 7 10 10 10 20 6.67 to 8.33


As explained in note 1.1, the property and rights in the above assets at January 01, 1996 were transferred to the Company
from Pakistan Telecommunication Corporation, under the Pakistan Telecommunication (Re–organization) Act, 1996. However,
the title to such freehold land, was not formally transferred in the name of the Company in the land revenue records. The
Company initiated the process of transfer of title of land in its name in the previous years, which is still ongoing and shall be
completed in due course of time.
60 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

14.2 The depreciation charge for the year


has been allocated as follows:
Cost of services 28 11,970,780 12,314,429
Administrative and general expenses 29 183,226 188,486
Selling and marketing expenses 30 61,076 62,829

12,215,082 12,565,744

14.3 Disposal of property, plant and equipment:
All items of property, plant and equipment disposed off during the year, individually have a book value of less than
Rs 50,000.

2010 2009
(Rupees in thousand)

14.4 Capital work–in–progress


Buildings 471,303 118,413
Lines and wires 5,918,700 1,589,605
Apparatus, plant and equipment 4,993,330 3,613,242
Others 48,813 38,632
Advances to suppliers 2,826,450 4,476,696

14,258,596 9,836,588

14.5 Movement during the year


Balance as at July 01 9,836,588 7,892,823
Additions during the year 12,866,755 9,454,327
Transfers during the year (8,444,747) (7,510,562)

Balance as at June 30 14,258,596 9,836,588



Capital work–in–progress includes an amount of Rs 337,985 thousand (2009: Rs 443,426 thousand) in respect of
overheads relating to development regions.

2010 2009
(Rupees in thousand)

14.6 Advances to suppliers include balances with the following related parties:

Telecom Foundation 61,659 147,206
Emirates Telecommunication Corporation – 1,685,532

61,659 1,832,738
Annual Report 2010 | 61

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Licenses Sofware Total


(Rupees in thousand)

15. Intangible assets


As at July 01, 2008
Cost 4,015,397 – 4,015,397
Accumulated amortization (866,334) – (866,334)

Net book value 3,149,063 – 3,149,063



Year ended June 30, 2009
Opening net book value 3,149,063 – 3,149,063
Additions – 397,979 397,979
Amortization (196,415) (29,957) (226,372)

Closing net book value 2,952,648 368,022 3,320,670



As at July 01, 2009
Cost 4,015,397 397,979 4,413,376
Accumulated amortization (1,062,749) (29,957) (1,092,706)

Net book value 2,952,648 368,022 3,320,670



Year ended June 30, 2010
Opening net book value 2,952,648 368,022 3,320,670
Amortization (196,416) (45,223) (241,639)

Closing net book value 2,756,232 322,799 3,079,031



As at June 30, 2010
Cost 4,015,397 397,979 4,413,376
Accumulated amortization (1,259,165) (75,180) (1,334,345)

Net book value – note 15.1 2,756,232 322,799 3,079,031


Note 2010 2009
(Rupees in thousand)

15.1 Breakup of net book value as at June 30 is as follows:


Licenses
Telecom 15.2 104,722 114,696
WLL spectrum 15.2 2,550,695 2,729,691
WLL and LDI License 15.3 98,340 103,806
IPTV 15.4 2,475 4,455

2,756,232 2,952,648

Software
Bill printing software 15.5 6,015 7,655
Billing and automation of broadband 15.5 36,085 45,297
Enterprise Resource Planning (ERP) SAP system 15.6 280,699 315,070

322,799 368,022

3,079,031 3,320,670
62 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

15.2 The Pakistan Telecommunication Authority (PTA) has issued a license to the Company to provide telecommunication
services in Pakistan for a period of 25 years commencing January 01, 1996 for an agreed license fee of Rs 249,344
thousand. In the year ended June 30, 2005, PTA modified the previously issued license to provide telecommunication
services to include spectrum license at an agreed license fee of Rs 4,278,639 thousand. This license allows the
Company to provide wireless local loop services in Pakistan over a period of 20 years commencing October 2004. The
cost of the license is being amortized on a straight–line basis over the period of the license.

15.3 The Pakistan Telecommunication Authority (PTA) has issued a license under section 5 of the Azad Jammu and
Kashmir Council Adaptation of Pakistan Telecommunication (Re–organization) Act, 1996, the Northern Areas
Telecommunication (Re–organization) Act, 2005 and the Northern Areas Telecommunication (Re–organization)
(Adaptation and Enforcement) Order, 2006 to the Company. The purpose of the license is to establish, maintain
and operate a telecommunication system in Azad Jammu and Kashmir and Gilgit–Baltistan for a period of 20 years
commencing May 28, 2008, for an agreed license fee of Rs 109,270 thousand. The cost of the license is being
amortized on a straight–line basis over the period of the license.

15.4 PTCL acquired the IPTV license from PEMRA on October 01, 2006 for an agreed price of Rs 9,900 thousand. The cost
of the license is being amortized on a straight–line basis over a period of 5 years.

15.5 The cost of the software is being amortized on a straight–line basis over a period of 5 years.

15.6 This represents cost of the SAP – Enterprise Resource Planning (ERP) system with a useful life of 10 years.

Note 2010 2009


(Rupees in thousand)

16. Long term investments – at cost


Investments in related parties 16.1 6,598,065 5,523,539
Other investments 16.2 83,900 83,900

6,681,965 5,607,439

16.1 Investments in related parties


Subsidiaries – unquoted
Pak Telecom Mobile Limited
650,000,000 (2009: 350,000,000)
ordinary shares of Rs 10 each
Ordinary shares held 100% (2009: 100% ) 6,500,000 3,500,000
Maskatiya Communications (Pvt) Limited (MAXCOM)
440,008 (2009: Nil) ordinary shares of Rs 100 each
Ordinary shares held 100% (2009: Nil) 16.3 74,526 –

Associate – unquoted
TF Pipes Limited
1,658,520 (2009: 1,658,520)
ordinary shares of Rs 10 each
Ordinary shares held 40% (2009: 40% ) 23,539 23,539

Advance against purchase of shares of subsidiary company


Pak Telecom Mobile Limited – 2,000,000

6,598,065 5,523,539


Annual Report 2010 | 63

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

16.2 Other investments


Available for sale investments – unquoted
Thuraya Satellite Company
3,670,000 (2009: 3,670,000)
ordinary shares of 1 Dirham each 63,900 63,900
Alcatel – Lucent Pakistan Limited
2,000,000 (2009: 2,000,000)
ordinary shares of Rs 10 each 20,000 20,000

New ICO Global Communications (Holdings) Limited


218,207 (2009: 218,207) ordinary shares of
USD 0.01 per share (net of impairment loss of
Rs 104,708 thousand; 2009: Rs 104,708 thousand) – –

World Tel Assembly of Governors


Participation fund investment of
USD 100,000 (2009: USD 100,000)
(net of impairment loss of Rs 6,390 thousand;
2009: Rs 6,390 thousand) – –

83,900 83,900

16.3 On March 01, 2010 the Company acquired 100% shareholding of MAXCOM. MAXCOM provides broadband services
to customers in the cities of Karachi and Hyderabad. In terms of agreement between the Company and previous
shareholders of MAXCOM, the purchase consideration will be paid to the previous shareholders on a revenue sharing
basis commencing from March 2010 to August 2012. On basis of estimates prepared by management, the Company
has recognized the present value of the consideration payable amounting to Rs 74,526 thousand.

Note 2010 2009


(Rupees in thousand)

17. Long term loans – considered good


Loans to subsidiary company 17.1 7,000,000 3,000,000

Loans to employees – secured 17.2 509,254 455,599


Current portion shown under current assets (172,244) (123,421)

337,010 332,178
Others 200 200

7,337,210 3,332,378

17.1 This represents unsecured loans of Rs 3,000,000 thousand, Rs 2,000,000 thousand and Rs 2,000,000 thousand
(June 30, 2009: Rs 3,000,000 thousand) to PTML, a wholly owned subsidiary of the Company, under subordinated
debt agreements. First two loans are recoverable in eight equal quarterly installments commencing after a grace
period of four years in 2013 and 2014 respectively, and carry mark–up at the rate of three months KIBOR plus 82
basis points. Third loan is recoverable in eight equal quarterly installments commencing after a grace period of three
years in 2014 and carry mark–up at the rate of three months KIBOR plus 180 basis points.

The maximum amount of the loan to PTML outstanding at any time since the date of previous statement of financial
position was Rs 7,000,000 thousand (2009: Rs 3,000,000 thousand).
64 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

17.2 These loans and advances are for house building and purchase of motor cars, motor cycles and bicycles. Loans to
gazetted employees of the Company carry interest at the rate of 15% per annum (2009: 12.5% per annum), whereas,
loans to other employees are interest free. The loans are recoverable in monthly installments spread over a period of
5 to 10 years. These loans are secured against future pension payments of employees.

This balance also includes Rs 14,821 thousand (2009: Rs 35,670 thousand) receivable from employees against sale
of vehicles, recoverable in monthly installments spread over a period of 1 to 2 years.

17.3 Reconciliation of loans

As at July 01, 2009 Disbursements Repayments As at June 30, 2010


(Rupees in thousand)

Executives 12,532 23 3,010 9,545
Other employees 443,067 194,244 137,602 499,709

455,599 194,267 140,612 509,254



As at July 01, 2008 Disbursements Repayments As at June 30, 2009
(Rupees in thousand)

Executives 15,641 – 3,109 12,532
Other employees 508,915 – 65,848 443,067

524,556 – 68,957 455,599


Note 2010 2009


(Rupees in thousand)

18. Stores, spares and loose tools


Stores, spares and loose tools 4,704,186 5,851,582
Provision for obsolescence 18.2 (628,323) (649,591)

4,075,863 5,201,991

18.1 Stores, spares and loose tools include items which may result in property, plant and equipment but are not
distinguishable.

18.2 Provision for obsolescence Note 2010 2009


(Rupees in thousand)

Balance as at July 01 649,591 551,455


Provision during the year 29 102,761 172,276

752,352 723,731
Write off against provision (124,029) (74,140)

Balance as at June 30 628,323 649,591


Annual Report 2010 | 65

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010


Note 2010 2009
(Rupees in thousand)

19. Trade debts – unsecured


Domestic
Considered good 19.1 7,236,255 7,566,398
Considered doubtful 17,612,764 18,110,656

24,849,019 25,677,054
International
Considered good 19.2 2,935,276 3,194,576
Considered doubtful 953,959 885,740

3,889,235 4,080,316

28,738,254 29,757,370
Provision for doubtful debts 19.3 (18,566,724) (18,996,396)

10,171,530 10,760,974

19.1 These include amounts due from the following related parties:
PTML 443,808 412,309
MAXCOM 18,250 –

462,058 412,309

19.2 These include amounts due from the following related parties:
Etisalat – Afghanistan 21,685 100,502
Etisalat – UAE 419,914 657,771
Mobily – Saudi Arabia 312,070 528,119

753,669 1,286,392

These amounts are interest free and accrued in the normal course of business.

19.3 Provision for doubtful debts


Balance as at July 01 18,996,396 17,206,069
Provision for the year 29 1,885,211 2,907,395

20,881,607 20,113,464
Trade debts written off against provision (2,314,883) (1,117,068)

Balance as at June 30 18,566,724 18,996,396

20. Loans and advances – considered good


Current portion of loans to employees 17 172,244 123,421
Advances to suppliers and contractors 20.1 426,787 466,640

599,031 590,061

20.1 This includes advance of Rs 6,841 thousand (2009: Rs 6,841 thousand) given to TF Pipes Limited, a related
party.

66 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

21. Accrued interest income


Accrued profit on bank placements 389,038 766,674
Interest receivable on long term loan – considered good 21.1 122,443 54,353
Interest receivable on loans / advances to executives 59,646 –

571,127 821,027

21.1 This represents markup on loan to PTML, a wholly owned subsidiary, as indicated in note 17.1

Note 2010 2009
(Rupees in thousand)

22. Recoverable from tax authorities


Income tax 6,063,561 –
Federal excise 466,176 466,176
Sales tax 635,234 593,432

7,164,971 1,059,608

23. Receivable from Government of Pakistan
This represents the balance amount receivable from Government of Pakistan on account of its agreed share in the
voluntary separation scheme offered to the Company’s employees during 2008.

Note 2010 2009


(Rupees in thousand)

24. Other receivables


Considered good
Due from related parties:
Pakistan Telecommunication Employees Trust 86,708 69,009
PTCL employees’ GPF Trust 286,757 147,767
PTML against service charges of software maintenance 8,359 –
Due from other parties:
Others 405,809 481,494

787,633 698,270

Considered doubtful 185,239 185,239


Provision for doubtful receivables 24.1 (185,239) (185,239)

– –

787,633 698,270

24.1 Provision for doubtful receivables


Balance as at July 01 185,239 26,559
Provision for the year 29 – 158,680

Balance as at June 30 185,239 185,239








Annual Report 2010 | 67

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

25. Short term investments


Term deposits – at amortized cost
maturity upto 3 months 13,238,949 19,795,904
maturity between 3 and 6 months – 1,221,886

25.1 13,238,949 21,017,790


Available for sale investment
Units of mutual funds – at market value 25.2 254,916 –

13,493,865 21,017,790

25.1 Term deposits
Term Maturity Profit rate % 2010 2009
(months) Upto per annum (Rupees in thousand)

Term deposits with:


National Bank of Pakistan 3 30–Jul–10 12.25 2,687,973 11,893,245
Bank Alfalah Limited 6 01–Sep–10 12.35 3,551,458 1,000,000
The Bank of Punjab 3 30–Sep–10 12.50 2,491,873 1,066,302
NIB Bank Limited 3 30–Sep–10 12.60 4,507,645 1,500,000
Allied Bank of Pakistan – 2,558,243
Habib Metropolitan Bank limited – 1,000,000
Askari Bank Limited – 2,000,000

13,238,949 21,017,790

25.2 Units of mutual funds
Units of open – end mutual funds:
Pakistan Cash Management Fund
2,013,768 (2009: Nil) units 102,059 –
NAFA Government Securities Liquid Fund
5,011,856 (2009: Nil) units 51,493 –
BMA Empress Cash Fund
2,416,129 (2009: Nil) units 25,691 –
Faysal Saving Growth Fund
489,285 (2009: Nil) units 50,455 –
Askari Sovereign Cash Fund
232,801 (2009: Nil) units 25,218 –

254,916 –

26. Cash and bank balances
Balances with banks
Deposit accounts 26.1 4,796,454 10,304,147
Current accounts
Local currency 1,331,971 730,292
Foreign currency (USD 3,430 thousand
(2009: USD 10,751 thousand)) 293,686 871,981

6,422,111 11,906,420
Cash in hand 33 28

6,422,144 11,906,448

68 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

26.1 The balances in deposit accounts bear mark–up which ranges from 5% to 13% per annum (2009: 5% to 19.5% per
annum).

Note 2010 2009
(Rupees in thousand)

27. Revenue
Domestic 27.1 50,080,664 53,039,455
International 27.2 7,093,863 6,199,546

57,174,527 59,239,001

27.1 Revenue is exclusive of Federal Excise Duty amounting to Rs 6,703,713 thousand (2009: Rs 8,611,191 thousand).

27.2 International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and
has been shown net of interconnect cost, relating to the other operators and Access Promotion Charges aggregating
to Rs 11,261,154 thousand (2009: Rs 10,886,794 thousand).

Note 2010 2009


(Rupees in thousand)

28. Cost of services


Salaries, allowances and other benefits 28.1 8,827,775 7,995,033
Call centre charges 199,061 187,165
Interconnect cost 3,166,881 4,103,667
Foreign operators cost and satellite charges 6,473,865 6,053,657
Fuel and power 3,380,201 3,109,948
Communication 9,522 7,421
Stores, spares and loose tools consumed 1,012,453 1,160,754
Rent, rates and taxes 636,143 502,709
Repairs and maintenance 1,802,417 1,475,724
Printing and stationery 281,432 255,198
Travelling and conveyance 12,653 16,308
Depreciation of property, plant and equipment 14.2 11,970,780 12,314,429
Amortization of intangible assets 15 241,639 226,372
Annual license fee to PTA 243,889 323,897

38,258,711 37,732,282

28.1 This includes Rs 1,576,511 thousand (2009: Rs 1,140,964 thousand) in respect of employees’ retirement benefits.



Annual Report 2010 | 69

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

29. Administrative and general expenses


Salaries, allowances and other benefits 29.1 899,225 814,614
Call centre charges 29,859 28,075
Fuel and power 254,415 234,074
Rent, rates and taxes 291,478 322,651
Repairs and maintenance 10,545 8,634
Printing and stationery 4,345 3,940
Travelling and conveyance 101,221 130,467
Technical services fee 29.2 1,821,556 1,886,885
Legal and professional services 29.3 153,762 486,434
Depreciation of property, plant and equipment 14.2 183,226 188,486
Research and development 29.4 321,921 471,239
Provisions for:
obsolete stores, spares and loose tools 18.2 102,761 172,276
doubtful debts 19.3 1,885,211 2,907,395
doubtful receivables 24.1 – 158,680
Donations 29.6 280 37,069
Receivables written off – 142,195
Other expenses 1,163,975 942,147

7,223,780 8,935,261

29.1 This includes Rs 161,062 thousand (2009: Rs 113,822 thousand) in respect of employees’ retirement benefits.

29.2 This represents an amount of PTCL’s share payable to Emirates Telecommunication Corporation (Etisalat), a related
party, under a technical service agreement between the Company and Etisalat for a period of five years commencing
October 1, 2006 at the rate of 3.5% of PTCL group’s consolidated annual revenue.

29.3 Auditors’ remuneration


The expenses for legal and professional services include the following in respect of auditors’ services:


2010 2009
(Rupees in thousand)

A. F. Ferguson & Co.


Statutory audit including half yearly review 4,500 4,500
Tax services 1,000 –
Out of pocket expenses 250 250

Ernst & Young Ford Rhodes Sidat Hyder
Statutory audit including half yearly review 4,500 4,500
Out of pocket expenses 250 250

10,500 9,500

29.4 This represents the Company’s contribution to the Information Communication Technology (ICT) Research and
Development Fund at the rate of 0.5% (1% till November 17, 2009) of its gross revenue less inter operator payments
and payments toward research and development activities in Pakistan, in accordance with the terms and conditions of
its license to provide telecommunication services.

70 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

29.5 Provision against doubtful debts is net of security deposits written back, amounting to Rs 222,751 thousand (2009:
Rs Nil) against receivable balances of customers in default.

29.6 There were no donations during the year in which the directors or their spouses had any interest.

Note 2010 2009
(Rupees in thousand)

30. Selling and marketing expenses


Salaries, allowances and other benefits 30.1 882,986 799,503
Call centre charges 19,906 18,717
Sales and distribution charges 316,878 357,486
Fuel and power 75,116 69,110
Printing and stationery 2,901 2,631
Travelling and conveyance 12,653 16,308
Advertisement and publicity 770,808 490,487
Depreciation of property, plant and equipment 14.2 61,076 62,829

2,142,324 1,817,071

30.1 This includes Rs 157,273 thousand (2009: Rs 116,565 thousand) in respect of employees’ retirement benefits.

Note 2010 2009


(Rupees in thousand)

31. Other operating income


Income from financial assets:
Interest on loans 31.1 610,105 270,436
Dividend 31.2 695,239 –
Return on bank placements 3,087,442 2,986,598
Late payment surcharge from subscribers on over due bills 162,465 213,268
Gain on sale of units of open – end mutual funds 4,916 –

Income from non–financial assets:
Gain on disposal of items of property, plant and equipment 137,155 190,606
Others 437,324 606,264

5,134,646 4,267,172

31.1 Included in interest on long term loans is an amount of Rs 603,257 thousand (2009: Rs 263,333 thousand) accrued
on the loan given to PTML, the wholly owned subsidiary, as shown in note 17.1.

31.2 This includes dividend from PTML, the wholly owned subsidiary, amounting to Rs 673,239 thousand (2009: Rs
Nil).
2010 2009
(Rupees in thousand)

32. Finance cost


Bank and other charges 223,123 265,232
Foreign exchange loss – net 25,262 458,160
Imputed interest on payment for:
WLL license fee for the year 151,529 185,132
Purchase of MAXCOM 3,326 –

403,240 908,524

Annual Report 2010 | 71

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

33. Taxation
Current 4,416,196 3,080,732
Deferred 8 570,770 1,789,000

4,986,966 4,869,732

33.1 Tax charge reconciliation
Numerical reconciliation between the average effective tax rate and the applicable tax rate is as follows:

2010 2009
(Percentage)

Applicable tax rate 35.00 35.00

Tax effect of amounts chargeable to tax at lower rates (1.22) (0.76)

Tax effect of amounts that are not deductible for


tax purposes and others 1.14 0.49

(0.08) (0.27)

Average effective tax rate charged to statement of


comprehensive income 34.92 34.73

34. Remuneration of Directors, Chief Executive and Executives


The aggregate amount charged in the financial statements for remuneration, including all benefits, to the Chairman,
Chief Executive and Executives of the Company is as follows:

Chairman Chief Executive Executives
2010 2009 2010 2009 2010 2009
(Rupees in thousand)

Managerial remuneration – – 78,074 59,128 555,866 548,632
Honorarium 300 300 – – 2,965 –
Bonus – – – – 6,148 7,113
Retirement benefits – – – – 50,270 45,700
Housing – – – – 183,489 181,272
Utilities – – – – 40,486 40,189

300 300 78,074 59,128 839,224 822,906

Number of persons 1 1 1 1 453 430



The Company also provides free medical and limited residential telephone facility to all its Executives including
the Chief Executive. The Chairman is entitled to free transport and limited residential telephone facility, whereas
the Directors are provided with limited telephone facility. Certain executives are also provided with the Company
maintained cars.

The aggregate amount charged in the financial statements for the year as fees to 9 directors (2009: 9 directors) is Rs
11,682 thousand (2009: Rs 3,736 thousand) for attending Board of Directors and sub–committee meetings.

35. Rates of exchange
Assets in foreign currencies have been translated into Pak Rupees at USD 1.1709 (2009: USD 1.2331) equal to Rs 100,
while liabilities in foreign currencies have been translated into Pak Rupees at USD 1.1682 (2009: USD 1.2300) equal to
Rs 100.
72 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

36. Cash generated from operations


Profit before tax 14,281,118 14,020,917
Adjustments for non – cash charges and other items:
Depreciation and amortization 12,456,721 12,792,116
Provision for doubtful trade debts 1,885,211 2,907,390
VSS expense – 92,118
Provision for doubtful receivables – 158,680
Employees’ retirement benefits 1,894,846 1,372,372
Receivables written off – 142,195
Imputed interest on payment to PTA
against WLL license fee 151,529 185,132
Imputed interest on consideration payable on
acquisition of a subsidiary – MAXCOM 3,326 –
Interest on long term loans (610,105) (270,436)
Gain on disposal of property, plant and equipment (137,155) (190,606)
Dividend (695,239) –
Return on bank placements (3,087,442) (2,986,598)
Gain on sale of units of open – end mutual funds (4,916) –
Provision for obsolete stores, spares and loose tools 102,761 172,276
Finance cost 248,385 723,392

26,489,040 29,118,948

Effect on cash flow due to working capital changes:


(Increase) / decrease in current assets:
Stores, spares and loose tools 1,023,367 (420,182)
Trade debts (1,295,767) (302,153)
Loans and advances 39,853 292,056
Recoverable from tax authorities (41,802) 324,158
Other receivables (89,363) 784,667

(363,712) 678,546

Increase / (decrease) in current liabilities:


Trade and other payables (1,226,150) 4,539,897

24,899,178 34,337,391

37. Cash and cash equivalents
Short term investments with maturity upto three months 25 13,493,865 19,795,904
Cash and bank balances 26 6,422,144 11,906,448

19,916,009 31,702,352

38. Capacity
Access Lines Installed (ALI) Access Lines In Service (ALIS)

2010 2009 2010 2009
(Number)

Number of lines 9,590,972 9,240,431 4,477,821 4,796,299



Annual Report 2010 | 73

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

ALI represents switching lines. ALI include 232,786 (2009: 225,195 ) and ALIS include 107,477 (2009: 115,575)
Primary Rate Interface (PRI) and Basic Rate Interface (BRI). ALI and ALIS also include 3,055,930 (2009: 2,656,000)
and 1,236,932 (2009 : 1,305,675) WLL connections respectively.

The difference between ALI and ALIS is due to pending and potential future demand.

2010 2009

39. Earnings per share – basic and diluted


Profit for the year Rupees in thousand 9,294,152 9,151,185

Weighted average number


of ordinary shares Numbers in thousand 5,100,000 5,100,000

Earnings per share Rupees 1.82 1.79


40. Financial risk management
40.1 Financial risk factors
The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, other price risk
and interest rate risk), credit risk and liquidity risk. The Company’s overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on its financial performance.

Risk management is carried out by the Board of Directors (the Board). The Board has prepared a ‘Risk Management
Policy’ covering specific areas such as foreign exchange risk, interest rate risk, credit risk and investment of excess
liquidity. All treasury related transactions are carried out within the parameters of this policy.

(a) Market risk

(i) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions, or
receivables and payables that exist due to transactions in foreign currencies.

The Company is exposed to currency risk arising from various currency exposures, primarily with respect to
the United States Dollar (USD), Swiss Franc (CHF) and Australian Dollar (AUD). Currently, the Company’s
foreign exchange risk exposure is restricted to the amounts receivable from / payable to foreign entities. The
Company’s exposure to currency risk is as follows:

2010 2009
(Rupees in thousand)

USD
Trade and other payables (3,590,376) (6,950,383)
Trade debts 4,042,311 3,995,351
Cash and bank balances 293,608 874,131

Net exposure 745,543 (2,080,901)

CHF
Trade and other payables (5,660) (5,385)

AUD
Loans and advances 1,850 1,673

74 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

The following significant exchange rates were applied during the year:

2010 2009

Rupees per USD


Average rate 83.92 79.92
Reporting date rate 85.60 81.30

Rupees per CHF


Average rate 79.07 64.98
Reporting date rate 79.10 75.26

Rupees per AUD


Average rate 74.00 53.97
Reporting date rate 72.96 65.98

If the functional currency, at reporting date, had fluctuated by 5% against the USD, CHF and AUD with all other
variables held constant, the impact on profit after taxation for the year would have been Rs 24,106 thousand
(2009: Rs 67,750 thousand) respectively lower / higher, mainly as a result of exchange gains / losses on
translation of foreign exchange denominated financial instruments. Currency risk sensitivity to foreign exchange
movements has been calculated on a symmetric basis.

(ii) Other price risk

Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices (other than those arising from interest rate risk or currency risk), whether
those changes are caused by factors specific to the individual financial instrument or its issuer, or factors
affecting all similar financial instruments traded in the market.

The Company is exposed to equity securities price risk because of the investments held by the Company in
money market mutual funds and classified on the statement of financial position as available–for–sale. To
manage its price risk arising from investments in mutual funds, the Company diversifies its portfolio.

The other financial assets includes available–for–sale investments of Rs 254,916 thousand (2009: Rs Nil) which
were subject to price risk.

If redemption price on mutual funds, at the year end date, fluctuate by 5% higher / lower with all other
variables held constant, profit after taxation for the year would have been Rs 12,749 thousand (2009: Rs Nil)
higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds.

(iii) Interest rate risk

Interest rate risk represents the risk that the fair value or future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.
Annual Report 2010 | 75

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

At the date of statement of financial position, the interest rate profile of the Company’s interest bearing
financial instruments is:

2010 2009
(Rupees in thousand)

Financial assets

Fixed rate instruments

Staff loans 509,254 455,599


Short term investments 13,238,949 21,017,790

Floating rate instruments

Long term loans – loan to subsidiary 7,000,000 3,000,000


Bank balances – deposit accounts 4,796,454 10,304,147

25,544,657 34,777,536

Fair value sensitivity analysis for fixed rate instruments

The Company does not account for any fixed rate financial assets and liabilities at fair value. Therefore, a change
in interest rates at the date of statement of financial position would not affect the total comprehensive income
of the Company.

Cash flow sensitivity analysis for variable rate instruments

If interest rates on long term loans to subsidiary and deposit bank balances, at the year end date, fluctuate
by 1% higher / lower with all other variables held constant, profit after taxation for the year would have been
Rs 64,797 thousand (2009: Rs 11,250 thousand) higher / lower, mainly as a result of higher / lower mark–up
income on floating rate loans / investments.

(b) Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. The maximum exposure to credit risk at the reporting date is as follows:

2010 2009
(Rupees in thousand)

Long term loans 7,337,210 3,332,178


Trade debts 10,171,530 10,760,974
Loans and advances 599,031 590,061
Accrued interest 571,127 821,027
Other receivables 787,633 698,270
Receivable from Government of Pakistan 2,164,072 2,164,072
Short term investments 13,493,865 21,017,790
Bank balances 6,422,111 11,906,420

41,546,579 51,290,792

The credit risk on liquid funds is limited, because the counter parties are banks with reasonably high credit ratings. In
case of trade debts the Company believes that it is not exposed to major concentration of credit risk as its exposure
is spread over a large number of counter parties and subscribers. Long term loan includes loan of Rs 7,000,000
thousand to a subsidiary–PTML.
76 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

The credit quality of cash and bank balances and short term investments that are neither past due nor impaired can
be assessed by reference to external credit ratings (if available) or to historical information about counterparty default
rate:

Rating Rating
Short term Long term Agency 2010 2009
(Rupees in thousand)


National Bank of Pakistan A1+ AAA JCR–VIS 3,940,843 15,636,639
Bank Alfalah Limited A1+ AA PACRA 3,171,623 4,000,593
MCB Bank Limited A1+ AA PACRA 38,003 11,281
Habib Metropolitan
Bank Limited A1+ AA+ PACRA 38,425 1,000,000
The Bank of Punjab A1+ AA– PACRA 5,644,946 3,937,071
NIB Bank Limited A1+ AA– PACRA 4,507,112 1,500,192
Faysal Bank Limited * A1+ AA PACRA – 1,476
Royal Bank of Scotland * A1+ AA PACRA 1,164 1,754,080
Askari Bank Limited A1+ AA PACRA 101,425 2,000,000
Allied Bank Limited A1+ AA PACRA 136,991 2,558,243
United Bank Limited A1+ AA+ JCR–VIS – 26
Bank Al Habib Limited A1+ AA+ PACRA 101,521 –
Dubai Islamic Bank A1 A JCR–VIS 479,337 –
Citibank, N.A. A1 A+ S&P’s 1,050,827 –
Silkbank Limited * A–3 A– JCR–VIS 7,705 –
SME Bank Limited A–3 BBB JCR–VIS 22,448 –
Standard Chartered Bank
(Pakistan) Limited A1+ AA– PACRA 418,677 –
Meezan Bank Ltd A1 AA– JCR–VIS 13 –
Mutual Fund – Arif Habib AM 2 + N/A PACRA 102,059 –
Mutual Fund – NAFA AM 2 – N/A PACRA 51,493 –
Mutual Fund – BMA AM 2 – N/A JCR–VIS 25,691 –
Mutual Fund – Faysal AM 2 – N/A JCR–VIS 50,455 –
Mutual Fund – Askari AM3 N/A PACRA 25,218 –

19,915,976 32,399,601

Due to the Company’s long standing business relationships with these counter parties, and after giving due consideration
to their strong financial standing, management does not expect non–performance by these counter parties on their
obligations to the Company. Accordingly, the credit risk is minimal.

*These banks have been placed on watchlist by the State Bank of Pakistan and the most recent rating of Royal Bank of
Scotland and Silkbank was carried out in September 2008 and June 2009 respectively.
Annual Report 2010 | 77

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities.

The Company follows an effective cash management and planning policy to ensure availability of funds and to take
appropriate measures for new requirements.

The following are the contractual maturities of financial liabilities as at June 30, 2010:

Carrying Less than One to More than


amount one year five years five years
(Rupees in thousand)

Long term security deposits 720,964 – 720,964 –


Employees’ retirement benefits 15,512,803 – – 15,512,803
Trade and other payables 22,537,541 22,537,541 – –
Payable to PTA against WLL license fee 1,894,950 1,894,950 – –
Dividend payable 3,375,631 3,375,631 – –

44,041,889 27,808,122 720,964 15,512,803



The following are the contractual maturities of financial liabilities as at June 30, 2009:

Carrying Less than One to More than
amount one year five years five years
(Rupees in thousand)

Long term security deposits 990,055 – 990,055 –
Employees’ retirement benefits 14,142,099 – – 14,142,099
Trade and other payables 23,758,462 23,758,462 – –
Payable to PTA against WLL license fee 1,953,971 1,953,971 – –
Dividend payable 7,650,000 7,650,000 – –

48,494,587 33,362,433 990,055 14,142,099



40.2 Fair values of financial assets and liabilities
The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair
values. Fair value is determined on the basis of objective evidence at each reporting date.
78 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

Available for sale Loans and receivables Total


2010 2009 2010 2009 2010 2009
(Rupees in thousand)

40.3 Financial instruments by categories


Financial assets as per statement
of financial position

Long term loans – – 7,337,210 3,332,378 7,337,210 3,332,378


Trade debts – – 10,171,530 10,760,974 10,171,530 10,760,974
Loans and advances – – 599,031 590,061 599,031 590,061
Accrued interest income – – 571,127 821,027 571,127 821,027
Other receivables – – 787,633 698,270 787,633 698,270
Receivable from Government of Pakistan – – 2,164,072 2,164,072 2,164,072 2,164,072
Short term investments 254,916 – 13,238,949 21,017,790 13,493,865 21,017,790
Cash and bank balances – – 6,422,144 11,906,448 6,422,144 11,906,448

254,916 – 41,291,696 51,291,020 41,546,612 51,291,020


Liabilities at fair value
through profit and loss Other financial liabilities Total
2010 2009 2010 2009 2010 2009
(Rupees in thousand)


Financial liabilities as per statement
of financial position

Long term security deposits – – 720,964 990,055 720,964 990,055


Employees’ retirement benefits – – 15,512,803 14,142,099 15,512,803 14,142,099
Trade and other payables – – 22,537,541 23,758,462 22,537,541 23,758,462
Payable to PTA against WLL license fee – – 1,894,950 1,953,971 1,894,950 1,953,971
Dividend payable – – 3,375,631 7,650,000 3,375,631 7,650,000

– – 44,041,889 48,494,587 44,041,889 48,494,587

40.4 Capital risk management


The Board’s policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence
and to sustain the future development of its business. The Board of Directors monitors the return on capital employed,
which the Company defines as operating income divided by total capital employed. The Board of Directors also
monitors the level of dividends to ordinary shareholders.

The Company’s objectives when managing capital are:

(i) to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders; and

(ii) to provide an adequate return to shareholders.

The Company manages the capital structure in the context of economic conditions and the risk characteristics of
the underlying assets. In order to maintain or adjust the capital structure, the Company may, for example, adjust the
amount of dividends paid to shareholders, issue new shares, or sell assets to reduce debt.

For working capital requirements and capital expenditure, the Company primarily relies on internal cash generation
and does not have any significant borrowings.


Annual Report 2010 | 79

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

41. Transactions with related parties


The Company’s related parties comprise of subsidiaries, associated undertakings, employees’ retirement benefit
plans and key management personnel. Amounts due from / (to) related parties are shown under receivables and
payables. Remuneration of key management personnel is disclosed in note 34. The Company had transactions with
following related parties during the year:

Subsidiaries

Pak Telecom Mobile Limited


Maskatiya Communications (Pvt) Limited

Associated undertakings

TF Pipes Limited
Etisalat International Pakistan
Etisalat – Afghanistan
Emirates Telecommunication Corporation
Mobily – Saudi Arabia
Thuraya Satellite Company

Employees’ retirement benefit plans

Pakistan Telecommunication Employees’ Trust


PTCL Employees’ GPF Trust

Disclosure of transactions between the Company and related parties other than those which have been disclosed
elsewhere in these financial statements:


2010 2009
(Rupees in thousand)


Subsidiaries Purchase of goods and services 1,604,145 1,417,608
Consideration paid against adjustment of
tax losses of PTML 1,198,943 –
Sale of goods and services 5,138,960 5,203,768
Mark–up on long term loans 603,257 263,333
Equity contribution 1,000,000 2,000,000
Disbursement of loan 4,000,000 3,000,000
Consideration paid on acquisition of MAXCOM 7,130 –

Associates Purchase of goods and services 1,707,042 2,365,226


Sale of goods and services 5,651,506 8,358,427
Advances against capital expenditure 61,659 1,832,738

80 | Pakistan Telecommunication Company Limited

Notes to and Forming Part of the Financial Statements


For the year ended June 30, 2010

42. Date of authorization for issue


These financial statements were authorized for issue on August 26, 2010 by the Board of Directors of the
Company.

43. General
Figures have been rounded off to the nearest thousand rupees unless otherwise specified.

Chairman President & CEO


Consolidated Financial Statements
For the year ended June 30, 2010
82 | Pakistan Telecommunication Group
Annual Report 2010 | 83

Auditors’ Report to the Members on Consolidated Financial Statements

We have audited the annexed consolidated financial statements comprising consolidated statement of financial position of
Pakistan Telecommunication Company Limited (the holding company) and its subsidiaries (hereinafter referred as the “Pakistan
Telecommunication Group”) as at June 30, 2010 and the related consolidated statement of comprehensive income, consolidated
statement of cash flows and consolidated statement of changes in equity together with the notes forming part thereof, for the
year then ended. We have also expressed separate opinion on the financial statements of Pakistan Telecommunication Company
Limited. The financial statements of subsidiary companies, Pak Telecom Mobile Limited and Maskatiya Communications
(Private) Limited were audited by one of the joint auditors, Ernst & Young Ford Rhodes Sidat Hyder and Rizwani Imtiaz &
Co, respectively, whose reports have been furnished to us and our opinion in so far it relates to the amounts included for
such companies, is based solely on the report of the said auditors. These financial statements are the responsibility of the
holding company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

Our audit was conducted in accordance with International Standards on Auditing and accordingly included
such tests of accounting records and such other auditing procedures as we considered necessary.

In our opinion, the consolidated financial statements audited by us present fairly the financial position of
Pakistan Telecommunication Group as at June 30, 2010 and the results of its operations for the year then ended.

A. F. Ferguson & Co. Ernst & Young Ford Rhodes Sidat Hyder
Chartered Accountants Chartered Accountants
Islamabad Islamabad

Audit Engagement Partner’s Name: Audit Engagement Partner’s Name:


M. Imtiaz Aslam Sajjad Hussain Gill

Dated: August 26, 2010


84 | Pakistan Telecommunication Group

Consolidated Statement of Financial Position


As at June 30, 2010

Note 2010 2009


(Rupees in thousand)

Equity and liabilities

Share capital and reserves

Share capital 6 51,000,000 51,000,000


Revenue reserves
Insurance reserve 2,113,704 1,683,074
General reserve 30,500,000 30,500,000
Unappropriated profit 24,461,054 22,069,860

108,074,758 105,252,934

Non current liabilities

Long term loans 7 13,000,000 9,000,000
Payable to PTA against license fee 8 169,847 167,090
Deferred taxation 9 10,633,651 7,205,377
Employees’ retirement benefits 10 15,676,877 14,252,785
Deferred government grants 11 1,632,701 1,061,044
Long term security deposits 12 1,295,008 1,478,764
Long term liabilities 13 10,459,040 13,931,199

52,867,124 47,096,259

Current liabilities

Trade and other payables 14 33,697,723 31,918,337
Interest and mark–up accrued 15 284,273 291,240
Current portions of:
Long term loans 7 – 100,949
Payable to PTA against license fee 8 1,935,288 1,977,762
Long term liabilities 13 5,980,398 19,476,149
Unearned income 1,855,127 1,376,256
Dividend payable 3,375,631 7,650,000

47,128,440 62,790,693

208,070,322 215,139,886

Contingencies and commitments 16

The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.

Chairman
Annual Report 2010 | 85

Note 2010 2009


(Rupees in thousand)

Assets

Non current assets



Fixed assets
Property, plant and equipment 17 152,082,836 145,207,712
Intangible assets 18 3,716,981 3,865,149

155,799,817 149,072,861

Long term investments 19 108,910 108,095
Long term loans 20 337,210 332,378

156,245,937 149,513,334

Current assets

Stores, spares and loose tools 21 4,075,863 5,201,991
Stock in trade 22 385,199 470,673
Trade debts 23 10,385,233 10,875,750
Loans and advances 24 718,211 963,418
Accrued interest income 25 456,523 795,435
Recoverable from tax authorities 26 7,747,957 1,118,703
Receivable from Government of Pakistan 27 2,164,072 2,164,072
Other receivables 28 2,324,902 1,833,154
Short term investments 29 13,493,865 21,017,790
Cash and bank balances 30 10,072,560 21,185,566

51,824,385 65,626,552

208,070,322 215,139,886

President & CEO


86 | Pakistan Telecommunication Group

Consolidated Statement of Comprehensive Income


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

Revenue 31 98,905,765 92,720,381


Cost of services 32 (62,212,774) (55,154,403)

Gross profit 36,692,991 37,565,978

Administrative and general expenses 33 (12,617,632) (13,488,954)


Selling and marketing expenses 34 (7,424,363) (7,996,056)
Other operating income 35 5,277,011 5,223,655

Operating profit 21,928,007 21,304,623

Voluntary separation scheme – (92,118)


Finance cost 36 (3,293,496) (4,473,429)

18,634,511 16,739,076

Share of profit from an associate 1,254 33

Profit before tax 18,635,765 16,739,109

Taxation
Group (6,888,502) (5,816,257)
Associate (439) (337)

37 (6,888,941) (5,816,594)

Profit after tax 11,746,824 10,922,515


Other comprehensive income for the year – –

Total comprehensive income for the year 11,746,824 10,922,515

Earnings per share – basic and diluted (Rupees) 38 2.30 2.14

The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.

Chairman President & CEO


Annual Report 2010 | 87

Consolidated Statement of Cash Flows


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

Cash flows from operating activities


Cash generated from operations 39 43,438,939 44,442,463
Long term security deposits (183,756) 38,437
Employees’ retirement benefits
paid / contribution to funded plans (586,041) (1,510,085)
Payment of other VSS components (5,323) (840,927)
Finance cost paid (1,477,754) (1,302,595)
Income tax paid (10,036,557) (3,196,967)

Net cash inflow from operating activities 31,149,508 37,630,326



Cash flows from investing activities
Capital expenditure (28,113,075) (17,663,529)
Acquisition of a subsidiary – net of cash acquired 44 3,990 –
Intangible assets (316,645) (397,979)
Proceeds from disposal of property, plant and equipment 247,333 236,807
Short term investments 1,221,886 (1,221,886)
Long term loans – net (53,655) 62,565
PTA WLL License Fee (257,653) –
Return on long term loans and short term investments 4,366,926 3,966,774
Government grants received 571,657 966,044
Dividend income 22,000 –

Net cash outflow from investing activities (22,307,236) (14,051,204)



Cash flows from financing activities
Long term liabilities (16,967,910) –
Long term loan received 4,000,000 (1,296,714)
Long term loan paid (100,949) –
Lease rentals paid – (2,231)
Dividend paid (13,188,458) (2,742)

Net cash outflow from financing activities (26,257,317) (1,301,687)

Net (decrease) / increase in cash and cash equivalents (17,415,045) 22,277,435


Cash and cash equivalents at beginning of the year 40,981,470 18,704,035

Cash and cash equivalents at end of the year 40 23,566,425 40,981,470

The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.

Chairman President & CEO


88 | Pakistan Telecommunication Group

Consolidated Statement of Changes in Equity


For the year ended June 30, 2010

Issued, subscribed and


paid–up capital Revenue reserves

Insurance General Unappropriated


Class “A” Class “B” reserve reserve profit Total

(Rupees in thousand)

Balance as at July 01, 2008 37,740,000 13,260,000 1,683,074 30,500,000 18,797,345 101,980,419

Total comprehensive income


for the year – – – – 10,922,515 10,922,515
Interim dividend for the year ended
June 30, 2009 – Rs. 1.5 per share – – – – (7,650,000) (7,650,000)

Balance as at June 30, 2009 37,740,000 13,260,000 1,683,074 30,500,000 22,069,860 105,252,934

Total comprehensive income


for the year – – – – 11,746,824 11,746,824
Transfer to insurance reserve – – 430,630 – (430,630) –
Interim dividend for the year ended
June 30, 2010 – Rs. 1.75 per share – – – – (8,925,000) (8,925,000)

Balance as at June 30, 2010 37,740,000 13,260,000 2,113,704 30,500,000 24,461,054 108,074,758

The annexed notes from 1 to 49 form an integral part of these consolidated financial statements.

Chairman President & CEO


Annual Report 2010 | 89

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

1. Legal status and nature of business

1.1 Constitution and ownership


The consolidated financial statements of the Pakistan Telecommunication Group (“the Group”) comprise of the
financial statements of:

Pakistan Telecommunication Company Limited (PTCL)

Pakistan Telecommunication Company Limited (“the holding Company”) was incorporated in Pakistan on December
31, 1995 and commenced business on January 01, 1996. The Company is listed on Karachi, Lahore and Islamabad
stock exchanges. The Company was established to undertake the telecommunication business formerly carried on by
Pakistan Telecommunication Corporation (PTC). The business was transferred to the Company on January 01, 1996
under the Pakistan Telecommunication (Re–organization) Act, 1996 at which date the Company took over all the
properties, rights, assets, obligations and liabilities of PTC except those transferred to National Telecommunication
Corporation (NTC), Frequency Allocation Board (FAB), Pakistan Telecommunication Authority (PTA) and Pakistan
Telecommunication Employees Trust (PTET). The registered office of the Company is situated at PTCL Headquarters,
G–8/4, Islamabad.

As a consequence of PTCL’s privatization during 2006, 26% of its shares were acquired by Etisalat International
Pakistan (LLC), based in the U.A.E.

Pak Telecom Mobile Limited (PTML)

PTML was incorporated in Pakistan on July 18, 1998, as a public limited company, to provide cellular mobile telephony
services in Pakistan. PTML commenced its commercial operations in phases, commencing on January 29, 2001,
under the brand name of Ufone. It is a wholly owned subsidiary of PTCL. The registered office of PTML is situated at
G–8/4, Islamabad.

Maskatiya Communications (Private) Limited (MAXCOM)

On March 01, 2010 the holding Company acquired 100 % shares of MAXCOM.

MAXCOM was incorporated in Pakistan on September 06, 2004 as a private limited company under the Companies
Ordinance, 1984, to provide broadband services in the cities of Karachi and Hyderabad. The registered office of the
Company is situated at PTCL, Southzone Office Clifton, Karachi.

1.2 Activities of the Group


The Group provides telecommunication and broadband internet services in Pakistan. PTCL owns and operates
telecommunication facilities and provides domestic and international telephone services throughout Pakistan. PTCL
has also been licensed to provide such services to territories in Azad Jammu and Kashmir and Gilgit–Baltistan. PTML
provides cellular mobile telephony services throughout Pakistan and Azad Jammu and Kashmir. MAXCOM provides
broadband services in the cities of Karachi and Hyderabad.

2. Statement of compliance
These consolidated financial statements have been prepared in accordance with approved accounting standards as
applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards
(IFRS) issued by the International Accounting Standards Board (IASB) as are notified under the Companies Ordinance,
1984, provisions of and directives issued under the Companies Ordinance, 1984. In case requirements differ, the
provisions or directives of the Companies Ordinance, 1984 shall prevail.

2.1 Adoption of new and revised standards and interpretations


Changes in accounting policies and disclosures
(i) IAS 1 (Revised), ‘Presentation of Financial Statements’ – changes in accounting policies and disclosures (effective for
annual periods beginning on or after January 01, 2009). The revised standard prohibits the presentation of items of
income and expenses (that is non–owner changes in equity) in the statement of changes in equity, requiring ‘non–owners
90 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

changes in equity’ to be presented separately from ‘owners changes in equity’. All ‘non–owners changes in equity’ are
required to be shown in a performance statement. Groups can choose whether to present one performance statement
(the statement of comprehensive income) or two statements (statement of comprehensive income and statement of
other comprehensive income). The Group has preferred to present one statement.

(ii) IAS 7 (Amendments), ‘Statement of Cash Flows’ (effective for annual periods beginning on or after January 01, 2009)
requires the Group to disclose total consideration paid, the portion of consideration consisting of cash and cash
equivalents and the amount of cash and cash equivalents in the subsidiary whose control is obtained during the year.
Additional disclosures consequent to this amendment have been disclosed in note 44.

(iii) IFRS 3 (Revised), ‘Business Combinations’ (effective for annual periods beginning on or after July 01, 2009). The
revised standard continues to apply the acquisition method to business combinations, with some significant changes.
For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with
contingent payments classified as debt subsequently re–measured through the income statement. There is a choice
on an acquisition–by–acquisition basis to measure the non–controlling interest in the acquiree at fair value or at the
non–controlling interest’s proportionate share of the acquiree’s net assets. All acquisition–related costs should be
expensed. The Group’s acquisition during the year has been recorded in accordance with IFRS 3 (Revised).

(iv) IFRS 8, ‘Operating Segments’ (effective for annual periods beginning on or after January 01, 2009). IFRS 8 replaces IAS
14, ‘Segment reporting’. The new standard requires a ‘management approach’, under which segment information is
presented on the same basis as that used for internal reporting purposes, and introduces detailed disclosures regarding
the reportable segments and products. Under IFRS 8, operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision–maker. The management has determined that the Group
has two reportable segments as the Board of Directors views the Group’s operations as two reportable segments.
The adoption of this standard has only resulted in certain additional disclosures to these financial statements of the
Pakistan Telecommunication Group as disclosed in note 46.

(v) IAS 23 (Revised), ‘Borrowing Costs’ (effective for annual periods beginning on or after January 01, 2009). The revised
standard requires capitalization of borrowing costs that are directly attributable to the acquisition, construction or
production of a qualifying asset. The Group’s policy is in line with the revision and therefore the adoption of the revised
IAS 23 and the consequent change in accounting policy had no impact on the earnings of the Group during the year
ended June 30, 2010.

(vi) IFRIC 18, ‘Transfer of assets from customers’ (effective for annual periods beginning on or after July 01, 2009). The
interpretation clarifies the accounting treatment of consideration received from customers to construct or acquire an
item of property, plant and equipment for provision of services to customers. The interpretation requires recognition
of property, plant and equipment in accordance with IAS 16 ‘Property, plant and equipment’ and recognition of
income as per IAS 18 ‘Revenue’. The Group’s current accounting policy is in compliance with this interpretation and
therefore there is no effect on the Group’s financial statements.

2.2 Amendments and Interpretations to published accounting standards not effective during the year and not yet adopted
by the Group:
Effective date
(annual periods beginning on or after)

IFRS 2 Share based payments (Amendments) January 01, 2010


IFRS 5 Non current assets held for sale and discontinued operations (Amendments) January 01, 2010
IFRS 8 Operating segments (Amendments) January 01, 2010
IAS 1 Presentation of financial statements (Amendments) January 01, 2010
IAS 7 Statement of cash flows (Amendment) January 01, 2010
IAS 17 Leases (Amendments) January 01, 2010
IAS 24 Related party disclosures (Revised) January 01, 2011
IAS 32 Financial instruments: Presentation (Amendments) February 01, 2010
IAS 36 Impairment of assets (Amendments) January 01, 2010
IAS 39 Financial instruments: Recognition and measurement (Amendments) January 01, 2010
IFRIC 14 “IAS 19” The limit on a defined benefit asset, minimum funding requirements
and their interaction (Amendments) January 01, 2011
IFRIC 19 Extinguishing financial liabilities with equity Instruments July 01, 2010
Annual Report 2010 | 91

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

The management anticipates that except for the effects on the financial statements, of IFRS 2 – Share based payments
(Amendments), if any, adoption of above standards, amendments and interpretations in future periods will have no
material impact on the Group’s financial statements except for additional disclosures. The management is currently
considering the implications of IFRS 2 (Amendments).

3. Basis of preparation
These consolidated financial statements have been prepared under the historical cost convention, except for the
revaluation of certain financial instruments at fair value and the recognition of certain employees’ retirement benefits
on the basis of actuarial assumptions.

4. Significant accounting judgement and estimates
The preparation of financial statements in conformity with approved accounting standards requires the use of certain
critical accounting estimates. It also requires management to exercise its judgment in the process of applying the
Group’s accounting policies. Estimates and judgements are continually evaluated and are based on historic experience
including expectation of future events that are believed to be reasonable under the circumstances. The areas involving
a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the financial
statements are as follows:

(a) Provision for employees’ retirement benefits
Actuarial valuation of pension, gratuity, medical and compensated leave absence contributions (note 5.22) requires
use of certain assumptions related to future periods including increase in remuneration / medical costs, expected long
term return on plan assets and the discount rate used to convert future cash flows to current values.

(b) Provision for income taxes


The Group recognizes tax provisions using estimates based upon expert opinions of tax / legal advisors. Differences,
if any, between the income tax provision and the tax liability is recorded on final determination of such liability.
Deferred income tax (note 5.21) is calculated at the rates that are expected to apply to the period when the differences
reverse, based on tax rates that have been enacted or substantially enacted by the date of statement of financial
position.

(c) Useful lives and residual values of fixed assets


The Group reviews the useful lives and residual values of fixed assets (note 5.11) on a regular basis. Any change in
estimates may affect the carrying amounts of the respective items of property, plant and equipment and intangible
assets with a corresponding effect on the depreciation / amortization charge.

(d) Provision for doubtful receivables
Provision against overdue receivable balances is recognized after considering the receipt pattern and the future outlook
of the concerned receivable party. It is reviewed by the management on a regular basis.

5. Summary of significant accounting policies
The significant accounting policies adopted in the preparation of these financial statements are set out below. These
policies have been consistently applied to all the years presented unless otherwise stated.

5.1 Consolidation
(a) Subsidiary
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 consolidated financial statements include
Pakistan Telecommunication Company Limited and all companies in which it directly or indirectly controls, beneficially
owns or holds more than 50% of the voting securities or otherwise has power to elect and appoint more than 50%
of its directors. 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 control ceases to exist.
92 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010


From the current year, consequent to revision of IFRS 3 ‘Business Combinations’, the acquisition method of accounting
is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the
aggregate of the consideration transferred, measured at acqusition date fair value and amount of any non controlling
interest in the acquiree. For each business combination, the acquirer measures the non controlling interest in the
acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acqusition costs
incurred are expensed. If the business combination is acheived in stages, the acqusition date fair value of the acquirer’s
previously held equity interest in the acquiree is remeasured to fair value as at the acqusition date through profit and
loss. Any contingent consideration to be transferred by the acquirer are recognized at fair value at the acqusition date.
Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will
be recognized in accordance with IAS 39 either in profit or loss or charged to other comprehensive income. If the
contingent consideration is classified as equity, it is remeasured untill it is finally settled within equity.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured
initially at their fair value at the acquisition date, irrespective of the extent of any non controlling interest. The excess
of the cost of 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 recognized directly in income.

Inter–company transactions, balances and unrealized gains on transactions between Group companies are eliminated.
Unrealized losses on assets transferred are also eliminated and considered an impairment indicator of such assets.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.

Previously, the purchase method of accounting was used and the cost of an acquisition was measured as the fair value
of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs
directly attributable to the acquisition. Business combination achieved in stages were accounted for as separate steps.
Any additional acquired share of interest did not affect previously recognized goodwill. Contingent consideration was
recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a
reliable estimate was determinable. Subsequent adjustments to the contingent consideration used to affect goodwill.
This change in method of accounting for acquisition of subsidiaries does not have any impact on these financial
statements.

(b) 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 recognized 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 recognized in the statement of comprehensive
income, and its unrealized gains on transactions between the Group and its associates are eliminated to the extent of
the Group’s interest in the associates. Unrealized losses on the assets transferred are also eliminated to the extent of
the Group’s interest and considered an impairment indicator of such asset. Accounting policies of the associates have
been changed where necessary to ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in associates are recognized in the statement of comprehensive
income.

5.2 Functional and presentation currency
Items included in the financial statements of the Group are measured and presented using the currency of the primary
economic environment in which the entity operates (the functional currency), which is the Pakistan Rupee (Rs).
Annual Report 2010 | 93

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010


5.3 Foreign currency transactions and translation
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date
of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional
currency using the exchange rate prevailing at the date of the statement of financial position. Foreign exchange gains
and losses resulting from the settlement of such transactions and from the translation of monetary items at year end
exchange rates, are charged to income for the year.

5.4 Insurance reserve
The assets of the holding Company are self insured. The holding Company has created an insurance reserve.
Appropriation out of profits are made on the discretion of the Board of Directors. The reserve is to be utilized to meet
any loss resulting from theft, fire or natural disasters.

5.5 Government grants


Government grants are recognized at their fair value as deferred income, when there is reasonable assurance that the
grant will be received and the Group will comply with the conditions associated with the grant.

Grants that compensate the Group for expenses incurred are recognized in income for the year on a systematic basis in
the same period in which the related expenses are recognized. Grants that compensate the Group for cost of an asset
are recognized in income for the year on a systematic basis over the expected useful life of the related asset, upon its
capitalization.

5.6 Borrowings and borrowing costs


Borrowings are recognized at the proceeds received. Any difference, between the proceeds (net of transaction costs)
and the redemption value, is recognized in income for the year over the period of the borrowings, using the effective
interest method.

Borrowing costs which are directly attributable to the acquisition and construction of a qualifying asset are capitalized
as part of the cost of that asset. All other borrowing costs are charged to income for the year.

5.7 Trade and other payables


Liabilities for creditors and other amounts payable are carried at cost which is the fair value of the consideration to be
paid in the future for the goods and / or services received, whether or not billed to the Group.

5.8 Provisions
Provisions are recognized when the Group has a present legal or constructive obligation as a result of past events, it
is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and the
reliable estimate of the amount can be made. Provisions are reviewed at each statement of financial position date and
are adjusted to reflect the current best estimate.

5.9 Dividend distribution


Final dividend distribution to the Group’s shareholders is recognized as a liability in the financial statements, in the
period in which the dividend is approved by the Group’s shareholders; interim dividend distribution is recognized in
the period in which it is declared by the Board of Directors.

5.10 Contingent liabilities


A contingent liability is disclosed when the Group has a possible obligation as a result of past events, whose existence
will be confirmed only by the occurrence or non–occurrence of one or more uncertain future events, not wholly within
the control of the Group; or the Group has a present legal or constructive obligation, that arises from past events, but
it is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
or the amount of the obligation cannot be measured with sufficient reliability.
94 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

5.11 Fixed assets


(a) Property, plant and equipment
Property, plant and equipment, except freehold land, is stated at cost less accumulated depreciation and any identified
impairment loss; freehold land is stated at cost less identified impairment loss, if any. Cost includes expenditure,
related overheads, mark up and borrowing costs referred to in note 5.6, that is directly attributable to the acquisition
of the asset.

Subsequent costs, if reliably measurable, are included in the assets’ carrying amount, or recognized as a separate
asset as appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group. The carrying amount of any replaced part as well as other repairs and maintenance costs are charged to
income for the year during the period in which they are incurred.

Depreciation is calculated using the straight–line method to allocate their cost over their estimated useful lives, at the
rates mentioned in note 17, after taking into account their residual values.

Depreciation on additions to property, plant and equipment, is charged from the month in which relevant asset is
acquired or capitalized, while no depreciation is charged for the month in which the asset is disposed off. Any
impairment loss, or its reversal, is also charged to income. Where an impairment loss is recognized, the depreciation
charge is adjusted in future periods to allocate the assets’ revised carrying amount less the residual value over its
estimated useful life.

The gain or loss on disposal of an asset, calculated as the difference between the sale proceeds and the carrying
amount of the asset, is recognized in income for the year.

(b) Intangible assets


(i) Goodwill
Goodwill is initially measured at cost being the excess of the consideration transferred over the fair value of
subsidiary’s identifiable assets acquired and liabilities assumed.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose
of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to
each of the Group’s cash generating units that are expected to benefit from the combination, irrespective of
whether other assets or liabilities of the acquiree are assigned to those units.

Where goodwill forms part of a cash–generating unit and part of the operation within that unit is disposed off,
the goodwill associated with the operation disposed off is included in the carrying amount of the operation
when determining the gain or loss on disposal of the operation. Goodwill disposed off in this circumstance is
measured based on the relative values of the operation disposed off and the portion of the cash–generating
unit retained.

(ii) Licenses
These are stated at cost less accumulated amortization and any identified impairment losses. Amortization is
calculated using the straight–line method to allocate the cost of the license over its estimated useful life, as
disclosed in note 18.1 and is charged to income for the year.

The amortization on licenses acquired during the year, is charged from the month in which a license is acquired
/ capitalized, while no amortization is charged in the month of expiry / disposal of the license.

(iii) Computer software


These are carried at cost less accumulated amortization and any identified impairment losses. Amortization
Annual Report 2010 | 95

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

is calculated using the straight–line method to allocate the cost of the software over its estimated useful life,
as disclosed in note 18.1 and is charged to income for the year. Costs associated with maintaining computer
software, are recognized as an expense as and when incurred.

Amortization on additions to computer software is charged from the month in which an intangible is acquired
or capitalized, while no amortization is charged for the month in which the intangible is disposed off.

5.12 Impairment of non–financial assets


Assets that have an indefinite useful life, for example land, are not subject to depreciation and are tested annually for
impairment. Assets that are subject to depreciation are reviewed for impairment at each statement of financial position
date, or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized for the amount for which the assets’ carrying amount exceeds its recoverable amount.
An asset’s recoverable amount is the higher of its fair value less cost 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. Non–financial assets that suffered an impairment, are reviewed for possible reversal of the impairment at each
statement of financial position date. Reversals of the impairment loss are restricted to the original cost of the asset.
An impairment loss or reversal of impairment loss is recognized in income for the year.

5.13 Stores, spares and loose tools


These are stated at lower of cost and net realizable value. Cost is determined using the moving average method. Items
in transit are valued at cost comprising invoice value and other related charges incurred up to the date of statement
of financial position.

5.14 Stock in trade


These are stated at lower of cost and net realizable value. Cost comprises of purchase price, import duties, purchase
taxes and other related costs.

5.15 Trade debts


Trade debts are carried at their original invoice amount less any estimate made for doubtful debts based on a review
of all outstanding amounts at the year end. Bad debts are written off when identified.

5.16 Financial instruments


Financial assets and liabilities are recognized when the Group becomes a party to the contractual provisions of the
instrument, and derecognized when the Group loses control of the contractual rights that comprise the financial
assets and in case of financial liabilities when the obligation specified in the contract is discharged, cancelled or
expired. All financial assets and liabilities are initially measured at cost, which is the fair value of the consideration
given and received respectively. These are subsequently measured at fair value, amortized cost or cost, as the case
may be. Any gain or loss on derecognition of financial assets and financial liabilities is included in income for the year.

5.17 Financial assets


(a) Classification
The Group classifies its financial assets in four categories: held to maturity, loans and receivables, fair value through
profit or loss and available–for–sale. The classification depends on the purpose for which the financial assets were
acquired. Management determines the classification of its financial assets at initial recognition.

(i) Held to maturity


A financial asset is classified in this category if it is acquired by the Group with the intention and ability to hold
it till its maturity.

(ii) Loans and receivables


Loans and receivables are non–derivative financial assets with fixed or determinable payments that are not quoted
96 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

in an active market. The Group’s loans and receivables comprise ‘Trade debts’, ‘Loans and advances’, ‘Accrued
interest income’, ‘Receivable from Government of Pakistan’, ‘Other receivables’, ‘Short term investments’ and
‘Cash and bank balances’.

(iii) Fair value through profit or loss


Financial assets at fair value through profit or loss, are financial assets held for trading. A financial asset is
classified in this category, if acquired principally for the purpose of selling in the short–term. Assets in this
category are classified as current assets.

(iv) Available–for–sale
Available–for–sale financial assets are non–derivatives, that are either designated in this category or not
classified in any of the other categories. These are included in non–current assets unless management intends
to dispose off these assets within twelve months of the date of statement of financial position.

(b) Recognition and measurement


Regular purchases and sales of financial assets are recognized on the trade date – the date on which the Group
commits to purchase or sell the asset. Investments are initially recognized at fair value plus transaction costs for all
financial assets. Financial assets carried at fair value through profit or loss, are initially recognized at fair value and the
related transaction costs are charged to income for the year. Investments classified as available–for–sale are initially
measured at cost being the fair value of the consideration given. At subsequent reporting dates, these investments
are remeasured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments
in which a quoted market price is not available, are measured at cost if it is not possible to apply any other valuation
methodology. Unrealised gains and losses arising from the changes in the fair value are included in income for the
year in the period in which they arise. Financial assets at fair value through profit or loss are subsequently carried at
fair value. Loans and receivables and held to maturity financial assets are carried at amortized cost using the effective
interest method.

Financial assets are derecognized, when the rights to receive cash flows from the investments have expired or have
been transferred.

Gains or losses arising from changes in the fair value of financial assets, at fair value through profit or loss category,
are recognized in income in the period in which they arise. Dividend income, from available–for–sale investments and
financial assets at fair value through profit or loss, is recognized in income, when the Group’s right to receive dividend
is established.

(c) Impairment
The Group assesses at each statement of financial position 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 a security below its cost is considered as an indicator that the
security is impaired. If any such evidence exists for available–for–sale financial assets, the impairment loss is reduced
from value of other comprehensive income and recognized in income for the year. Impairment losses recognized in
income on equity instruments are not reversed.

5.18 Offsetting of financial assets and liabilities


Financial assets and liabilities are offset and the net amount is reported in the statement of financial position if the
Group has a legally enforceable right to set off the recognized amounts and the Group intends to settle on a net basis
or realize the asset and settle the liability simultaneously.

5.19 Cash and cash equivalents
Cash and cash equivalents are carried at cost. For the purpose of the statement of cash flows, cash and cash
equivalents comprise cash in hand, other short term highly liquid investments with original maturities of three months
or less, that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change
Annual Report 2010 | 97

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

in value.
5.20 Revenue recognition
Revenue comprises of the fair value of the consideration received or receivable, for the provision of telecommunication,
broadband and related services in the ordinary course of the Group’s activities.

Revenue is recognized, when it is probable that the economic benefits associated with the transaction will flow to the
Group, and the amount of revenue, and the associated cost incurred or to be incurred, can be measured reliably, and
when specific criteria have been met for each of the Group’s activities as described below:

(i) Rendering of telecommunication services
Revenue from telecommunication services comprises of amounts charged to customers in respect of monthly
line rent, line usage, cellular operations and provision of other telecommunication services (including data
services). Revenue also includes the net income received and receivable from revenue sharing arrangements
entered into with overseas and local telecommunication companies.

Revenue is recognized based on the fair value received or receivable for the services rendered, net of services
tax, rebates and discounts. Revenue from fixed line business, mainly in respect of line rent and line usage, is
invoiced and recorded as part of a periodic billing cycle. Revenue from the sale of prepaid credit is deferred
until such time as the customer uses the air time, or the credit expires. Unutilized airtime is carried in the
statement of financial position as unearned income.

(ii) Income on bank deposits
Return on bank deposits and investments is recognized using the effective interest method.

(iii) Dividend income


Dividend income is recognized when the right to receive payment is established.

5.21 Taxation
The tax expense for the year comprises of current and deferred income tax, and is recognized in income for the year,
except to the extent that it relates to items recognized directly in the statement of other comprehensive income, where
the related tax is also recognized in statement of other comprehensive income.

(a) Current
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the
statement of financial position date. Management periodically evaluates positions taken in tax returns, with respect to
situations in which applicable tax regulation is subject to interpretation, and establishes provisions, where appropriate,
on the basis of amounts expected to be paid to the tax authorities.

(b) Deferred
Deferred income tax is accounted for using the balance sheet liability method, in respect of all temporary differences
arising between the carrying amount of assets and liabilities in the financial statement and the corresponding tax base
used in the computation of taxable profit.

Deferred income tax liabilities are recognized for all taxable temporary differences and deferred income tax assets are
recognized to the extent that it is probable that taxable profits will be available against which the deductible temporary
differences, unused tax losses and tax credits can be utilized.

Deferred income tax is calculated at the rates that are expected to apply to the period when the differences reverse,
based on tax rates that have been enacted or substantially enacted by the statement of financial position date.
98 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010


5.22 Employees’ retirement benefits
The Group operates various retirement / post retirement benefit schemes. The plans are generally funded through
payments determined by periodic actuarial calculations or up to the limits allowed in the Income Tax Ordinance, 2001.
The Group has constituted both defined contribution and defined benefit plans.

The main features of the schemes operated by the Group in the PTCL and its subsidiary–PTML are as follows:

PTCL
(a) Defined contribution plan
The Company operates an approved funded provident plan covering permanent employees. For the purposes of the
plan, a separate trust titled the “PTCL Employees’ GPF Trust” (the Trust) has been established. Monthly contributions
are deducted from the salaries of employees, and are paid to the Trust by the Company. Interest is paid at the rate
announced by the Federal Government and this rate for the year was 14% (2009: 15%) per annum. The Company also
contributes to the fund the differential, if any, of the interest paid / credited for the year and the income earned on the
investments made by the Trust.

(b) Defined benefit plans


The Company operates the following defined benefit plans:
(i) Pension plans
The Company operates an approved funded pension plan through a separate trust called the “Pakistan
Telecommunication Employees’ Trust” (PTET) for its employees recruited prior to January 01, 1996 when
the Company took over the business from PTC. The Company also operates an unfunded pension scheme for
employees recruited on a regular basis on or after January 01, 1996.

(ii) Gratuity plan


The Company operates an unfunded and unapproved gratuity plan for its New Terms and Conditions (NTC) /
contractual employees.

(iii) Medical benefits plan


The Company provides post retirement medical facility to pensioners and their families. Under the unfunded
plan, all such ex–employees, their spouses and children up to the age of 21 except unmarried daughters which
are not subject to 21 years age limit and parents residing with and dependent on the employee are entitled to
this benefit. The pensioner and the family are entitled to the facility up to the life of the pensioner and spouse.
There are no annual limits to the cost of drugs, hospitalized treatment and consultation fees.

(iv) Accumulating compensated absences


The Company provides a facility to its employees for accumulating their annual earned leave. Under this plan,
regular employees are entitled to four days of earned leaves per month. Unutilized leaves can be accumulated
without limit and can be used at any time, subject to the Company’s approval, up to 120 days in a year without
providing medical certificate, 180 days with medical certificate and 365 days during the entire service of the
employee. Up to 180 days of accumulated leave can be encashed on retirement, provided the employee has
a minimum leave balance of 365 days. Leaves are encashed at latest emoluments applicable for monthly
pension.

New Compensation Pay Grade (NCPG) employees are entitled to 20 leaves after completion of one year of
service. Leaves can be accumulated after completion of the second year of service, to a maximum of 28
days.

New Terms and Conditions (NTC) / contractual employees are entitled to three days earned leave per month. Unutilized
leaves can be accumulated without limit. Up to 180 days of accumulated leaves can be encashed on departure at gross pay.
Annual Report 2010 | 99

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

The liability recognized in the statement of financial position in respect of defined benefit plans is the present value
of the defined benefit obligation at the statement of financial position date less the fair value of plan assets, if any,
together with adjustments for unrecognized actuarial gains / losses, if any.

The defined benefit obligation is calculated annually, by independent actuary using the projected unit credit method.
The most recent valuations were carried out as at June 30, 2010. The present value of the defined benefit obligation
is determined by discounting the estimated future cash outflows using interest rates of high–quality corporate bonds,
that are nominated in the currency in which the benefits will be paid, and that have terms to maturity approximating
to the terms of the related liability. Actuarial gains and losses arising from experience adjustments and changes in
actuarial assumptions, in excess of the ‘corridor’ (10% of the higher of the fair value of the plan assets or the present
value of the defined benefit obligation) at the beginning of the current reporting year, are recognized over the expected
average remaining working lives of employees participating in the defined benefit plan. Actuarial gains and losses
arising on compensated absences are recognized immediately.

PTML
(a) Defined contribution plan
The Company operates an approved contributory provident fund for all its employees, and for which, contributions are
charged to income for the year.

(b) Defined benefit plans


The Company operates the following defined benefit plans:
(i) Gratuity plan
The Company operates a funded gratuity scheme for all permanent employees. The liability is provided for on
the basis of an actuarial valuation carried out as at June 30, 2010 using the “Projected Unit Credit Method”.
The actuarial gains and losses are amortised over the expected remaining service of employees.

(ii) Accumulating compensated absences


The Company provides a facility to its employees for accumulating their annual earned leaves. The liability is
provided for on the basis of an actuarial valuation, carried out as at June 30, 2010, using the “Projected Unit
Credit Method”. The actuarial gains and losses are recognised in the statement of comprehensive income
account.

5.23 Operating segments


Operating segments are reported in a manner consistent with the internal reporting of the Group in note 46 to the
financial statements.
100 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

6. Share capital
6.1 Authorized share capital

2010 2009 2010 2009
(Number of shares in thousand) (Rupees in thousand)

11,100,000 11,100,000 “A” class ordinary shares of Rs 10 each 111,000,000 111,000,000
3,900,000 3,900,000 “B”class ordinary shares of Rs 10 each 39,000,000 39,000,000

15,000,000 15,000,000 150,000,000 150,000,000



6.2 Issued, subscribed and paid up capital

2010 2009 2010 2009
(Number of shares in thousand) (Rupees in thousand)

3,774,000 3,774,000 “A” class ordinary shares of Rs 10 each


issued as fully paid for consideration
other than cash – note 6.3 37,740,000 37,740,000

1,326,000 1,326,000 “B” class ordinary shares of Rs 10 each


issued as fully paid for consideration
other than cash – note 6.3 13,260,000 13,260,000

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



6.3 These shares were initially issued to the Government of Pakistan in consideration for the assets and liabilities
transferred from Pakistan Telecommunication Corporation (PTC) to Pakistan Telecommunication Company Limited
(PTCL) under the Pakistan Telecommunication (Re–organization) Act, 1996 as referred to in note 1.1.

6.4 Except for voting rights, the “A” and “B” class ordinary shares rank pari passu in all respects. “A” class ordinary shares
carry one vote and “B” class ordinary shares carry four votes, save for the purposes of election of directors. “A”
class ordinary shares cannot be converted into “B” class ordinary shares. However, “B” class ordinary shares may be
converted into “A” class ordinary shares at the option, exercisable in writing, submitted to the Company by the holders
of three fourths of the “B” class ordinary shares. In the event of termination of the license issued to the Company
under the provisions of Pakistan Telecommunication (Re–organization) Act, 1996, the “B” class ordinary shares shall
be automatically converted into “A” class ordinary shares.

6.5 The Government of Pakistan through an “Offer for Sale” document, dated July 30, 1994 issued to its domestic
investors a first tranche of vouchers exchangeable for “A” class ordinary shares of the Company; subsequently
through an Information Memorandum dated September 16, 1994, a second tranche of vouchers was issued to the
international investors, also exchangeable, at the option of voucher holders, for “A” class ordinary shares or Global
Depository Receipts ( GDRs ) representing “A” class ordinary shares of the Company. Out of 3,774,000 thousand “A”
class ordinary shares, vouchers against 601,084 thousand “A” class ordinary shares were issued to the general public.
Till June 30, 2010, 599,506 thousand (2009: 599,500 thousand) “A” class ordinary shares had been exchanged for
such vouchers.

6.6 In pursuance of the privatization of the Company, a bid was held by the Government of Pakistan on June 08, 2005
for sale of “B” class ordinary shares of Rs 10 each, alongwith management control. Emirates Telecommunication
Corporation (Etisalat), UAE was the successful bidder. The shares, alongwith management control, were transferred
with effect from April 12, 2006 to Etisalat International Pakistan (EIP), UAE which is a subsidiary of Etisalat.
Annual Report 2010 | 101

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

6.7 Ordinary shares of the Company held by related parties as at the year end are as follows:

2010 2009
(Number of shares)

Etisalat International Pakistan (LLC) SE (“B” class ordinary shares) 407,809,524 407,809,524
Etisalat International Pakistan (LLC) (“B” class ordinary shares) 918,190,476 918,190,476

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

Note 2010 2009


(Rupees in thousand)

7. Long term loans


Subsidiary–PTML
Secured
From banks 7.1 4,000,000 100,949
From consortia of banks 7.2 9,000,000 9,000,000

13,000,000 9,100,949
Current portion thereof – (100,949)

13,000,000 9,000,000

7.1 From banks


This comprises loans from:
Bank Al Habib Limited 7.1.1 1,000,000 –
Faysal Bank Limited 7.1.2 2,000,000 –
NIB Bank Limited 7.1.3 1,000,000 –
Habib Bank Limited – 100,949

4,000,000 100,949

7.1.1 The loan carries mark–up @ 3 Month KIBOR plus 1.80%, effectively resulting in a mark–up rate, ranging between
14.060% and 14.150% per annum during the current year.

7.1.2 This represents two loans carrying mark–up @ 3 Month KIBOR plus 1.80%, effectively resulting in a mark–up rate,
ranging between 14.060% and 14.150% per annum during the current year.

7.1.3 The loan carries mark–up @ 3 Month KIBOR plus 1.75%, effectively resulting in a mark–up rate, ranging between
14.010% and 14.10% per annum during the current year.

7.1.4 The above loans are secured by way of first charge ranking pari passu by way of hypothecation over all
present and future movable equipment and other assets of PTML. These loans were disbursed on March 29,
2010 and have a grace period of three years from the disbursement date and are repayable in eight equal quarterly
installments, commencing June 29, 2013 till March 29, 2015.

Note 2010 2009
(Rupees in thousand)

7.2 From consortia of banks


Syndicated term financing – 1 7.2.1 4,500,000 4,500,000
Syndicated term financing – 2 7.2.2 4,500,000 4,500,000

9,000,000 9,000,000

102 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

7.2.1 This represents a term finance loan, obtained by PTML, from a syndicate of commercial banks. The outstanding
balance represents the unpaid principal sum due to the syndicate at the date of the statement of financial position.

The loan carries mark–up rate of 0.69 % over a simple average of 3 months KIBOR prevailing on the last five working
days prior to the date of first disbursement, and thereafter prior to each installment period, effectively resulting
in a mark up rate, ranging between 13.020% and 13.450% (2009: 10.83% to 16.19%) per annum during the current
year.

The loan is secured by first ranking pari passu charge by way of hypothecation over all present and future assets
(excluding land) of PTML. The loan is repayable in July 2011.

7.2.2 This represents a term finance loan, obtained by PTML, from a syndicate of commercial banks. The outstanding
balance represents the unpaid principal sum due to the syndicate at the date of the statement of financial position.

The loan carries a mark–up rate of 0.69 % over 3 months KIBOR, prevailing on the last working day prior to the
date of the first disbursement, and thereafter prior to each installment period, effectively resulting in a mark–up
rate, ranging between 12.910% and 13.440% (2009: 10.83% to 16.19%) per annum during the current year.

The loan is secured by first ranking pari passu charge by way of hypothecation over all present and future
assets (excluding land) of PTML. The loan is repayable in July 2011.

Note 2010 2009
(Rupees in thousand)

8. Payable to PTA against license fee


PTCL 8.1 1,894,950 1,953,971
PTML 8.2 210,021 190,881
MAXCOM 164 –

2,105,135 2,144,852
Current portion of license fee payable (1,935,288) (1,977,762)

169,847 167,090

8.1 Payable to PTA against license fee – PTCL
Payable to PTA against WLL license fee 2,105,500 2,105,500
Present value adjustment (631,756) (631,756)

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


Imputed interest charged to date 631,756 480,227

2,105,500 1,953,971
Payment made during the year (210,550) –

1,894,950 1,953,971
Current portion shown under current liabilities (1,894,950) (1,953,971)

– –

8.2 Payable to PTA against license fee – PTML
Payable to PTA against AJK license fee 8.2.1 298,600 325,725
Imputed interest charged (45,879) (94,194)

252,721 231,531
Payment made during the year (42,700) (40,650)

210,021 190,881
Current portion shown under current liabilities (40,174) (23,791)

169,847 167,090
Annual Report 2010 | 103

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

8.2.1 This represents a license fee of USD 5,000 thousand, in respect of the PTML’s operations in AJK, payable to the
PTA in ten equal annual installments without any interest. The license fee will be repaid over a period of ten years
commencing June 2007 to 2016, in USD or equivalent Pak Rupees. Accordingly, at initial recognition, the amount
payable was discounted to the present value of future cash flows at the rate of 6% per annum representing LIBOR.

9. Deferred taxation
The liability / (assets) for deferred taxation comprises of timing differences relating to:

Note 2010 2009


(Rupees in thousand)

Accelerated tax depreciation / amortization 21,440,739 19,301,747


Provision for doubtful trade debts (6,790,902) (6,284,901)
Provision for doubtful advances and receivables (146,734) (165,055)
Available tax losses (3,909,262) (5,692,523)
Intangible assets 41,581 43,003
Others (1,771) 3,106

10,633,651 7,205,377

The gross movement in deferred taxation


during the year is as follows:

Balance as at July 01 7,205,377 4,469,852
Charge for the year 3,437,465 2,735,525
Deferred taxation as at March 01, 2010
of subsidiary acquired (9,191) –

Balance as at June 30 10,633,651 7,205,377



10. Employees’ retirement benefits
Liabilities for pension obligations
Funded 10.1 5,283,449 4,550,208
Unfunded 10.1 1,086,113 841,872

6,369,562 5,392,080
Gratuity
Funded 10.1 71,314 51,460
Unfunded 10.1 498,256 391,609

569,570 443,069
Accumulating compensated absences 10.1 1,019,098 1,084,390
Post retirement medical facility 10.1 7,718,647 7,333,246

15,676,877 14,252,785
104 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

10.1 The latest actuarial valuations of the Group’s defined benefit plans were conducted at June 30, 2010 using the pro-
jected unit credit method. Details of these defined benefit plans are as follows:

Pension Gratuity Accumulating Post retirement medical Total


Funded Unfunded Funded Unfunded compensated absences facility
2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009
(Rupees in thousand)

(a) The amounts recognised


in the statement of financial position:

Present value of defined
benefit obligations 62,752,225 53,610,885 1,139,102 932,231 209,446 152,555 423,702 314,871 1,019,098 1,084,390 7,807,167 6,448,686 73,350,740 62,543,618
Fair value of plan assets – note 10.3 (53,521,666) (50,096,598) – – (115,814) (82,072) – – – – – – (53,637,480) (50,178,670)

9,230,559 3,514,287 1,139,102 932,231 93,632 70,483 423,702 314,871 1,019,098 1,084,390 7,807,167 6,448,686 19,713,260 12,364,948
Unrecognized actuarial gains / (losses) (3,947,110) 1,035,921 (52,989) (90,359) (22,318) (19,023) 74,554 76,738 – – (88,520) 884,560 (4,036,383) 1,887,837

Liability as at June 30 5,283,449 4,550,208 1,086,113 841,872 71,314 51,460 498,256 391,609 1,019,098 1,084,390 7,718,647 7,333,246 15,676,877 14,252,785

(b) Changes in the present value


of defined benefit obligation:

Balance as at July 01 53,610,885 50,105,610 932,231 709,378 152,555 106,094 314,871 251,226 1,084,390 880,970 6,448,686 5,195,430 62,543,618 57,248,708
Current service cost 542,494 445,896 137,708 131,893 62,566 45,480 103,717 108,135 60,000 53,015 64,186 64,052 970,671 848,471
Interest cost 6,433,306 6,012,673 111,868 85,125 18,307 12,731 37,785 30,147 130,127 123,175 773,842 623,452 7,505,235 6,887,303
Past service cost 270,000 – – – – – – – – – – – 270,000 –
Actuarial (gains) / losses 6,098,147 953,077 (37,370) 11,870 6,244 3,196 (5,358) (60,858) (188,994) (21,756) 955,960 940,121 6,828,629 1,825,650
Benefits paid (4,202,607) (3,906,371) (5,335) (6,035) (30,226) (14,946) (27,313) (13,779) (66,425) (96,496) (435,507) (374,369) (4,767,413) (4,411,996)
Recognition of contractual liabilities – – – – – – – – – 145,482 – – – 145,482

Balance as at June 30 62,752,225 53,610,885 1,139,102 932,231 209,446 152,555 423,702 314,871 1,019,098 1,084,390 7,807,167 6,448,686 73,350,740 62,543,618

(c) Charge for the year:



Current service cost 542,494 445,896 137,708 131,893 62,566 45,480 103,717 108,135 60,000 53,015 64,186 64,052 970,671 848,471
Interest cost 6,433,306 6,012,673 111,868 85,125 18,307 12,731 37,785 30,147 130,127 123,175 773,842 623,452 7,505,235 6,887,303
Past service cost 270,000 – – – – – – – – – – – 270,000 –
Expected return on plan assets (6,512,558) (6,297,387) – – (9,849) (7,680) – – – – – – (6,522,407) (6,305,067)
Actuarial (gains) / losses – – – 472 290 929 (7,541) – (188,994) (21,756) (17,121) (100,396) (213,366) (120,751)
Contribution from deputationists (175) – – – – – – – – – – – (175) –
Contractual liabilities – – – – – – – – – 145,482 – – – 145,482

733,067 161,182 249,576 217,490 71,314 51,460 133,961 138,282 1,133 299,916 820,907 587,108 2,009,958 1,455,438

(d) Significant actuarial assumptions


at the date of statement of
financial position:

Expected rate of return on plan assets 13% 13% 10% 10%
Discount rate 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12% 12%
Future salary / medical cost increase 9–11% 9–11% 9–11% 9–11% 12% 12% 9–11% 9–11% 9–11% 9–11% 11% 11%
Future pension increase 8% 8% 8% 8%
Average expected remaining
working lives of participants 13 years 13 years 16 years 17 years 12 years 12 years 6 years 6 years 14 years 14 years
Expected mortality rate EFU 61–66* EFU 61–66* EFU 61–66* EFU 61–66*
Expected withdrawal rate Based on experience Based on experience Based on experience Based on experience

* Mortality table adjusted for Company’s experience


Annual Report 2010 | 105

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

10.2 Historical information

2010 2009 2008 2007 2006


(Rupees in thousand)

Defined benefit pension plan – funded


Present value of defined benefit obligations as at June 30 62,752,225 53,610,885 50,105,610 36,529,541 31,413,488
Fair value of plan assets as at June 30 (53,521,666) (50,096,598) (48,441,436) (45,158,318) (39,243,528)
Deficit / (surplus) in the plan 9,230,559 3,514,287 1,664,174 (8,628,777) (7,830,040)

Experience adjustment on plan liabilities losses 6,098,147 953,077 778,679 2,581,597 603,337
Experience adjustment on plan assets – (losses) / gains 1,115,117 (1,735,854) (522,664) 3,776,675 2,611,253

Defined benefit pension plan – unfunded


Present value of defined benefit obligations as at June 30 1,139,102 932,231 709,378 1,180,770 1,050,561
Experience adjustment on plan liabilities – (gains) / losses (37,370) 83,101 1,764 (96,454) 47,981

Defined benefit gratuity plan – funded


Present value of defined benefit obligations as at June 30 209,446 152,555 106,094 71,363 48,293
Fair value plan assets at year end (115,814) (82,072) (64,002) – –
Deficit in the plan 93,632 70,483 42,092 71,363 48,293

Experience adjustment on plan liabilities – losses 6,244 3,196 4,645 2,326 4,616
Experience adjustment on plan assets – gains 2,659 5,930 1,464 – –

Defined benefit gratuity plan – unfunded


Present value of defined benefit obligations as at June 30 423,702 314,871 251,226 111,444 136,265
Experience adjustment on plan liabilities – (gains) / losses (5,358) (51,220) 41,126 (77,172) 10,089

Accumulating compensated absences


Present value of defined benefit obligations as at June 30 1,019,098 1,084,390 880,970 1,910,834 1,762,043
Experience adjustment on plan liabilities – (gains) / losses (188,994) 45,308 18,328 30,993 (238,728)

Defined benefit post retirement medical facility


Present value of defined benefit obligations as at June 30 7,807,167 6,448,686 5,195,430 4,798,947 4,583,853
Experience adjustment on plan liabilities – losses / (gains) 955,960 940,121 (51,761) (274,176) (673,407)

10.3 Changes in the fair value of plan assets


Pension funded Gratuity funded
2010 2009 2010 2009
(Rupees in thousand)

Balance as at July 01 50,096,598 48,441,436 82,072 64,002


Expected return on plan assets 6,512,558 6,297,387 9,849 7,680
Contributions during the year – 1,000,000 51,460 19,406
Benefits paid (4,202,607) (3,906,371) (30,226) (14,946)
Actuarial gains / (losses) on plan assets 1,115,117 (1,735,854) 2,659 5,930
Balance as at June 30 53,521,666 50,096,598 115,814 82,072

Actual return on plan assets 7,627,675 4,561,533 12,507 13,610


106 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

10.4 Major categories of plan assets as a percentage of total plan assets are as follows:
Pension funded Gratuity funded
2010 2009 2010 2009
(Percentage)

Defence saving certificates – 43 – –


Special saving certificates 84 47 – –
Pakistan investment bonds 6 6 – –
Fixed and other assets 10 4 – –
Bank balances – – 100 100
Balance as at June 30 100 100 100 100

10.5 Effect of increase / decrease in medical cost trend rates


The effect of 1% increase in the medical cost trend rate in current service cost and interest cost is Rs 22,523
thousand (2009: Rs 18,181 thousand) and the effect of 1% decrease the medical cost trend rate in current service
cost and interest cost is Rs 18,691 thousand (2009: Rs 15,063 thousand).

The effect of 1% increase in the medical cost trend rate in the present value of defined benefit obligations for medical
cost is Rs 2,295,307 thousand (2009: Rs 1,892,189 thousand) and the effect of 1% decrease in the medical cost
trend rate in the present value of defined benefit obligations for medical cost is Rs 1,904,949 thousand (2009: Rs
1,563,113 thousand).

In the next financial year, the expected contribution to be paid to the funded pension plan and funded gratuity plan
by the Group is Rs 1,623,346 thousand (2009: Rs 463,242 thousand) and Rs 80,071 thousand (2009: Rs 60,131
thousand) respectively.

Note 2010 2009


(Rupees in thousand)

11. Deferred government grants


Balance as at July 01 1,061,044 95,000
Received during the year 11.1 571,657 966,044

Balance as at June 30 1,632,701 1,061,044

11.1 This represents the grant from the Universal Service Fund (a Government formed agency) received as assistance
towards development of telecommunication infrastructure in rural areas comprising of telecom infrastructure projects
for basic telecom access, transmission and broad band services spread over the country.

12. Long term security deposits


These represent security deposits received from distributors, franchisees and customers. These are interest free and
refundable on termination of relationship with the Group. The holding Company adjusted Rs 222,751 thousand (2009:
Rs Nil) during the year against balances of customers in default.
Annual Report 2010 | 107

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

13. Long term liabilities


This represents amount payable to a supplier of network equipment and comprises of:

Note 2010 2009


(Rupees in thousand)

Obligation under acceptance of bills of exchange 12,629,543 23,193,983


Other accrued liabilities 3,809,895 10,213,365

16,439,438 33,407,348
Current portion thereof (5,980,398) (19,476,149)

13.1 10,459,040 13,931,199

13.1 These include liabilities aggregating to Rs 10,000,000 thousands which are due within twelve months of the date
of statement of financial position. However, PTML has entered into financial agreements with banks and PTCL for
repayment of the above liabilities, therefore the liabilities have been classified as long term.

Note 2010 2009


(Rupees in thousand)

14. Trade and other payables


Trade creditors 14.1 9,244,826 7,300,336
Accrued liabilities 14.2 6,264,269 4,241,213
Receipts against third party works 678,439 499,556
Taxes payable
Income tax collected from subscribers 709,964 507,988
Income tax deducted at source 4,734 13,017

714,698 521,005
Sales tax payable 1,650,608 1,496,997
Advances from customers 1,612,761 1,576,153
Technical services fee payable to related party 33.2 874,721 864,059
Retention money payable to contractors / suppliers 5,407,995 5,924,366
Payable to
Research and Development Fund 2,773,454 2,397,144
Universal Service Fund 14.3 3,523,508 6,122,799
Pakistan Telecommunication Authority 6,542 34,542
Unclaimed dividend 131,253 120,342
VSS benefit payable 55,734 61,057
Consideration payable on acquisition of a subsidiary – MAXCOM 67,396 –
Others 691,519 758,768

33,697,723 31,918,337

14.1 These include following balances payable to related parties:


TF Pipes Limited 2,621 2,232
Telecom Foundation 49,365 –
Emirates Telecommunication Corporation 210,251 65,050
Thuraya Satellite Company 1,124 8,929

263,361 76,211

These relate to the normal business of the Group and are interest free.
108 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

14.2 This includes Rs 640,711 thousand (2009: Rs 573,155 thousand) representing a provision against EOBI contribution
payable under the EOBI Act 1976, for employees hired subsequent to PTCL’s incorporation. The holding Company has
withheld payment to EOBI, pending the settlement of the court case, as discussed in note 16.3. The provision made
during the year is Rs 67,556 thousand (2009: Rs 53,304 thousand).

14.3 This includes Rs 230,591 thousand (2009: Rs 3,458,866 thousand) representing the last installment out of total
amount of Rs 3,458,866 thousand payable to Universal Service Fund for the period commencing from May 1, 2008 to
December 31, 2008 in fifteen equal monthly installment.

2010 2009
(Rupees in thousand)

15. Interest and mark–up accrued


Interest payable on long term loans 284,273 288,459
Interest payable on short term borrowings – 2,781

284,273 291,240

16. Contingencies and commitments

Contingencies – PTCL
16.1 1,574 cases (2009: 1,850 cases) have been filed against the Company primarily by subscribers and employees.
Because of the number of cases involved and their uncertain nature, it is not possible to quantify their financial
impact at present. However, the management and the Company’s legal advisor are of the view that the outcome of
these cases is expected to be favorable and a liability, if any, arising on the settlement of these cases is not likely to
be material.

16.2 In 1995 the Government of Pakistan, in the interest of public safety, passed an order to close transmission of all
messages, inter alia, through card phone services and mobile telephone services within and outside the city of Karachi.
Telecard Limited, a pay card service provider, served a legal notice to the Government of Pakistan seeking restoration
of its services and claimed damages from the Government amounting to Rs 2,261,924 thousand. The Government of
Pakistan ordered for immediate restoration of Pay Card services including rebate relief and discount to all pay phone
service providers. In view of relief and discount offered by the Government, Telecard Limited withheld payments on
account of their monthly bills to the Company and obtained a stay order from the Honourable Sindh High Court for
an amount of Rs 110,033 thousand against the Company.

On the instructions of the Honourable Court, external consultants calculated the rebate and discount amounting to Rs
349,953 thousand payable by the Company to Telecard Limited for the period from January 1997 to August 2001. In
the suit, final arguments of the parties are to be reheard. The Company has also filed claims against Telecard Limited
for aggregate receivables amounting to Rs 334,099 thousand up to December 31, 2001.

In another case, identical to the above matter, M/s Telefon has claimed Rs 97,337 thousand from the Company. In
the last hearing held on May 9, 2006 issues have been framed and evidence will be recorded in the next hearing.
The management and the Company’s legal advisor are of the view that the outcome of the appeal is expected to be
favourable.

16.3 The Employees’ Old–Age Benefits Institute (EOBI) served a demand notice on the Company under section 12(3) of
Employees’ Old–Age Benefits (EOBI) Act, 1976 for payment of Company’s and employees contribution amounting to
Rs 1,496,829 thousand for the period January 01, 1996 to May 31, 2005. The management has filed a writ petition
against the demand before the Honourable High Court, which is pending for hearing. However, the management and
legal advisor are of the view that the case would be decided in the favour of the Company.

16.4 In previous years the Income Tax Authorities served show cause notices under section 52 and section 86 of the
repealed Income Tax Ordinance 1979 for the assessment years 1996 – 1997 to 1998 – 1999 on failure to withhold /
Annual Report 2010 | 109

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

deduct tax under section 50(3) while making payments to non resident satellite companies. The Company filed a writ
petition before the Honourable Lahore High Court against the said notices, which was dismissed. An appeal was filed
against the dismissal before the Honourable Supreme Court of Pakistan which was also dismissed and the Company
was advised by the Honourable Court to file an appeal before the Income Tax Appellate Authorities. Subsequently, the
Company filed an appeal with the Commissioner Income Tax (CIT) Appeals who has annulled the order of the Taxation
Officer. The department has filed an appeal with the Income Tax Appellate Tribunal (ITAT) against the order of CIT
(Appeals).

Pending final outcome of the appeal, no provision has been made in these financial statements for the demands
aggregating Rs 1,599,557 thousand (2009: Rs 1,599,557 thousand). The management and the Company’s tax advisor
are of the view that the outcome of the appeal is expected to be favourable.

16.5 Consequent to an audit of Federal Excise Duty (FED) collected by the Company from subscribers for the years 1998–99
and 1999–2000 the Rawalpindi Collectorate of Federal Excise Department raised a demand for excise duty along with
additional duties and penalties amounting to Rs 2,043,268 thousand. The matter was taken up by the Company with
the Federal Board of Revenue (FBR), Government of Pakistan for resolution. A committee was formed comprising
representatives from the Company and FBR. As a result of the negotiations, the Company deposited an amount of Rs
466,176 thousand on account of FED.

It was agreed that the Company would retain the right to contest the additional duties and penalties at all appellate
forums and, in the event of a favourable decision, the amount would be refunded to the Company by Collectorate of
Federal Excise. The Company has filed an appeal to contest the additional duties and penalties levied by the Collectorate.
During the year ended June 30, 2008 appeals amounting to Rs 1,468,806 thousand had been decided by the Custom,
Federal Excise and Sales Tax Appellate Tribunal in favour of PTCL, subject to submission of proof. Pending the final
outcome, no provision has been made in these financial statements for the above demand, since the management and
the Company’s lawyer are of the view that the outcome of the appeal is expected to be favourable.

16.6 In respect of tax years 2006 and 2007, the Additional Commissioner of Income Tax (ACIT) inter alia, amended the
Company’s income tax assessment on the grounds, that the Company’s claim of a concessional rate of tax at 1%
of revenue received from international customers, (provided for through Clause 3 of Part II of Second Schedule to
the Income Tax Ordinance, 2001) is not in accordance with such legal provisions, as underlying telecommunication
services have not been rendered outside Pakistan, and as a result raised a demand of Rs 1,659,000 thousand. The
Commissioner of Income Tax (CIT Appeals) and Income Tax Appellate Tribunal (ITAT) have endorsed the departmental
view and presently Company’s reference against the judgment of ITAT, in this respect, is pending before the Rawalpindi
Bench of the Honourable Lahore High Court. The management and the Company’s lawyer consider that the litigation
would eventually be settled in the Company’s favour.

16.7 The tax authorities selected tax year 2007 for audit purposes and created additional tax demand of Rs 2,345,628
thousand by disallowing certain expenses citing non–deduction of respective withholding tax as the prime reason. The
Commissioner Income Tax (Appeals) withheld the decision of the taxation officer and the ensuing appeal filed by the
Company is pending before the Income Tax Appellate Tribunal (ITAT). Further, the Company has also challenged the
selection of tax year 2007 for audit by the tax authorities before the Honorable Islamabad High Court (not functional at
present). No provision has been made in these financial statements pending outcome of the appeals which is expected
to be in favour of the Company.

16.8 Based on an audit of Federal Excise Duty (FED) returns submitted for the period from July 2004 to June 2009, the
Deputy Commissioner of Inland Revenue (DCIR) raised a demand of Rs 1,018,568 thousand on the premise that the
Company has claimed total input tax without apportioning the same between allowable and exempt supplies and
the exempt supplies were also not declared in these returns. The Company is in appeal against the said order before
Commissioner Inland Revenue – Appeals (CIR Appeals) and has also challenged the same through a writ petition filed
before Rawalpindi bench of the Honourable Lahore High Court.

No provision on this account has been made in these financial statements as the management and the Company’s tax
advisor consider that based on the underlying legal and factual position, the litigation would eventually settle in the
Company’s favour.
110 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

16.9 For tax year 2008, the Taxation Officer (TO) raised a demand of Rs 4,559,208 thousand on the plea that the Company
has erroneously applied average rate of tax while deducting withholding tax from payments made to employees under
the Voluntary Separation Scheme (VSS) as the required options before concerned commissioners of income tax were
not filed by such employees. Commissioner Income Tax (Appeals) upheld the decision of TO and disposing of the
ensuing second appeal, the Income Tax Appellate Tribunal (ITAT) remanded the case back to the TO for verification of
filing of options before concerned commissioners in the light of related law. The Company has also filed a reference
application with the Rawalpindi Bench of the Honorable Lahore High Court which is pending.

The management and the Company’s tax advisor are of the view that the eventual outcome of the case is expected to be
in favour of the Company and, as such, no provision has been made in the financial statements on this account.

2010 2009
(Rupees in thousand)

16.10 Bank guarantees and bid bonds issued in favour of:


Universal Service Fund (USF) against government grants 3,087,311 2,030,337
Others 314,254 5,000

3,401,565 2,035,337

Subsidiary Company – PTML

16.11 Letter of guarantee issued to PTA in


compliance with license terms 60,600 60,600


16.12 Letter of guarantees issued to Custom Authorities – 46,859

16.13 The company is in appeal against various claims made by the Income Tax and Sales Tax authorities before the
Commissioner of Income Tax (Appeals), Income Tax Appellate Tribunal and Sales Tax Appellate Tribunal, AJK. However,
no provision has been made there against in the financial statements, as these cases are pending adjudication before
the authorities, and the management believes that the company has a prima facie valid claim.

Note 2010 2009


(Rupees in thousand)

16.14 Commitments – Group


a) Letter of credit for purchase of stock 437,727 63,111

b) Commitments for capital expenditure


for network equipment 18,746,346 24,907,069
for others 221,093 348,536

18,967,439 25,255,605

17. Property, plant and equipment


Operating assets 17.1 134,123,749 131,909,917
Capital work–in–progress 17.4 17,959,087 13,297,795

152,082,836 145,207,712
Annual Report 2010 | 111

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

17.1 Operating assets

Land Buildings on Lines Apparatus, plant Office Furniture Computer & elec– Submarine
Freehold Leasehold Freehold land Leasehold land and wires and equipment equipment and fittings Vehicles trical equipment cables Total
(Rupees in thousand)

As at July 01, 2008


Cost 1,643,950 628,080 9,838,254 1,009,184 102,895,985 171,287,288 1,008,318 468,515 1,827,196 1,081,507 5,715,407 297,403,684
Accumulated depreciation – (130,646) (2,701,091) (351,389) (71,323,741) (91,523,688) (518,677) (302,561) (1,455,708) (447,849) (2,086,315) (170,841,665)
Net book value 1,643,950 497,434 7,137,163 657,795 31,572,244 79,763,600 489,641 165,954 371,488 633,658 3,629,092 126,562,019

Year ended June 30, 2009


Opening net book value 1,643,950 497,434 7,137,163 657,795 31,572,244 79,763,600 489,641 165,954 371,488 633,658 3,629,092 126,562,019
Additions 16,535 175,669 210,065 – 1,677,423 21,355,864 183,575 17,393 197,230 640,113 – 24,473,867
Disposals
Cost – (587) – – – (105,537) (1,968) (5,076) (423,814) (1,253) – (538,235)
Accumulated depreciation – 439 – – – 4,426 1,186 4,919 407,328 644 – 418,942
– (148) – – – (101,111) (782) (157) (16,486) (609) – (119,293)
Depreciation charge for the year – (134,186) (247,328) (25,230) (4,630,990) (12,847,134) (103,480) (27,175) (162,162) (406,928) (422,063) (19,006,676)
Net book value 1,660,485 538,769 7,099,900 632,565 28,618,677 88,171,219 568,954 156,015 390,070 866,234 3,207,029 131,909,917

As at July 01, 2009


Cost 1,660,485 803,162 10,048,319 1,009,184 104,573,408 192,537,615 1,189,925 480,832 1,600,612 1,720,367 5,715,407 321,339,316
Accumulated depreciation – (264,393) (2,948,419) (376,619) (75,954,731) (104,366,396) (620,971) (324,817) (1,210,542) (854,133) (2,508,378) (189,429,399)
Net book value 1,660,485 538,769 7,099,900 632,565 28,618,677 88,171,219 568,954 156,015 390,070 866,234 3,207,029 131,909,917

Year ended June 30, 2010


Opening net book value 1,660,485 538,769 7,099,900 632,565 28,618,677 88,171,219 568,954 156,015 390,070 866,234 3,207,029 131,909,917
Assets of subsidiary acquired
Cost – – – – – 64,390 2,404 3,587 – 4,014 – 74,395
Accumulated depreciation – – – – – (38,381) (607) (1,145) – (2,356) – (42,489)
– – – – – 26,009 1,797 2,442 – 1,658 – 31,906
Additions 683 124,495 175,010 – 1,859,648 27,410,469 73,848 10,127 57,986 980,755 24,548 30,717,569
Disposals
Cost – (18,587) (502) – (144,353) (15,930,696) (11,924) (7,546) (62,174) (144,628) – (16,320,410)
Accumulated depreciation – 5,713 328 – 144,353 8,647,595 11,503 7,485 53,431 76,609 – 8,947,017
– (12,874) (174) – – (7,283,101) (421) (61) (8,743) (68,019) – (7,373,393)
Depreciation charge for the year – (151,890) (251,659) (25,225) (4,355,835) (15,256,596) (123,050) (27,312) (146,638) (441,499) (382,546) (21,162,250)
Net book value 1,661,168 498,500 7,023,077 607,340 26,122,490 93,068,000 521,128 141,211 292,675 1,339,129 2,849,031 134,123,749

As at June 30, 2010
Cost 1,661,168 909,070 10,222,827 1,009,184 106,288,703 204,081,778 1,254,253 487,000 1,596,424 2,560,508 5,739,955 335,810,870
Accumulated depreciation – (410,570) (3,199,750) (401,844) (80,166,213) (111,013,778) (733,125) (345,789) (1,303,749) (1,221,379) (2,890,924) (201,687,121)
Net book Value 1,661,168 498,500 7,023,077 607,340 26,122,490 93,068,000 521,128 141,211 292,675 1,339,129 2,849,031 134,123,749

Annual rate of depreciation (%) 1 to 10 2.5 2.5 7 10 to 30 10 to 30 10 20 20 to 33 6.67 to 8.33

As explained in note 1.1, the property and rights in the above assets at January 01, 1996 were transferred to the holding
Company from Pakistan Telecommunication Corporation, under the Pakistan Telecommunication (Reorganization) Act, 1996.
However, the title to freehold land, was not formally transferred in the name of the holding Company in the land revenue
records. The holding Company initiated the process of transfer of title of land in its name in the previous years, which is still
ongoing and shall be completed in due course of time.

17.2 Apparatus, plant and equipment include borrowing costs aggregating to Rs 378,248 thousand (2009: Rs 362,019
thousand) capitalized during the year at the average capitalization rate of 1.79% (2009: 1.28%) per annum.
112 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

17.3 The depreciation charge for the year has been allocated as follows:
Cost of services 32 20,279,048 18,165,584
Administrative and general expenses 33 822,126 778,263
Selling and marketing expenses 34 61,076 62,829
21,162,250 19,006,676

17.4 Details of property, plant and equipment disposals are as follows:


Description Accumulated Net Book Sale
Cost Depreciation Value Proceeds Mode of Disposal Particulars of Buyer
(Rupees in thousand)

Computers and 54,886 16,993 37,892 37,892 Insurance NA


accessories 22,617 – 22,617 22,617 Insurance NA
1,436 997 439 439 Insurance NA
112 53 59 59 Insurance NA
112 56 56 56 Insurance NA
92 10 82 82 Insurance NA
86 10 76 76 Insurance NA
86 17 69 69 Insurance NA
86 24 62 62 Insurance NA
85 17 68 68 Insurance NA
85 17 68 68 Insurance NA
Electrical equipment 7,065 2,587 4,478 4,478 Insurance NA
Leasehold improvements 8,684 3,257 5,428 5,428 Insurance NA
1,448 715 733 150 Sale Sania Shahid/
Sana Kamran, Islamabad
1,545 515 1,030 1,030 Insurance NA
Motor vehicles 3,017 1,207 1,810 1,810 Insurance NA
2,321 1,315 1,006 1,006 Insurance NA
1,405 187 1,218 1,218 Insurance NA
1,140 323 817 817 Insurance NA
794 794 – 198 Sale to Employee Farid Alvi, Islamabad
739 739 – 185 Sale Tahir Hussain, Islamabad
674 674 – – Insurance NA
579 328 251 251 Insurance NA
147 24 122 122 Claim Pasban Security, Islamabad
Network and allied
systems 14,550,148 7,288,449 7,261,698 7,263,813 Exchange of assets Huawei Technologies Pakistan
(Pvt) Limited,
Pakistan and Huawei Technologies
Company Limited, Singapore
28,854 19,018 9,836 9,836 Insurance NA
6,465 3,042 3,423 3,423 Insurance NA
1,680 686 994 994 Insurance NA
1,688 689 999 999 Insurance NA
810 304 506 506 Insurance NA
810 304 506 506 Insurance NA
704 422 281 281 Insurance NA
568 507 62 62 Insurance NA
568 507 62 62 Insurance NA
512 192 320 320 Insurance NA
490 176 314 314 Insurance NA
271 154 117 117 Insurance NA
229 173 55 55 Insurance NA
229 173 55 55 Insurance NA
253 192 61 61 Insurance NA
253 192 61 61 Insurance NA
216 122 93 93 Insurance NA
155 52 103 103 Insurance NA
66 3 63 63 Claim Pasban Security, Islamabad
64 11 54 54 Claim Pasban Security, Islamabad
14,704,274 7,346,227 7,358,044 7,359,959
Annual Report 2010 | 113

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

17.5 Capital work–in–progress


Buildings 471,303 118,413
Lines and wires 5,918,700 1,589,605
Apparatus, plant and equipment 8,253,267 6,933,793
Others 489,367 179,288
Advances to suppliers 17.5.2 2,826,450 4,476,696

17,959,087 13,297,795

Capital work–in–progress (CWIP) includes an amount of Rs 337,985 thousand (2009: Rs 443,426 thousand) in respect
of overheads relating to development regions.

2010 2009
(Rupees in thousand)

17.5.1 Movement during the year


Balance as at July 01 13,297,795 12,106,394
Additions during the year 35,773,723 25,858,141
Transfers during the year (31,114,404) (24,666,740)
CWIP of subsidiary acquired 1,973 –

Balance as at June 30 17,959,087 13,297,795



17.5.2 Advances to suppliers include balances with the following related parties:

Telecom Foundation 61,659 147,206
Emirates Telecommunication Corporation – 1,685,532

61,659 1,832,738

18. Intangible assets
Goodwill 26,424 –
Other intangible assets 18.1 3,690,557 3,865,149

3,716,981 3,865,149

18.1 Other intangible assets

Frequency
Licenses Software vacation charges Total
(Rupees in thousand)

As at July 01, 2008


Cost 4,588,988 – 342,000 4,930,988
Accumulated amortization (967,331) – (209,000) (1,176,331)

Net book value 3,621,657 – 133,000 3,754,657

Year ended June 30, 2009


Opening net book value 3,621,657 – 133,000 3,754,657
Additions at cost – 397,979 – 397,979
Amortization for the year (234,730) (29,957) (22,800) (287,487)

Closing net book value 3,386,927 368,022 110,200 3,865,149



114 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Frequency
Licenses Software vacation charges Total
(Rupees in thousand)

As at July 01, 2009


Cost 4,588,988 397,979 342,000 5,328,967
Accumulated amortization (1,202,061) (29,957) (231,800) (1,463,818)

Net book value 3,386,927 368,022 110,200 3,865,149



Year ended June 30, 2010
Opening net book value 3,386,927 368,022 110,200 3,865,149
Additions at cost – 316,645 – 316,645
Amortization for the year (234,942) (233,425) (22,870) (491,237)

Closing net book value 3,151,985 451,242 87,330 3,690,557



As at June 30, 2010
Cost 4,588,988 714,624 342,000 5,645,612
Accumulated amortization (1,437,003) (263,382) (254,670) (1,955,055)

Net book value 3,151,985 451,242 87,330 3,690,557

Note 2010 2009


(Rupees in thousand)

18.2 Breakup of net book value as at June 30 is as follows:


Licenses – PTCL
Telecom 18.3 104,722 114,696
WLL spectrum 18.3 2,550,695 2,729,691
WLL and LDI License 18.4 98,340 103,806
IPTV 18.5 2,475 4,455
Licenses – PTML 18.5 395,753 434,279

3,151,985 3,386,927

Software – PTCL
Bill printing software 18.7 6,015 7,655
Billing and automation of broadband 18.7 36,085 45,297
Enterprise Resource Planning
(ERP) SAP system 18.8 280,699 315,070
Software – PTML 18.9 128,443 –

451,242 368,022
Frequency vacation charges 18.10 87,330 110,200

3,690,557 3,865,149

18.3 The Pakistan Telecommunication Authority (PTA) has issued a license to the holding Company to provide
telecommunication services in Pakistan for a period of 25 years commencing January 01, 1996 for an agreed license
fee of Rs 249,344 thousand. In the year ended June 30, 2005, PTA modified the previously issued license to provide
telecommunication services to include spectrum license at an agreed license fee of Rs 4,278,639 thousand. This
license allowed the holding Company to provide the wireless local loop services in Pakistan over a period of 20 years
commencing October 2004. The cost of the license is being amortized on straight–line basis over the period of the
license.

Annual Report 2010 | 115

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

18.4 PTA has issued a license under section 5 of the Azad Jammu and Kashmir Council Adaptation of Pakistan
Telecommunication (Re–organization) Act, 1996, Northern Areas Telecommunication (Re–organization) Act, 2005
and Northern Areas Telecommunication (Re–organization) (Adaptation and Enforcement) Order, 2006 to the holding
Company to establish, maintain and operate a telecommunication system in Azad Jammu and Kashmir and Gilgit
Baltistan for a period of 20 years commencing May 28, 2008 for an agreed license fee of Rs. 109,270 thousand. The
cost of the license is being amortized on straight–line basis over the period of the license.

18.5 PTCL acquired the IPTV license from PEMRA on October 01, 2006 for the agreed price of Rs 9,900 thousand. The
cost of license is being amortized on straight–line basis over the period of 5 years.

18.6 PTA has issued two licenses to the subsidiary company to establish, maintain and operate cellular services in Pakistan
and AJK for a period of 15 years commencing May 1999 and June 2006 respectively.

18.7 The cost of the software is being amortized on a straight–line basis over a period of 5 years.

18.8 This represents cost of the SAP – Enterprise Resource Planning (ERP) system with a useful life of 10 years.

18.9 Software comprise machine independent IT software purchased as a separate asset. Useful life of software is 3
years.

18.10 Vacancy charges comprise the amount paid in year 2000 to Special Communication Organization on initial vacation of
their equipment and releasing the spectrum in favour of PTML. It has a useful life of 15 years.

18.11 The amortization charge for the year has been allocated as follows:

Note 2010 2009
(Rupees in thousand)

Cost of services 32 303,035 287,487


Administrative and general expenses 33 188,202 –

491,237 287,487

19. Long term investments


Investments in related parties 19.1 25,010 24,195
Other investments 19.2 83,900 83,900

108,910 108,095

19.1 Investment in related parties


Associate – unquoted
TF Pipes Limited
1,658,520 (2009: 1,658,520)
ordinary shares of Rs 10 each
Ordinary shares held 40% (2009: 40%)
Cost 23,539 23,539
Post acquisition profits 1,471 656

25,010 24,195

116 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

19.1.1 The Group’s share in the net assets of the associate – TF Pipes Limited is:

Note 2010 2009
(Rupees in thousand)

Total assets 95,006 91,840

Total liabilities 49,863 48,735

Revenue 145,146 148,254

Expenses 143,108 149,014

Profit / (loss) 2,038 (760)



19.2 Other investments – at cost
Available for sale – Unquoted
Thuraya Satellite Company
3,670,000 (2009: 3,670,000) ordinary shares of 1 Dirham each 63,900 63,900

Alcatel – Lucent Pakistan Limited
2,000,000 (2009: 2,000,000) ordinary shares of Rs 10 each 20,000 20,000

New ICO Global Communications (Holdings) Limited
218,207 (2009: 218,207) ordinary
shares of USD 0.01 per share
(net of impairment loss of Rs 104,708 thousand;
2009: Rs 104,708 thousand) – –

World Tel Assembly of Governors
Participation fund investment of USD 100,000
(2009: USD 100,000)
(net of impairment loss of Rs 6,390 thousand;
2009: Rs 6,390 thousand) – –

83,900 83,900

20. Long term loans


Secured – considered good
Loans to employees 20.1 509,254 455,599
Current portion shown under current assets 24 (172,244) (123,421)

337,010 332,178
Others 200 200

337,210 332,378

20.1 These loans and advances by PTCL are for house building and purchase of motor cars, motor cycles and bicycles.
Loans to gazetted employees of the Company carry interest at the rate of 15% per annum (2009: 12.5% per annum),
whereas, loans to other employees are interest free. The loans are recoverable in monthly installments spread over a
period of 5 to 10 years. These loans are secured against future pension payments of employees.

This balance also includes Rs 14,821 thousand (2009: Rs 35,670 thousand) receivable from employees of the PTCL
against sale of vehicles, recoverable in monthly installments spread over a period of 1 to 2 years.

Annual Report 2010 | 117

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

20.2 Reconciliation of loans

As at July 01, 2009 Disbursements Repayments As at June 30, 2010


(Rupees in thousand)

Executives 12,532 23 3,010 9,545
Other employees 443,067 194,244 137,602 499,709

455,599 194,267 140,612 509,254



As at July 01, 2008 Disbursements Repayments As at June 30, 2009
(Rupees in thousand)

Executives 15,641 – 3,109 12,532
Other employees 508,915 – 65,848 443,067

524,556 – 68,957 455,599


Note 2010 2009


(Rupees in thousand)

21. Stores, spares and loose tools


Stores, spares and loose tools 21.1 4,704,186 5,851,582
Provision for obsolescence 21.2 (628,323) (649,591)

4,075,863 5,201,991

21.1 Stores, spares and loose tools include items which may result in property, plant and equipment but are not
distinguishable.

Note 2010 2009


(Rupees in thousand)

21.2 Provision for obsolescence


Balance as at July 01 649,591 551,455
Provision during the year 33 102,761 172,276

752,352 723,731
Write off against provision (124,029) (74,140)

Balance as at June 30 628,323 649,591

22. Stock in trade


PTML
SIM cards 181,970 170,624
Scratch cards 17,381 39,116
Mobile phones 185,848 255,281
Stock in transit – 5,652

385,199 470,673



118 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

23. Trade debts


PTCL – unsecured
Domestic
Considered good 6,774,197 6,873,129
Considered doubtful 17,612,764 18,110,656

24,386,961 24,983,785

International
Considered good 23.1 2,935,276 3,194,576
Considered doubtful 953,959 885,740

3,889,235 4,080,316

PTML
Considered good – secured 23.2 294,270 195,948
Considered good – unsecured 365,594 612,097
Considered doubtful – unsecured 233,715 193,200

893,579 1,001,245

MAXCOM – unsecured
Considered good 15,897 –
Considered doubtful 5,744 –

21,641 –

29,191,416 30,065,346

Provision for doubtful debts 23.3 (18,806,183) (19,189,596)

10,385,233 10,875,750

23.1 These include amounts due from the following related parties:
Etisalat – Afghanistan 21,685 100,502
Etisalat – UAE 433,405 770,594
Mobily – Saudi Arabia 312,070 528,119

767,160 1,399,215

These amounts are interest free and accrued in the normal course of business.

23.2 These are secured against customer deposits, aggregating to Rs 351,928 thousand (2009: Rs 338,166 thousand).
This also include unbilled revenue related to postpaid subscribers, aggregating to Rs 163,315 thousand (2009:
Rs 153,910 thousand).

Note 2010 2009


(Rupees in thousand)

23.3 Provision for doubtful debts


Balance as at July 01 19,189,596 17,350,471
Provision for the year 33 1,925,726 2,956,193
Provision related to acquisition of a subsidiary 5,744 –

21,121,066 20,306,664
Trade debts written off against provision (2,314,883) (1,117,068)

Balance as at June 30 18,806,183 19,189,596



Annual Report 2010 | 119

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

24. Loans and advances


Loans – considered good
Short term loans 24.1 9,964 9,964
Current portion of long term loans to employees 20 172,244 123,421

Advances – considered good
Advances to employees 24.2 27,933 20,280
Advances to suppliers and contractors 24.3 508,070 809,753

718,211 963,418

24.1 This represents loan to Pakistan MNP Database (Guarantee) Limited for working capital purposes, carrying interest @
13% (2009: 13%) per annum on prior disbursements and 17% per annum on disbursements made during the current
year.

24.2 These include advances to Executives, amounting to Rs 19,569 thousand (2009: Rs 5,541 thousand).

24.3 These include advances of Rs 6,841 thousand (2009: Rs 6,841 thousand) given to TF Pipes Limited, a related party.

2010 2009
(Rupees in thousand)

25. Accrued interest income


Accrued profit on bank placements 396,877 795,435
Interest receivable on loans / advances to executives 59,646 –

456,523 795,435

26. Recoverable from tax authorities
Income tax 6,646,547 59,095
Federal excise 466,176 466,176
Sales tax 635,234 593,432

7,747,957 1,118,703

27. Receivable from Government of Pakistan


This represents the balance amount receivable from Government of Pakistan on account of its share in the voluntary
separation scheme offered to the holding Company’s employees during 2008.
120 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

28. Other receivables


Considered good
Due from related parties:
Pakistan Telecommunication Employees Trust 86,708 69,009
PTCL employees’ GPF Trust 286,757 147,767
Security deposits 58,471 53,630
Site rentals 702,872 604,139
Maintenance 272,426 127,173
Margin against letter of credit 160,123 97,663
Other receivables from:
Vendors 184,902 101,172
Others 572,643 632,601

2,324,902 1,833,154

Considered doubtful – Others 185,239 185,239
Provision for doubtful receivables 28.1 (185,239) (185,239)

– –

2,324,902 1,833,154

28.1 Provision for doubtful receivables


Balance as at July 01 185,239 26,559
Provision for the year 33 – 158,680

Balance as at June 30 185,239 185,239



29. Short term investments
Term deposits – at amortized cost
maturity upto 3 months 13,238,949 19,795,904
maturity between 3 and 6 months – 1,221,886

29.1 13,238,949 21,017,790


Available–for–sale investment
Units of mutual funds – at market value 29.2 254,916 –

13,493,865 21,017,790

29.1 Term deposits
Term Maturity Profit rate % 2010 2009
(months) Upto per annum (Rupees in thousand)

Term deposits with:


National Bank of Pakistan 3 30–Jul–10 12.25 2,687,973 11,893,245
Bank Alfalah Limited 6 01–Sep–10 12.35 3,551,458 1,000,000
The Bank of Punjab 3 30–Sep–10 12.50 2,491,873 1,066,302
NIB Bank Limited 3 30–Sep–10 12.60 4,507,645 1,500,000
Allied Bank of Pakistan – 2,558,243
Habib Metropolitan Bank limited – 1,000,000
Askari Bank Limited – 2,000,000

13,238,949 21,017,790

Annual Report 2010 | 121

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

29.2 Units of mutual funds


Units of open – end mutual funds:
Pakistan Cash Management Fund
2,013,768 (2009: Nil) units 102,059 –
NAFA Government Securities Liquid Fund
5,011,856 (2009: Nil) units 51,493 –
BMA Empress Cash Fund
2,416,129 (2009: Nil) units 25,691 –
Faysal Saving Growth Fund
489,285 (2009: Nil) units 50,455 –
Askari Sovereign Cash Fund
232,801 (2009: Nil) units 25,218 –

254,916 –

30. Cash and bank balances


Balances with banks
Deposit accounts 30.1 6,346,454 18,104,147
Saving accounts 30.2 2,048,195 1,456,536
Current accounts
Local currency 1,358,156 –
Foreign currency (USD 3,430 thousand (2009:
USD 10,751 thousand)) 293,686 1,602,273

10,046,491 21,162,956
Cash in hand 26,069 22,610

10,072,560 21,185,566

30.1 The balances in deposit accounts bear mark–up which ranges from 5 % to 13.8 % per annum (2009: 5 % to 19.7 %
per annum).

30.2 This includes foreign currency balances of USD 192 thousand (2009: USD 108 thousand) and Euro 39 thousand
(2009: Euro 22 thousand). The effective interest / mark–up rate on saving accounts ranged from 4% to 12.65% (2009:
5% to 17%) per annum.

30.3 As at June 30, 2010, PTML had undrawn running finance facilities aggregating to Rs 1,960,000 thousand (2009: Rs
1,960,000 thousand).
Note 2010 2009
(Rupees in thousand)

31. Revenue
Domestic 31.1 91,958,760 86,613,483
International 31.2 6,947,005 6,106,898

98,905,765 92,720,381

31.1 Revenue is exclusive of Federal Excise Duty amounting to Rs 14,593,713 thousand (2009: Rs 15,501,191
thousand).

31.2 International revenue represents revenue from foreign network operators, for calls that originate outside Pakistan, and
has been shown net of interconnect cost, relating to the other operators and Access Promotion Charges aggregating to
Rs 11,261,154 thousand (2009: Rs 10,886,794 thousand).
122 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009


(Rupees in thousand)

32. Cost of services


Salaries, allowances and other benefits 32.1 9,188,049 8,330,902
Call centre charges 199,061 187,165
Interconnect cost 10,797,066 10,911,246
Foreign operators cost and satellite charges 7,293,971 6,605,202
Network operating cost 3,309,326 1,380,411
Fuel and power 3,380,357 3,109,948
Communication 9,522 7,421
Cost of SIMs 625,376 364,850
Mobile number portability fee 319,790 103,025
Cost of prepaid cards 134,702 180,187
Discount on prepaid cards 1,749,481 1,280,186
Stores and spares consumed 1,014,250 1,160,754
Rent, rates and taxes 636,335 502,709
Repairs and maintenance 1,802,766 1,475,724
Printing and stationery 281,604 255,198
Travelling and conveyance 12,656 16,308
Depreciation of property, plant and equipment 17.2 20,279,048 18,165,584
Amortization of intangible assets 18.11 303,035 287,487
Annual license fee to PTA 873,163 827,651
Others 3,216 2,445

62,212,774 55,154,403

32.1 This includes Rs 1,617,133 thousand (2009: 1,162,633 thousand) in respect of employees’ retirement benefits.

Note 2010 2009


(Rupees in thousand)

33. Administrative and general expenses


Salaries, allowances and other benefits 33.1 1,953,737 1,635,601
Call centre charges 29,859 28,075
Fuel and power 254,427 234,074
Rent, rates and taxes 104,340 442,421
Repairs and maintenance 443,261 407,121
Printing and stationery 4,345 3,940
Travelling and conveyance 273,492 215,413
Technical services fee 33.2 3,412,554 3,194,301
Legal and professional services 33.3 207,064 552,750
Depreciation of property, plant and equipment 17.2 822,126 778,263
Amortization of intangible assets 18.11 188,202 –
Research and development 33.4 321,921 471,239
Provisions for:
obsolete stores 21.2 102,761 172,276
doubtful debts 23.3 and 33.5 1,925,726 2,956,193
doubtful receivables 28.1 – 158,680
Donations 33.6 280 37,069
Receivables written off – 142,195
Other expenses 2,573,537 2,059,343

12,617,632 13,488,954

33.1 This includes Rs 251,121 thousand (2009: Rs 156,284 thousand) in respect of employees’ retirement benefits.

Annual Report 2010 | 123

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

33.2 This represents an amount payable to the Emirates Telecommunication Corporation (Etisalat), a related party, under a
technical service agreement between the Group and Etisalat for a period of five years commencing October 1, 2006,
at the rate of 3.5% of the Group’s consolidated annual revenue.

33. 3 Auditors’ remuneration
The expenses for the legal and professional services include the following in respect of auditors’ services for:

2010 2009
(Rupees in thousand)

A. F. Ferguson & Co.


Statutory audit including half yearly review 4,500 4,500
Tax services 3,026 –
Others 250 250

Ernst & Young Ford Rhodes Sidat Hyder
Statutory audit including half yearly review 5,350 5,350
Others 925 500

14,051 10,600

33.4 This represents the Group’s contribution to the Information Communication Technology (ICT) Research and Development
Fund at the rate of 0.5% (1% till November 17, 2009) of its gross revenue less inter operator payments and payments
toward research and development activities in Pakistan, in accordance with the terms and conditions of its license to
provide telecommunication services.

33.5 Provision against doubtful debts is net of security deposits written back, amounting to Rs 222,751 thousand (2009:
Rs Nil), against receivable balances of customers in default.

33.6 There were no donations during the year in which the directors or their spouses had any interest.

Note 2010 2009
(Rupees in thousand)

34. Selling and marketing expenses


Salaries, allowances and other benefits 34.1 1,425,015 1,248,706
Call centre charges 19,906 18,717
Sales commission 1,614,841 1,491,296
Fuel and power 75,116 69,110
Printing and stationery 2,901 2,631
Travelling and conveyance 12,653 16,308
Cost of handsets 80,233 190,614
Advertisement and publicity 3,300,709 2,733,401
GoP activation tax 472,341 1,877,738
Depreciation of property, plant and equipment 17.2 61,076 62,829
Others 359,572 284,706

7,424,363 7,996,056

34.1 This includes Rs 206,077 thousand (2009: 139,796 thousand) in respect of employees’ retirement benefits.

124 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

2010 2009
(Rupees in thousand)

35. Other operating income


Income from financial assets:
Interest on loans 4,909 7,103
Dividend 22,000 –
Return on bank placements 4,018,189 4,202,766
Late payment surcharge from subscribers on over due bills 162,465 213,268
Gain on sale of units of open – end mutual funds 4,916 –

Income from non–financial assets:


Gain on disposal of items of property, plant and equipment 137,753 206,437
Others 926,779 594,081

5,277,011 5,223,655

36. Finance cost


Interest on:
Long term loans and other borrowings 955,472 1,039,317
Long term liability 638,446 274,873
Short term running finances 8,212 5,076
Bank and other charges 390,955 367,096
Foreign exchange loss – net 1,079,149 2,601,935

Imputed interest on payment for:


WLL license fee for the year 151,529 185,132
AJK license fee 66,407 –
Purchase of MAXCOM 3,326 –

221,262 185,132

3,293,496 4,473,429

37. Taxation
Group
Current 3,451,037 3,080,732
Deferred 3,437,465 2,735,525

6,888,502 5,816,257
Share of tax of an associate 439 337

6,888,941 5,816,594

37.1 Tax charge reconciliation


Numerical reconciliation between the average effective tax rate and the applicable tax rate is as follows:

2010 2009
(Percentage)

Applicable tax rate 35.00 35.00


Tax effect of amounts chargeable to tax at lower rates – (0.65)
Tax effect of amounts that are not deductible for
tax purposes and others 1.97 0.40

Average effective tax rate charged to statement of


comprehensive income 36.97 34.75

Annual Report 2010 | 125

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

2010 2009

38. Earnings per share – basic and diluted

Profit for the year Rupees in thousand 11,746,824 10,922,515

Weighted average number


of ordinary shares Numbers in thousand 5,100,000 5,100,000

Earnings per share Rupees 2.30 2.14



(Rupees in thousand)
39. Cash generated from operations

Profit before tax 18,635,765 16,739,109
Adjustments for non – cash charges and other items:
Depreciation and amortization 21,653,487 19,294,163
Provision for doubtful trade debts 1,925,726 2,956,188
Provision for doubtful receivables – 158,680
Provision for obsolete stores, spares and lose tools 102,761 172,276
Employees’ retirement benefits 2,009,958 1,455,438
VSS expense – 92,118
Bad debts written off – 142,195
Imputed interest 221,262 185,132
Interest on long term loans (4,909) (7,103)
Gain on sale of units of open ended mutual funds (4,916) –
Gain on disposal of property, plant and equipment (137,753) (206,437)
Return on bank placements (4,018,189) (4,202,766)
Share of profit from associate (1,254) –
Dividend income (22,000) –
Finance cost 1,478,316 1,604,417

41,838,254 38,383,410

Effect on cash flows due to working capital changes


(Increase) / decrease in current assets:
Stores, spares and loose tools 1,023,367 (700,439)
Stock in trade 85,474 –
Trade debts (1,424,356) (560,029)
Loans and advances 294,338 196,660
Recoverable from tax authorities (41,802) 324,158
Other receivables (491,288) 1,835,850

(554,267) 1,096,200
Increase in current liabilities:
Trade and other payables 1,676,081 4,612,821
Unearned income 478,871 350,032

2,154,952 4,962,853

43,438,939 44,442,463

126 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Note 2010 2009



(Rupees in thousand)

40. Cash and cash equivalents


Short term investments with maturity upto
three months 29 13,493,865 19,795,904
Cash and bank balances 30 10,072,560 21,185,566

23,566,425 40,981,470

41. Remuneration of Directors, Chief Executive and Executives


The aggregate amount charged in the financial statements for remuneration, including all benefits, to the Chairman,
Chief Executive and Executives of the Group is as follows:

Chairman Chief Executive Executives
2010 2009 2010 2009 2010 2009
(Rupees in thousand)

Managerial remuneration – – 78,074 59,128 1,092,355 948,681
Honorarium 300 300 – – 2,965 –
Bonus – – – – 79,220 51,885
Retirement benefits – – – – 245,387 175,594
Housing – – – – 406,078 341,835
Utilities – – – – 72,501 63,454

300 300 78,074 59,128 1,898,506 1,581,449

Number of persons 1 1 1 1 780 665



The Group also provides free medical and limited residential telephone facility to all its Executives including the
Chief Executive. The Chairman is entitled to free transport and limited residential telephone facility, whereas the
Directors are provided with limited telephone facility. Certain executives are also provided with Company maintained
cars.

The aggregate amount charged in the financial statements for the year as fees to 9 directors (2009: 9 directors) is Rs
11,682 thousand (2009: Rs. 4,236 thousand) for attending Board of Directors and sub–committee meetings.

42. Rates of exchange
Assets in foreign currencies have been translated into Pak Rupees at USD 1.1709 (2009: USD 1.2331) equal to Rs 100,
while liabilities in foreign currencies have been translated into Pak Rupees at USD 1.1682 (2009: USD 1.2300) equal to
Rs 100.

43. Financial risk management


43.1 Financial risk factors
The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, other price risk
and interest rate risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the
unpredictability of financial markets and seeks to minimize potential adverse effects on the financial performance.

Risk management is carried out by the Board of Directors (the Board). The Board has provided ‘Risk Management
Policy’ covering specific areas such as foreign exchange risk, interest rate risk, credit risk and investment of excess
liquidity. All treasury related transactions are carried out within the parameters of this policy.
Annual Report 2010 | 127

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

(a) Market risk

(i) Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because
of changes in foreign exchange rates. Currency risk arises mainly from future commercial transactions or
receivables and payables that exist due to transactions in foreign currencies.

The Group is exposed to currency risk arising from various currency exposures, primarily with respect to the
United States Dollar (USD), Australian Dollar (AUD), Euros and Swiss Franc (CHF). Currently, the Group’s
foreign exchange risk exposure is restricted to the amounts receivable from / payable to the foreign entities.
The Group’s exposure to currency risk is as follows:

2010 2009
(Rupees in thousand)

USD
Trade and other payables (3,687,435) (7,496,354)
Long term liabilities (10,676,940) (22,194,711)
Trade debts 4,042,311 4,197,014
Cash and bank balances 294,493 882,907

Net exposure (10,027,571) (24,611,144)

EURO
Trade and other payables (53,683) (19,621)
Trade debts 30,459 69,560
Cash and bank balances 4,131 2,477

Net exposure (19,093) 52,416

CHF
Trade and other payables (5,660) (5,385)

AUD
Loans and advances 1,850 1,673

The following significant exchange rates were applied during the year:

2010 2009

Rupees per USD


Average rate 83.92 79.92
Reporting date rate 85.60 81.30

Rupees per EURO
Average rate 116.45 103.59
Reporting date rate 104.62 114.54

Rupees per CHF
Average rate 79.07 64.98
Reporting date rate 79.10 75.26

Rupees per AUD
Average rate 74.00 53.97
Reporting date rate 72.96 65.98
128 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

If the functional currency, at reporting date, had fluctuated by 5% against the USD, EURO, CHF and AUD with
all other variables held constant, the impact on profit after taxation for the year would have been Rs 327,000
thousand (2009: Rs 798,000 thousand) respectively lower / higher, mainly as a result of exchange gains
/ losses on translation of foreign exchange denominated financial instruments. Currency risk sensitivity to
foreign exchange movements has been calculated on a symmetric basis.

(ii) Other price risk

Other price risk represents the risk that the fair value or future cash flows of a financial instrument will fluctuate
because of changes in market prices (other than those arising from interest rate risk or currency risk), whether
those changes are caused by factors specific to the individual financial instrument or its issuer, or factors
affecting all similar financial instruments traded in the market.

The Group is exposed to equity securities price risk because of the investments held by the Group in money
market mutual funds and classified on the statement of financial position as available for sale. To manage its
price risk arising from investments in mutual funds, the Group diversifies its portfolio.

The short term investments includes available for sale investments of Rs 254,916 thousand (2009: Rs Nil)
which were subject to price risk.

If redemption price on mutual funds, at the year end date, fluctuate by 5% higher / lower with all other
variables held constant, profit after taxation for the year would have been Rs 12,749 thousand (2009: Rs Nil)
higher / lower, mainly as a result of higher / lower redemption price on units of mutual funds.

(iii) Interest rate risk

Interest rate risk represents the risk that the fair value of future cash flows of a financial instrument will
fluctuate because of changes in market interest rates.

At the date of statement of financial position, the interest rate profile of the Group’s interest bearing financial
instruments is:


2010 2009
(Rupees in thousand)

Financial assets

Fixed rate instruments

Staff loans 509,254 455,599


Short term investments 13,238,949 21,017,790
Loan to Pakistan MNP Database (Guarantee) Limited 9,964 9,964
Bank balances – deposit accounts 1,550,000 7,800,000

Floating rate instruments

Bank balances – deposit accounts 4,796,454 10,304,147


Bank balances – saving accounts 2,048,195 1,456,536

22,152,816 41,044,036

Floating rate instruments
Long term loans 13,000,000 9,100,949


Annual Report 2010 | 129

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value. Therefore, a change in
interest rates at the date of statement of financial position would not affect the total comprehensive income of the
Group.

Cash flow sensitivity analysis for variable rate instruments

If interest rates on variable rate instruments of the Group, at the year end date, fluctuate by 1% higher / lower with
all other variables held constant, profit after taxation for the year would have been Rs 111,713 thousand (2009:
Rs 316,700 thousand) higher / lower, mainly as a result of higher / lower markup income on floating rate loans /
investments.

(b) Credit risk

Credit risk represents the risk that one party to a financial instrument will cause a financial loss for the other party by
failing to discharge an obligation. The maximum exposure to credit risk at the reporting date is as follows:

2010 2009
(Rupees in thousand)

Long term loans 337,210 332,378


Trade debts 10,385,233 10,875,750
Loans and advances 718,211 963,418
Accrued interest income 456,523 795,435
Receivable from Government of Pakistan 2,164,072 2,164,072
Other receivables 2,324,902 1,833,154
Short term investments 13,493,865 21,017,790
Cash and bank balances 10,072,560 21,185,566

39,952,576 59,167,563

The credit risk on liquid funds is limited because the counter parties are banks with reasonably high credit ratings. In
case of trade debts the Group believes that it is not exposed to a major concentration of credit risk as its exposure is
spread over a large number of counter parties and subscribers.
130 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

The credit quality of cash and bank balances and short term investments that are neither past due nor impaired can
be assessed by reference to external credit ratings (if available) or to historical information about counterparty default
rate:
Rating Rating
Short term Long term Agency 2010 2009
(Rupees in thousand)

Samba Bank Limited A1 A JCR–VIS 100,000 –


Meezan Bank Limited A1 AA JCR–VIS 13 –
National Bank of Pakistan A1+ AAA JCR–VIS 3,940,843 15,648,141
Bank Alfalah Limited A1+ AA PACRA 3,228,919 7,219,590
MCB Bank Limited A1+ AA+ PACRA 125,136 157,203
Standard Chartered Bank A1+ AAA PACRA 453,384 33,879
(Pakistan) Limited
Citibank A1+ AA S&P 1,110,883 203,904
Bank Al Habib Limited A1+ AA+ PACRA 318,504 1,447,823
Dubai Islamic Bank A2 A JCR–VIS 480,974 114,719
Hongkong and Shanghai
Banking Corporation Ltd. F1+ AA Fitch 67 1,068
Barclays Bank PLC A1+ AA– S&P 3,955 172,834
Arif Habib Bank Limited A2 A JCR–VIS 1,122,490 1,506,166
KASB Bank Limited A1 A PACRA – 21,838
Emirates Global
Islamic Bank Limited A2 A– PACRA 803 6,968
Soneri Bank Limited A1+ AA– PACRA 3,701 3,434
Silkbank Limited * A3 A– JCR–VIS 7,705 –
SME Bank Limited A3 BBB JCR–VIS 22,498 –
Habib Metropolitan
Bank Limited A1+ AA+ PACRA 38,425 1,000,000
The Bank of Punjab A1+ AA– PACRA 5,646,366 3,943,140
NIB Bank Limited A1+ AA– PACRA 5,033,791 1,508,690
Faysal Bank Limited * A1+ AA PACRA 240,630 9,244
Habib Bank Limited A1+ AA+ JCR–VIS 68,437 2,082,628
Royal Bank of Scotland * A1+ AA PACRA 42,814 1,818,864
Askari Bank Limited A1+ AA PACRA 302,183 2,088,748
Allied Bank Limited A1+ AA PACRA 154,345 2,570,069
United Bank Limited A1+ AA+ JCR–VIS 864,643 94,869
Mutual Fund – Arif Habib AM 2 + N/A PACRA 102,059 –
Mutual Fund – NAFA AM 2 – N/A PACRA 51,493 –
Mutual Fund – BMA AM 2 – N/A JCR–VIS 25,691 –
Mutual Fund – Faysal AM 2 – N/A JCR–VIS 50,455 –
Mutual Fund – Askari AM3 N/A PACRA 25,218 –

  23,566,425 41,653,819


Due to the Group’s long standing business relationships with these counter parties and after giving due consideration
to their strong financial standing, management does not expect non–performance by these counter parties on their
obligations to the Group. Accordingly, the credit risk is minimal.

* These banks have been placed on a watch list by the State Bank of Pakistan and the most recent rating of Royal Bank
of Scotland and Silkbank was carried out in September 2008 and June 2009 respectively.
Annual Report 2010 | 131

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

(c) Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial
liabilities.

The Group follows an effective cash management and planning policy to ensure availability of funds and to take
appropriate measures for new requirements.

The following are the contractual maturities of financial liabilities as at June 30, 2010:

Carrying Less than One to More than


amount one year five years five years
(Rupees in thousand)

Long term loans 13,000,000 – 12,500,000 500,000


Payable to PTA against license fee 2,105,135 1,935,288 139,756 30,091
Employees’ retirement benefits 15,676,877 – – 15,676,877
Long term security deposits 1,295,008 – 1,295,008 –
Long term liabilities 16,439,438 5,980,398 10,459,040 –
Trade and other payables 32,084,962 32,084,962 – –
Interest and mark–up accrued 284,273 284,273 – –
Dividend payable 3,375,631 3,375,631 – –

84,261,324 43,660,552 24,393,804 16,206,968



The following are the contractual maturities of financial liabilities as at June 30, 2009:

Carrying Less than One to More than
amount one year five years five years
(Rupees in thousand)

Long term loans 9,100,949 100,949 9,000,000 –
Payable to PTA against license fee 2,144,852 1,977,762 120,244 46,846
Employees’ retirement benefits 14,252,785 – – 14,252,785
Long term security deposits 1,478,764 – 1,478,764 –
Long term liabilities 33,407,348 19,476,149 13,931,199 –
Trade and other payables 31,918,337 31,918,337 – –
Interest and mark–up accrued 291,240 291,240 – –
Dividend payable 7,650,000 7,650,000 – –

100,244,275 61,414,437 24,530,207 14,299,631



132 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

43.2 Fair values of financial assets and liabilities


The carrying values of all financial assets and liabilities reflected in the financial statements approximate their fair
values. Fair value is determined on the basis of objective evidence at each reporting date.

Available for sale Loans and receivables Total


2010 2009 2010 2009 2010 2009
(Rupees in thousand)

43.3 Financial instruments by categories


Financial assets as per statement
of financial position

Long term investments 83,900 83,900 – – 83,900 83,900


Long term loans – – 337,210 332,378 337,210 332,378
Trade debts – – 10,385,233 10,875,750 10,385,233 10,875,750
Loans and advances – – 718,211 963,418 718,211 963,418
Accrued interest income – – 456,523 795,435 456,523 795,435
Receivable from Government of Pakistan – – 2,164,072 2,164,072 2,164,072 2,164,072
Other receivables – – 2,324,902 1,833,154 2,324,902 1,833,154
Short term investments 254,916 – 13,238,949 21,017,790 13,493,865 21,017,790
Cash and bank balances – – 10,072,560 21,185,566 10,072,560 21,185,566

338,816 83,900 39,697,660 59,167,563 40,036,476 59,251,463


Liabilities at fair value
through profit and loss Other financial liabilities Total
2010 2009 2010 2009 2010 2009
(Rupees in thousand)


Financial liabilities as per statement
of financial position

Long term loans – – 13,000,000 9,100,949 13,000,000 9,100,949


Payable to PTA against license fee – – 2,105,135 2,144,852 2,105,135 2,144,852
Employees’ retirement benefits – – 15,676,877 14,252,785 15,676,877 14,252,785
Long term security deposits – – 1,295,008 1,478,764 1,295,008 1,478,764
Long term liabilities – – 16,439,438 33,407,348 16,439,438 33,407,348
Trade and other payables – – 32,084,962 31,918,337 32,084,962 31,918,337
Interest and mark–up accrued – – 284,273 291,240 284,273 291,240
Dividend payable – – 3,375,631 7,650,000 3,375,631 7,650,000

– – 84,261,324 100,244,275 84,261,324 100,244,275

43.4 Capital risk management


The Board’s policy is to maintain an efficient capital base so as to maintain investor, creditor and market confidence
and to sustain the future development of its business. The Board of Directors monitors the return on capital employed,
which the Group defines as operating income divided by total capital employed. The Board of Directors also monitors
the level of dividends to ordinary shareholders.

The Group’s objectives when managing capital are:

(a)
to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and

Annual Report 2010 | 133

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

(b) to provide an adequate return to shareholders



The Group manages the capital structure in the context of economic conditions and the risk characteristics of the
underlying assets. In order to maintain or adjust the capital structure, the Group may, for example, adjust the amount
of dividends paid to shareholders, issue new shares, or sell assets to reduce the debt.

For working capital requirements and capital expenditure, the Group relies on internal cash generation and bank
borrowings.

44. Business combination


On March 01, 2010 the holding Company acquired 100% shares of Maskatiya Communications (Pvt) Limited
(MAXCOM). MAXCOM provides broadband services to customers in the cities of Karachi and Hyderabad. In terms of
agreement between the holding Company and previous shareholders of MAXCOM, the purchase consideration will be
paid to the previous shareholders on a revenue sharing basis commencing from March 2010 to August 2012. On basis
of estimates prepared by management, the holding Company has recognised the present value of the consideration
payable amounting to Rs 74,526 thousand as of the acquisition date of MAXCOM. The present value has been
discounted on weighted average cost of capital of the holding Company. The undiscounted purchase consideration
payable ranges between Rs 79,071 thousand to Rs 96,643 thousand.

Details of net assets acquired and goodwill are as follows:

(Rupees in thousand)

Assets
Property, plant and equipment 33,879
Long term deposits 7,354
Deferred taxation 9,191

Trade debts 16,597


Provision for doubtful debts (5,744)

10,853
Loans and advances 308
Receivable from tax authorities 1,932
Other receivables 460
Cash and bank balances 11,120

Less: Liabilities
Trade and other payables (26,995)

Net assets acquired 48,102


Goodwill 26,424

Total purchase consideration payable 74,526

44.1 Purchase consideration settled in cash during the period (7,130)


Cash and cash equivalents in subsidiary acquired 11,120

Cash inflow on acquisition 3,990



134 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

44.2 The goodwill is attributable to the acquired customer base and economies of scale expected from combining the
operations of the Group and MAXCOM.

(Rupees in thousand)

Profit of subsidiary since acquisition 9,429

Revenue of the Group if acquisition had occurred


at the beginning of the year 99,485,217

Profit of the Group if acquisition had occurred


at the beginning of the year 11,729,717

45. Transactions with related parties


The Group’s related parties comprise of associated undertakings, employees’ retirement benefit plans and
key management personnel. Amounts due from / (to) related parties are shown under receivables and payables.
Remuneration of key management personnel is disclosed in note 41.

Associates
TF Pipes Limited
Etisalat International Pakistan
Etisalat – Afghanistan
Emirates Telecommunication Corporation
Mobily – Saudi Arabia
Thuraya Satellite Company

Employee benefit plans


Pakistan Telecommunication Employee Trust
PTCL Employees’ GPF Trust
Pak Telecom Mobile Limited – Employees’ Provident Fund
Pak Telecom Mobile Limited – Employees’ Gratuity Fund

Disclosure of transactions between the Group and related parties other than those which have been disclosed elsewhere
in these financial statements:

2010 2009
(Rupees in thousand)

Associates
Purchase of goods and services 1,763,280 2,393,250
Sale of goods and services 5,699,037 8,410,141
Advances against capital expenditure – 1,685,532

46. Operating segment Information


46.1 Management has determined the operating segments based on the information that is presented to the Group’s Board
of Directors for allocation of resources and assessment of performance. The Group is organised into two operating
segments i.e fixed line communications (Fixed line) and wireless communications (Wireless). The reportable operating
segments derive their revenue primarily from voice, data and other services.

46.2 The Group’s Board of Directors monitor the results of the above mentioned segments for the purpose of making
decisions about the resources to be allocated and for assessing performance based on total comprehensive income
for the year.
Annual Report 2010 | 135

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

46.3 The segment information for the reportable segments is as follows:


Fixed line Wireless Total
(Rupees in thousand)

Year ended June 30, 2010


Segment revenue 54,854,619 50,856,228 105,710,847
Inter – segment revenue (4,843,955) (1,961,127) (6,805,082)

Revenue from external customers 50,010,664 48,895,101 98,905,765

Segment results 8,740,244 3,006,580 11,746,824



Year ended June 30, 2009
Segment revenue 57,277,619 42,257,085 99,534,704
Inter – segment revenue (5,396,715) (1,417,608) (6,814,323)

Revenue from external customers 51,880,904 40,839,477 92,720,381



Segment results 8,908,444 2,014,071 10,922,515

Information on assets and liabilities of the segments is as follows:

Fixed line Wireless Total


(Rupees in thousand)

As at June 30, 2010


Segment assets 128,703,930 79,366,392 208,070,322

Segment liabilities 56,627,659 43,367,905 99,995,564



As at June 30, 2009
Segment assets 136,413,292 78,726,594 215,139,886

Segment liabilities 50,071,131 59,815,821 109,886,952



46.4 Other segment information is as follows:
Fixed line Wireless Total
(Rupees in thousand)

Year ended June 30, 2010


Depreciation 11,264,313 9,897,937 21,162,250
Amortization 45,223 446,014 491,237
Finance cost 387,111 2,906,385 3,293,496
Interest income 3,549,645 473,453 4,023,098
Income tax expense 4,443,419 2,081,356 6,524,775
Share of profit from associates 1,254 – 1,254

Year ended June 30, 2009
Depreciation 11,808,896 7,197,780 19,006,676
Amortization 29,957 257,530 287,487
Finance cost 881,269 3,592,160 4,473,429
Interest income 3,159,323 1,050,546 4,209,869
Income tax expense 4,723,966 1,092,628 5,816,594
Share of profit from associates 33 – 33
136 | Pakistan Telecommunication Group

Notes to and Forming Part of the Consolidated Financial Statements


For the year ended June 30, 2010

46.5 The Group’s customer base is diverse with no single customer accounting for more than 10% of net revenues.

46.6 The amount of revenue from external parties, total segment assets and segment liabilities is measured in a manner
consistent with that of the financial information reported to the Group’s Board of Directors.

46.7 Breakdown of the revenue from all services by category is as follows:



2010 2009
(Rupees in thousand)

Voice 84,558,457 84,563,232


Data 8,699,697 4,949,324
Other services 5,647,611 3,207,826

98,905,765 92,720,382

47. Corresponding figures


The following major corresponding figures have been reclassified for the purposes of better presentation:

From To (Rupees in thousand)

Operating assets Intangible assets 300,494


Cost of services Selling and marketing expenses 190,614


48. Date of authorization for issue
These financial statements were authorized for issue on August 26, 2010 by the Board of Directors of the holding
Company.

49. General
Figures have been rounded off to the nearest thousand rupees unless otherwise specified.

Chairman President & CEO


Annexes
138 | Pakistan Telecommunication Company Limited

Pattern of Shareholding
As at June 30, 2010

HAVING SHARES NUMBER OF NUMBER OF



SHAREHOLDERS SHARES HELD
FROM TO

1 100 25,861 2,564,729


101 500 9,731 3,016,706
501 1,000 3,221 2,841,993
1,001 5,000 3,400 9,042,063
5,001 10,000 780 6,385,674
10,001 15,000 266 3,415,276
15,001 20,000 176 3,308,169
20,001 25,000 114 2,705,111
25,001 30,000 86 2,491,400
30,001 35,000 46 1,547,047
35,001 40,000 47 1,822,414
40,001 45,000 22 945,906
45,001 50,000 72 3,569,400
50,001 55,000 17 889,402
55,001 60,000 21 1,239,275
60,001 65,000 15 939,599
65,001 70,000 9 619,975
70,001 75,000 19 1,412,200
75,001 80,000 11 864,300
80,001 85,000 3 245,466
85,001 90,000 14 1,241,689
90,001 95,000 5 468,600
95,001 100,000 46 4,595,500
100,001 105,000 7 719,778
105,001 110,000 4 437,300
110,001 115,000 6 672,407
115,001 120,000 2 237,000
120,001 125,000 8 991,000
125,001 130,000 1 129,500
130,001 135,000 2 270,000
135,001 140,000 6 833,000
140,001 145,000 1 142,000
145,001 150,000 13 1,941,200
150,001 155,000 4 608,400
155,001 160,000 5 793,668
160,001 165,000 3 488,850
165,001 170,000 3 506,600
170,001 175,000 6 1,044,975
175,001 180,000 4 717,000
180,001 185,000 4 732,268
185,001 190,000 3 566,300
190,001 195,000 1 193,000
195,001 200,000 13 2,600,000
200,001 205,000 3 606,550
205,001 210,000 2 420,000
210,001 215,000 1 215,000
215,001 220,000 1 218,600
220,001 225,000 2 450,000
225,001 230,000 4 912,832
230,001 235,000 1 234,953
235,001 240,000 3 711,500
240,001 245,000 1 245,000
245,001 250,000 4 999,986
250,001 255,000 3 762,000
255,001 260,000 1 256,540
265,001 270,000 1 267,790
270,001 275,000 3 824,000
285,001 290,000 2 575,769
295,001 300,000 2 600,000
Annual Report 2010 | 139

Pattern of Shareholding
As at June 30, 2010

HAVING SHARES NUMBER OF NUMBER OF



SHAREHOLDERS SHARES HELD
FROM TO

300,001 305,000 2 607,500


305,001 310,000 1 308,972
310,001 315,000 2 625,600
320,001 325,000 2 649,235
345,001 350,000 3 1,049,500
350,001 355,000 1 353,900
370,001 375,000 1 371,000
380,001 385,000 1 384,498
385,001 390,000 1 390,000
390,001 395,000 1 395,000
395,001 400,000 2 800,000
400,001 405,000 1 401,645
405,001 410,000 2 816,000
415,001 420,000 2 830,700
430,001 435,000 1 434,300
435,001 440,000 1 440,000
450,001 455,000 1 453,089
470,001 475,000 2 950,000
475,001 480,000 1 479,328
485,001 490,000 1 487,000
495,001 500,000 2 1,000,000
505,001 510,000 1 506,000
525,001 530,000 1 526,000
570,001 575,000 2 1,146,765
585,001 590,000 1 585,600
595,001 600,000 1 600,000
600,001 605,000 1 601,500
625,001 630,000 1 626,400
645,001 650,000 1 649,000
650,001 655,000 1 650,600
660,001 665,000 1 665,000
690,001 695,000 1 690,400
695,001 700,000 1 700,000
710,001 715,000 2 1,425,100
730,001 735,000 1 730,900
745,001 750,000 1 750,000
785,001 790,000 1 786,800
795,001 800,000 1 800,000
810,001 815,000 1 815,000
870,001 875,000 1 873,000
875,001 880,000 1 878,845
895,001 900,000 1 900,000
900,001 905,000 1 901,720
940,001 945,000 1 943,396
965,001 970,000 1 970,000
970,001 975,000 1 971,500
985,001 990,000 1 986,300
995,001 1,000,000 5 5,000,000
1,095,001 1,100,000 2 2,200,000
1,155,001 1,160,000 1 1,156,980
1,175,001 1,180,000 1 1,179,500
1,210,001 1,215,000 1 1,215,000
1,225,001 1,230,000 1 1,227,800
1,295,001 1,300,000 1 1,300,000
1,300,001 1,305,000 1 1,304,329
1,305,001 1,310,000 1 1,307,700
1,320,001 1,325,000 1 1,322,400
1,370,001 1,375,000 1 1,370,701
1,435,001 1,440,000 1 1,439,600
140 | Pakistan Telecommunication Company Limited

Pattern of Shareholding
As at June 30, 2010

HAVING SHARES NUMBER OF NUMBER OF


SHAREHOLDERS SHARES HELD
FROM TO

1,545,001 1,550,000 1 1,550,000


1,575,001 1,580,000 1 1,577,400
1,580,001 1,585,000 1 1,580,500
1,635,001 1,640,000 1 1,640,000
1,670,001 1,675,000 1 1,671,452
1,680,001 1,685,000 1 1,681,800
1,700,001 1,705,000 1 1,705,000
1,745,001 1,750,000 1 1,750,000
1,995,001 2,000,000 1 2,000,000
2,015,001 2,020,000 1 2,016,843
2,045,001 2,050,000 1 2,050,000
2,080,001 2,085,000 1 2,083,269
2,220,001 2,225,000 1 2,223,000
2,490,001 2,495,000 1 2,493,372
2,550,001 2,555,000 1 2,551,100
2,695,001 2,700,000 1 2,700,000
2,705,001 2,710,000 1 2,709,500
2,715,001 2,720,000 1 2,719,935
2,895,001 2,900,000 1 2,900,000
3,080,001 3,085,000 1 3,084,050
3,140,001 3,145,000 1 3,141,800
3,325,001 3,330,000 1 3,326,631
3,345,001 3,350,000 1 3,347,600
3,370,001 3,375,000 1 3,372,938
3,690,001 3,695,000 1 3,693,857
3,695,001 3,700,000 1 3,696,200
3,780,001 3,785,000 1 3,784,181
3,830,001 3,835,000 1 3,831,265
3,895,001 3,900,000 1 3,900,000
3,995,001 4,000,000 1 3,998,329
4,025,001 4,030,000 1 4,030,000
4,160,001 4,165,000 1 4,164,951
4,500,001 4,505,000 1 4,502,535
4,845,001 4,850,000 1 4,847,500
5,545,001 5,550,000 1 5,547,705
5,890,001 5,895,000 1 5,893,731
5,985,001 5,990,000 1 5,985,639
6,200,001 6,205,000 1 6,202,091
6,410,001 6,415,000 1 6,413,500
7,220,001 7,225,000 1 7,221,600
8,145,001 8,150,000 1 8,145,568
9,060,001 9,065,000 1 9,062,734
9,075,001 9,080,000 1 9,077,804
9,210,001 9,215,000 1 9,215,000
9,400,001 9,405,000 1 9,403,557
9,505,001 9,510,000 1 9,506,653
10,220,001 10,225,000 1 10,225,000
11,140,001 11,145,000 1 11,143,500
12,115,001 12,120,000 1 12,115,800
15,775,001 15,780,000 1 15,775,577
24,600,001 24,605,000 1 24,600,953
44,200,001 44,205,000 1 44,204,009
54,315,001 54,320,000 1 54,316,633
54,625,001 54,630,000 1 54,628,382
55,890,001 55,895,000 1 55,893,800
196,385,001 196,390,000 1 196,387,991
407,805,001 407,810,000 1 407,809,524
918,190,001 918,195,000 1 918,190,476
2,974,680,000 2,974,685,000 1 2,974,680,002
Annual Report 2010 | 141

Categories of Shareholders
As at June 30, 2010

Trades in PTCL Shares


The Directors, CEO, CFO, Company Secretary and their spouses and minor children have not traded in PTCL shares during
the financial year 2009–2010.
142 | Pakistan Telecommunication Company Limited

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

DIRECTORS, CEO & CHILDREN


1 82713 MR. ABDULRAHIM A. AL NOORYANI 1
2 82714 MR. ABDULAZIZ A. AL SAWALEH 1
3 82715 MR. FADHIL AL ANSARI 1
4 82716 MR. ABDULAZIZ H. TARYAM 1
5 83215 MR. NAGUIBULLAH MALIK 1
6 83216 MR. MUSHTAQ AHMAD BHATTI 1
7 83217 MR. KHURSHED AHMED JUNEJO 1
8 83218 MR. SALMAN SIDDIQUE 1
9 83219 DR. AHMED AL JARWAN 1
Total 9

NIT & ICP
1 02154–27 NATIONAL BANK OF PAKISTAN – TRUSTEE DEPARTMENT NI(U)T FUND 8,145,568
2 11353–22 NATIONAL INVESTMENT TRUST LIMITED 4,847,500
3 26869 INVESTMENT CORPORATION OF PAKISTAN 3,400
4 33312 NATIONAL BANK OF PAKISTAN TRUSTEE WING 1,000
5 4702 NATIONAL BANK OF PAKISTAN TRUSTEE WING 2,000
6 67726 INVESTMENT CORPORTION OF PAKISTAN 100
7 71094 NATIONAL INVESTMENT TRUST LIMITED 400
8 79615 INVESTMENT CORPORATION OF PAKISTAN 800
Total 13,000,768

BANKS, DFI & NBFI
1 01446–31 MCB BANK LIMITED 50,000
2 01867–22 PAKISTAN KUWAIT INVESTMENT CO. (PVT) LIMITED 5,547,705
3 01990–27 INVEST CAPITAL INVESTMENT BANK LIMITED 3,693,857
4 02394–29 NIB BANK LIMITED 50,000
5 02659–34 PAK LIBYA HOLDING COMPANY (PVT) LIMITED 1,000,000
6 02832–32 MEEZAN BANK LIMITED 2,551,100
7 02980–35 IGI INVESTMENT BANK LIMITED 100,000
8 03111–46 UNITED BANK LIMITED – TRADING PORTFOLIO 300,000
9 03335–57 BANK ALFALAH LIMITED 2,000,000
10 03798–52 THE BANK OF KHYBER 103,278
11 03871–52 THE BANK OF PUNJAB 50,000
12 03871–86 THE BANK OF PUNJAB 2,493,372
13 03889–28 NATIONAL BANK OF PAKISTAN 3,372,938
14 03889–44 NATIONAL BANK OF PAKISTAN 15,775,577
15 03947–20 SECURITY INVESTMENT BANK LIMITED 649,000
16 04127–28 MCB BANK LIMITED – TREASURY 5,893,731
17 04606–29 SILKBANK LIMITED 1,000,000
18 04838–22 INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN 30,597
19 05132–26 ASKARI BANK LIMITED 3,141,800
20 05181–21 SME BANK LIMITED 8,600
21 06239–23 FIRST DAWOOD INVESTMENT BANK LIMITED 25,000
22 06247–519 SAUDI PAK INV. CO. 3,900,000
23 07393–24 ARIF HABIB BANK LIMITED 873,000
24 09332–28 FIRST CREDIT & INVESTMENT BANK LIMITED 2,500
25 11940–4410 ESCORTS INVESTMENT BANK LIMITED 5,900
26 43305 UNITED BANK LIMITED. 600
27 57252 CRESCENT INVESTMENT BANK LIMITED 1,000
28 57664 CRESCENT INVESTMENT BANK LIMITED 1,000
29 67159 CRESECENT INVESTMENT BANK LIMITED 200
30 75124 MUSLIM COMMERCIAL BANK LIMITED 690,400
31 78786 THE BANK OF PUNJAB 100
Total 53,311,255
Annual Report 2010 | 143

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

INSURANCE COMPANIES
1 02139–29 PREMIER INSURANCE LIMITED 90,000
2 02451–21 NEW JUBILEE INSURANCE COMPANY LIMITED 1,322,400
3 03277–10526 HABIB INSURANCE CO. LIMITED 250,000
4 03277–15009 CENTURY INSURANCE COMPANY LIMITED 33,500
5 03277–17338 EAST WEST LIFE ASSURANCE COMPANY LIMITED 50,000
6 03277–2538 EFU LIFE ASSURANCE LIMITED 6,413,500
7 03277–3711 ADAMJEE INSURANCE COMPANY LIMITED 175,000
8 03277–4064 NATIONAL INSURANCE COMPANY LIMITED 350,000
9 03277–4255 PAKISTAN REINSURANCE COMPANY LIMITED 440,000
10 03277–48501 TAKAFUL PAKISTAN LIMITED 5,500
11 03277–57588 ATLAS INSURANCE LIMITED 121,500
12 03277–6454 ALPHA INSURANCE CO. LIMITED 20,000
13 03277–7330 RELIANCE INSURANCE COMPANY LIMITED 90,000
14 03277–9371 NEW JUBILEE LIFE INSURANCE CO. LIMITED 1,705,000
15 03277–9404 ALLIANZ EFU HEALTH INSURANCE LIMITED 100,000
16 03459–996 ASKARI GENERAL INSURANCE CO. LIMITED 38,322
17 56890 PAKISTAN GUARANTEE INSURANCE CO. LIMITED 100
18 73493 GULF INSURANCE CO. LIMITED 100
Total 11,204,922

MODARABAS & MUTUAL FUNDS
1 00646–4138 FIRST PRUDENTIAL MODARABA 10,000
2 02113–21 FIRST EQUITY MODARABA 75,000
3 02667–25 TRUST MODARABA 155,000
4 03277–1149 B.F.MODARABA 57,000
5 03277–1651 FIRST UDL MODARABA 75,000
6 03277–4962 FIRST ALNOOR MODARABA 147,500
7 03277–7525 FIRST PAK MODARABA 5,000
8 03525–52268 FIRST ELITE CAPITAL MODARABA 52,000
9 04077–25 FIRST FIDELITY LEASING MODARABA 4,000
10 05454–28 JS VALUE FUND LIMITED 1,750,000
11 05520–28 GOLDEN ARROW SELECTED STOCKS FUND LIMITED 100,000
12 05652–23 CDC – TRUSTEE JS LARGE CAP. FUND 6,202,091
13 05959–27 CDC – TRUSTEE ATLAS STOCK MARKET FUND 1,100,000
14 05991–23 CDC – TRUSTEE MEEZAN BALANCED FUND 1,580,500
15 06072–23 CDC – TRUSTEE FIRST DAWOOD MUTUAL FUND 401,645
16 06171–21 CDC – TRUSTEE FAYSAL BALANCED GROWTH FUND 2,050,000
17 06197–29 CDC – TRUSTEE ALFALAH GHP VALUE FUND 200,050
18 06213–25 CDC – TRUSTEE UNIT TRUST OF PAKISTAN 9,403,557
19 06221–24 CDC – TRUSTEE JS AGGRESSIVE ASSET ALLOCATION FUND 390,000
20 06395–25 ASIAN STOCK FUND LIMITED 800,000
21 06403–22 CDC – TRUSTEE FAYSAL INCOME & GROWTH FUND 500,000
22 06411–21 CDC – TRUSTEE AKD INDEX TRACKER FUND 234,953
23 06486–24 SAFEWAY MUTUAL FUND LIMITED 700,000
24 06619–26 CDC – TRUSTEE AKD OPPORTUNITY FUND 111,339
25 06726–23 CDC – TRUSTEE PAKISTAN INTERNATIONAL ELEMENT ISLAMIC FUND 1,000,000
26 06825–21 MCFSL – TRUSTEE JS KSE – 30 INDEX FUND 89,275
27 07062–23 AL MEEZAN MUTUAL FUND LIMITED 3,696,200
28 07070–22 CDC – TRUSTEE MEEZAN ISLAMIC FUND 9,506,653
29 07096–20 FDIBL TRUSTEE – NAMCO BALANCED FUND 710,100
30 07252–20 CDC – TRUSTEE FAYSAL ASSET ALLOCATION FUND 1,000,000
31 09449–25 CDC – TRUSTEE ATLAS ISLAMIC STOCK FUND 900,000
32 09480–21 CDC – TRUSTEE NAFA STOCK FUND 2,223,000
33 09506–26 CDC – TRUSTEE NAFA MULTI ASSET FUND 1,156,980
34 09738–29 CDC – TRUSTEE MCB DYNAMIC STOCK FUND 574,765
35 10108–22 CDC – TRUSTEE ASKARI ASSET ALLOCATION FUND 250,000
144 | Pakistan Telecommunication Company Limited

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

36 10397–29 CDC – TRUSTEE MEEZAN TAHAFFUZ PENSION FUND – EQUITY SUB FUND 229,500
37 10447–9718 FIRST PRUDENTIAL MODARABA 10,000
38 10520–21 TRUSTEE – PPF EQUITY (SUB–FUND) 100,000
39 10603–21 CDC – TRUSTEE APF – EQUITY SUB FUND 90,000
40 10660–25 CDC – TRUSTEE JS PENSION SAVINGS FUND – EQUITY ACCOUNT 61,000
41 10710–28 CDC – TRUSTEE ALFALAH GHP ISLAMIC FUND 150,000
42 10728–27 CDC – TRUSTEE HBL – STOCK FUND 1,550,000
43 10801–27 CDC – TRUSTEE NAFA ISLAMIC MULTI ASSET FUND 626,400
44 10850–22 TRUSTEE PIPF EQUITY SUB – FUND 48,800
45 10900–25 CDC – TRUSTEE APIF – EQUITY SUB FUND 190,000
46 11049–29 MC FSL – TRUSTEE JS GROWTH FUND 9,077,804
47 11056–28 CDC – TRUSTEE HBL MULTI – ASSET FUND 80,000
48 11320–25 B.R.R. GUARDIAN MODARABA 50,000
49 11403–25 FIRST CAPITAL MUTUAL FUND LIMITED 150,000
50 11429–23 MC FSL – TRUSTEE JS CAPITAL PROTECTED FUND – IV 453,089
51 11577–25 CDC – TRUSTEE MEEZAN CAPITAL PROTECTED FUND – I 100,000
52 11809–26 CDC – TRUSTEE IGI STOCK FUND 1,215,000
53 11924–22 CDC – TRUSTEE ALFALAH GHP ALPHA FUND 256,540
54 12021–20 CDC – TRUSTEE NIT STATE ENTERPRISE FUND 54,628,382
55 12047–28 CDC – TRUSTEE PAK OMAN ADVANTAGE ISLAMIC FUND 200,000
56 12054–27 CDC – TRUSTEE PAK OMAN ADVANTAGE STOCK FUND 125,000
57 12120–28 CDC – TRUSTEE NIT – EQUITY MARKET OPPORTUNITY FUND 5,985,639
58 12278–21 MCFSL–TRUSTEE ASKARI ISLAMIC ASSET ALLOCATION FUND 35,000
59 12310–25 CDC – TRUSTEE FIRST HABIB STOCK FUND 182,600
60 12336–23 CDC – TRUSTEE LAKSON EQUITY FUND 162,850
61 12435–21 MCFSL TRUSTEE JS PRINCIPAL SECURE FUND II 475,000
62 37257 L.T.V. CAPITAL MODARABA 100
Total 123,444,312

PUBLIC SECTOR COMPANIES & CORPORATIONS
1 02683–15 STATE LIFE INSURANCE CORP. OF PAKISTAN 943,396
2 02683–23 STATE LIFE INSURANCE CORP. OF PAKISTAN 54,316,633
Total 55,260,029

OTHERS
1 00307–46 IGI FINEX SECURITIES LIMITED 1
2 00307–56279 CAPITAL VISION SECURITIES (PVT) LIMITED 5,100
3 00307–9500 Y.S. SECURITIES & SERVICES (PVT) LIMITED 32,900
4 00364–10155 TRUSTEE EAPCL MPT EMP. PENSION FUND 20,000
5 00364–13688 TRUSTEES KUEHNE & NAGEL PAKISTAN SPF 20,000
6 00364–55242 CRAFTSMAN (PVT) LIMITED (8095) 100,000
7 00364–83467 AMIR FINE EXPORTS (PVT) LIMITED 37,500
8 00414–35 MOOSA, NOOR MOHAMMAD, SHAHZADA & CO. (PVT) LIMITED 43,500
9 00539–14700 TECNO PACK TELECOM (PVT) LIMITED 10,000
10 00539–30 WE FINANCIAL SERVICES LIMITED 2,100
11 00547–6424 TRUSTEE – IBM ITALIA S.P.A. PAKISTAN EMPLOYEES PENSION FUND 20,000
12 00547–6432 TRUSTEE – IBM ITALIA S.P.A. PAKISTAN EMPLOYEES GRATUITY FUND 20,000
13 00547–6457 TRUSTEE – IBM SEMEA EMPLOYEES PROVIDENT FUND 20,000
14 00620–18650 PANTHER EXPORTS (PVT) LIMITED 63,000
15 00620–21 TAURUS SECURITIES LIMITED 2,900
16 00653–3683 TRUSTEE – NISHAT (CHUNIAN) LIMITED EMPLOYEES PROVIDENT FUND 10,000
17 00695–10049 TRUSTEE – UNILEVER PENSION PLAN (1145–3) 600,000
18 00695–10684 TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED (1386–2) 36,610
19 00695–10692 TRUSTEE PAKISTAN TOBACCO COMPANY LI MITED (1385–5) 20,700
20 00695–10700 TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED (1383–4) 40,000
21 00695–10759 TRUSTEE PAKISTAN TOBACCO COMPANY LIMITED [1390–2] 52,000
Annual Report 2010 | 145

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

22 00935–11450 G. R. SECURITIES ( SMC – PVT ) LIMITED 1,000


23 01057–11449 SARDAR MOHAMMAD ASHRAF D BALUCH (PVT) LIMITED 5,500
24 01164–7584 TRUSTEES D.G. KHAN CEMENT CO. LIMITED EMPLOYEES PROVIDENT FUND 240,000
25 01412–14092 TRUSTEE, H.J. BEHRANA PARSI FIRE TEMPLE T 25,000
26 01412–15727 TRUSTEES, SETH H.M. KHAJURINA TECH.TR. FN 2,000
27 01412–16410 M.C. MAMA PARSI GIRL`S SEC. SCHOOL 40,000
28 01412–16618 ZOROASTRIAN CO–OP. HOUSING SOCIETY LIMITED 7,500
29 01412–21576 TRUSTEES, EDULJEE DINSHAW LIMITED PROV FUND 70,000
30 01420–17 STANDARD BEARER SECURITIES LIMITED 1,100
31 01446–866 TRUSTEE – MCB EMPLOYEES PENSION FUND 200,000
32 01552–45 FIRST CAPITAL EQUITIES LIMITED 300
33 01552–52 FIRST CAPITAL EQUITIES LIMITED 34,000
34 01669–26 SHAFFI SECURITIES (PVT) LIMITED 12,700
35 01826–42036 MUHAMMAD SHAFI TANNERIES (PVT) LIMITED 158,291
36 01917–33 PRUDENTIAL SECURITIES LIMITED 20,400
37 01917–41 PRUDENTIAL SECURITIES LIMITED 200
38 01990–19373 FAIR DEAL SECURITIES (PVT) LIMITED 5,300
39 01990–25545 MONEY LINE SECURITIES (PVT) LIMITED 22,000
40 01990–27301 INVEST FORUM (SMC–PVT) LIMITED 9,000
41 02832–743 MEEZAN BANK LIMITED STAFF PROVIDENT FUND 5,000
42 03053–36 AZIZ FIDAHUSEIN & COMPANY (PVT) LIMITED 13,645
43 03103–10053 TRUSTEE – CRESCENT LEASING GRATUITY FUND 15,000
44 03137–36 MOOSANI SECURITIES (PVT) LIMITED 125,000
45 03210–28 Y.S. SECURITIES & SERVICES (PVT) LIMITED 8,735
46 03228–43 ABBASI & COMPANY (PVT) LIMITED 100
47 03277–10621 TRUSTEES ARTAL RESTAURANTS INT’L EMP P.F 7,000
48 03277–10726 TRUSTEES WORLD MEMON FND. COMM. CEN. TRUST 50,000
49 03277–11151 BANDENAWAZ (PVT) LIMITED 19,000
50 03277–11821 TRUSTEES OF DHORAJI HOUSING & RELIEF TRUST 165,000
51 03277–11924 AMIR FINE EXPORTS (PVT) LIMITED 415,200
52 03277–12220 TRUSTEES CHEVRON PAKISTAN LIMITED MNGT. STAFF PROVIDENT FUND 100,000
53 03277–1225 HASHOO HOLDINGS (PVT) LIMITED 200,000
54 03277–12636 TRUSTEES PAKISTAN PTA MNGT STAFF PEN. F 13,300
55 03277–12637 TRUSTEES PAKISTAN PTA MNGT STAFF G. FUND 34,200
56 03277–13122 MANG.COM.KARACHI ZARTHOSTI BANU MANDAL 17,000
57 03277–13154 TRUSTEES HOMMIE & JAMSHED NUSSERWANJEE C.T 236,000
58 03277–1339 PREMIER FASHIONS (PVT) LIMITED 10,000
59 03277–1340 SIZA (PVT) LIMITED 395,000
60 03277–14005 TRUSTEES PAKISTAN PTA MNG STAFF PF 43,000
61 03277–14731 TRUSTEES AKHTAR & HASAN (PVT) LIMITED EMP. P. F 1,900
62 03277–14768 AL NOOR MODARABA MANAGEMENT (PVT) LIMITED 10,000
63 03277–14818 TRUSTEES ADAMJEE ENTERPRISES STAFF P. F 2,000
64 03277–15138 TRUSTEES ENGRO CHEMICAL PAK LIMITED P. F 730,900
65 03277–15506 TRUSTEES PERAC MNG & SUPERVISORY S. PEN FND 2,310
66 03277–16576 TRUSTEES DUKE OF EDINBURGH’S AWARD F. PAK 5,000
67 03277–17628 TRUSTEES QAMARUNNISA SHARIF WEL. TRUST 20,000
68 03277–18963 TRUSTEES OF HAJI MOHAMMED WELFARE TRUST 150,000
69 03277–19048 TRUSTEES PAK PTA MNG STAFF DEF. CONT. SF 37,400
70 03277–19908 PMC INTERNATIONAL (PVT) LIMITED 10,000
71 03277–2102 THE AGA KHAN UNIVERSITY FOUNDATION 475,000
72 03277–23841 TRUSTEES MCB EMPLOYEES FOUNDATION 100,000
73 03277–2404 MOHAMAD AMIN BROS (PVT) LIMITED 13,000
74 03277–24198 PAKISTAN SERVICES LIMITED 350,000
75 03277–25504 PRINTEK (PVT) LIMITED 3,000
76 03277–31790 RELIANCE MERCHANDISING CORP (PVT) LIMITED 20,000
77 03277–32070 TRUSTEES ENGRO CHEM PAK LIMITED, MPT EMP G. F 305,000
78 03277–34161 TRUSTEES NRL EXEC STAFF POST RTD MBF 29,500
146 | Pakistan Telecommunication Company Limited

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

79 03277–34872 TRUSTEES ENGRO CHEMICAL PAK LIMITED MPT EMP DEF. CONT P. FUND 715,000
80 03277–35326 ASLAM SONS (PVT) LIMITED 286,569
81 03277–35867 TRUSTEE GUL AHMED TEXTILE MILLS LIMITED EMP P. F 2,500
82 03277–3785 TRUSTEE CHERAT CEMENT CO. LIMITED EMP. PRO. FND 20,000
83 03277–38250 TRUSTEES OF STATE OIL COMPANY LIMITED. EMPLOYEES P. F 25,000
84 03277–3893 SITARA CHEMICAL INDUSTRIES LIMITED 50,000
85 03277–4070 EMPLOYEE’S OLD–AGE BENEFITS INSTITUTION 55,893,800
86 03277–4230 CRESCENT STEEL AND ALLIED PRODUCTS LIMITED 302,500
87 03277–4275 TRUSTEES NRL OFFICERS PROVIDENT FUND 14,000
88 03277–4841 BULK MANAGEMENT PAKISTAN (PVT) LIMITED 415,500
89 03277–4865 SHAKOO (PVT) LIMITED 50,000
90 03277–48792 TRUSTEES OF GREAVES PAKISTAN (PVT) LIMITED EMP PROVIDENT FUND 10,000
91 03277–5006 PAK GREASE MFG. (PVT) LIMITED 70,500
92 03277–543 SIDDIQSONS DENIM MILLS LIMITED 215,000
93 03277–55465 MARIAM ALI MUHAMMAD TABBA FOUNDATION 150,000
94 03277–57693 MAGNUS INVESTMENT ADVISORS LIMITED 100
95 03277–6081 TRUSTEES ALOO & MINOCHER DINSHAW CHR. TRUST 40,000
96 03277–61129 TRUSTEE NATIONAL REFINERY LIMITED MANAGEMENT STAFF PENSION FUND 42,890
97 03277–61348 POLYPROPYLENE PRODUCTS LIMITED 229,400
98 03277–63669 TRUSTEE OF HAJI MOHAMMED BENEVOLENT TRUST 200,000
99 03277–64919 FIRHAJ FOOTWEAR (PVT) LIMITED 20,000
100 03277–64984 SAUDI PAK REAL ESTATE LIMITED 100,000
101 03277–65957 AMANAH INVESTMENTS LIMITED 10,000
102 03277–67482 TRUSTEES OF ENGRO CHEMICAL PAK LIMITED NON–MPT EMP GRATUITY FUND 88,063
103 03277–70845 NOMAN ABID HOLDINGS LIMITED 16
104 03277–7421 TRUSTEES SAEEDA AMIN WAKF 125,000
105 03277–7633 TRUSTEES MOHAMAD AMIN WAKF ESTATE 150,000
106 03277–7652 ISMAILIA YOUTH SERVICES 70,000
107 03277–7702 TRUSTEES JAMIA MASJID REHMANIA TRUST 6,000
108 03277–894 M/S S. FAZALILAHI & SONS (PVT) LIMITED 100,500
109 03277–895 M/S IHSAN INDUSTRIES (PVT) LIMITED 3,000
110 03277–9217 JUPITER TEXTILE MILLS (PVT) LIMITED 50,000
111 03277–9219 TRUSTEES AL–MAL GROUP STAFF PROVIDENT FN 5,000
112 03277–9284 PAKISTAN HOUSE INTERNATIONAL LIMITED 142,000
113 03277–9351 TRUSTEES CRESCENT STEEL & ALLIED PROD G. F. 61,500
114 03277–9352 TRUSTEES CRESCENT STEEL & ALLIED PROD PN. F 150,500
115 03277–9353 TRUSTEES CRESCENT STEEL & ALLIED PROD SPF 42,500
116 03277–9372 TRUSTEES ASIATIC P.R. NETWORK (PVT) EMP PF 2,000
117 03277–973 LUCKY ENERGY (PVT) LIMITED 50,000
118 03277–9981 TRUSTEES OF FAROUKH & ROSHEN KARANI TRUST 20,000
119 03293–12 S.H. BUKHARI SECURITIES (PVT) LIMITED 200
120 03319–26 KHALID JAVED SECURITIES (PVT) LIMITED 13,000
121 03350–22 ZAHID LATIF KHAN SECURITIES (PVT) LIMITED 200
122 03475–28 REPUBLIC SECURITIES LIMITED 1,500
123 03525–1895 VOHRAH ENGINEERING (PVT) LIMITED 2,500
124 03525–48472 MANAGING COMMITTEE CRESCENT FOUNDATION 129,500
125 03525–63817 NH SECURITIES (PVT) LIMITED 10,000
126 03525–6645 TRUSTEES PACKAGES LIMITED MGT. STAFF PEN. FUND 10,000
127 03525–66811 TRUSTEES NESTLE PAKISTAN LIMITED MANAGERIAL STAFF PENSION FUND 30,000
128 03525–66812 TRUSTEES NESTLE PAKISTAN LIMITED EMPLOYEES PROVIDENT FUND 30,000
129 03525–66813 TRUSTEES NESTLE PAKISTAN LIMITED EMPLOYEES GRATUITY FUND 20,000
130 03525–68468 TRUSTEES GHANI GLASS LIMITED EMPLOYEES PROVIDENT FUND 10,000
131 03574–25 PROGRESSIVE INVESTMENT MANAGEMENT (PVT) LIMITED 1,500
132 03715–27 EXCEL SECURITIES (PVT) LIMITED 12,300
133 03855–21 DARSON SECURITIES (PVT) LIMITED 300
134 03863–20 ACE SECURITIES (PVT) LIMITED 80,600
135 03939–12703 EXCEL SECURITIES (PVT) LIMITED 2,450
Annual Report 2010 | 147

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

136 03939–21 PEARL SECURITIES LIMITED 100,000


137 03939–8891 TRUSTEE– NWFP PENSION FUND 180,000
138 03996–30634 PASHA SECURITIES (PVT) LIMITED (015–006) 25,000
139 04010–21 FAWAD YUSUF SECURITIES (PVT) LIMITED 50,000
140 04044–36 TOTAL SECURITIES LIMITED 1,000
141 04085–24 M.R.A. SECURITIES (PVT) LIMITED 406,000
142 04150–15346 ATLAS TEXTILE (PVT) LIMITED 300
143 04150–25 FRIENDLY SECURITIES (PVT) LIMITED 5,000
144 04234–10768 SHAFFI SECURITIES (PVT) LIMITED 500
145 04234–10859 TRUSTEE – GHANI GLASS EMPLOYEE PROVIDENT FUND 10,000
146 04234–5651 FAIR EDGE SECURITIES (PVT) LIMITED 500
147 04275–21 MOTIWALA SECURITIES (PVT) LIMITED 585,600
148 04291–2611 HK SECURITIES (PVT) LIMITED 10,000
149 04341–22 ORIENTAL SECURITIES (PVT) LIMITED 300
150 04358–2092 TURSTEE–FAZAL REHMAN FOUNDATION 25,000
151 04358–21 MAZHAR HUSSAIN SECURITIES (PVT) LIMITED 23,500
152 04416–23 A.H.K.D. SECURITES (PVT) LIMITED 1,000
153 04424–22 SAKARWALA CAPITAL SECURITIES (PVT) LIMITED 73,000
154 04432–1292 GENERAL INVESTMENT & SECURITIE (PVT) LIMITED 1,600
155 04457–45 FDM CAPITAL SECURITIES (PVT) LIMITED 50,000
156 04457–78 FDM CAPITAL SECURITIES (PVT) LIMITED 100,000
157 04473–19 THE KARACHI STOCK EXC (G) LIMITED – FUTURE CONT. 2,000
158 04481–26 DOSSLANI’S SECURITIES (PVT) LIMITED 11,000
159 04580–23 CAPITAL VISION SECURITIES (PVT) LIMITED 26,100
160 04705–10416 NATIONAL LOGISTIC CELL 500,000
161 04705–48962 SHAKIL EXPRESS (PVT) LIMITED 1,000
162 04705–50687 TRUSTEES OF GENERAL RAHIM KHAN TRUST (GRK TRUST) 200
163 04705–5941 TRUSTEE OF PTC EMPLOYEES GRATUITY FUND 51,000
164 04705–5942 TRUSTEE OF PTC MANAGEMENT PROVIDENT FUND 51,000
165 04705–6004 TRUSTEE OF PTC STAFF PENSION FUND 193,000
166 04705–6327 TRUSTEE OF PTC EMPLOYEES PROVIDEND FUND 101,000
167 04705–68853 TRUSTEES OF ARL GENRAL STAFF PROVIDENT FUND 95,000
168 04705–68854 TRUSTEES OF ARL STAFF PROVIDENT FUND 30,000
169 04705–68903 TRUSTEES OF OVERSEAS PAKISTANI PENSION TRUST 15,000
170 04705–69173 TRUSTEES OF ARL MANAGEMENT STAFF PENSION FUND 100,000
171 04705–70711 PAKISTAN OILFIELDS LIMITED 250,000
172 04804–10917 AMCAP SECURITIES (PVT) LIMITED 19,500
173 04804–21559 MAXIMUS SECURITIES (PVT) LIMITED 5,000
174 04804–25 INVEST AND FINANCE SECURITIES LIMITED 59,328
175 04820–23 STOCK VISION (PVT) LIMITED 8,500
176 04879–28 AKHAI SECURITIES (PVT) LIMITED 29,000
177 04895–26 DJM SECURITIES (PVT) LIMITED 665,000
178 04903–23 AMPLE SECURITIES (PVT) LIMITED 1,200
179 04978–12930 EXCEL SECURITIES (PVT) LIMITED 500
180 04978–42 LIVE SECURITIES LIMITED 228,432
181 05116–28 TIME SECURITIES (PVT) LIMITED 3,700
182 05264–21 JS GLOBAL CAPITAL LIMITED 55,000
183 05264–29343 MICRO INNOVATIONS & TECHNOLOGIES (PVT) LIMITED 95,000
184 05272–20 H.S.Z. SECURITIES (PVT) LIMITED 9,900
185 05306–25 FAIR EDGE SECURITIES (PVT) LIMITED 200
186 05314–24 INVESTFORUM (PVT) LIMITED – SMC 3,000
187 05405–10923 UNIFIED JUNCTIONS SERVICES (PVT) LIMITED 5,500
188 05405–23 GENERAL INVEST. & SECURITIES (PVT) LIMITED 1,400
189 05462–7709 NOMAN ABID SECURITIES (PVT) LIMITED 1,370
190 05470–26 B & B SECURITIES (PVT) LIMITED 22,000
191 05546–26 STOCK MASTER SECURITIES (PVT) LIMITED 10,357
192 05587–53476 SAT SECURITIES (PVT) LIMITED 6,000
148 | Pakistan Telecommunication Company Limited

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

193 05587–55 FIRST NATIONAL EQUITIES LIMITED 56,400


194 05660–4677 THE JINNAH SOCIETY 25,000
195 05728–24 STOCK STREET (PVT) LIMITED 200
196 05769–9351 ELITE STOCK SERVICE (PVT) LIMITED 14,900
197 05785–28 ABM SECURITIES (PVT) LIMITED 800
198 05801–24 ADEEL & NADEEM SECURITIES (PVT) LIMITED 40,400
199 05850–29 PACE INVESTMENT & SECURITIES (PVT) LIMITED 12,000
200 05884–26 ISMAIL IQBAL SECURITIES (PVT) LIMITED 50,000
201 05900–22 AFIC SECURITIES (PVT) LIMITED 300
202 05942–28 AAA SECURITIES (PVT) LIMITED 400
203 06007–7959 GENERAL INVESTMENT & SECURITIES (PVT) LIMITED 2,000
204 06122–8946 TRUSTEE OVERSEAS PAKISTANIS PENSION TRUST 1
205 06262–20 HUM SECURITIES LIMITED 86,000
206 06288–28 UNITED CAPITAL SECURITIES (PVT) LIMITED 58,257
207 06361–28 A. H. M. SECURITIES (PVT) LIMITED 15,001
208 06445–26189 NOMAN ABID SECURITIES (PVT) LIMITED 13,380
209 06445–28 DARSON SECURITIES (PVT) LIMITED 249,986
210 06445–9870 STOCK STREET (PVT) LIMITED 4,000
211 06452–12790 SIDDIQSONS TIN PLATE LIMITED 225,000
212 06452–17120 MUHAMMAD SHAFI TANNERIES (PVT) LIMITED 95,000
213 06452–3112 SIDDIQSONS DENIM MILLS LIMITED STAFF PROVIDENT FUND 10,000
214 06601–27 KAI SECURITIES (PVT) LIMITED 487,000
215 06676–3388 TRUSTEES INDUS MOTOR EMPLOYEES PROV. FUND 50,000
216 06676–3396 TRUSTEES INDUS MOTOR EMPLOYEES PEN. FUND 50,000
217 06676–6753 SINDH GAS (PVT) LIMITED 45,500
218 06684–17684 AMER SECURITIES (PVT) LIMITED 2,000
219 06684–22999 PROGRESIVE SECURITIES (PVT) LIMITED 10,600
220 06684–29 MOHAMMAD MUNIR MOHAMMAD AHMED KHANANI SECURITIES (PVT) LIMITED 20,000
221 06700–2740 SHALIMAR ESTATES CO–OPERATIVE HOUSING SOCIETY LIMITED 10,000
222 06734–22 GAZIPURA SECURITIES & SERVICES (PRIVATE) LIMITED 4,500
223 06759–12 ATLAS CAPITAL MARKETS (PVT) LIMITED – LHR 100
224 06809–23 GHORY’S SECURITIES (PVT) LIMITED 5,000
225 06874–3731 RYK MILLS LIMITED 11,000
226 06882–25 AWJ SECURITIES (SMC – PVT) LIMITED 800
227 06916–20 PASHA SECURITIES (PVT) LIMITED 3,400
228 06924–29 HK SECURITIES (PVT) LIMITED 200
229 06940–27 SIS SECURITIES (PVT) LIMITED 2,000
230 06999–22 MUHAMMAD AHMED NADEEM SECURITIES (SMC – PVT) LIMITED 4
231 07005–29 MAM SECURITIES (PVT) LIMITED 2,600
232 07153–22 MAHA SECURITIES (PVT) LIMITED 158,900
233 07161–21 ZHV SECURITIES (PVT) LIMITED 76,500
234 07179–20 MUHAMMAD SALIM KASMANI SECURITIES (PVT) LIMITED 1,000
235 07229–23 ALTAF ADAM SECURITIES (PVT) LIMITED 29,000
236 07245–21 128 SECURITIES (PVT) LIMITED 1,500
237 07260–29 M.R. SECURITIES (SMC – PVT) LIMITED 950
238 07278–28 WASI SECURITIES (SMC – PVT) LIMITED 100
239 07286–27 DR. ARSLAN RAZAQUE SECURITIES (SMC – PVT) LIMITED 114,900
240 07294–26 AL–HAQ SECURITIES (PVT) LIMITED 200
241 07385–25 ISMAIL ABDUL SHAKOOR SECURITIES (PVT) LIMITED 600
242 07419–20 TOPLINE SECURITIES (PVT) LIMITED 2,500
243 07419–6944 FALKI CAPITAL (PVT) LIMITED 23,000
244 07450–26 DAWOOD EQUITIES LIMITED 5,500
245 08847–27 FAIRWAY SECURITIES (PVT) LIMITED 11,650
246 09563–20 VALUE STOCK SECURITIES (PVT) LIMITED 35,500
247 09621–10187 FAIRDEAL SECURITIES (PVT) LIMITED 3,200
248 09639–13 KSR STOCK BROKERAGE (PVT) LIMITED 100
249 09787–24 SNM SECURITIES (PVT) LIMITED 1,500
Annual Report 2010 | 149

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

250 10231–27 MSMANIAR FINANCIALS (PVT) LIMITED 51,000


251 10447–22 PEARL CAPITAL MANAGEMENT (PVT) LIMITED 21,050
252 10470–29 GPH SECURITIES (PVT) LIMITED 63,000
253 10611–33567 TRUSTEE – PAK GUMS & CHEMICAL LIMITED EXCUTIVE STAFF PENSION FUND 10,500
254 10629–29 AKD SECURITIES LIMITED 1,370,701
255 10934–22 CAPITAL DEVELOPMENT AUTHORITY 353,900
256 11072–1271 AL–HAQ SECURITIES (PVT) LIMITED 11,000
257 11478–28 CMA SECURITIES (PVT) LIMITED 10,000
258 11692–21 ABA ALI HABIB SECURITIES (PVT) LIMITED 434,300
259 11940–6423 JAMSHAID & HASAN SECURITIES (PVT) LIMITED 7,000
260 11965–754 DCD FACTORS (PVT) LIMITED 80,000
261 12005–22 GUL DHAMI SECURITIES (PVT) LTD 16,500
262 12161–24 HAJI ABDUL SATTAR SECURITIES (PVT) LIMITED 10,600
263 12203–1372 FALKI CAPITAL (PVT) LIMITED 31,500
264 12203–1398 M/S SHAFFI SECURITIES (PVT) LIMITED 1,000
265 12203–1752 FAIR DEAL SECURITIES (PVT) LIMITED 1,060
266 12203–1919 NOMAN ABID SECURITIES (PVT) LIMITED 500
267 12369–1143 TRUSTEES LEINER PAK GELATINE LIMITED EMPLOYEES PROVIDENT FUND 24,500
268 12393–19 PINE SECURITIES (PVT) LIMITED 74,900
269 20795 SIR.E.HAROON JAFFER & SONS (PVT) LIMITED 100
270 20800 JAFFER BROTHERS (PVT) LIMITED 16,700
271 25329 GRAND LEISURE CORP (PVT) LIMITED 500
272 25330 AREEN INTERNATION (PVT) LIMITED 1,000
273 39143 CAPITOL TRAVELS (PVT) LIMITED 2,000
274 48919 YUNAS METAL WORKS (PVT) LIMITED 500
275 56640 SIDCO CONSTRUCTION LIMITED 200
276 61251 ARSHAD CORPORATION (PVT) LIMITED 300
277 62420 UNIVERSAL BRUSHWARES (PVT) LIMITED 100
278 62470 ENVICRETE LIMITED 500
279 62529 TAURUS SECURITIES LIMITED 600
280 62586 WORLD TRADE CENTRE (PVT) LIMITED 500
281 63174 M/S YUNAS ELECTRONICS AJK, (PVT) LIMITED 400
282 63570 YUNAS ELECTRONICS PAK (PVT) LIMITED 400
283 68500 EVERGREEN TRADERS 100
284 68502 SHADAB ENTER PRISES 100
285 73578 KHAQAN NAJEEB (PVT) SERVICE 200
286 74270 FIRST CAPITAL SECURITIES CORPORATION LIMITED 100
287 75253 NAZIR, SINDH HIGH COURT, REF. 1674/1997 11,500
288 75761 IHSAN SONS (PVT) LIMITED 500
289 76780 Y. S. SECURITIES AND SERVICES (PVT) LIMITED 100
290 77695 AQEEL KARIM DHEDHI SECURITIES (PVT) LIMITED 300
291 77819 Y. S. SECURITIES & SREVICES (PVT) LIMITED 700
292 78341 PRUDENTIAL SECURITIES LIMITED 100
293 78343 PRUDENTIALL SECURITIES LIMITED 100
294 78345 AL MAL SECURITIES & SERVICES LIMITED 100
295 78350 SAKHAWAT HUSSAIN BUKHARI (PVT) LIMITED 100
296 78388 FINEX SECURITIES LIMITED 100
297 78401 PRUDENTIAL SECURITIES LIMITED 100
298 79171 KHADIM ALI SHAH BUKHARI & CO. LIMITED 100
299 79172 INDOSUES W.I. CARR SECURITIES (PVT) LIMITED 300
300 79173 PREMIER CAPITAL MANAGEMENT (PVT) LIMITED 300
301 80012 FAWAD YOUSUF SECURITIES (PVT) LIMITED 100
302 80014 ACE SECURTIES (PVT) LIMITED 100
303 80021 MARS SECURITIES (PVT) LIMITED 1,000
304 80642 ADAMJEE AUTOMOTIVE (PVT) LIMITED 2,000
305 80715 RAHAT SECURITIES LIMITED 300
306 80717 ZAHID LATIF KHAN SECURITIES (PVT) LIMITED 100
150 | Pakistan Telecommunication Company Limited

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

307 80721 KHADIM ALI SHAH BUKHARI & CO. LIMITED 100
308 80723 ZILLION CAPITAL SECURITIES (PVT) LIMITED 100
309 80725 M.S. SECURITIES (PVT) LIMITED 200
310 80728 ZAFAR SECURITIES (PVT) LIMITED 200
Total 75,481,407

GOVERNMENT OF PAKISTAN
1 1 PRESIDENT OF PAKISTAN 5,600
2 1000001 PRESIDENT OF PAKISTAN 3,900
3 2000001 PRESIDENT OF PAKISTAN 2,974,680,002
4 2000004 PRESIDENT OF PAKISTAN 1,577,400
5 2050000 PRESIDENT OF PAKISTAN 196,387,991
Total 3,172,654,893

FOREIGN COMPANIES
1 00364–11161 RO LIMITED (032985) 200,000
2 00364–18430 ARAB EMIRATES INVESTMENT BANK P.J.S.C. 26,400
3 00521–1179 DEUTSCHE BANK SECURITIES INC. 100
4 00521–2185 THE BANK OF NEW YORK MELLON SA/NV 110,000
5 00521–2300 THE BANK OF NEW YORK MELLON SA/NV 3,326,631
6 00521–2342 THE BANK OF NEW YORK MELLON SA/NV 110,000
7 00521–2631 THE BANK OF NEW YORK MELLON SA/NV 601,500
8 00521–2839 THE BANK OF NEW YORK MELLON SA/NV 12,544
9 00521–502 STATE STREET BANK AND TRUST CO. 24,600,953
10 00521–528 THE BANK OF NEW YORK MELLON 44,204,009
11 00521–700 DEUTSCHE BANK LONDON GLOBAL EQUITIES 2,016,843
12 00547–1938 CLSA SINGAPORE PTE LIMITED – CLIENT ACCOUNT 2,500
13 00547–2068 MERRILL LYNCH INTERNATIONAL 1,671,452
14 00547–2282 EMIRATES NATIONAL INVESTMENT CO. LLC 3,084,050
15 00547–2316 DUBAI ISLAMIC BANK PJSC 3,347,600
16 00547–2399 HSBC FUND SERVICES A/C. 006–606669–431 1,000,000
17 00547–2407 LEGAL & GENERAL ASSURANCE (PENSIONS MANAGEMENT) LIMITED 1,227,800
18 00547–2712 THE ROYAL BANK OF SCOTLAND N.V. 4,164,951
19 00547–2753 J.P.MORGAN WHITEFRIARS INC. 11,143,500
20 00547–2779 THE NORTHERN TRUST CO. A/C IBM DIVERSIFIELD GLOBAL EQUITY FD 3,831,265
21 00547–3306 WILMINGTON INTERNATIONAL EQUITY FUND SELECT, L.P – FM 2 80,366
22 00547–3421 CFSIL RE COMMONWEALTH EMERGING MARKETS FUND 2 526,000
23 00547–3595 THE DEPARTMENT OF THE STATE TREASURER OF MASSACHUSETTS 1,900
24 00547–3793 ADVANCE SERIES TRUST – AST PARAMETRIC EMERGING MARKETS EQUITY 1,307,700
25 00547–3843 OLD WESTBURY FUNDS INC A/C OLD WESTBURY GLOBAL OPPORTUNITY 901,720
26 00547–4023 WILMINGTON MULTI–MANAGER INTERNATIONAL FUND 135,000
27 00547–4064 THE NORTHERN TRUST CO, MELBOURNE BRANCH FUTURE FUND CLIENTS 201,500
28 00547–4429 FNIL A/C J.P. MORGAN SECURITIES (ASIA PACIFIC) LIMITED CLIENT A/C 2,000
29 00547–4841 THE NORTHERN TRUST COMPANY 4,502,535
30 00547–4932 THE NORTHERN TRUST COMPANY 384,498
31 00547–4940 THE NORTHERN TRUST COMPANY 3,998,329
32 00547–4981 THE NORTHERN TRUST COMPANY 84,500
33 00547–6150 THE NORTHERN TRUST COMPANY 174,975
34 00547–6267 THE NORTHERN TRUST COMPANY 88,183
35 00547–6622 BNP PARIBAS ARBITRAGE 479,328
36 00547–6697 JP MORGAN WHITEFRIARS INC 650,600
37 00547–716 THE NORTHERN TRUST COMPANY 1,100
38 00695–10122 THE NAMURA TRUST AND BANKING CO. LIMITED (1153–5) 324,735
39 00695–10783 SEI INSTITUTIONAL INVESTMENT TRUST [1395–1] 1,439,600
40 00695–10817 GOLDMAN SACHS INVESTMENTS (MAURITIUS) I LIMITED [1399–3] 308,972
41 00695–1089 GOLDMAN SACHS & CO. [148–9] 253,000
Annual Report 2010 | 151

Details of categories of shareholders


As at June 30, 2010

S.No. Folio Name Holding

42 00695–1105 GOLDMAN SACHS INTERNATIONAL [178–0] 2,719,935


43 00695–1535 CREDIT SUISSE (HK) LIMITED (368–6) 124,000
44 00695–2764 UNION BANK OF CALIFORNIA GLOBAL (460–1) 3,784,181
45 00695–3036 JPMORGAN CHASE BANK (484–2) 12,115,800
46 00695–5148 MORGAN STANLEY & CO INT’L PLC [644–1] 1,304,329
47 00695–8340 BROWN BROTHERS HARRIMAN & CO. [964–6] 971,500
48 00695–8480 FRANKLIN TEMPLETON INVESTMENT AUSTRALIA LIMITED AS (978–4) 34,500
49 00695–9058 WORLD INVESTMENT OPPORTUNITIES FUND. [1045–1] 786,800
50 00695–9512 TEMPLETON GLOBAL INVESTMENT TRST – TEMP. FRONT. MKTS. FND (1091–0) 1,681,800
51 00695–9603 CACEIS BANK LUXEMBOURG (1100–6) 2,700,000
52 00695–9694 MS ASST. MGT. S.A. ACTING ON BEHALF OF MS GALAXY FND (1109–0) 9,215,000
53 00695–9892 MORGAN STANLEY MAURITIUS COMPANY LIMITED (1130–1) 114,068
54 03277–47575 TRUSTEES OF DIAMOND INVESTMENT & RETIREMENT PLAN TRUST 16,500
55 03533–698 HABIB BANK AG ZURICH, ZURICH, SWITZERLAND 506,000
56 03533–706 HABIB BANK AG ZURICH, LONDON 1,179,500
57 03533–722 HABIB BANK AG ZURICH, DEIRA DUBAI 9,062,734
58 05264–12505 MONTAGUE INTERNATIONAL TRADING LIMITED 10,000
59 05264–7240 KAYMO TRADING (FZE) 49,000
60 05918–1185 ABT HOLDING LIMITED 50,000
61 06502–755 HABIBSONS BANK LIMITED – CLIENT ACCOUNT 10,225,000
62 1000002 CITIBANK N.A., NEW YORK 7,221,600
63 1000007 SOMERS NOMINEES (FAR EAST) LIMITED 500
64 1000015 STATE STREET BANK & TRUST CO. 600
65 1000040 SOMERS NOMINEES (FAR EAST) LIMITED 100
66 1000082 BARING (GUERNSEY) LIMITED 1,000
67 1000213 ROYAL BANK OF SCOTLAND PLC U.K. 100
68 1000251 NOMURA BANK (LUXEMBOURG) S.A. 100
69 1000373 FLEDGELING NOMINEES INTERNATIONAL LIMITED 100
70 1000530 ASIAN CAPITAL HOLDINGS FUND 500
71 1000711 CREDIT LYONNAIS SECRITIES(SINGAPORE) PTE 300
72 1000898 FIDUCIARY TRUST COMPANY INTERNATIONAL 5,000
73 1000957 TEMPLETON DEVELOPING MARKETS TRUST 1,100
74 1000963 MORGAN STANLEY BANK LUXEMBOURG 800
75 1001143 CITIBANK N.A., NEW YORK 3,000
76 1001181 UBL EXPORT PROCESSING ZONE BRANCH 150,000
77 25341 GATES LIMITED 1,500
78 71121 BOSTON SAFE DEPOSIT & TRUST CO. 100
Total 184,565,686

HOLDING MORE THEN 10%
1 04705–44589 ETISALAT INTERNATIONAL PAKISTAN (LLC) – FIRST CDC ACCOUNT 918,190,476
2 04705–44676 ETISALAT INTERNATIONAL PAKISTAN (LLC) – SECOND CDC ACCOUNT 407,809,524
Total 1,326,000,000
152 | Pakistan Telecommunication Company Limited

Notice of 15th Annual General Meeting

Notice is hereby given that the Fifteenth Annual General Meeting of Pakistan Telecommunication Company Limited will be
held on Thursday, 28th October, 2010 at 10:30 a.m. at the Islamabad Serena Hotel, Sheesh Mahal Hall, Opposite Convention
Center, Sector G–5, Khayaban–e–Suhrwardy, Islamabad, to transact the following business:

1. To confirm the minutes of the last AGM held on 31st October, 2009.

2. To receive, consider and adopt the Audited Accounts for the year ended 30th June, 2010, together with the Auditors’
and Directors’ reports.

3. To approve and declare the interim cash dividend of 17.5% (Rs. 1.75 per share) already announced and paid for the
year ended June 30, 2010.

4. To appoint Auditors for the financial year ending 30th June, 2011 and to fix their remuneration. The retiring Auditors
M/s A. F. Ferguson & Co., Chartered Accountants and M/s Ernst & Young Ford Rhodes Sidat Hyder, Chartered
Accountants, being eligible, offer themselves for reappointment.

5. To transact any other business with the permission of the Chair.

By order of the Board

Dated: August 26, 2010. (Farah Qamar)


Islamabad Company Secretary

Notes:

1. Any member of the Company entitled to attend and vote at this meeting may appoint any person as his/her proxy
to attend and vote instead of him/her. Proxies in order to be effective must be received by the Company at the
Registered Office not less than 48 hours before the time fixed for holding the meeting.

2. The Share Transfer Books of the Company will remain closed from 18th October, 2010 to 28th October, 2010 (both
days inclusive).

3. Members are requested to notify any change in address immediately to our Share Registrar, M/s FAMCO Associates
(Pvt.) Limited at Ground Floor, State Life Building No. 1–A, I.I. Chundrigar Road, Karachi.

4. Any individual Beneficial Owner of CDC, entitled to vote at this meeting, must bring his/her original NIC with him/
her to prove his/her identity, and in case of proxy, a copy of shareholder’s attested NIC must be attached with the
proxy form. Representatives of corporate members should bring the usual documents required for such purpose.
Form of Proxy
Pakistan Telecommunication Company Limited

I/We

Of

being a member of Pakistan Telecommunication Company Limited, and a holder of

Ordinary Shares as per Share Register Folio No. and / or CDC Participant

I.D. No. hereby appoint Mr. / Mrs. /Miss

of as my/our proxy to vote for me/us and on my/our behalf at

the Fifteenth Annual General Meeting of the Company to be held on Thursday, October 28, 2010 at 10:30 a.m. and at any
adjournment thereof.

Signed this day of 2010.

For beneficial owners as per CDC List

Signature
on Rs. 5/-
Revenue
Stamp

1. Witness 2. Witness

Signature: Signature:
Name: Name:
Address: Address:

CNIC No. CNIC No.

or Passport No. or Passport No.

Notes
(i) The proxy need not be a member of the Company.
(ii) The instrument appointing a proxy must be duly stamped, signed and deposited at the office of the Company
Secretary PTCL, Headquarters, Sector G–8/4, Islamabad, not less than 48 hours before the time fixed for holding
the meeting.
(iii) Signature of the appointing member should match with his/her specimen signature registered with the Company.
(iv) If a proxy is granted by a member who has deposited his / her shares into Central Depository Company of Pakistan
Limited, the proxy must be accompanied with participant’s ID number and account/sub-account number along
with attested copies of the Computerized National Identity Card (CNIC) or the Passport of the beneficial owner.
Representatives of corporate members should bring the usual documents required for such purpose.
AFFIX
CORRECT
POSTAGE

To
The Company Secretary
Pakistan Telecommunication Company Limited
PTCL Headquarters, Sector G–8/4,
Islamabad–44000