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CAMGSM COMPANY LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2003
CAMGSM COMPANY LIMITED
FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
| Page | |
---|---|---|
Report of independent registered public accounting firm | 1 | |
Statements of income | 2 | |
Statements of changes in owner's equity | 3 | |
Balance sheets | 4 | |
Statements of cash flows | 5 | |
Notes to the financial statements | 6 - 19 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Owner
of CamGSM Company Limited:
We have audited the accompanying balance sheets of CamGSM Company Limited, as of December 31, 2003 and 2002 and the related statements of income, changes in owner's equity and cash flows for each of the three years in the period ended December 31, 2003. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of CamGSM Company Limited, as of December 31, 2003 and 2002 and the result of its operations, changes in owner's equity and cash flows for each of the three years in the period ended December 31, 2003 in accordance with International Financial Reporting Standards as published by the International Accounting Standards Board.
International Financial Reporting Standards vary in certain respects from accounting standards generally accepted in the United States of America. Information relating to the nature and effect of such differences is presented in Note 24 to the financial statements.
PRICEWATERHOUSECOOPERS (CAMBODIA) LIMITED
Phnom Penh, Kingdom of Cambodia
30 June 2004
Exh 14.6-1
CAMGSM COMPANY LIMITED
STATEMENTS OF INCOME
FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
| Notes | 2003 US$ | 2002 US$ | 2001 US$ | ||||
---|---|---|---|---|---|---|---|---|
Income | 3 | 69,997,554 | 55,207,422 | 48,916,675 | ||||
Cost of sales | 4 | 30,537,952 | 15,732,026 | 13,020,737 | ||||
GROSS PROFIT | 39,459,602 | 39,475,396 | 35,895,938 | |||||
General and administrative expenses | 5 | 19,263,804 | 19,416,435 | 15,809,739 | ||||
Sales and marketing expenses | 6,012,998 | 5,806,031 | 8,843,844 | |||||
Net finance expenses | 6 | 420,129 | 825,421 | 876,613 | ||||
INCOME BEFORE INCOME TAX | 13,762,671 | 13,427,509 | 10,365,742 | |||||
Income tax expense | 7 | 2,782,082 | 2,685,502 | 2,088,933 | ||||
NET INCOME FOR THE YEAR | 10,980,589 | 10,742,007 | 8,276,809 | |||||
The accompanying notes on pages 6-19 form an integral part of these financial statements.
Exh 14.6-2
CAMGSM COMPANY LIMITED
STATEMENTS OF CHANGES IN OWNER'S EQUITY
FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
| Note | Share capital US$ | Retained earnings US$ | Total US$ | |||||
---|---|---|---|---|---|---|---|---|---|
2001 | |||||||||
At 1 January 2001 | 5,000,000 | 13,183,991 | 18,183,991 | ||||||
Net income | — | 8,276,809 | 8,276,809 | ||||||
As at 31 December 2001 | 5,000,000 | 21,460,800 | 26,460,800 | ||||||
2002 | |||||||||
At 1 January 2002 | 5,000,000 | 21,460,800 | 26,460,800 | ||||||
Net income | — | 10,742,007 | 10,742,007 | ||||||
Dividend declared and paid | — | (24,070,000 | ) | (24,070,000 | ) | ||||
As at 31 December 2002 | 5,000,000 | 8,132,807 | 13,132,807 | ||||||
2003 | |||||||||
At 1 January 2003 | 5,000,000 | 8,132,807 | 13,132,807 | ||||||
Net income | — | 10,980,589 | 10,980,589 | ||||||
Dividend declared and paid | — | (7,500,000 | ) | (7,500,000 | ) | ||||
As at 31 December 2003 | 5,000,000 | 11,613,396 | 16,613,396 | ||||||
The accompanying notes on pages 6 to 19 form an integral part of these financial statements.
Exh 14.6-3
CAMGSM COMPANY LIMITED
BALANCE SHEETS
AS AT 31 DECEMBER 2003 AND 2002
| Notes | 2003 US$ | 2002 US$ | |||
---|---|---|---|---|---|---|
ASSETS | ||||||
NON-CURRENT ASSETS | ||||||
Property, plant and equipment | 8 | 42,949,964 | 35,095,509 | |||
Intangible fixed assets | 9 | — | 167 | |||
Prepaid rent | 10 | 198,900 | 198,900 | |||
Total non-current assets | 43,148,864 | 35,294,576 | ||||
CURRENT ASSETS | ||||||
Cash and cash equivalents | 11 | 11,790,600 | 6,883,959 | |||
Trade and other receivables | 12 | 6,947,369 | 5,055,366 | |||
Prepaid expenses | 13 | 1,813,374 | 3,774,483 | |||
Inventories | 14 | 436,755 | 229,854 | |||
Receivable from related companies | 15 | 5,977,572 | 2,104,461 | |||
Total current assets | 26,965,670 | 18,048,123 | ||||
TOTAL ASSETS | 70,114,534 | 53,342,699 | ||||
LIABILITIES AND OWNERS' EQUITY | ||||||
NON-CURRENT LIABILITIES | ||||||
Interest-bearing loans and borrowings | 16 | 2,200,000 | 2,717,040 | |||
CURRENT LIABILITIES | ||||||
Trade and other payables | 17 | 33,075,021 | 18,452,215 | |||
Current portions of interest-bearing loans and borrowings | 16 | 4,183,707 | 7,711,880 | |||
Taxes payable | 18 | 7,281,854 | 4,719,488 | |||
Due to related company | 19 | 4,533,038 | 3,562,005 | |||
Accrued liabilities | 20 | 2,227,518 | 3,047,264 | |||
Total current liabilities | 51,301,138 | 37,492,852 | ||||
OWNER'S EQUITY | ||||||
Contributed legal capital | 21 | 5,000,000 | 5,000,000 | |||
Retained earnings | 11,613,396 | 8,132,807 | ||||
Total owner's equity | 16,613,396 | 13,132,807 | ||||
TOTAL LIABILITIES AND OWNER'S EQUITY | 70,114,534 | 53,342,699 | ||||
These financial statements have been approved for issue by the board of directors on 28 May 2004.
The accompanying notes on pages 6 to 19 form an integral part of these financial statements.
Exh 14.6-4
CAMGSM COMPANY LIMITED
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
| Note | 2003 US$ | 2002 US$ | 2001 US$ | ||||||
---|---|---|---|---|---|---|---|---|---|---|
OPERATING ACTIVITIES | ||||||||||
Income after income taxes for the year | 10,980,589 | 10,742,007 | 8,276,809 | |||||||
Adjustments for: | — | |||||||||
Depreciation of property, plant and equipment | 8 | 12,126,690 | 13,002,107 | 10,634,151 | ||||||
Amortisation of intangible assets | 9 | 4,167 | 55,833 | 225,000 | ||||||
Provisions for bad and doubtful debts | 367,814 | 182,247 | 499,907 | |||||||
Profit on disposal of property, plant and equipment | — | (15,844 | ) | (34,304 | ) | |||||
23,479,260 | 23,966,350 | 19,601,563 | ||||||||
Working capital movements | ||||||||||
Increase/(decrease) in trade and other payables | 14,622,806 | 9,888,754 | (5,757,768 | ) | ||||||
Increase in taxes payable | 2,562,366 | 579,549 | 1,786,112 | |||||||
Increase in due to related company | 971,033 | 1,772,967 | 195,118 | |||||||
(Decrease)/increase in accrued liabilities | (819,746 | ) | 1,938,762 | (914,953 | ) | |||||
(Increase)/decrease in trade and other receivable | (2,259,817 | ) | (1,092,984 | ) | 620,252 | |||||
Decrease/(Increase) in prepaid expenses | 1,961,109 | (1,285,435 | ) | (1,937,112 | ) | |||||
(Increase)/decrease in inventories | (206,901 | ) | 104,454 | (61,733 | ) | |||||
(Increase)/decrease in receivable from related companies | (3,873,111 | ) | (1,901,743 | ) | 558,299 | |||||
Net cash inflow from operating activities | 36,436,999 | 33,970,674 | 14,089,778 | |||||||
INVESTING ACTIVITIES | ||||||||||
Payments to acquire property, plant and equipment | (19,981,145 | ) | (11,042,954 | ) | (17,942,984 | ) | ||||
Payments for license—intangible asset | (4,000 | ) | (56,000 | ) | — | |||||
Proceeds from sale of property, plant and equipment | — | 133,444 | 238,217 | |||||||
Net cash outflow from investing activities | (19,985,145 | ) | (10,965,510 | ) | (17,704,767 | ) | ||||
FINANCING ACTIVITIES | ||||||||||
New interest-bearing loans and borrowings | 4,400,000 | — | 12,487,099 | |||||||
Repayment of interest-bearing loans and borrowings | (8,445,213 | ) | (7,711,879 | ) | (3,855,940 | ) | ||||
Dividend declared and paid | (7,500,000 | ) | (24,070,000 | ) | — | |||||
Net cash outflow from financing activities | (11,545,213 | ) | (31,781,879 | ) | 8,631,159 | |||||
Net increase/(decrease) in cash and cash equivalents | 4,906,641 | (8,776,715 | ) | 5,016,170 | ||||||
Cash and cash equivalents at the beginning of the year | 6,883,959 | 15,660,674 | 10,644,504 | |||||||
Cash and cash equivalents at the end of the year | 11 | 11,790,600 | 6,883,959 | 15,660,674 | ||||||
Taxes paid amounted to US$ 3,125,156 (2002: US$ 3,398,306, 2001: US$ 527,935)
The accompanying notes on pages 6 to 19 form an integral part of these financial statements.
Exh 14.6-5
CAMGSM COMPANY LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
1. BACKGROUND
CamGSM Company Limited is a Company established in the Kingdom of Cambodia under the Law on Foreign Investment. The company is wholly owned by Royal Millicom Co., Limited with its principal office at 246 H-I Monivong Boulevard, Phnom Penh. Royal Millicom Co., Limited is a joint venture between Millicom Holdings Cambodia B.V, a Company incorporated in Netherlands with an 61.5% share and Royal Group of Companies, a Company incorporated in Cambodia with a 38.5% share.
The company was formed on the 20th day of April 1996. The share capital of the Company is US$ 5,000,000 divided into 5,000 shares at US$ 1,000 each. At formation, Royal Millicom Co., Limited made the total contribution of the share capital.
The Company obtained the license for the provision and operation of GSM Digital Cellular mobile telephone services within the Kingdom of Cambodia from the Ministry of Posts and Telecommunications on the 20th of April 1996. The license is valid for a period of 35 years. Prior to the end of the 35-year license period, the Company can apply to the MPTC for an extension to the license.
The Company obtained the investment approval letter number 1066/96 from the Council for the Development of Cambodia/Cambodian Investment Board dated 7 August 1996. The Company was registered with the Ministry of Commerce (MOC) and received letter reference 2159 M.O.C dated 26th August 1996. The MOC Registration number is INV 231/96 M.
The Company is using "Mobitel," "Everyday" and "Telesurf" brands for its mobile phone and internet connections, respectively. In order to protect the brand names, Mobitel Company Limited and Everyday Company Limited were established as wholly owned subsidiaries of the CamGSM Company Limited. Mobitel Company Limited was registered with MOC on 20th January 1997 as per license reference CO 2824/97P. Everyday Company Limited was registered with MOC on 9th August 2001 as per license reference CO 5561/01P. Both companies are dormant.
On 21 July 2000, the Ministry of Commerce approved the change of the Company from a joint venture to a wholly owned subsidiary of Royal Millicom Co., Limited and the change of the registration number to Inv.231/96E dated 20 August 1996.
The principal activities of the Company are to:
- (a)
- Install and operate any and all equipment and machinery used in connection with the operation of the GSM mobile cellular telephone network in the entire Kingdom of Cambodia and all products which are ancillary, complementary or component parts of such equipment; and
- (b)
- Market and sell any telecommunications product and/or service of the Company.
The registered office of CamGSM Company Limited is at #33 Preah Sihanouk Boulevard, Phnom Penh 3 District, Phnom Penh, Kingdom of Cambodia.
As at 31 December 2003, the Company employed 134 employees (2002: 136 employees).
Exh 14.6-6
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation
The financial statements of the company, which are expressed in United States dollars, are prepared under the historical cost convention, drawn up in accordance with International Financial Reporting Standards, a basis other than the General Accounting Plan of Cambodia.
The significant policies adopted in the preparation of the financial statements are set out below.
Property, plant and equipment
All items of property, plant and equipment are initially recorded at cost.
Expenses for additions, improvements and renewals are capitalised and expenditure for maintenance and repairs are charged to the statement of income. When assets are sold or retired, their cost and accumulated depreciation are removed from the accounts and any gain or loss from their disposal is included in the statement of income and retained earnings.
The carrying amount is written down immediately to its recoverable amount if the carrying amount is greater than its estimated recoverable amount. Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).
Intangible assets
Cost to obtain license
License costs are included in the balance sheet as intangible assets. These costs are amortised over twelve months, on a straight-line basis.
Trade receivables
Trade receivables are carried at original invoice amount less provision made for impairment of these receivables. A provision for impairment is established when there is objective evidence that the Company will not be able to collect all amounts due according to the original terms of receivables. The amount of provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers.
Inventories
Inventories consist of cellular telephone equipment, related accessories, telesurf equipment, prepaid telephone and internet cards and network equipment spares and are stated at the lower of cost (including costs incurred in bringing the product to its present location and condition) and estimated net realizable value.
Cost is determined on a first-in-first-out basis. Net realizable value represents the estimated selling price less anticipated costs of disposal.
Provisions are made against damaged, obsolete and slow moving items and are included in the cost of sales.
Exh 14.6-7
Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the statement of cash flows, cash and cash equivalent comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments, and bank overdrafts. In the balance sheet, bank overdrafts are included in current liabilities.
Revenue recognition
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised:
Sale of goods
Revenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer.
Rendering of services
Revenue from services consists of billing to customers for monthly subscription fees, airtime usage fees and one-time connection fees. Revenue is recognized on an accrual basis. Unbilled revenues for airtime usage and subscription fees resulting from service provided from the billing cycle date to the end of each month are estimated and recorded.
Phone subsidies
Discounts are given on phones sold as part of promotional activities and the excess of the cost of the phone over its sale price is included in marketing expenses.
Operating leases
Leases where substantially all the risks and rewards of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases net of any incentives received from the leasing company are charged to the profit and loss account on a straight-line basis over the lease periods.
Depreciation
Depreciation is provided on a straight-line basis on all property, plant and equipment at rates calculated to write off the cost of each asset evenly over its expected useful life as follows:
Building and leasehold improvements | 5 and 25 years | |
Network equipment | 3 and 5 years | |
Billing system | 3 years | |
Office equipment | 2 and 3 years | |
Motor vehicles | 3 years | |
Furniture and fixtures | 3 years |
Fully depreciated assets are retained in the accounts until they are no longer used and no further charge for depreciation is made in respect of these assets.
Exh 14.6-8
Deferred income tax
Deferred income tax is provided in full on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are recognized to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. The principal temporary difference arises from tax losses carried forward.
Deferred income taxes are calculated using a principal tax rate of 20%.
Foreign currencies
The Company maintains its accounting records in United States dollars, the functional and widely accepted and used currency in the Kingdom of Cambodia.
Transactions in currencies other than US$ are recorded at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in currency other than US$ are retranslated to US$ at exchange rates ruling at the balance sheet date. All exchange differences arising on settlement or restatement are recognised in the statement of income and retained earnings.
Risk management
Liquidity risk
The Company has incurred significant indebtedness but evaluates its ability to meet its obligations on an ongoing basis. Based on these evaluations, the Company devises strategies to manage its liquidity risk.
Credit risk
Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and cash equivalents, fixed deposits, letters of credit and account receivable. The counter-parties to the agreement related to the Company's cash and cash equivalents, fixed deposits and letters of credit are significant financial institutions. Management does not believe there is significant risk of non-performance by these counter-parties. Accounts receivable are derived from the provision of telecom services to a large number of customers, including businesses and individuals as well as local telecommunication companies and the related concentration of credit risk is therefore limited. The Company maintains a provision for impairment of trade receivables based upon the expected collectability of all trade accounts receivable.
Cash flow and fair value interest rate risk
As the Company has no significant interest-bearing assets, the Company's income and operating cash flows are substantially independent of changes in market interest rates.
The Company's interest rate risk arises from long-term borrowings. Borrowings issued at variable rates expose the Group to cash flow interest-rate risk. Borrowings issued at fixed rates expose the Company to fair value interest-rate risk. The Company evaluates the interest rate risk on an on going basis and devises strategies to manage its risk. At the year end, 57% of borrowings were at fixed rates. (2002: All borrowings are at variable rates)
Exh 14.6-9
3. INCOME
| 2003 US$ | 2002 US$ | 2001 US$ | |||
---|---|---|---|---|---|---|
Provision of telecom services | 63,971,714 | 48,709,773 | 38,341,791 | |||
Connection and subscription revenues | 5,386,586 | 6,143,076 | 10,085,332 | |||
Equipment revenues | 436,209 | 106,699 | 17,155 | |||
Other revenues | 203,045 | 247,874 | 472,397 | |||
69,997,554 | 55,207,422 | 48,916,675 | ||||
4. COST OF SALES
| 2003 US$ | 2002 US$ | 2001 US$ | |||
---|---|---|---|---|---|---|
Costs from the provision of telecom services | 29,464,698 | 14,842,001 | 12,157,370 | |||
Connection costs | 481,099 | 835,230 | 827,535 | |||
Telephone and equipment | 592,155 | 54,795 | 35,832 | |||
30,537,952 | 15,732,026 | 13,020,737 | ||||
The costs from the provision of telecom services include interconnection fees, roaming charges, lease lines, the consultancy costs of identifying, procuring, installing and commissioning new cell sites and revenue sharing.
Revenue sharing
The revenue sharing represents fee paid/payable by the company to the Ministry of Posts and Telecommunication of the Kingdom of Cambodia for the right to operate a GSM cellular mobile telephone network. This is calculated as a percentage of gross revenue of the company. The rates applicable are:
1996 to 1998 | 5% per annum | |
1999 to 2001 | 10% per annum | |
2002 onwards | 15% per annum |
The Company determines gross revenue as total revenue less charges by the Ministry of Post and Telecommunication of the Kingdom of Cambodia.
5. GENERAL AND ADMINISTRATIVE EXPENSES
| 2003 US$ | 2002 US$ | 2001 US$ | |||
---|---|---|---|---|---|---|
Depreciation expense (note 8) | 12,126,690 | 13,002,107 | 10,634,151 | |||
Personnel and travelling expenses | 1,778,604 | 2,302,762 | 2,433,081 | |||
Professional fees | 1,444,031 | 1,235,112 | 272,673 | |||
Rentals | 189,920 | 130,190 | 140,668 | |||
Amortization expense (note 9) | 4,167 | 55,833 | 225,000 | |||
Other operating expenses | 3,720,392 | 2,690,431 | 2,104,166 | |||
19,263,804 | 19,416,435 | 15,809,739 | ||||
Exh 14.6-10
6. NET FINANCE EXPENSES
| 2003 US$ | 2002 US$ | 2001 US$ | ||||
---|---|---|---|---|---|---|---|
Interest expenses | 586,359 | 852,428 | 1,141,061 | ||||
Foreign exchange (gain) / loss | (8,050 | ) | 10,633 | 6,750 | |||
Gains on disposal of fixed assets | — | (15,844 | ) | (34,304 | ) | ||
Interest income | (158,180 | ) | (21,796 | ) | (236,894 | ) | |
420,129 | 825,421 | 876,613 | |||||
7. INCOME TAX EXPENSE
Income tax expense is calculated on the basis of the current interpretation of the tax regulations. However, these regulations are subject to periodic variation and the ultimate determination of the income tax expense will be made following inspection by the tax authorities.
(a) Income tax expense
| 2003 US$ | 2002 US$ | 2001 US$ | |||
---|---|---|---|---|---|---|
Income tax expense | 2,782,082 | 2,685,502 | 2,088,933 | |||
(b) Reconciliation between income tax expense and accounting profit
| 2003 US$ | 2002 US$ | 2001 US$ | |||
---|---|---|---|---|---|---|
Accounting profit | 13,762,671 | 13,427,509 | 10,365,742 | |||
Tax expense at 20% | 2,752,534 | 2,685,502 | 2,073,148 | |||
Tax effect of non deductibles expenses | 29,548 | — | 15,785 | |||
Current income tax expense | 2,782,082 | 2,685,502 | 2,088,933 | |||
(c) Deferred tax
There is no deferred tax recognised as there are no temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Exh 14.6-11
8. PROPERTY, PLANT AND EQUIPMENT
| Building and leasehold improvement US$ | Network equipment US$ | Billing system US$ | Equipment, furniture & fixture US$ | Motor vehicles US$ | Capital work-in- progress US$ | Total US$ | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Cost | |||||||||||||||
As at 1 January 2003 | 565,690 | 60,619,999 | 2,844,531 | 3,536,247 | 598,696 | 7,210,936 | 75,376,099 | ||||||||
Additions | — | — | — | 321,434 | 50,445 | 19,609,266 | 19,981,145 | ||||||||
Transfers | 79,466 | 14,465,535 | 596,812 | 41,006 | — | (15,182,819 | ) | — | |||||||
Disposal | — | — | — | — | (13,000 | ) | — | (13,000 | ) | ||||||
As at 31 December 2003 | 645,156 | 75,085,534 | 3,441,343 | 3,898,687 | 636,141 | 11,637,383 | 95,344,244 | ||||||||
Accumulated depreciation | |||||||||||||||
As at 1 January 2003 | 172,806 | 34,487,168 | 2,344,422 | 2,791,233 | 484,961 | — | 40,280,590 | ||||||||
Charge for the year | 57,708 | 11,007,340 | 391,691 | 580,788 | 89,163 | — | 12,126,690 | ||||||||
Disposal | — | — | — | — | (13,000 | ) | — | (13,000 | ) | ||||||
As at 31 December 2003 | 230,514 | 45,494,508 | 2,736,113 | 3,372,021 | 561,124 | — | 52,394,280 | ||||||||
Net book value | |||||||||||||||
As at 31 December 2002 | 392,884 | 26,132,831 | 500,109 | 745,013 | 113,735 | 7,210,936 | 35,095,509 | ||||||||
As at 31 December 2003 | 414,642 | 29,591,026 | 705,230 | 526,666 | 75,017 | 11,637,383 | 42,949,964 | ||||||||
Cost of property, plant and equipment includes US$27,560,525 (2002: US$15,575,944) which has been fully depreciated.
9. INTANGIBLE FIXED ASSETS
| 2003 US$ | 2002 US$ | |||
---|---|---|---|---|---|
Cost | |||||
Cost to obtain license | 360,000 | 356,000 | |||
Amortisation | |||||
At 1 January | (355,833 | ) | (296,000 | ) | |
Cost to obtain license | (4,167 | ) | (59,833 | ) | |
At 31 December | (360,000 | ) | (355,833 | ) | |
Net book value | |||||
Cost to obtain license | — | 167 | |||
— | 167 | ||||
Exh 14.6-12
The cost to obtain the license amounting to US$ 360,000 represents US$ 300,000 payment to a consultant to assist in obtaining the license to operate broadband services throughout Cambodia incurred in 2001 and US$ 60,000 cost of Tango (092 prefix) license incurred in 2002.
10. PREPAID RENT
This represents rental deposit of US$192,000 equivalent to two years of rental fees on the lease of the main office located at House No. 33, Street 274, Chak Tu Muk, Daun Penh District, Phnom Penh, Cambodia. This deposit shall be applied on the last rental payment which falls on year 2020 and 2021.
Additional rental deposit of US$6,900 equivalent to six months rental fees on the lease of main office extension. This deposit shall be applied on rental payments which will fall due on 5 March 2010.
11. CASH AND CASH EQUIVALENTS
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Cash on hand | 223,408 | 198,814 | ||
Cash at bank | 11,567,192 | 6,685,145 | ||
11,790,600 | 6,883,959 | |||
12. TRADE AND OTHER RECEIVABLES
| 2003 US$ | 2002 US$ | |||
---|---|---|---|---|---|
Accounts receivables—airtime and subscription | 6,136,111 | 4,262,172 | |||
Accounts receivables—interconnect | 2,610,082 | 1,708,054 | |||
Accounts receivables—roaming | 637,868 | 1,106,591 | |||
Accounts receivables—telephone and equipment | — | 20,602 | |||
Other receivables | 155,056 | 176,684 | |||
9,539,117 | 7,274,103 | ||||
Less: Provisions for bad and doubtful accounts | (2,729,078 | ) | (2,382,326 | ) | |
Trade receivable—net | 6,810,039 | 4,891,777 | |||
Advances to suppliers | 99,936 | 37,940 | |||
Other advances | 37,394 | 125,649 | |||
6,947,369 | 5,055,366 | ||||
13. PREPAID EXPENSES
Prepaid expenses represent prepayments made for rentals, insurance, lease lines, interconnect fees, advertising, consultancy and other expenses.
Exh 14.6-13
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
SIM Cards | 231,790 | 137,618 | ||
Telesurf (internet) equipment | 120,821 | 1,033 | ||
Prepaid telephone and internet cards | 84,144 | 91,203 | ||
436,755 | 229,854 | |||
15. RECEIVABLE FROM RELATED COMPANIES
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Cambodian Broadcasting Services Ltd. | 4,905,830 | 1,440,927 | ||
Royal Telecam International Limited | 665,520 | 404,683 | ||
Royal Millicom Company Limited | 228,286 | 157,673 | ||
Millicom International Cellular | 91,039 | 91,279 | ||
Millicom Lao Co., Ltd. | 76,998 | — | ||
Millicom International London | 9,899 | 9,899 | ||
5,977,572 | 2,104,461 | |||
16. INTEREST-BEARING LOANS AND BORROWINGS
| 2003 US$ | 2002 US$ | |||
---|---|---|---|---|---|
Loan no. 1 | 2,717,040 | 5,434,080 | |||
Less: Current portion of interest-bearing loans and borrowings | (2,717,040 | ) | (2,717,040 | ) | |
— | 2,717,040 | ||||
Loan no. 2 | 2,000,000 | — | |||
Less: Current portion of interest-bearing loans and borrowings | (800,000 | ) | — | ||
1,200,000 | — | ||||
Loan no. 3 | 1,666,667 | — | |||
Less: Current portion of interest-bearing loans and borrowings | (666,667 | ) | — | ||
1,000,000 | — | ||||
Loan no. 4 | — | 4,994,840 | |||
Less: Current portion of interest-bearing loans and borrowings | — | (4,994,840 | ) | ||
— | — | ||||
2,200,000 | 2,717,040 | ||||
Maturity of interest-bearing loans and borrowings is as follows:
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Between 1 and 2 years | 2,200,000 | 2,717,040 | ||
Loan number 1
Loan no. 1 is obtained in accordance with the term loan agreement signed between CamGSM Company and ABN AMRO Bank, N.V. on 31 August 1999 to obtain total term loan facilities
Exh 14.6-14
amounting to US$ 9,523,105. The facilities were made for financing 100% of the capital expenditure for the extension of MobiTel GSM network in Cambodia pursuant to Indent nine. The rate of interest applicable to the outstanding balance shall be 0.5% plus LIBOR per annum. The Company shall repay the loan in instalments by repaying an amount equal to one-seventh of the amount of the loan every six months starting 31 August 2001. As at 31 December 2003, the outstanding balance for this term loan facilities amounts to US$ 2,717,040 (2002: US$ 5,434,080).
Loan number 2
The company entered into new loan agreement with Union Commercial Bank Plc ("UCB") in February 2003. The agreement with UBC was signed by Union Commercial Bank Plc and CamGSM Company Limited on 10 February 2003 for the aggregate principal amount of US$2,400,000. The loan was made to finance up to 100% of the capital expenditure for the expansion of Mobitel GSM network in Cambodia. The Company shall repay the loan in six equal semi-annual instalments starting 15 August 2003. The interest rate shall be a fixed rate of 11% and shall be calculated on the basis of 365 day year. As at 31 December 2003, the outstanding balance for this loan amounts to US$2,000,000.
Loan number 3
On 27 March 2003, CamGSM Company Limited and Singapore Banking Corporation Ltd (SBC), Phnom Penh signed a loan agreement for a commercial loan of US$2,000,000. The loan was made to finance up to 100% of the capital expenditure for the expansion of Mobitel GSM net work in Cambodia. The Company shall repay the loan in six equal semi-annual instalments. The Company shall pay the first instalment on 30 September 2003. The interest rate shall be a fixed rate of 10% and shall be calculated on the basis of 360 day year. As at 31 December 2003, the outstanding balance as at 31 December 2003 is US$ 1,666,667.
Loan number 4
On 28 December 2000, CamGSM Company Limited and Crédit Agricole Indosuez, Paris signed a loan agreement for a commercial loan of US$12,487,099. The loan was made to finance up to 100% of the capital expenditure for the expansion of Mobitel GSM network in Cambodia pursuant to purchase order number one dated 18 April 2000. The rate of interest applicable to the outstanding balance shall be 1.625% plus LIBOR per annum. The Company shall repay the loan in five equal instalments every six months starting 28 December 2001. As at 31 December 2003, this loan was fully repaid.
Fair value of financial liabilities
The carrying amount of the loans as at 31 December 2003 approximated its fair value.
Interest expense is calculated on the effective yield basis by applying the effective interest rate on the loan balances. Effective interest rate is the internal rate of return of the loans for that period.
17. TRADE AND OTHER PAYABLES
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Ministry of Posts and Telecommunications of the Kingdom of Cambodia | 14,664,613 | 12,382,338 | ||
Alcatel CIT | 9,350,146 | 2,634,690 | ||
Prepaid cards—unearned airtime revenue | 2,940,268 | 1,424,708 | ||
Subscribers' deposits | 326,850 | 391,751 | ||
Other accounts payable | 5,793,144 | 1,618,728 | ||
33,075,021 | 18,452,215 | |||
Exh 14.6-15
18. TAXES PAYABLE
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Profit tax payable | 3,686,136 | 3,926,988 | ||
Value added tax payable | 3,264,944 | 591,749 | ||
Other taxes payable | 330,774 | 200,751 | ||
7,281,854 | 4,719,488 | |||
19. DUE TO RELATED COMPANY
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Millicom International Cellular Luxembourg | 1,748,259 | 2,099,840 | ||
Royal Telecam International Limited | 2,784,779 | 1,462,165 | ||
4,533,038 | 3,562,005 | |||
The amount payable to Millicom International Cellular Luxembourg represents expenses incurred prior to the commencement of commercial operations of the Company, management salaries and down payment made to Alcatel CIT related to Indent one to the Frame Agreement on GSM network paid on behalf of the Company.
This amount is interest free with no fixed repayment terms.
20. ACCRUED LIABILITIES
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Accrued direct costs | 1,337,828 | 2,561,365 | ||
Accrued operating expenses | 756,066 | 410,780 | ||
Accrued interest expenses | 133,624 | 75,119 | ||
2,227,518 | 3,047,264 | |||
21. LEGAL CAPITAL
| Number of Shares | Amount US$ | ||
---|---|---|---|---|
At 31 December 2003 & 2002 | 5,000 | 5,000,000 | ||
The share capital of the Company is US$ 5,000,000 divided into 5,000 ordinary shares, each with a par value of US$ 1,000. All issued shares are fully paid.
Exh 14.6-16
22. COMMITMENTS
As at 31 December, the Company has the following commitments:
| 2003 US$ | 2002 US$ | |||
---|---|---|---|---|---|
Capital commitment for purchase of fixed assets | 8,082,746 | 1,158,568 | |||
Lease commitment for office rental | |||||
Due within one year | 482,952 | 440,420 | |||
Due within one to three years | 992,982 | 758,395 | |||
Due within three to five years | 954,349 | 424,979 | |||
Due after five years | 826,310 | 1,449,989 | |||
3,256,593 | 3,073,783 | ||||
The Company signed a Network Development Agreement ("the Agreement) with a local company for the identifying, procuring, installing and commissioning of new cell sites. In accordance with this agreement, the consultancy fee is calculated at 9% of revenue. For purposes of this Agreement, revenue represents all revenue less all charges by international gateway operators, interconnect and roaming costs and dealers commission. The agreement is valid until 31 December 2006.
23. RELATED PARTY TRANSACTIONS
(a) Corporate guarantees given
- 1.
- The term loan amounting to US$9,523,105 is guaranteed by Millicom International Cellular S.A. up to 50% of the credit facility.
- 2.
- The commercial loan signed on 28 December 2000 with a total facility of US$12,487,099 is guaranteed by Millicom International Cellular S.A. up to 50% of the credit facility.
- 3.
- The loan amounting to US$2,000,000 is guaranteed by Personal Gurantee from Neak Okhna Kith Meng and the Corporate Guarantee issued by Millicom International Cellular S.A, Luxembourg.
- 4.
- The loan amounting to US$2,400,000 is guaranteed by Personal Gurantee from Neak Okhna Kith Meng and the Corporate Guarantee issued by Millicom International Cellular S.A, Luxembourg.
(b) Transactions with Royal Telecam International Limited (RTI)
| 2003 US$ | 2002 US$ | ||
---|---|---|---|---|
Revenue | ||||
Marketing support | 142,853 | 157,224 | ||
Thaicom satellite lease | 39,200 | 40,800 | ||
Outsourcing activities | 20,992 | 49,850 | ||
203,045 | 247,874 | |||
Cost of sales | ||||
Airtime costs and leased line | 3,529,084 | 3,755,000 | ||
3,529,084 | 3,755,000 | |||
The revenue from RTI includes interconnect fee, marketing support, outsourcing activities and sublease of 1 Mhz Thaicom Satellite.
Exh 14.6-17
- •
- Marketing support is calculated at 5% of gross revenue of RTI related to calls made by CamGSM Company Limited's customers.
- •
- Outsourcing activities represents staff support for helpline and engineering. Helpline is charged at 30 cents per minute of call center support to RTI's customers. Engineering support is calculated at US$ 20 per hour on actual time charges of engineers assisting RTI.
- •
- The satellite lease line is based on cost plus 5% margin.
The airtime costs are calculated on air time usage at the rate prescribed by the Ministry of Post and Telecommunication.
(c) Transactions with MIC Group
Technical assistance is provided by MIC Cellular SA. Total charged for the year amounts to US$ 1,000,000 (2002: US$ 1,006,000).
24. RECONCILIATION TO U.S. GAAP
The financial statements of the Company have been prepared in accordance with IFRS. If the financial statements had been prepared under accounting principles generally accepted in the United States of America ("U.S. GAAP") the following principal differences would arise:
- a)
- Under IFRS, the Company recognizes revenues for connection fees when the customer is connected and able to use the service.
- b)
- Under IFRS all borrowing costs are expensed as incurred.
Under U.S. GAAP, the Company applies the guidance in Staff Accounting Bulletin No. 101 (SAB 101),Revenue recognition in Financial Statements, and Staff Accounting Bulletin No. 104 (SAB 104),Revenue recognition. Under this guidance, the Company evaluates each element of a customer arrangement to determine the appropriate period for recognition of revenues. Revenues on connection fees are deferred and recognized as revenues on a pro rata basis over the estimated life of the customer relationship. In 2003 management changed its estimate of the life of such relationship from 1 to 2 years and applied this change prospectively. The effect on net income of this change in 2003 is a loss of US$(377,000).
Under US GAAP, interest cost is included as a component of historical cost of assets acquired or constructed (1) for a company's own use or (2) for sale or lease that are constructed as separate and discrete projects. The Company acquires and constructs network equipment and other assets for its own use. Accordingly, under US GAAP the Company adjusts net income to capitalize a portion of interest cost from interest bearing loans and borrowings, net of incremental depreciation expense for property plant and equipment, which includes amounts previously capitalized.
Reconciliation of Net Profit for the year:
The above item gives rise to the following differences in net profit recorded under U.S. GAAP:
| 2003 US$ | 2002 US$ | 2001 US$ | |||
---|---|---|---|---|---|---|
Net profit for the year reported under IFRS | 10,980,589 | 10,742,007 | 8,276,809 | |||
Items (decreasing) increasing reported profit: | ||||||
Recognition of connection fees | (683,000 | ) | (158,000 | ) | 96,000 | |
Capitalization of interest | 146,890 | (160,393 | ) | 248,794 | ||
Net profit under U.S. GAAP | 10,444,479 | 10,423,614 | 8,621,603 | |||
Exh 14.6-18
Shareholder's Equity Reconciliation:
| 2003 US$ | 2002 US$ | |||
---|---|---|---|---|---|
Shareholders' equity under IFRS | 16,613,396 | 13,132,807 | |||
Items (decreasing) increasing reported equity: | |||||
Recognition of connection fees | (745,000 | ) | (62,000 | ) | |
Capitalization of interest | 1,182,252 | 1,035,362 | |||
Shareholders' equity under U.S. GAAP | 17,050,648 | 14,161,969 | |||
25. SUBSEQUENT EVENTS
New facilities
Loan with Society de Promotion et de Participation Por La Cooperation Economique S.A (PROPARCO)
On 8 December 2003, CamGSM Company Limited and PROPARCO signed a loan agreement for a commercial loan of US$8,500,000. The loan was made to finance up to 100% of the capital expenditure for the expansion of Mobitel GSM network in Cambodia. The loan is guaranteed by the Corporate Guarantee issued by Millicom International Cellular S.A, Luxembourg.
Interest payable shall be calculated at USD LIBOR three months plus the margin based on rates published two Business Days prior to the first day of each Interest Period. Interest is payable on the 16th of January, 16th of April, 16th of July and 16th of October each year. The Company shall repay the loan in seventeen equal quarterly payments due and owing on the Payment Dates commencing from 15 January 2005.
No draw down has been made as at 31 December 2003.
Opening of Stand By Letter of Credit (SBLC)
On 27 February 2004, the Company opened a SBLC with Credit Agricole Indosuez, Paris amounting to US$ 1,177,020. The SBLC is signed in favor of Society de Promotion et de Participation Por La Cooperation Economique S.A. (PROPARCO) as a security for the credit facility signed between the Company and PROPARCO. Simultaneously, the Company have a fixed deposit at Credit Agricole Indosuez for the same amount.
Changes in the Law on Taxation
Beginning from 1 January 2004, the specific tax on local and international calls has increased, as follows:
- i)
- specific tax on international calls has increased from 2% to 10%, and
- ii)
- local calls are now subject to 10% specific tax.
Specific tax is calculated on gross airtime revenue. Specific tax for 2004 will approximately be US$ 4.5 million to US$ 6 million.
Exh 14.6-19
CAMGSM COMPANY LIMITED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
CONTENTS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
CAMGSM COMPANY LIMITED STATEMENTS OF INCOME FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
CAMGSM COMPANY LIMITED STATEMENTS OF CHANGES IN OWNER'S EQUITY FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
CAMGSM COMPANY LIMITED BALANCE SHEETS AS AT 31 DECEMBER 2003 AND 2002
CAMGSM COMPANY LIMITED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001
CAMGSM COMPANY LIMITED NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2003, 2002 AND 2001