BOTSWANA TELECOMMUNICATIONS this report botswana telecommunications corporation botswana telecommunications corporation group highlights group highlights group financials

  • Published on
    06-Feb-2018

  • View
    220

  • Download
    4

Transcript

BOTSWANA TELECOMMUNICATIONSCORPORATION ANNUAL REPORT 2009timelinesbOTswANA TELEcOmmUNicATiONs cORPORATiON1999BTC Group records an all time high profit of Pula 75.0 million. BTC Group enters into interconnect and backhaul network agreement with mobile operators. Customer connections increased to 144 195 lines.2001Despite resolution of billing system problems, net profit declines to Pula 2.2 million. Wireless technology introduced in the local loop. BTC Group realises that it has lost significant market share to mobile operators. Introduces pre-paid technology.2003VSAT technology introduced. Measures to improve technology and quality introduced2005BTC adopts Intelligent Network Platforms strategy and refocuses its strategy based on broadband data. Broad band is rolled out with ADSL in Gaborone. Profitability returns to 139.0 million. 2007BTC Group awarded a Public Telecommunications Operator licence. 2000BTC Group looses market share. The new billing system creates doubts. BTCs image slide. Mobile operators sky rocket with their connections.2002IDI of Ireland is invited to steady BTC Group. Restructuring commences with 600 staff retrenched, staff numbers dropping to less than 1,000. Government engages BTC Group for its Rural Development Programme (Nteletsa Project). BTC Group records an all time high loss of Pula 39 million2004Profitability returns. Total restructuring cost Pula 162.0 million. International connectivity established through SAT 3 through South Africa. BTC Group endorses Government of Botswanas ICT plan Maitlamo Initiatives.2006Telecommunication liberalisation announcement by the minister responsible for Science, Communication and Technology.2008BTC Group launches its mobile service under the brand name be Mobile2009Aggressive rollout of the beMOBILE Network. Successful launch of converged product offering and expansion of broadband to entire Botswana contentsCorporate Profile 1Organisational Structure 2Vision and Mission 3Board of Directors 4Executive Management 6Chairmans Report 8Chief Executive Officers Report 1210 Year Review 16Business Review 18Corporate Governance 30Enterprise Risk Management 50Brand Management 56Regulatory Report 60Human Resources Review 64Sustainability Reporting 68 Corporate Social Responsibility 74 Environmental Relations and Issues 76 Economic Performance 78 Customer Relations 80 Community Relations 82 Employee Relations 84 Supplier Relations 88 Financial Review 102Caution Regarding ForwardLooking Statements 104Financial Review andManagement Discussion 106Report of The Finance andAudit Committee 131Annual Financial Statements 134botswana telecommunications corporationabout this reportbotswana telecommunications corporation botswana telecommunications corporationgroup highlightsgroup highlightsgroup financialsfor the year ended 31 March 2009 (Pula millions) GroupEBIDTAupPula89.4millionto Pula268.7million ProfitfortheyearPula118.9millionnet income operating revenuesale of Goods and services ebidta - net operating cash Flowearnings before interest Depreciation and taxationtotal assets Recommendingdividendof141.4thebe pershareup104.0%. RobustbalancesheetatPula1.65billion Weareconfidentaboutourprospectsfor2009/10 2008/09 2007/08 change main driversSales 835.9 799.2 + 4.6% New sources such as mobile, data, networks increasing together with stabilisation of traditional fixed and voice lines. EBIDTA 268.7 179.3 + 60.5% An increasingly efficient business with margin progressions. Gross margin at same level as at 53.0 percentage points. Operating costs as a percentage of sales down 7.8 percentage points to 88.7%. EBIDTA margin up 9.7 percentage points. Depreciation and amortisation 151.7 152.9 - 0.8% Managed capital expenditure Finance income 45.9 59.3 - 22.6% Lower cash balances Finance expense 21.2 29.2 - 27.4% Lower loans Net profit / income 118.9 58.3 + 104.1% Reduced restructuring costsdumela! once againBTC today is a company confidently moving forward, thanks to the essential changes we made since 2006. We have now become a leaner company striving to be more responsive to our countrys and customer needs. We are more than ever before determined to realise our goal: to be the communications company of choice.about this annual reportIt is that time of the year again when we report on our performance for the financial year. This is our twenty-ninth annual report since our humble beginning! In this report, we invite you to share our successes, failures, difficulties, achievements and our dreams for the future, the way we see it. Despite the difficult trading conditions in Botswana resulting from the world economic down turn, we are pleased to report yet another milestone performance for the year 2008/09.here are some of the highlights for the year: SuccessfullaunchofbemoBIlE,ourmobile servicecoupledwithonetariffstructure ExpansionofbroadbandtoentireBotswana launchofNteletsaII Sustainedfinancialperformance1601401201008060402001000800600400200030025020015010050017001650160015501500145014001350PulamillionPulamillionPulamillionPulamillion05Yearended31march Yearended31marchYearended31march Yearended31march05 05 0508 08 08 0807 07 07 0706 06 06 0609 09 09 09Other sales & serviceTelephone - InternationalData & private circuitsCustomer premises equipmentTelephone - NationalLocal & access servicesstrategic initiativesand business targetsbotswana telecommunications corporationarea strategic initiatives achievements in 2008/09 business target For 2009 / 10Services Increase revenue streams by Enhanced broadband services; Entry into mobile market and new Strengthen our support for BTC outlets; Set up customer promoting customer retention tariff plans; Free weekend calling for customers; Reduced rate centres where they can get assistance; Offer batteries for high through flat rate schemes; for, between fixed and fixed, and fixed and mobile. usage customers; Focus on customer lifestyle and establish Improve bundled packages; long-term value plays; Customer satisfaction surveys. Special billing plans; Enhanced handsets subsidies. Network Continue building a superior Expanded metropolitan network; Currently working on Nteletsa II Continue with network availability and quality; Better network network to handle expanded data in northern Botswana; Improved network resilience and reliability management; Developed managed data services. handling ability. through rigourous testing (99.9 % availability). Tariff New billing plans (flat structures Introduced bundled tariff packages such as dual play By offering further discount services foster long-term for longer-term commitment); (voice and data) triple play (voice, data and mobility) etc. relationship with our customers; Improved handsets which Bundled tariff plans; Loyalty Upgraded internet packages. can handle multiple sims. benefits; Handset subsidisation. NewBusiness Continuously explore new traffic Mobile services; Additional broadband customers. Mobile services; Additional broadband customers. insensitive growth areas with other service providers such as banks, shopping outlets. operatingcosts Reduce technology and handset Further headcount reduction; Rationalised expenditure; Opex to revenue down - Expenditure to match businesscontainment costs. Shared services. outcomes and strategies with further reductions in real terms; Further savings in opex through better process and accountability; Shared services.Capital Continue to build superior Rationalised capital expenditure and generate cash for investment. Capital expenditure will continue to maintain quality ofexpenditure network to achieve service networks. differentiation and competitive advantage. Transformation Continue business transformation. Business demonstrated resilience; Hold voice revenue stream. One BTC programme.Our HistOryBTC Group is a public corporation constituted under the BTC Act 1980 and later amended in 1996. Its mandate is to provide national and international telephony on sound commercial lines.From its humble beginning in 1980 with about 6,500 access lines provided mostly by electro mechanical switches linked by analogue radio microwave systems, today it boasts of more than 144,000 access lines all connected by digital switches with thousands of kilometers of fibre optic and digital microwave technology. BTC Group provides services nationally. It has two regional offices, four districts offices and a number of customer care centres. It also publishes the Botswana Telephone Directory and provides a countrywide directory assistance service.BTC Group is run by a Board, appointed in terms of the BTC Act, supported by an Executive Management Committee. BTC Group is known for its corporate governance practices and is in the forefront of fair corporate reporting in Botswana.Our BusinessBTC Groups core business is voice and data services through a broad spectrum of modern network platforms. Currently BTC Group is the only fixed line operator in Botswana. BTC Group provides both national and international voice telephony both fixed line and mobile, toll free services, public payphones, internet wholesale access, data services including leased circuits, private wires, very small aperture terminals (VSATs), managed networks and switched data services, customer equipment etc. In 2008, BTC Group commenced a mobile telephony service under the brand name beMobile. BTC Group provides internet and some managed data services through its subsidiary, Botsnet. BTC Groups strategy is sharply focused on leveraging its leadership in a converged fixed mobile network in three growth areas: voice, data and internet. New services will focus on fixed / wireless / mobile / internet convergence, as well as virtual private networks and advanced data services.BTC Group is organised on business and functional lines with decentralised operations in over seventeen offices. BTC Group also supplies the backbone network to facilitate cellular communications throughout the country. An active participator in the development of telecommunications in Botswana through its support for Government ICT policy the Maitlamo Initiative - it takes its role seriously as a revered and responsible corporate citizen.corporate profilebotswana telecommunications corporation10000111011000111BTC ANNuAlrepOrt200911100011011100002 BTC ANNuAlrepOrt2009botswana telecommunications corporationorganisational structurememBers Of tHe BOardCHief eXeCutiVe OffiCer finanCe and auditCOmmitteeHuman resOurCesCOmmitteegrOup general managerCOrpOrate affairsgrOup general managerfinanCegrOup general managerteCHnOlOgygrOup general managerOperatiOnsgrOup general managerCOmmerCialHead Of prOgramme managementHead Of netwOrk seCurity and fraud managementHead Of internal auditCOmpany seCretarygeneral managerfiXedgeneral managerbemOBilegeneral managerBrOadBandtenderCOmmittee30000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporationOur COrpOrate VisiOnTo be the communications company of choice focused on delivering exceptional value to our customers, employees and shareholders.Our Valuesrespect and trustWe respect and trust each other, treating each other as we would like to be treated regardless of differences.Ownership and responsibilityWe take ownership of our objectives within the company, accepting responsibility for our actions at all times.teamworkWe operate as indivisible teams at a leadership, functional and cross functional level to achieve corporate strategy.performanceWe are driven to perform in such a way that the commercial and operational goals of the company are achieved.leadershipOur leaders are the role models of the culture we desire.CustomerEverything we do begins and ends with the customer.Our missiOnTransform Botswana Telecommunications Corporation into the regional state-of-the art Telecommunications Services Provider, while optimising our overall value and growth opportunities as viewed by our customers, stakeholders and future partners.Protect and leverage the legacy investment in BTC Group by implementing strategic commercial and network initiatives designed to converge fixed, mobile, and broadband services within a seamless, synergistic, and cost-beneficial environment, which is comparable to any successful regional telecommunications operator.vision and mission11100011011100004 BTC ANNuAlrepOrt2009Board of directorsbotswana telecommunications corporation14253650000111011000111BTC ANNuAlrepOrt20091. mr. leOnard makwinJachairman (non-executive)Mr. leonard Makwinja was first appointed Chairman of the BTC in April 2006, to lead the strategic direction of the corporation. He holds a Master of Science Degree in Industrial and Administrative Sciences from City university, uK and Bachelor of Science in Mineral Exploration (Honours) from the university of Cardiff, uK. His extensive career in management spans over fifteen years, including as the General Manager of Orapa and letlhakane Mines and as the Deputy Managing Director of Debswana Mining Company until July 2007. Mr. Makwinja is currently a private management consultant, and is a member of the African Banking Corporation Board of Directors, as well as a member of the Y- Care Board, a non-governmental agency.2. mr. tHapelO lippe chief executive officer (ex-officio member) appointed october 2008Mr. Thapelo lippe was appointed the Chief Executive Officer of BTC in October 2008. Mr. lippe has over 18 years of experience and has held positions ranging from Microsoft General Manager (13 countries), Orange Botswana CEO / Country Manager, Orange Botswana CIO, international consultancies; had multi-region directorial responsibilities managing diverse teams and projects within varying business sectors; and, has had full practice / organisation management responsibilities in service delivery. He continues to hone his managerial, technical, and financial skills resulting in a proven track record in delivering complex solutions / services and products in a timely and profitable manner; meeting and often exceeding shareholder and market expectations.3. mr. ratsela mOOketsimember (non-executive)Mr. Ratsela Mooketsi joined the Board in April 2006. He is currently Director of Information Technology, university of Botswana. As a member of the BTC Board, Mr. Mooketsi is currently the Chairman of the Tender Committee. Mr. Mooketsi holds a Master of Information Technology from The university of Newcastle - Australia; Bachelor of Engineering (Honours) in Telecommunications Systems Management and Design (Anglia Polytechnic university); and Bachelor of Science from the university of Botswana.He joined the university of Botswana in 1994 as Network Manager, and then became Director of Information Technology in 2000. He has twenty one years experience in providing leadership in information technology and IT-based services. Mr. Mooketsi, is an Associate Member of The Institute of Engineering and Technology (IET, uK). 4. mr. maBua maBuamember (non-executive)Mr. Mabua Mabua, the Deputy Permanent Secretary responsible for ICT, in the Ministry of Communications, Science and Technology was first appointed to the Board in April 2006. He has also worked as a Director of the Department of Telecommunications and Postal Services in the same ministry. He is a telecommunications engineer, and holds a Bachelor of Engineering (honours) in Electrical Systems from Colchester, uK. Prior to joining the Ministry, he worked at BTC in various technical positions including as Chief Engineer.5. mrs. serty leBuru (non-executive) appointed may 2009Mrs. Serty leburu joined the Board in May 2009. An accountant by profession; she is currently Executive Director- Finance and Chief Operating Officer at Standard Chartered Bank. Prior to joining the bank, she had been part of the Diamond Mining Business for 17 years. She worked at both Jwaneng mine and Botswana Diamond Valuing Company with a strong focus on commercial and business issues. Mrs. leburu graduated with a Bachelor of Commerce from the university of Botswana and later acquired a professional qualification, CIMA.6. ms. gOitseOne mOsalakatane (non-executive) appointed may 2009Ms. Goitseone Mosalakatane joined the Board in May 2009. The human resource management practitioner is Managing Director of BothoPele Management Consultants. She served as the Country Director Institute of Development Management (Botswana). She has worked for Botswana Housing Corporation (BHC), formulating all aspects of human resource policies. Ms Mosalakatane obtained a Bachelor of Arts in Social Sciences in Public Administration and Political Science at the university of Botswana. She holds a Master of Science in Human Resource Development from the university of Manchester. 7. mr. OaBile maBusa (not in picture)member (non-executive)Mr. Oabile Mabusa was appointed to the Board in 2001. He is an economist and currently works at Bank of Botswana as Director in Charge of Banking Supervision. He has also held a number of senior positions in the Ministry of local Government. He graduated with a BA (Sociology and Public Administration) at the university of Botswana and Swaziland. He also holds a post graduate Diploma in Quantitative Analysis and an MSC in Public Policy Analysis from the university of Southern California, uSA.8. mr. pHadZHa kgalemang (not in picture)member (non-executive)Mr. Phadzha Kgalemang was appointed to the Board in November 2007. Mr. Kgalemang, a lawyer by profession was admitted to practice into the courts of Botswana in 1993 having been a prosecutor since 1975. He is the founder of and managing partner of Kgalemang and Associates, one of the premier law firms established in 1996 and based in Francistown.9. mr. miCHael mOtHOBi (not in picture) member (non-executive)Mr. Michael Mothobi was appointed to the Board in October 2007. He is an attorney, admitted and enrolled into the Courts of Botswana since 1979. He was formerly the coordinator of and lecturer in the Clinical legal Education Programme, Department of law at the university of Botswana. He is also an associate member of Botswana Association of Arbitrators and a member of the Board of Trustees of Ditshwanelo - an NGO which champions human rights. Mr. Mothobi is currently a lecturer of law at the university of Botswana. 11100011011100006 BTC ANNuAlrepOrt2009executive managementbotswana telecommunications corporation159261037114870000111011000111BTC ANNuAlrepOrt20091. tHapelO lippe ChiefExecutiveOfficer (ex-officiomember)AppointedOctober20082. keaBetswe segOle GroupGeneralManager,Technology3. riCHard malikOngwa GroupGeneralManager,CorporateAffairs4. lOiC desCamps GroupGeneralManager,Commercial5. ngele ngele ActingGroupGeneralManager,Finance6. BamBinO masOkO GeneralManager,Fixed7. antHOny masunga GeneralManager,beMOBILE8. grant sOn GeneralManager,Broadband9. CHristOpHer diswai Head,ProgrammeManagement10. Jennifer duBe CompanySecretary11. annO tsHipa Head,MarketingandCommunicationsbotswana telecommunications corporation11100011011100008 BTC ANNuAlrepOrt2009chairmans reportbotswana telecommunications corporationbtc Group has developed a new business model that will fit the maturing botswana communications market and we are steadfastly implementing plans to achieve our goals. 11100011011100008 BTC ANNuAlrepOrt2009botswana telecommunications corporation90000111011000111BTC ANNuAlrepOrt2009As Chairman of the BTC Board, it gives me great pleasure to humbly present the Corporations financial report for the 2008/09 financial year. The year under review was an exceptionally eventful one for the Corporation beginning with the launch of our new beMOBIlE service in Botswana. Over the past decade, mobile phones have brought about major changes in how people communicate. We have seized the opportunity to penetrate the industry. I am extremely happy to report that we have managed to surpass all our forecasts and expectations for the year, and have become a force to be reckoned with. Botswanas mobile market has matured and is estimated to have around 1.5 million subscribers. While competition to acquire subscribers has intensified, the diversification of customer values and lifestyles are generating a variety of growth opportunities. We are of course excited about these opportunities.Increased competition resulting in falling prices, rising data speeds and constant innovation continue to make communications intensively competitive. It has been paramount that we continue to serve every sector of Botswanas economy, from mines to finance, banking to health, transport to logistic, rural to urban, Government to residential with relevant products and services.Towards the last quarter of 2008 and the first quarter of 2009, we faced additional challenges that resulted from the world economic slowdown, which led to traffic decline. The economic slowdown is causing business and personal customers to shop around for the best value. We have responded to this new challenge by offering customers complete packages that meet their needs and deliver great value for money.Two of our lines of business managed network and data services continue to perform well. Broadband remains one of the most popular wideband service for people in Botswana and trends suggest that the Corporation will continue to grow as more and more people take up the service. In the fixed line and mobile market, BTC Group has almost achieved a population coverage ratio of 80% by end of June 2009. In the mobile network, we have completed 86 base stations with further 74 in the pipeline to be commissioned over the next six months. By then, we would have covered major parts of the country. This presents a great opportunity for us to take on the competition on an even footing! tOwards a new Business mOdelBTC Group has developed a new business model that will fit the maturing Botswana communications market. We are steadfastly implementing plans to achieve our goals. Convergence of the network and data markets, together with our targeted expansion of mobile and fixed telephony products, will form the corner stone of our overall 4 point strategy, paving the way for sustainable growth in the future. We believe we have identified a clear path to a profitable and sustainable business model, building on a strong market position.priVatisatiOnThe privatisation effort, initiated in 2006 was postponed in 2008, due to unfavorable capital markets. Deteriorating global capital markets mean privatisation transaction can not take place in the present time. Even as the transaction is postponed temporarily, the Corporation is still undergoing a fundamental transformation towards eventual privatisation.finanCial perfOrmanCeA sound financial base is fundamental for implementing business strategies. Execution of the strategic plan by BTC Group has resulted in steadily improving financial and operating results. The progress is supported by a sound overall financial strategy, based on strong liquidity and our ability to generate free cash flow to fund our financial obligations.90000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000010 BTC ANNuAlrepOrt2009chairmans report (continued)botswana telecommunications corporation111000110111000010 BTC ANNuAlrepOrt2009COrpOrate CitiZensHipBTC Group is a communications company which operates throughout Botswana. We are proud to serve customers that range from large multinationals and public entities to small and medium business sector and thousands of families in the most rural parts of of the country. BTC is committed to contribute positively to the communities in which we operate in a socially responsible manner. With our technologies and practices, we will help meet the challenge of global integration, and improve the lives of people to promote a more inclusive society and enable sustainable economic growth.We commit a minimum of 0.5 % of our profits to activities that support societies. We invested a total of Pula 1.90 million during the past financial year. We believe that being a recognised leader in the field of corporate responsibility contributes to shareholder value. It builds our brand and encourages the best people to work for BTC. It is also a powerful reason for customers to do business with us and stay loyal to the Group.BOard gOVernanCeDuring the year under review, one of our Directors Ms Shirley Segokgo retired from the Board. Shirley had been a member of the Board since April 2006 and provided valuable guidance to the Corporation during a period of turmoil. On behalf of the Board, I would like to thank her for impeccable service rendered by her to the Corporation. Two new additional members, Ms Goitseone Mosalakatane and Mrs Serty leburu, joined the Board with effect from May 2009. I welcome them to the Board and look forward to working with them in the future. In addition Mr Thapelo lippe was appointed Chief Executive Officer of BTC effective from 1st October 2008. We look forward to his contribution especially at a time when competition is high and only innovative leadership will be successful. There has also been significant changes in the executive committee and on behalf of the Board. I congratulate the newly appointed executives and wish them well.COnClusiOnWe have a prudent plan and a clear strategy in place to achieve our operational and financial objectives, all of them aimed at creating value. I would like to thank all our stakeholders for their understanding and support during the time of change and turmoil in the local economy.l m makwinJaChairman of the Boardbotswana telecommunications corporation110000111011000111BTC ANNuAlrepOrt2009 110000111011000111BTC ANNuAlrepOrt2009convergence of the network and data markets, together with our targeted expansion of mobile and fixed telephony products, will form the corner stone of our overall 4 point strategy, paving the way for sustainable growth in the future. botswana telecommunications corporation111000110111000012 BTC ANNuAlrepOrt2009chief executiveofficers reportbotswana telecommunications corporationbtc is developing a new business model that will fit the maturing botswana communications market and we are steadfastly implementing them to achieve our goals. 111000110111000012 BTC ANNuAlrepOrt2009botswana telecommunications corporation130000111011000111BTC ANNuAlrepOrt2009I am honoured to have been appointed as the Chief Executive Officer (CEO) of BTC on 1st October 2008. My appointment coincides with a significant turning point in the history of communications in Botswana. The challenge will prove to be daunting but no doubt exciting considering a liberalised sector and the ability to leverage technologies towards converged solutions / products; while reducing Total Cost of Ownership (TCO), benefiting the nation via affordable pricing. We are at the centre of a global communication revolution. Current technological breakthroughs will continue changing peoples lives and possibly their lifestyles; including the way we do business as well. As a 100% citizen owned company, it is our responsibility to exploit technological innovation and improvements bringing added value to you, our customers.As the CEO, it is my responsibility to demonstrate and reap the full potential of our organisation by aligning the business to customer needs - improved customer service, service delivery and the introduction of pertinent products/solutions - realising BTC Groups vision of being the communications company of choice. new Business mOdel fOr BtCThe nations highly developed mobile sector is negatively impacting growth in traditional product based revenue; growth will be highly limited. New products and value propositions are the order of the day to retain and maintain a loyal customer base while attracting new customers. BTC Group is reviewing new lines of business positioning the organisation for current market needs. We are shifting from a BTC that provided traditional voice services to a company that is to provide flexible and dynamic mobile and broadband services; and introduce a managed services portfolio. Again, providing a positive all round customer experience is at the core of the change underfoot; the door on mediocrity is closed.One COmpany But many prOduCt linesConsolidation is the order of the day. No longer will BTC Group deliver different product lines through separate companies. The global recession and the competitive landscape calls for reduced operating expenses (OPEX), fleet footed management decisions and a collaborative Team approach efficiently delivering products and services. One stop shops are in line for our present and future customers. Integration into fewer units also facilitates considerable gains in the brand strategy. Optimised workforce allocation, will streamline customer contact points and ensure uniform quality of service irrespective of the service / product. lets nOt fOrget Our strengtH tHe netwOrkThe on time, below budget successful completion of the Trans-Kalahari (national) fiber ring provides a bar none competitive network advantage that will play a significant role in future business development; thereby increasing our Returns of Capital Employed (ROCE). High quality networks are a prerequisite for the provision of national services and are a solid foundation for growth initiatives. The construction of high quality networks is not, itself, a business goal; rather, it is a necessary condition for meeting customer needs. With the introduction of high speed universal Mobile Telecommunications Systems (uMTS) broadband services, customers will enjoy the full potential of the internet whether at home or on the move. The network infrastructure is scalable in order to meet the expected explosive growth in (customer) traffic. The introduction of the Brobe offering, as an example, are already providing the most cost effective internet speeds in the market thanks to BTC Groups redundant networks.130000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000014 BTC ANNuAlrepOrt2009chief executiveofficers report (continued)botswana telecommunications corporation111000110111000014 BTC ANNuAlrepOrt2009Rationalising the systems and networks with the view to accelerate wireless technologies coupled with upgraded fiber optic infrastructure towards broadband throughput is core to our delivery strategy. BTC Group is currently striving for continuous efficiencies in network operations, workforce management and security applications. mOBile telepHOny as part Of Our new strategyDuring the year under review, BTC Group introduced its mobile telephony service under the beMOBIlE brand. No doubt a challenging time to introduce mobile services what with a liberalised sector, an all but saturated market and the stagnant economy. That said, the business unit has beat all performance metrics clearing the set subscriber base by more than 20% thanks to tenacity, innovation and supportive customers. BTC Group will continue investing heavily in beMOBIlEs services ensuring nationwide penetration including rural Botswana facilitated by the Nteletsa II initiative; and a revamp of Nteletsa I. The flexible Internet Protocol (IP) based Intelligent Network (IN) billing platform employed will facilitate innovative and many first to market solutions / products such as the beFREE offering. More flexible and value added convergent, bundle offerings are in the pipeline. CustOmers at tHe Centre Of Our strategyThe BTC Group Team is dedicated to improving customer satisfaction. We are aware that in an increasingly competitive and demanding marketplace, enhancing every possible interaction we have with our customers, both current and future, is instrumental towards building long-term relationships.The plan is to regroup, restructure and re-energise the organisation focusing on the goal of becoming the communications company of choice. We at BTC Group are focused on delivering exceptional value to our customers, employees and shareholders.COst struCtureWith an unfavourable market economy, it is imperative retail and wholesale pricing is reduced maintaining a foothold in the hyper competitive sector. Per the strategy, management is reengineering the entire BTC Group towards a profitable streamlined, cost effective, customer value adding organisation by leveraging human capital and technology; thereby enhancing affordability. finanCial perfOrmanCeThe above strategies, launched during the second half of the year, are testament to a pertinent, well crafted strategy. BTC Group achieved revenues of P882 mil (versus a budget of P868 mil) with Operating Expenses of (OPEX) of P762 mil (versus a budget of P803 mil) producing Earnings Interest, Depreciation and Tax and Amortisation (EBIDTA) of P248.7 mil (versus a budget of P212.8 mil) and Net Profit After Tax (NPAT) of 118.9 mil (versus a budget of P64 mil). It is paramount to note the results above were realised only in second half of the year under review. Below is a comparison of first half and second half performance illustrating the gains made in six (6) months:first Half (april 2008 - september 2008) Revenue: P399.6 mil (vs. budget of P438 mil) down 9% OPEX: P182 mil (vs. budget of P172 mil) overspending by 8% EBIDTA: P106 mil (vs. budget of P129.7 mil) down 18% NPAT: P63.9 mil (vs. budget of P50.6 mil) exceed by 26%seCOnd Half (October 2008 - march 2009) Revenue: P436 mil (vs. budget of P383 mil) exceeded by 14% OPEX: P156.9 mil (vs. budget of P223 mil) savings of 30% EBIDTA: P142.6 mil (vs. budget of P83 mil) exceeded by 72% NPAT: P55mil (vs. budget of P13.4mil) exceed by 310%botswana telecommunications corporation150000111011000111BTC ANNuAlrepOrt2009 150000111011000111BTC ANNuAlrepOrt2009COnClusiOnThere have been many challenges ranging from leadership, labour and staff moral issues; and, court cases against the organisation; however there is no challenge too great for achieving our goals on behalf of our shareholders Batswana.With the Management Team all but complete, BTC Group will continue to root out inefficiency, poor customer service and all negative legacy pockets throughout the organisation; enabling the renaissance of the Group via cost effective, innovative solutions, products and services.It is my privilege and honour leading BTC Group; and over the next year, new management and respective divisions will work tirelessly toward delivering customer promise and shareholder value!t l lippeChief Executive Officerten year reviewbotswana telecommunications corporation111000110111000016 BTC ANNuAlrepOrt2009 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000Statementofoperationaldata(P000s) Saleofgoodsandservices 835,900 799,174 743,843 685,957 641,809 624,638 615,425 605,001 610,683 556,885 Cost of services excluding depreciation 244,017 217,534 214,361 203,015 176,323 170,834 199,051 190,972 212,475 162,842 Selling and distribution costs 12,349 8,599 9,607 9,087 3,767 2,774 2,390 3,321 3,980 Employee costs 196,274 190,557 182,027 170,170 158,581 141,326 139,660 134,932 122,775 116,348 Other operating costs, repairs and maintenance net of sundry income 137,299 108,137 101,138 53,267 62,722 77,635 32,068 134,613 115,292 95,139 Earningsbeforeinterest,depreciation,taxationandamortisation(EBIDTA) 245,961 274,347 236,710 250,418 240,416 232,069 242,256 141,163 160,141 178,576 Depreciation net of amortisation 151,653 152,806 146,928 128,097 120,860 116,321 117,958 113,201 105,980 93,497 Operatingprofit 94,308 121,541 89,782 122,321 119,556 115,748 124,298 27,962 54,161 85,079 Investment income / interest income 45,873 60,971 59,526 53,097 46,278 37,661 1,348 1,413 1,625 2,398 Earningsbeforeinterestandtaxation(EBIT) 140,181 182,512 149,308 175,418 165,834 153,409 125,646 29,375 55,786 87,477 Interest costs (Financing costs) 21,228 29,168 31,337 36,524 33,427 30,921 48,302 53,596 53,635 47,435 Earnings(Netincome)beforerestructuringcosts 118,953 153,344 117,971 138,894 132,407 122,488 77,344 (24,221 ) 2,151 40,042 Restructuring costs and retrenchment costs 95,017 7,177 50,849 111,622 6,879 Earnings(Netincome)beforetaxation(EBT) 118,953 58,327 117,971 138,894 125,230 71,639 (34,278 ) (31,100 ) 2,151 40,042 Net operating cash flow * (Pula million) (prior to restructuring costs) 245,961 274,347 236,710 250,418 240,416 232,069 242,256 141,163 160,141 178,576 Capital expenditure 167,727 371,994 125,226 130,392 167,606 94,178 78,266 145,135 131,588 220,281 Balancesheetdata(P000s) Total assets 1,658,263 1,643,236 1,601,661 1,567,235 1,453,013 1,343,260 1,040,806 1,084,423 1,107,870 1,148,120 Current liabilities (excluding current portion of long-term debts) 194,344 204,887 115,854 104,255 107,118 113,740 211,221 220,789 248,853 281,445 long-term debts (including current portion, net of protection) 107,273 200,813 238,711 279,473 249,999 233,665 312,762 320,388 328,839 338,852 Development grant and deferred income 228,220 239,301 277,938 297,218 315,786 333,410 95,394 102,648 65,522 66,550 Shareholders equity 1,128,426 998,235 969,158 886,289 780,110 662,445 421,429 440,598 464,656 461,273 Earningsratios Revenue (Turnover) growth (%) 4.6 7.4 8.4 6.9 2.7 1.5 1.7 8.6 9.7 44.2 Earning per share (Pula) 5.7 2.8 5.6 6.6 5.6 4.3 (1.9 ) (1.2 ) 0.1 1.9 EBIDTA margin (%) 29.4 34.3 31.8 36.5 37.5 37.2 39.4 23.3 26.2 32.1 Operating profit to revenue (%) 11.3 15.2 12.1 17.8 18.6 18.5 20.2 4.6 8.9 15.3 Return on average equity (%) 11.2 16.7 12.7 16.7 17.4 13.2 (8.0 ) (6.9 ) 0.5 9.1 Return on average capital employed (%) 9.7 17.2 10.1 12.5 12.3 10.0 1.7 2.6 6.5 11.0 Return on average operating assets (%) 8.5 11.6 9.4 11.6 11.3 8.6 1.3 2.1 4.9 8.7 Otheroperationaldata Accees lines connected 144,195 142,282 136,946 132,000 136,463 131,774 142,362 142,600 135,900 123,819 Staff strength 905 1,057 1,067 1,079 1,064 985 1,694 1,754 1,754 1,754 Economicdata Inflation (consumer price inflation) 11.70 9.80 7.20 13.80 6.50 6.90 11.30 6.10 7.50 6.90 Value of Pula (1 Pula equals to uS $) 0.13 0.15 0.18 0.18 0.21 0.21 0.19 0.15 0.17 0.20for the year ended 31 March 2009 170000111011000111BTC ANNuAlrepOrt2009 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000Statementofoperationaldata(P000s) Saleofgoodsandservices 835,900 799,174 743,843 685,957 641,809 624,638 615,425 605,001 610,683 556,885 Cost of services excluding depreciation 244,017 217,534 214,361 203,015 176,323 170,834 199,051 190,972 212,475 162,842 Selling and distribution costs 12,349 8,599 9,607 9,087 3,767 2,774 2,390 3,321 3,980 Employee costs 196,274 190,557 182,027 170,170 158,581 141,326 139,660 134,932 122,775 116,348 Other operating costs, repairs and maintenance net of sundry income 137,299 108,137 101,138 53,267 62,722 77,635 32,068 134,613 115,292 95,139 Earningsbeforeinterest,depreciation,taxationandamortisation(EBIDTA) 245,961 274,347 236,710 250,418 240,416 232,069 242,256 141,163 160,141 178,576 Depreciation net of amortisation 151,653 152,806 146,928 128,097 120,860 116,321 117,958 113,201 105,980 93,497 Operatingprofit 94,308 121,541 89,782 122,321 119,556 115,748 124,298 27,962 54,161 85,079 Investment income / interest income 45,873 60,971 59,526 53,097 46,278 37,661 1,348 1,413 1,625 2,398 Earningsbeforeinterestandtaxation(EBIT) 140,181 182,512 149,308 175,418 165,834 153,409 125,646 29,375 55,786 87,477 Interest costs (Financing costs) 21,228 29,168 31,337 36,524 33,427 30,921 48,302 53,596 53,635 47,435 Earnings(Netincome)beforerestructuringcosts 118,953 153,344 117,971 138,894 132,407 122,488 77,344 (24,221 ) 2,151 40,042 Restructuring costs and retrenchment costs 95,017 7,177 50,849 111,622 6,879 Earnings(Netincome)beforetaxation(EBT) 118,953 58,327 117,971 138,894 125,230 71,639 (34,278 ) (31,100 ) 2,151 40,042 Net operating cash flow * (Pula million) (prior to restructuring costs) 245,961 274,347 236,710 250,418 240,416 232,069 242,256 141,163 160,141 178,576 Capital expenditure 167,727 371,994 125,226 130,392 167,606 94,178 78,266 145,135 131,588 220,281 Balancesheetdata(P000s) Total assets 1,658,263 1,643,236 1,601,661 1,567,235 1,453,013 1,343,260 1,040,806 1,084,423 1,107,870 1,148,120 Current liabilities (excluding current portion of long-term debts) 194,344 204,887 115,854 104,255 107,118 113,740 211,221 220,789 248,853 281,445 long-term debts (including current portion, net of protection) 107,273 200,813 238,711 279,473 249,999 233,665 312,762 320,388 328,839 338,852 Development grant and deferred income 228,220 239,301 277,938 297,218 315,786 333,410 95,394 102,648 65,522 66,550 Shareholders equity 1,128,426 998,235 969,158 886,289 780,110 662,445 421,429 440,598 464,656 461,273 Earningsratios Revenue (Turnover) growth (%) 4.6 7.4 8.4 6.9 2.7 1.5 1.7 8.6 9.7 44.2 Earning per share (Pula) 5.7 2.8 5.6 6.6 5.6 4.3 (1.9 ) (1.2 ) 0.1 1.9 EBIDTA margin (%) 29.4 34.3 31.8 36.5 37.5 37.2 39.4 23.3 26.2 32.1 Operating profit to revenue (%) 11.3 15.2 12.1 17.8 18.6 18.5 20.2 4.6 8.9 15.3 Return on average equity (%) 11.2 16.7 12.7 16.7 17.4 13.2 (8.0 ) (6.9 ) 0.5 9.1 Return on average capital employed (%) 9.7 17.2 10.1 12.5 12.3 10.0 1.7 2.6 6.5 11.0 Return on average operating assets (%) 8.5 11.6 9.4 11.6 11.3 8.6 1.3 2.1 4.9 8.7 Otheroperationaldata Accees lines connected 144,195 142,282 136,946 132,000 136,463 131,774 142,362 142,600 135,900 123,819 Staff strength 905 1,057 1,067 1,079 1,064 985 1,694 1,754 1,754 1,754 Economicdata Inflation (consumer price inflation) 11.70 9.80 7.20 13.80 6.50 6.90 11.30 6.10 7.50 6.90 Value of Pula (1 Pula equals to uS $) 0.13 0.15 0.18 0.18 0.21 0.21 0.19 0.15 0.17 0.20eVer CHanging markets111000110111000018 BTC ANNuAlrepOrt2009BuSINESS reViewbotswana telecommunications corporation190000111011000111BTC ANNuAlrepOrt2009BuSINESS reViewalthough difficult to predict, we are working on a presumption that the future of communications will be driven by ever evolving customer needs, enhanced through different dimensions of convergence, increased mobility and data handling capacity, all driven through preferably, a single network. botswana telecommunications corporation111000110111000020 BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000020 BTC ANNuAlrepOrt2009BuSINESS reViewbotswana telecommunications corporation210000111011000111BTC ANNuAlrepOrt2009Worldwide, the lifestyles of customers are changing fast. Changes initially brought about by the technological advancement have been taken over by customer needs for multiple services with fewer tools. The current mobile handsets include video games, internet access and other location related information such as GPS. The future handsets will include much more personalised functions such as shopping and payment schemes, payment terminals, medical terminals etc. In future, rather than lifestyles adjusting to equipment, equipment will adjust to lifestyles rather than being driven by technology it will be led by needs of people. The social and economic transformation of our lives based on a knowledge-based society is also fueling the rate of growth and innovation in the ICT sector. The communication world is becoming increasingly connected. This has been brought about through the choices that we have in technology and communications. A knowledge-based society no longer restricts itself to technological or geographic boundaries. Resulting from such changes, customers needs are fast changing including the desire for faster access to services, easy to use devices and mobility. With one person-one number and future demand for number portability from one network to another, customers will shape tomorrows market rather than telecommunications companies.it is BeCOming inCreasingly diffiCult tO prediCt tHe future market plaCe witH any preCisiOn.In Botswana, the aftermath of the introduction of Public Telecommunications Operator licence (PTO) by the Botswana Telecommunications Authority has opened up the telecommunications landscape in Botswana. The competition felt in the voice telephony market is extending to other services, putting pressure on the market share that BTC Group has enjoyed thus far. To thrive in such an environment demands an agile, fast moving and innovative organisation to cope with the complexity of the needs, pressure for cheaper price and demand for escalating customer solutions and performance. This requires an approach to convergence in communications solutions. As the market place is demanding converged solutions, BTC Group is modeling itself as a One stop shop for all communication needs for customers, by introducing bundled services and solutions, combining two or more services such as fixed voice, broadband and mobile into attractive price plans. With a complete range of Data, Internet, Voice and Mobility capabilities, BTC Group has never been more ready than today to meet those challenges.tOwards a new Business mOdelIn the personal communications segment, competition in the traditional voice telephony market is fierce and shifting at a faster rate to mobile networks. 210000111011000111BTC ANNuAlrepOrt2009Although difficult to predict, we are working on a presumption that the future of communications will be driven by ever evolving customer needs, enhanced through different dimensions of convergence, increased mobility and data handling capacity, driven through preferably, a single network. BuSINESS reView111000110111000022 BTC ANNuAlrepOrt2009Customers are also demanding faster service, improved coverage and cheaper prices, resulting in further declining revenues with increasing costs. Profitability in this traditional and major business segment is declining. In the corporate and government segment, demand for networks that can handle many services including voice and data (end-to-end communications) are escalating. Increasingly, corporates and governments are looking for managed services from a single communications provider as opposed to multiple communications service vendors. In future, such demand will spill over to other ICT services and will not just be restricted to the communications sector. Further, majority of the corporates in Botswana have not made the transition to IP telephony. This indicates that there is significant opportunity on offer. Relatively, these are untapped potentials for us.Our future growth will have to be gained from services stemming from customer demand scalable networks converged solutions mobility faster data transferability etc. Realising this need, we are making concerted efforts to shift the revenue base from the traditional sources to new businesses growth areas such as broadband networks, mobile voice communications, Internet and other personalised converged services. We are on the move to develop a new business model to sustain balanced growth through revenue stimulation and reducing costs.BTC Groups ability to embrace change and to welcome the Information Age through a knowledge-driven society resulted in the creation and launch of a modern network capable of providing fixed and mobile, wireline and wireless technology. The Group is re-engineering its business with a view of becoming a unified (and converged) communications provider. The successful launch of BTC Groups mobile (brand) beMOBIlE is the first step in pursuit of the BTC Groups vision of becoming the telecommunications provider of choice. Mobility in voice telephony is fundamental to any future growth. We have sought to increase our competitiveness in these markets by introducing innovative mobile services, expanding on our Broadband value and driving convergence on our network. BTC Group is also focusing on being a true value-added services distributor to address the volume IP opportunities including IP phones, IP-based networks and gateways and IP-based managed services. The retail arm of BTC Group, Botsnet has been combined with BTC Group mainline data business. With the implementation of our new network architecture on a single platform, we are now positioning ourselves as the first operator to provide a converged service wecallitFixedMobileConvergence.To truly understand and get feedback from the customer we need to be in touch with them directly. One of our strategies is to increase the front line contacts we have with customers. We have 20 centres around the country with further outlets for beMOBIlE and Botsnet in the pipeline.We will further strengthen our ties with customers by taking their viewpoint, accurately grasping their needs, and providing tangible value that will satisfy every customer. Going forward we will continue to enhance the new relationship we are forging with our customers and market as a converged service provider. As we work to achieve this, a noticeable change will emerge in our capabilities to fulfill ever changing customers communications requirements. Our strength is providing a quality, dependable service.CustOmer VCentriC serViCeIn the corporate sector, we continue to position ourselves as the leading Managed Services Provider in the market. Our focus in this area has been to free corporates the burden of capital investment and associated financial pressures in communications infrastructure. Our robust network infrastructure and our continued investment in the network tools, places us in a much more unique position to provide end-to-end communications solutions and to achieve operational efficiencies. Business review (continued)botswana telecommunications corporation230000111011000111BTC ANNuAlrepOrt2009Key benefits of managed services to corporates will include reduced costs, including traditional services fees, hardware, IT operations, and transport, ease of adoption of new business processes, increases in levels of support and network availability, IT budget will be more stable and predictable with access to the latest technologies and enhanced skills base, facilitating easier adoption to change and to focus on core business.BTC Groups managed service offerings include Managed Virtual Private Networks (VPNs), Managed IP Telephony, Managed Customer Network etc.With more than 1,500,000 subscribers, the mobile market in Botswana presents greater challenge for acquisition of new customers. This indicates a penetration level of 80 percent. However, the mobile phones have become an integral part of the daily lives of users and have substantial potential to transcend their conventional boundaries and make further advances. The entry into the mobile market at a time when the industry is already showing signs of maturity poses a number of challenges to BTC Group. The traditional handset subsidisation and deposit less tariff packages are less relevant in this type of market. BTC Group is aggressively targeting customers for second phone with attractive tariff packages. Furthermore, the introduction of 3G system, faster data transmission will enable web browsing, e-mail and terrestrial TV broadcasts. ADSl Broadband as a service, has continued to perform well despite the low e-market penetration in Botswana. We provide these services directly through Botsnet and in a bundled service through beMOBIlE and Brobe. The already IP based network provide a suitable broadband infrastructure. Broadband is now available in all major towns and villages around the country. A Botsnet outlet has been opened in Francistown to aggressively sell broadband services to the mining industry and other users in the northern part of the country as part of our drive to bring Botsnet closure to the customers.Over the past year, we successfully introduced two bundled services a dual play (Fixed Voice and Mobile Voice) and a triple play (Fixed Voice, Mobile voice and Broadband). botswana telecommunications corporation111000110111000024 BTC ANNuAlrepOrt2009111000110111000024 BTC ANNuAlrepOrt2009BTC Groups bundling strategy is focused on meeting customers demands with attractive price points. This is backed up by roll-out loyalty programs to reward subscribers and offer one-stop customer service centres and consolidated monthly billings. Typically, customer benefits of service bundling include added value through discounts and pre-determined monthly charge, new features and functionalities, single bills and one stop shop convenience.We will continue to provide simple voice telephony through beMOBIlE for the man on the street to fixed line voice with mobility to managed services covering voice, broadband and internet.a mOdern Open netwOrktHe Beginning Of full COnVergenCeThe digital revolution is opening up a world of new possibilities. We are investing in our networks, systems and services to ensure that we optimise the benefits of this revolution. The full convergence of all solutions and services based on a single IP based multimedia platform through a converged network is on the horizon.tHe enaBling teCHnOlOgy ip neXt-generatiOn netwOrkBTC Groups quest to embrace change and to welcome the Information Age through a knowledge-driven society drives the initiatives to create and launch a modern network, capable of providing fixed and mobile, wire line and wireless technology all on a single platform. Voice and data traffic continues the transition from circuit-switched networks to next generation IP-based networks for both fixed and wireless access. At the same time, next-generation networks themselves are being re-defined. These new NGN platforms will provide voice, data and multimedia communications over a converged IP infrastructure. NGN of today support the multiple applications, the cost-effectiveness in traditional toll/tandem and local voice services, as well as new and converged multi-media services. Additionally, they also facilitate new revenue opportunities through faster service provisioning. The changes happening in the mobile telephony market where gains are achieved in speed and content handling, will force networks to expand and become more sophisticated. We are on track to transform BTC Group from a traditional fixed line operator into a multi-layered next generation network operator providing both fixed and mobile capability with broadband internet and multi media services on a retail and wholesale basis. As BTC Group travels the road towards Fixed-Mobile Convergence, the capability of our network investments will show results through customer satisfaction and greater financial returns. transpOrt netwOrkWe have one of the modern transport networks. We have completed our new core network which is a unified software driven platform. This helps us to deliver services to customers whether they are delivered over copper or wireless or fibre networks. We are continuing to invest in order to expand our fibre networks to all major towns and cities available to homes and businesses. This will deliver a range of services with speeds up to 100 Mb, allowing customers to run bandwidth hungry multiple applications simultaneously. Business review (continued)botswana telecommunications corporationbotswana telecommunications corporation250000111011000111BTC ANNuAlrepOrt2009 250000111011000111BTC ANNuAlrepOrt2009The national backbone network comprises of high capacity fibre SDH ring infrastructure around the country. The TransKalahari ring network connecting major towns such as Gaborone, Jwaneng, Ghanzi, Maun, Orapa and Francistown has built-in re-routing capabilities to the previously resisted network from lobatse to Francistown with spur routes to Jwaneng and Orapa to restore traffic once the fibre cable is cut. This project upgraded the existing microwave network to establish a full national optical fibre ring system hence the network has never been as resilient as it is now. There are other smaller regional fibre rings connecting towns in those respective regions and with spur links towards the borders with neighboring countries for international connectivity.metrOpOlitan area netwOrkThe MAN is the first commercial Multi-Protocol label Switching (MPlS) deployment in Botswana and continues to support the advanced needs of our customers. MPlS brings a number of additional service benefits to corporate customers who already rely on BTC Group to support their networks. Growth in the advanced multi-service capabilities of the MAN continues to drive our customers to increase their reliance on a converged network supported by BTC Group. This gives Government and enterprises more resources and capabilities to focus on their core business.aCCess netwOrkThe modernisation of our telephony network continues to be one of the focus areas. We continue to invest in the expansion and modernisation of the access networks in towns and villages. The introduction of mobile services based on GSM has further enhanced our access capabilities to previously unconnected outlying villages through Nteletsa II project.VSAT allows BTC Group to extend voice and data coverage beyond the cable network infrastructure. BTC Groups VSAT services can be provided beyond the borders of Botswana and currently have a foot print access to cover most parts of Sub-Saharan Africa. The system supports voice, video and data including internet access. mOBile netwOrkThe mobile network currently uses 2.5G technology and has coverage in most parts of eastern Botswana (80 % of the population) and offering services such as voice, text messaging and basic data services. In addition, under General Packet Radio Services (GPRS), which allows mobile services to be used for sending and receiving data over radio networks and enabling wireless access to data networks like the internet. With the impeding introduction of 3G networks in the coming financial year, we would offer data speeds from 384 Kbps up to 14.4 Mbps, which will provide an alternative to customers on the move and fixed customers who require higher data speeds.The modernisation of our telephony network continues to be one of the focus areas. We continue to invest in the expansion and modernisation of the access networks in towns and villages.botswana telecommunications corporation111000110111000026 BTC ANNuAlrepOrt2009111000110111000026 BTC ANNuAlrepOrt2009Botswanas mobile phone market has moved from an expansionary phase to a mature phase. Accordingly, BTC Group is taking steps to implement sustainable developments to achieve growth in the years ahead. data netwOrksThe current Managed Data Network (MDN) is built on ATM infrastructure and extends throughout the country. Services currently offered include leased lines, Frame Relay, ATM, X25, ISDN and xDSl. BTC Group also provides wholesale Internet services through 5 dialup Points of Presence (PoPs) and the central BotsGate Internet gateway in Gaborone.internatiOnal COnneCtiVityThe completion of our national network expansion has further enabled BTC Group to become the interconnecting point and transit for the region. Business review (continued)botswana telecommunications corporationAlong those lines, global connectivity continues to expand via leased capacity on the existing SAT3 undersea cable system while the government and BTC complete their investments in various undersea connectivity projects. There is also planned international connectivity through EASSY and WACS undersea cable projects which are due for completion projects by 2010 and 2011 respectively. During 2008/9. BTC Group further expanded its satellite and terrestrial capacity connecting to the rest of the world and reached a key milestone of 320Mbps of total capacity. This milestone is further enhanced through 90% of BTC Groups international connectivity being via high quality redundant fiber links. Growth in Broadband, Managed services and Tier-1 Internet demand is expected to double the capacity within the next year. This growth will further drive the coming online of various cable investments such as EASSY and WACS.Cape VerdeIslandsCanary IslandsPortugalunited KingdomlondonMoronilegendAngolaBotswanaCameroonCongoDRCGhanaIvory CoastNamibiaNigeriaPortugalSouth AfricaTogoKenyalesothoMagadascarMozambiqueSomaliaSudanTanzaniaWACSCable EASSyCablebotswana telecommunications corporation270000111011000111BTC ANNuAlrepOrt2009 270000111011000111BTC ANNuAlrepOrt2009internal prOCesses and COmmitted emplOyeesBTC Groups Philosophy and culture has always been to put our people, our most valued asset, first. Our success depends on the people we employ in our organisation being an effective arm to execute the corporations strategy.In addition to technology innovation, we are working on the internal processes and operational capability to cut the number of steps in providing the required service. We have significantly shortened delivery times and automated processes that can be felt by the customers. A prerequisite for the efficient customer service is a well functioning supply chain, an optimised back-office or IT system and committed employees.We have invested more than P 1 million in our billing and customer care systems over the past few years, expanding their reach, ensuring higher speeds and positioning to deliver next-generation services more reliably. We are migrating to a single billing platform with capability to provide a single bill to customers including fixed, broadband, mobile, internet and customer equipment services.Our goal is to shorten the time taken to provide solution to the customers or to our internal projects. We are setting up simplified processes which can cut down bureaucracy and help our employees to become more agile in providing solutions to our customers. As we become more agile, we can cut down further costs as well as the number of people we employ. We continue to train and re-train our core employees and drive to reduce our cost base. BTC Group values the many loyal partners who contribute across our business with great competence and flexibility in fulfilling their value propositions. Over the years, we have built partnership with a magnitude of associates, whether they be global giants or a local supplier in a remote village. BTC Group has, through these partnerships been able to grow confidence and provide services to customers.The business transitions will come about through various exercises such as process simplification, skills development, restructuring, service delivery improvements and operational excellence programs. We are setting about systematically to look at the major processes and to reduce the number of steps in each of our processes either through elimination or automation.WIRE-LINERATINGANDBILLINGINTERNETCREDITCONTROLuNIFORMCuSTOMERCAREINTERFACEWIRELESSWIRELESSCONvERGENTBSSENvIRONMENTCONvERGENTOSSENvIRONMENTNETWORkMANAGEMENTSySTEMSHARED/SERvICESPECIFICNETWORkELEMENTS111000110111000028 BTC ANNuAlrepOrt2009Business review (continued)botswana telecommunications corporationtHe futureOur goal is to provide excellent service in every market in which we operate by putting our customers at the center of everything we do. Towards this, we are constantly changing our business processes to make substantial improvements in the delivery of our services. We have made substantial gains during the year and are determined to make further improvements in the coming years.BTC Group has always looked to grow rapidly into new and emerging markets segments; we were amongst the earliest movers into IP networks and broadband market; though late in entering the mobile arena, BTC Group continues to make an impact in the market as a quality service operator rapidly gaining market share.INTERNETFIxED MuLTIMEDIAMOBILEneXt generatiOnserViCeprOViderglOBal trends - COnVergenCe290000111011000111BTC ANNuAlrepOrt2009Being able to capitalise on growth opportunities is not size dependent but on entrepreneurial spirits and ability to respond to customer needs. As a niche player we can act faster than the really big players and thereby create high value for customers and shareholders.The technological transition towards becoming a converged service provider is being managed through the strategic investments into areas such as the long-haul Fiber routes, Switch Modernisation programmes, Metropolitan Area Network and the Broadband expansion. These will further facilitate the investment into future technologies such as 3G (uMTS/EVDO), 4G, WiMAX and IP Multimedia Subsystem (IMS). The future growth of the organisation will come through the diversified revenue streams of being the overall converged service provider for key customers. This is being achieved through the creation of value-adding business units which focus on solution development and delivery versus traditional connectivity delivery. Additional investments in Mobile voice and data, multimedia distribution or delivery and Internet services enhancements will align BTC Group with the rest of the world.Collectively these initiatives and strategies, not far from global trends, will transform BTC Group into a next generation service provider which is capable of supporting Botswanas ICT development. New services such as Quad-Play, Advanced IP services, IP VPNs, MPlS, IPTV, VoD and VoIP will become a reality through the technological and business transformation initiatives.The new BTC Group will be one built on growth services both fixed and mobile, video and internet and a new generation of IP-based other business services. Definitely, it will look very different from what it is today.The technological transition towards becoming a converged service provider is being managed through the strategic investments into areas such as the long-haul Fiber routes, Switch Modernisation programmes, Metropolitan Area Network and the Broadband expansion.botswana telecommunications corporation111000110111000030 BTC ANNuAlrepOrt2009CORPORATE gOVernanCe111000110111000030 BTC ANNuAlrepOrt2009botswana telecommunications corporationbotswana telecommunications corporation310000111011000111BTC ANNuAlrepOrt2009CORPORATE gOVernanCe310000111011000111BTC ANNuAlrepOrt2009btc is committed to the highest standards of business integrity, ethical values and professionalism in all its activities. as an essential part of this commitment, members of the board support high standards of corporate Governance and are accountable to the shareholders in this regard.botswana telecommunications corporation111000110111000032 BTC ANNuAlrepOrt2009CORPORATE gOVernanCebotswana telecommunications corporation111000110111000032 BTC ANNuAlrepOrt2009botswana telecommunications corporation330000111011000111BTC ANNuAlrepOrt2009 330000111011000111BTC ANNuAlrepOrt2009BTC Group is committed to the highest standards of business integrity, ethical values and professionalism in all its activities. As an essential part of this commitment, Members of the Board support high standards of corporate governance and are accountable to the shareholders in this regard.Besides committee levels and internal control governance, BTC Group adheres to the Corporations founding legislation, the Botswana Telecommunications Corporation (BTC) Act (Cap 72:02) of the laws of Botswana, other common law provisions of corporate law and internationally accepted standards in observing good corporate governance.By subscribing to best practices on good governance and applying them where feasible, the BTC Board is of the opinion that it has improved its compliance to those principles and codes. BTC Group has over time created and refined its structures so as to comply with the applicable recommendations as laid down in the relevant international codes of corporate governance. BTC Group understands that adhering to sound principles of corporate governance is critical to earning and maintaining the trust of key stakeholders and ultimately our performance goals. The methods we employ to achieve our goals are as important as the goals themselves. The key principles underpinning the governance of the Corporation are setout in this statement.memBers Of tHe BOardThe governing body of the Corporation is the Board consisting of the Chairman, the Chief Executive as Ex Officio member and members appointed to the Board by the Minister of Communications, Science and Technology in accordance with section 4 of the Botswana Telecommunications Corporation Act.The Board is responsible for setting the direction of the Corporation in line with the BTC Act, through the establishment of key strategic objectives and policies. The Board met on 14 (fourteen) occasions during the financial year 2008/09 to consider various strategic and policy issues and other matters having a material effect on the Corporations affairs. Except for the Chief Executive Officer, other members of the Board are non-executive and independent of the management of the Corporation and, between them have a wide range of experience at senior level. The selection of Board members is based on their experience in various disciplines covering Finance, Technology, Economics and General Management or Administration among others. All members of the Board are considered to be independent of management and do not have any conflicts with the organisation. The tenure of Board Members ranges from three to four years and the Members are eligible for re-appointment at the end of their terms.The introduction of the Public Telecommunications Operators (PTO) licence introduced new opportunities for BTC Group, allowing for the provision of a telecommunications service whether wired or wireless including mobile cellular services.CORPORATE gOVernanCebotswana telecommunications corporation111000110111000034 BTC ANNuAlrepOrt2009111000110111000034 BTC ANNuAlrepOrt2009the btc board for the year was constituted by the following members:memBer pOsitiOn date and periOd Of appOintment Mr. leonard Makwinja Chairman Appointed on 1 April 2006 for three years and re-appointed on 1 April 2009 for three more years.Ms. Shirley Segokgo Vice - Chairperson Appointed on 1 April 2006 for three years. Retired with effect from 31 March 2009.Mr. Thapelo lippe Chief Executive Appointed on 1st October 2008 for Officer (ex-officio) three years expiring on 30 September 2011.Mr. Oabile Mabusa Member Member since March 2001, re-appointed on 16 September 2007 for three years.Mr. Mabua Mabua Member Appointed on 1 April 2006 for four years, resigned and reappointed on 01/10/07 for 3 years Mr. Ratsela Mooketsi Member Appointed on 1 April 2006 for four years.Mr. Michael Mothobi Member Appointed on 1 October 2007 for three yearsMr. Phadzha Kgalemang Member Appointed on 1 October 2007 for three yearscorporate governance (continued)botswana telecommunications corporationbotswana telecommunications corporation350000111011000111BTC ANNuAlrepOrt2009 350000111011000111BTC ANNuAlrepOrt2009The Chairman is responsible for leading the Board and, with the assistance of the Chief Executive Officer, ensures that Members receive timely, accurate and clear information before Board meetings and updates on matters arising between meetings. Whilst Members have access to the Auditors, Executive Management and to such information as is necessary to carry out their duties and responsibilities fully and effectively, the Board seeks professional advice as and when necessary.The Corporations operations are organised on a hierarchy of functional units, individual Business to Strategic Business units, Regional Operating units and a Corporate unit. The individual Group General Managers are accountable for the functional units under their control and the ensuing responsibility, authority and planning structures, together with the limits placed on Executive Management by the Board, ensuring that no one operating body or unit or individual has unfettered powers of decision making. The Chief Executive Officer, as the Head of Executive Management, provides leadership and direction to the Executive Management.The Chief Executive Officer is bound by a contract of employment with agreed and set targets, which are appraised by the Board from time-to-time. respOnsiBilities Of tHe BOardBTC Group is led by a Board that brings leadership, commitment and rigour to the business of the organisation, as well as its governance in pursuance of its statutory mandate, ensuring proper and effective control of the Corporations business and carrying out periodic evaluation of corporate performance.The Board is also responsible for guiding corporate governance by establishing committees and structures within the organisation in order to assist it in effective fulfilment of its responsibilities.The Board, directly or through its sub-committees: Approves the BTCs corporate strategies, annual budgets and business plans; Approves significant capital expenditure projects, selection of suppliers and major financial proposals; Assesses the comprehensive system of reporting on financial and non-financial matters, strategy and other operational matters; Ensures compliance with applicable laws and regulations; Approves acquisitions and divestments; Assesses key business risks and monitors management of those risks;botswana telecommunications corporation111000110111000036 BTC ANNuAlrepOrt2009111000110111000036 BTC ANNuAlrepOrt2009botswana telecommunications corporationcorporate governance (continued) Ensures effectiveness of internal control systems; and Evaluates and monitors performance of senior management. Management is required to implement approved plans and strategies and support the Board. As part of its responsibility, the Board also ensures that BTC makes a fair representation of the financial position, results of operations, statement of changes in equity and cash flow statements in conformity with the International Financial Reporting Standards. The Board has delegated these responsibilities to management of the Corporation. In preparing these financial statements, management on behalf of the Board has: Selected suitable accounting policies and applied them consistently; Made judgement and estimates that are reasonable and prudent; Followed applicable International Financial Reporting Standards; and Prepared financial statements on a going concern basis.BOard COmmitteesThe following committees are appointed by the Board to assist in governance of the Corporation: Finance and Audit Committee Human Resources Committee Board Tender CommitteeResponsibilities, membership and their activities are discussed below.attendanCe and meetings Of tHe BOard and BOard COmmitteesThe Board is required to meet at least four times a year. During the financial year, members of the Board as part of the respective committees attended the following meetings: BOard finanCe and Human BOard tender audit resOurCes COmmittee COmmittee COmmitteeMr. leonard Makwinja Chairman 14/14 Ms. Shirley Segokgo Vice Chairperson 13/14 4/4 8/8 Mr. Thapelo lippe CEO 2/2 2/3 Mr. Oabile Mabusa Member 9/14 4/4 Mr. Mabua Mabua Member 13/14 2/3Mr. Ratsela Mooketsi Member 13/14 3/3Mr. Michael Mothobi Member 12/14 6/8 Mr. Phadzha Kgalemang Member 5/14 1/3key (N/N) number of meetings attended in comparison to total number of meetings entitled to attendbotswana telecommunications corporation370000111011000111BTC ANNuAlrepOrt2009 370000111011000111BTC ANNuAlrepOrt2009BOard COmmitteesThe Board is supported by specialist committees as follows:eXeCutiVe management COmmittee (eXCO)The Board has, subject to pre-defined limits, delegated its executive authority to the Executive Management Committee (known as EXCO), and headed by the Chief Executive Officer. The other members of the EXCO are Group General Managers responsible for Finance, Operations, Corporate Services, Technology, Commercial, Business units General Managers, Head of Public Relations and Marketing, Corporation Secretary and Head of Programme Management. Management is responsible for proposing strategic alternatives to the Board and will be accountable for the implementation of strategies, policies and other decisions approved by the Board. EXCO manages the business and affairs of the Corporation, implements strategic decisions, prioritises the allocation of capital, technical and human resources and establishes best management practices.All executive members of the Corporation meet at least fortnightly to consider and review matters of strategic, operational and tactical importance.finanCe and audit COmmitteeFinance and Audit Committee is responsible for ensuring that management creates and maintains an effective control environment in the Corporation and that management encourages the necessary respect for internal controls amongst employees. The Committee is comprised of three Board members and the Chief Executive Officer. remuneratiOn Of memBers Of tHe BOardExcept for the Chief Executive Officer, members of the Board are not entitled to monthly or annual salaries. The members of the Board and Sub-committees are paid a sitting allowance.memBer pOsitiOn amOunt (pula)Mr. leonard Makwinja Chairman 14,700Ms. Shirley Segokgo Vice Chairperson 21,000Mr. Thapelo lippe Chief Executive Officer Mr. Oabile Mabusa Member 10,920Mr. Mabua Mabua Member 12,600Mr. Ratsela Mooketsi Member 13,440Mr. Michael Mothobi Member 15,120Mr. Phadzha Kgalemang Member 5,040botswana telecommunications corporation111000110111000038 BTC ANNuAlrepOrt2009111000110111000038 BTC ANNuAlrepOrt2009this responsibility is achieved through: Assessing the policies and procedures of the Corporation to ensure that the accounting systems and related controls are adequate and functioning effectively. Identifying major risk to which the Corporation is exposed and verify that the related internal control systems are adequate and functioning effectively Reviewing the financial statements of the Corporation to provide assurance that financial disclosures made by the management portray the Corporations financial conditions, results of operation and long term commitments; Overseeing both the internal and external audit process, together with reviewing the effectiveness of both auditors. Reviewing non-audit services provided by the external auditors. Monitoring all legal and regulatory compliance Monitoring compliance with the Corporations Code of ConductMembers of the Finance and Audit Committee for the year under review were Mr. Mabusa, Ms. Segokgo and Mr. lippe.The Finance and Audit Committee met four times during the year under reporting.Representatives of both internal and external auditors attend these meetings, and have direct access to the Chairman of the committee. Human resOurCes COmmitteeThe Committee is responsible for ensuring that all matters relating to remuneration and benefits of the Corporations employees are decided under the authority of the Board and that it keeps abreast of developments in the market place, with regard to remuneration and benefits. The Committee is comprised of three Board members and three ex-officio management members.in particular, the committee: Deliberates and decides on policy issues relating to remuneration and benefits, salaries, bonuses Determines, for Board approval, the remuneration policy for all BTC staff Determines targets and objectives for any performance related pay schemes Recommends specific remuneration packages for staff Recommends to the Board appointments for Senior managers Ms. Segokgo chaired the committee whilst the other members of the Committee are Mr. Mothobi, Mr. Mooketsi and Mr. lippe.The Human Resources Committee met eight times during the year.BOard tender COmmitteeThe responsibility of the Board Tender Committee is to ensure that all tenders within the authority of the Board are addressed in a transparent and procedural manner to enhance an effective control environment in the Corporations procurement process and that the Board encourages the necessary respect for control by Management and employees of the Corporation. The Board Tender Committee comprises of selected members of the Board.The Board Tender Committee has the authority to deliberate and decide on tenders in excess of P 5 million. In order to expedite the business operations, tenders below the value of P 5 million have been delegated to a sub-committee consisting of management and the outcomes of the tender evaluations and adjudications are reported to the Board Tender Committee on a periodical basis.botswana telecommunications corporationcorporate governance (continued)botswana telecommunications corporation390000111011000111BTC ANNuAlrepOrt2009 390000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000040 BTC ANNuAlrepOrt2009111000110111000040 BTC ANNuAlrepOrt2009Members of the Board Tender Committee during the reporting year were Mr. Mooketsi, Mr. Mabua, Mr. Kgalemang and Mr. lippethe board tender committee is also responsible for: Making recommendations to management on ways to improve procurement procedures and policies Monitoring implementation of projects for which tenders have been approved Ensuring adherence to Corporate Governance Standards Ensuring that the Corporation complies to relevant legislations and regulatory requirements Reviewing any complaints, pending litigations or regulatory proceedings relating to tendersadHOC COmmitteesAdhoc Committees are appointed by the Board, as and when necessary, to consider specific issues before the submission of the Board for a final decision. The Board, as it finds necessary, determines the terms of reference for such committees.appOintment Of seniOr managementThe Chief Executive Officer is appointed by the Minister responsible for Communications Science and Technology based on the recommendation by the Board. usually solicitations for senior positions are made through local print media. All senior management positions are approved by the Board. apprOVal Of annual finanCial statementsThe financial statements of the Corporation were reviewed by the Finance and Audit Committee, approved by the Board and were signed accordingly on behalf of the Corporation by the Chairman and the Chief Executive.gOing COnCernThe financial statements have been prepared on a going concern basis. Having made relevant enquiries, the Board has a reasonable expectation that the Corporation has adequate resources to continue in operational existence for the foreseeable future.internal COntrOlsThe Board, through its Finance and Audit Committee, is responsible for the effectiveness of the Corporations systems of internal controls and has established a continuous process for identifying, evaluating and managing significant risks faced by the Corporation. Key business risks are reviewed periodically by the Committee, with formal reviews of the full internal control environment performed annually. Where areas of improvement are brought to the Committees attention, steps are taken to embed internal control and risk management into the operations of the business. The Board regularly reviews the process, which has been in place throughout the year and up to the date of the approval of this report, which is in accordance with - Code of Best Practices in Corporate Governance set out in this report. The systems are designed to provide reasonable assurances to the integrity and reliability of the financial statements and other operational information. Such systems of internal controls are designed to manage rather than eliminate the risks of failure to meet business objectives, providing reasonable but not an absolute assurance against material loss or misstatement.Based on the information received from the management and the Internal Audit Department, the Board was of the opinion that the systems of internal controls can be reasonably relied upon, and that there was no material or fundamental breakdown in the system of internal control during the year under review.botswana telecommunications corporationcorporate governance (continued)botswana telecommunications corporation410000111011000111BTC ANNuAlrepOrt2009 410000111011000111BTC ANNuAlrepOrt2009Whilst no system of internal control can provide absolute assurance against material misstatements or loss, the Corporations systems are designed to provide the Board with reasonable assurance that the procedures in place are operating effectively. The key elements of the system of internal control are delegation, operations, planning and empowerment, competence, monitoring and reporting, and Internal Audit.delegatiOnThe overall financial objectives of the Corporation are agreed by the Board, which delegates day-to-day responsibility to management. There is a clear organisational structure, detailing lines of authority and control responsibilities. There are defined operating and capital spend authorisation limits in place.Formal policies and procedures are in place, including the documentation of key systems and rules relating to the delegation of authority. This allows for the monitoring of controls and restricts the unauthorised use of the Corporations assets.All major procurements are subject to a formal authorisation procedure, with a Board Tender Committee comprising the members of the Board overseeing the major awards.OperatiOns, planning and empOwermentA rolling three year corporate planning process that facilitates and encourages the involvement of staff through Annual Plans that articulate strategies at Functional, Individual Business units, Strategic Business units, Departments, Regional and corporate offices ensure employee empowerment. Employee participation improves the sense of ownership, the reduction of bureaucracy and speedy decision making.Key policies, processes and control procedures are communicated throughout the Corporation. Non-compliance is reviewed and any areas of weaknesses identified are addressed and promptly reported to the Board. Continuing actions are taken throughout the year to embed risk management and internal controls into the day-to-day operations of the Corporation.In relation to potential major contracts or acquisitions, external advisors, together with senior management within the Corporation, are appointed under clearly defined scopes to carry out commercial, financial and legal due diligence. The Board is kept fully up to date with any issues arising during such due diligence.COmpetenCeIt is the Corporations policy to continually strengthen the effectiveness of the system of internal control by recruiting, developing and managing employees of the highest calibre and matching their skills to the appropriate disciplines.Staff skills are maintained both by a formal recruitment process and a performance appraisal system, which identifies skill gaps and training needs.mOnitOring results and management repOrtingAll reporting of financial and other results is carried out as an effective monitoring mechanism; actual results are compared against the annual plans and against the historical trends in the previous years.internal audit funCtiOnBTC Group has an independent Internal Audit function which administratively reports directly to the Chief Executive, with a dual reporting responsibility to the Finance and Audit Committee. The Internal Audit process provides an assurance that significant risks are subject to periodic reviews and control processes are in place and weaknesses are identified and mitigated. The Internal Audit Department has an Internal Audit Charter setting out the independence of the function, which has been adopted by the Finance and Audit Committee and signed by the Chairperson of that committee.botswana telecommunications corporation111000110111000042 BTC ANNuAlrepOrt2009111000110111000042 BTC ANNuAlrepOrt2009eXternal auditOrsIn terms of the BTC Act, the Auditor General of Botswana has been empowered to carry out the audit of the Corporation. under a special dispensation, he has delegated the power to Ernst & Young, a firm of Certified Public Accountants.risk reView and COntrOlIn addition to the above, the Board has, through the involvement of an Enterprise-wide Distributed Risk Management Programme, endeavoured to ensure that control systems, designed to safeguard the Corporations assets and maintain proper accounting records that facilitate the production and availability of reliable information, are in place and are functioning as planned. The programme ensures that wider range of risks, arising as a result of the Corporations diverse operations, are effectively managed in support of the uninterrupted communications services to Botswana and the creation and preservation of shareholder wealth. The significant business risks to the Corporation, financial, operational and compliance, which could undermine the achievement of the Corporations business objectives are identified, mitigation actions are established and risk owners appointed. Business risks are reviewed on a semi-annual basis. industrial relatiOns and emplOyee representatiVesThe Corporations staff, other than those in the management cadre, are entitled to join one of the two registered staff unions. Regular consultative meetings between management and the two registered trade unions are conducted regularly to share relevant information and consult on a number of staff issues to foster good employer / employee relationships.staff remuneratiOnThe Corporation has an employee remuneration policy formulated in wide consultations with its employees. Remuneration issues are negotiated with the two registered unions and there are general consultations with other employees not represented by the union. The Board is charged with the responsibility of approving remuneration packages on the recommendation of the Remunerations and Benefits Committee.pensiOn fundThe Corporations Staff Pension Fund the BTC Staff Pension Fund is a defined contribution fund. This fund is controlled by trustees who are Corporation and union members. The trustees make investment decisions based on the recommendation of the fund managers. The assets of the fund are kept separately from those of the Corporation. The fund can only be used in accordance with its rules and for no other purpose.etHiCsMembers of the Board and staff are required to conduct themselves according to the highest ethical standards. The Corporation strives at all times to make relevant disclosures of information to stakeholders in a transparent manner.COmplianCe witH laws and legal reQuirementsThe Board is conscious of its responsibility and is unequivocally committed to upholding ethical behaviour in conducting its business. The Board, through the Corporate legal Department and Finance Division, strives to ensure that the businesses of the Corporation comply with the laws and regulations of Botswana.botswana telecommunications corporationcorporate governance (continued)botswana telecommunications corporation430000111011000111BTC ANNuAlrepOrt2009 430000111011000111BTC ANNuAlrepOrt2009regulatOry affairs and aCCOuntaBilityIn terms of the amended Telecommunications Act of 1996, the Corporation is issued with a license to carry out public telecommunications services in Botswana. In terms of the Act and the license conditions, the Botswana Telecommunications Authority has power to approve tariffs (i.e price control) related to local and national telephony services and to request the Corporation to provide certain financial information related to these services. relatiOn witH tHe COmmunityThe Board is ever conscious of the principles of good citizenship and the operational dimensions of the Corporations social programmes. The Corporation ensures that, resources permitting, the needs of the society are linked to the Corporations business and social objectives. relatiOnsHip witH gOVernmentThe Corporation, through the Chief Executive Officers office, maintains an active dialogue with various Government Ministries and Departments. Concerns raised by the various Ministries, Departments and Offices are discussed, actioned and addressed appropriately.botswana telecommunications corporation111000110111000044 BTC ANNuAlrepOrt2009111000110111000044 BTC ANNuAlrepOrt2009botswana telecommunications corporationcorporate governance (continued)tHe COde On COrpOrate gOVernanCe: COmplianCe statementIn an attempt to improve the corporate governance principles and to enhance the Boards accountability, the Corporation has voluntarily decided to subject itself to world class codes on corporate governance. The statement below, which was based on the codes published by the Financial Reporting Council of the united Kingdom, measures the degree of its compliance to the respective codes. The Corporation has complied with the Codes of Best Practice throughout the financial year ended 31 March 2009, other than with the exceptions stated below:Code of Best practice - principles Compliance with / exception to the Code of Best practicea BOard memBers and aCCOuntaBilitya.1 the Board partially Complied Every company should be headed by an BTC is headed by a Board appointed in terms of the BTC Act, effective Board, which is collectively responsible with the responsibility to run the Corporations affairs on for the success of the company. a sound commercial basis. The Board set the strategic direction and approves matters relating to senior management changes, staff remuneration policies, business plans, annual budgets, major contracts etc. a.2 Chairman and Chief executive Complied There should be a clear division of responsibilities There is clear separation between the duties and at the head of the company between the running responsibilities of the Chairman and the Chief Executive. of the Board and the executive responsibility for The Chairman, appointed in terms of the BTC Act does not the running of the company business. No one have executive powers except to direct the Board on their individual should have unfettered powers decisions. The division of powers is set out in the BTC Act, of decision. Board Charter and the Shareholders Contract.botswana telecommunications corporation450000111011000111BTC ANNuAlrepOrt2009 450000111011000111BTC ANNuAlrepOrt2009a.3 Board balance and independence partially Complied The Board should include a balance of executive Seven of the eight members of the Board are non- and non-executive directors (and in particular executive and are appointed to the Board by the Minister independent non-executive directors) such that responsible for BTC Group to represent the wider no individual or small group of individuals can stakeholder fora. A non-executive member is selected as dominate the Boards decision taking. the Vice Chairperson. No member of the staff other than the Chief Executive sits on the Board. At the same time, the Board has to be completely independent of management to ensure full and accurate disclosure of information. Their opinions carry significant weight in the decision making process, both operational and financial, and they are free from any business or personal relationships that could interfere with their independent judgement.Board balance can also be interpreted to mean a balance of capabilities. The non-executive members of the Board contribute a wide range of skills and experience, forming a strong and independent element within the Board. The non-executive members of the Board receive only a nominal sitting allowance for services rendered, have served for less than eight years. Except for two members of the Board, none of the other members have been ex-employees of the Corporation at any time. Only one of such members has been in the employment of the Corporation during the last five years.a.4 appointment to the Board partially Complied There should be a formal, rigorous and There is no Nomination Committee in place to lead the transparent procedure for the appointment of process of appointment of members of the Board. From new directors to the Board. time to time, the Minister responsible for BTC appoints themembers of the Board from a list of candidates submitted by the Corporation. A new practice currently put in place will ensure that future appointments will be made by the Minister on the recommendation of a list of candidates submitted by Public Enterprises Evaluation and Privatisation Agency (PEEPA) which in turn selects such candidates through a public invitation process.botswana telecommunications corporation111000110111000046 BTC ANNuAlrepOrt2009111000110111000046 BTC ANNuAlrepOrt2009botswana telecommunications corporationcorporate governance (continued)tHe COde On COrpOrate gOVernanCe: COmplianCe statement (continued)a.5 information and professional development Complied The Board should be supplied in a timely manner The Board ensures that a new member is properly with information in a form and of a quality inducted and that members obtain sufficient professional appropriate to enable it to discharge its duties. advices, both from internal and external sources. All directors should receive induction on joining the Board and should regularly update and The Board meets at least quarterly to consider matters put refresh their skills and knowledge. before them. All matters discussed at the Board meetingsare supported by written and / or oral presentations to make informed decisions. The Board has been inducted at various times.The Boards Secretary is responsible to the Board for ensuring that its procedures are followed.a.6 performance evaluation partially Complied The Board should undertake a formal and The Chief Executive is set with targets against which the rigorous annual evaluation of its own performances are evaluated annually. However, the Board performance and that of its committees and has not set targets for itself so far. individual directors.a.7 re-election partially Compliant All directors (members) should be submitted for The members of the Board are usually appointed for a re-election at regular intervals, subject to period of four years by the Minister and, generally hold continued satisfactory performance. The Board office for the entire period unless he/she resigns for any should ensure planned and progressive reason. At the end of the initial period, the Board may refreshing of the Board. recommend renewal of the members appointment to the Minister responsible. Generally, a person is restricted to serve no more than two terms of four years. botswana telecommunications corporation470000111011000111BTC ANNuAlrepOrt2009 470000111011000111BTC ANNuAlrepOrt2009B tHe leVel and make-up Of remuneratiOn BOard memBers and seniOr eXeCutiVeB.1 remuneration policy non-compliant levels of remuneration should be sufficient to Only the Chief Executive, who is a member of the Board, attract, retain and motivate directors of the is entitled to remuneration paid on a monthly basis. quality required to run the company successfully, All other members of the Board are only entitled to but a company should avoid paying more than is nominal sitting allowances. There are no incentive plans necessary for this purpose. A significant in force relating to the performance of the Corporation. proportion of executive directors remuneration BTC Group believes that, although it is not a market leader should be structured so as to link rewards to in terms of staff rewards and remuneration in Botswana, corporate and individual performance. its remuneration schemes are sufficient to attract qualified and competent persons to its management level. There are no set notice periods for non-executive members whilst the Chief Executive Officer is expected to offer a minimum period of three months notice in the event of resignation.B.2 procedure Complied There should be a formal and transparent The rewards and remuneration for the Chief Executive procedure for developing policy on executive and senior management staff members are set by the remuneration and for fixing the remuneration Remuneration Committee and approved by the Board of packages of individual directors. No director Directors, and are in line with the normally approved should be allowed in deciding his or her own salaries and rewards packages of the Government of remuneration. Botswanas Incomes Policy. On the other hand, the Board members sitting allowances are set by the Government. botswana telecommunications corporation111000110111000048 BTC ANNuAlrepOrt2009111000110111000048 BTC ANNuAlrepOrt2009botswana telecommunications corporationcorporate governance (continued)tHe COde On COrpOrate gOVernanCe: COmplianCe statement (continued)C aCCOuntaBility and auditC.1 financial reporting Complied The Board should present a balanced and BTC complies with all applicable International Financial understandable assessment of the companys Reporting Standards, Botswana Telecommunications Act position and prospects. and other relevant legislation.C.2 internal control Complied The Board should maintain a sound system of The Board through the Finance and Audit Committee internal control to safeguard shareholders ensures that the internal controls and risk management investment and the company assets. practices are aimed to safeguard its assets and resources.C.3 audit committee and auditors Complied The Board should establish formal and The Board through its Finance and Audit Committee transparent arrangements for considering how ensures that basic internal controls principles which they should apply the financial reporting and culminate in good financial reporting are adhered to. internal control principles and for maintaining The appointment of external auditors is sanctioned by the an appropriate relationship with the companys Auditor General of Botswana and ensures that sufficient auditors. independence is maintained. The relationship with the external auditors is good.d relatiOns witH sHareHOldersd 1 dialogue with institutional shareholders Complied There should be dialogue with shareholders BTC has a specific department to deal with the based on the mutual understanding of objectives. shareholder, the Government of Botswana and its various The Board as a whole has responsibility for organs. ensuring that satisfactory dialogue with the shareholders takes place. The Chairman and members of the Board have sufficientaccess to the Minister responsible to discuss any matters of mutual concern. There is always satisfactory dialogue between the Corporation and its shareholder.d.2 Constructive use of agm not complied / not applicable The Board should use the AGM to communicate BTCs founding document, which is an Act of Parliament, with investors and to encourage their does not require calling of a General Meeting with its participation. shareholder. However, in terms of the Act, the Annual Reports are submitted to Parliament with in 180 days from the financial year end.botswana telecommunications corporation490000111011000111BTC ANNuAlrepOrt2009 490000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000050 BTC ANNuAlrepOrt2009ENTERPRISE RISK managementbotswana telecommunications corporation111000110111000050 BTC ANNuAlrepOrt2009botswana telecommunications corporation510000111011000111BTC ANNuAlrepOrt2009 510000111011000111BTC ANNuAlrepOrt2009BtC risk pHilOsOpHyBTC Group recognises that an effective risk management process is fundamental to achieving its business goals. The Corporation is aware that business opportunities can be enhanced through better management of risk. The Risk Management process therefore aims to ensure that a more inter-dependent and more explicit connection exists between managing the business and managing the risk. BTC Group also believes that it can manage risk only if its employees are equipped to manage risk. The Group believes that it is the corporate culture which facilitates the enterprise wide risk management process. The Corporation also recognises that in order to add value to its business, it needs to take business risks. There are risks in every activity it is involved in. Business risks that carry no compensating gains are therefore avoided or minimised. BTC Groups view is that it is not possible to eliminate the risks entirely and therefore systems should be designed to manage risk rather than to eliminate the risk of failure; such systems providing only reasonable and not absolute assurance.respOnsiBilityThe Board through the Finance and Audit Committee is ultimately responsible for the Corporations system of internal control and risk management and for reviewing the effectiveness of those systems. BTC Group has adopted a Distributed Enterprise-wide Risk Management Framework where risks are managed within the major functional departments. The Head of Internal Audit is responsible for ensuring that all business risks are assessed, included in the Risk Register and managed on an ongoing basis. The enterprise-wide risk management is mainly distributed among the following functions:BTC Group as an important player in the telecommunications sector in Botswana and faces a multitude of risks. understanding and managing these risks is therefore important for the Group to achieve its goals. Managing risks is part of our corporate culture. netwOrk seCuritydistriButed risk management framewOrknetwork Fraudaccess controlphysical security managementreVenue assuranCeend-to-end revenue assurancecredit risk managementfinanCialFinancial risk and insurance portfolioeconomic and market risksnetwOrk serViCesbusiness continuity risksDisaster recovery managementHuman resOurCessafety, Health and environmentregulatOryregulatory risk management111000110111000052 BTC ANNuAlrepOrt2009enterprise riskmanagement (continued)botswana telecommunications corporationBtC grOups risk management prOCessIn order to manage risk, BTC Group identifies and analyses risks it faces, ranks them by the likelihood of occurrences and significance of consequences, and determines the most effective ways to manage the risk universe. The Groups Headline Risk Register groups the risks into five broader categories for reporting purposes: market / business, technology, operational, compliance and financial risks.High level Risk Assessment takes place as an integral part of the Corporations annual strategic planning phase. These are followed up by more detailed systematic analysis and identification at business unit or departmental levels. The Risk Management Programme at BTC Group embodies the following steps: Discussion of the Corporations vision and strategic goals so that they are well understood by all senior managers. Identifying the events (or risks) that could positively or negatively impact on the achievement of the strategies. The likelihood of frequency and consequence / impact of the events (or risks) on the Corporations operation, profitability and its image and the likelihood of such events detected through the existing internal controls and processes. Maintaining a Risk Register for the Corporation. The headline risks, being the most hierarchical in the risk/s structure, are tested for the following: What is the likelihood of occurrence / frequency of such risks? What will be the consequence or impact of such occurrences? Should the Corporation accept the risk/s? What control measures could be adopted to avoid or mitigate the gross risk/s? Who is accountable for managing the risk and maintaining and managing the control measures? What is the residual risk/s that remains a risk after the application of control measures? What is the cost of control and does the benefit exceed the cost? What are the early warning mechanisms? Internal Audit Department carry out continuing assessment of the risk/s, management and control, and their Internal Audit reports to Management, and the Finance and Audit Committee on the status of specific areas identified for improvement. The Finance and Audit Committee, on behalf of the Board, considers the effectiveness of the operation of internal control procedures in the Corporation by reviewing reports from the Internal Audit department and from the external auditors. Control strategies usually considered are: Accepting the risk Transferring the risk to a third party Elimination of the risk by adopting an Exit Strategy Building controls into operational process, additional quality control or by involving top staff in managing the risk Avoiding the risk in other ways Some of the routine processes that are part of the normal day-to-day operations to early identify, prevent and control risk/s are: Disaster Recovery Plans Safety Awareness Programmes Environmental Impact Assessments Planned and Preventive Maintenance Programmes Compliance and Assurance Audits Regular Monitoring of the Market and Financial Indicators Internal and External Audit reviews Structured training530000111011000111BTC ANNuAlrepOrt2009Headline risk registerThe following table summarises the identified headline risk/s, the brief description of the identified risk/s, the consequence of each risk and the Corporations policy on mitigating such risk/s. Headline risk risk desCriptiOn COnseQuenCe Of risk OBJeCtiVes Of BtC tO mitigate risk market / Strategies and Planning Inability to achieve Impact on growth Continuous planningBusiness risks Risk. business objectives. prospects and profitability. and review processes. Economic and Market Weak economic conditions Impact on operations, New and innovative Risk (Weaker economy, will result in weaker demand. profitability, cash flow and services, efficient credit lack of infrastructure) lack of infrastructure, lack of uncertainty in collecting policy better credit market and lack of access to receivables. management. new human resources Competition Risk Further liberalisation can loss of customers and Tariff plans which (liberalisation) create competition for our revenue without provide value for money fixed network services, loss of compensating savings in and longer term voice and data traffic to other costs leading to adverse commitment. operators and VoIP. effect on profitability.teCHnOlOgy Technology Risk Rapid technologies changes Effect on new business Deploying therisks can cause network to be opportunities, continuity appropriate cost efficient outdated. Delays in of business, work technology for regulatory approvals for new processes and costs. competitive advantage. technologies can cause delays in newer services. Network Risk Network fraud and disasters loss of revenue and Fraud free networks and can cause loss of business, profitability; and adverse adequate disaster assets and revenue. effect on business recovery plans. continuity. 111000110111000054 BTC ANNuAlrepOrt2009enterprise riskmanagement (continued)botswana telecommunications corporation Headline risk risk desCriptiOn COnseQuenCe Of risk OBJeCtiVes Of BtC tO mitigate risk OperatiOnal Brand Image / Effect on Corporate Image loss of customers and Apply best practices,risks Reputation Risk Brand and Image. enterprise value. transparency in dealings and building goodwill with all stakeholders. Business Continuity Risk Continuity of business under lack of customer Develop Disaster threat following disasters. satisfaction, loss of Recovery Plans. customers and profitability. Internal Process Risk Delays in implementing new Effects on Internal Control Develop World Class processes. and smooth operation Best Practices. Transformation Risk Failure of transformation loss of customers will lead Target significant growth processes can cause loss of to loss of revenue and in new business areas. customers. profitability. Human Human Resources Risk loss of talented people, Effect on Morale and Moral Involvement in HIV/AIDSresOurCes risk reduction in morale, Issues, Compensation Costs, Awareness Campaigns. Epidemics, HIV/AIDS control). Corporate Image, Most sought after Productivity, Growth and employer. Performance.COmplianCe legal and Regulatory Significant price control and Effect on business To be a compliantrisks Risk other regulatory controls may opportunities, growth, organisation. reduce our market share, investor climate, decision competitive position and making cost, planning and future profitability. financial implications. Environmental, Health Occupational diseases, Injuries Effects on Costs, Image, Safer working and Safety Risk & Environmental impairment. Performance at Work. environment and be socially responsible. finanCial & liquidity, Capital and High cost of capital or even Effects on Investment, Managing capital atCredit risks Financial Risk non-availability of capital. Costs of operation and optimum level. continuity of business. Credit Risk Risk of lack of revenue Effects on business Well managed credit collections. profitability and business policy. continuity.550000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000056 BTC ANNuAlrepOrt2009111000110111000056 BTC ANNuAlrepOrt2009BRAND managementbotswana telecommunications corporation570000111011000111BTC ANNuAlrepOrt2009teCHnOlOgy, resOurCes, trademarks and BrandstechnologiesBTC Groups network infrastructure is fundamental to its capability to provide fixed and mobile voice and data services and other point-to-point and point-to-multi-point network connections. The Corporations fixed line customers are connected to the access network through wired and wireless connections which in turn links to the core network, which manages the calls set up, transfer of data etc. and collects the billing information. BTC Group operates a superior core national transport network which covers most parts of the country with sufficient redundancy capable of transmitting almost unlimited amount of traffic. beMOBIlE, BTC Groups mobile arm that provides the customers with mobility, came into operation in April 2008. The network which currently works on a 2.5G technology (through Global System for Mobile GSM network) will soon be upgraded to 3G technology capable of transmitting high speed data for most parts of the country. Currently, the network (which is referred to as the General Packet Radio Services GPRS) offers voice, text messaging and data services including those of IP based network services, which enables access to data networks such as the internet. With the introduction of 3G technology, it will offer increased mobile data traffic to facilitate additional service offerings such as high speed internet and email access, video telephony, music downloads etc.licencesBTC Groups key technologies and resources include the Public Telecommunications Operator (known as PTO) licence it holds and its infrastructure which makes it possible for it to provide a seemless, superior, quality service. This licence enables it to provide a wide range of services including fixed and mobile networks, wireline and wireless communications and supply and delivery of various telecommunications services.57BTC ANNuAlrepOrt2009The Corporations fixed line customers are connected to the access network through wired and wireless connections which in turn links to the core network, which manages the calls set up, transfer of data and collects the billing information.key lines Of BusinessBrOadBand ADSL Mobiledata Internet Internationalvoice Internet Leasedlines National interconnect voicecalling Messaging Traditionaldata IP-vPN MetroethernetinternatiOnal serViCes, infrastruCture, interCOnneCtfiXed & mOBile managed serViCes0000111011000111botswana telecommunications corporation111000110111000058 BTC ANNuAlrepOrt2009Brand management (continued)botswana telecommunications corporation111000110111000058 BTC ANNuAlrepOrt2009trademarks and BrandsBTC Group has continued to focus on delivering a consistent superior quality service, which differentiates itself from other operators in terms of reliability and costs. These are the values on which the BTC Groups brands are being built on. We believe that our trademarks are important for our success. The table below is a list of our trademarks and the respective Companies which own them:Brand name Brand Brand Owner Brand Values Brand strategy desCriptiOnBTC Botswana Innovative, resourceful, We will rebuild our brand and Telecommunications willing to take risk, provide strengthen our ties with our Corporation communications for all. customers. We will continue to drive innovations and aspire to become a Corporation that is admired for service excellence.Botsnet Botsnet (Pty) ltd, a Being closer to the As an ISP within BTC Group we 100 % owned subsidiary customers and delivering a maintained top position of BTC Group. global solution which stands in the market with our market out in the market place. share which mainly leveraged on the broadband connections. In particular the small business segment delivered the best ever results for the year, benefiting from a new strategy which brought Botsnet closer to the customers. We will continue to focus on delivering propositions that make BOTSNET- Broadband Solutions stand out in the market place with our mandate to ensure that internet service is accessible to all. As in the past, we will also continue to aggressively embark on the e-literacy and e-business initiatives.botswana telecommunications corporationbotswana telecommunications corporation590000111011000111BTC ANNuAlrepOrt2009 590000111011000111BTC ANNuAlrepOrt2009Brand name Brand Brand Owner Brand Values Brand strategy desCriptiOnbeMOBILE beMOBIlE, a 100 % Can do we want to deliver Through our direct and owned subsidiary of on our promise. indirect distribution channels BTC Group. Young We are a young we will reach most of the and responsive brand with customers wherever they a young culture. are situated. With a fully leading we aspire to be resourced and 24hr call centre, market leaders and we are able to at all times challenge the competition. provide a unique and SIMPLICITy,INNOvATION, refreshing service experience EFFECIENCy and vALuE to to our customer. its customers. Our dominant We reach customers through colour, green, symbolises blitz at urban malls, GROWTH,HARMONy, engagement of villages FRESHNESS, and FERTILITy. through traditional structures such as the Kgotla and most significantly through the soccer platform. Our tariff packages including the popular free on-net weekend calls. botswana telecommunications corporation111000110111000060 BTC ANNuAlrepOrt2009REGulATORY repOrtbotswana telecommunications corporation111000110111000060 BTC ANNuAlrepOrt2009botswana telecommunications corporation610000111011000111BTC ANNuAlrepOrt2009 610000111011000111BTC ANNuAlrepOrt2009regulatiOn in BOtswanaThe implementation of the New licensing Framework, Service-Neutral licensing, transformed the telecommunications sector in Botswana. The introduction of the Public Telecommunications Operators (PTO) licence opened new opportunities for BTC Group, allowing provision of a telecommunications service whether wired or wireless including mobile cellular services.BtC grOups regulatOry pOliCyBTC Group is committed to full compliance with the regulatory framework in which it operates, in order to meet the provisions of the Telecommunications Act 1996, (amended in 2004) and the PTO licence (the licence) under which BTC Group operates, the Corporation through the Office of the Company Secretary, continues to closely monitor and ensure compliance to the licence Conditions.tHe serViCe neutral liCensing framewOrkBTC Group now operates in a more liberalised environment as the service neutral Public Telecommunications Operators licence (PTO licence) allows the Group and the other two operators to provide public telecommunications services of any description, which includes any service provided over a Mobile Cellular, fixed wired or wireless network. We have unified all its operations under a single umbrella. The BTC Group will facilitate efficient service delivery. Botsnet and beMOBIlE now operate as business units under the BTC Group. BTC Group views itself, in future, as a service provider of choice offering a broad range of telecommunications products and services on a unified or converged network.The Group is planning ahead and has started laying the ground work for Fixed Mobile Convergence (FMC). The BTC Group network is being upgraded to an Internet Protocol (IP) based Platform or Next-Generation Network (NGN).BOtswana teleCOmmuniCatiOns autHOrity (Bta)BTA continues to regulate the telecommunications market. The Telecommunications Authority, among others things, develops and implements regulations in order to create a level playing field, promote competition, enhance availability of a wider range of services and, above all, ensures that the customers interests are protected and upheld. Such regulations take the form of licence Conditions and Directives issued by the BTA from time to time to all telecommunications operators and service providers in Botswana. The BTA from time to time engages BTC Group and other stakeholders on issues intended to develop frameworks for the efficient running of the sector. The Registration of Prepaid Mobile Subscribers commenced in September 2008 and all existing prepaid subscribers are required to be registered by 31 December 2009.uniVersal serViCe and aCCessThe Government through the Ministry of Communications Science and Technology (MCST) has embarked on a nation-wide exercise to provide telephony and related services, utilising GSM technology to underserved communities throughout Botswana through a project called Nteletsa II.The introduction of the Public Telecommunications Operators (PTO) licence opened new opportunities for BTC Group, allowing provision of a telecommunications service whether wired or wireless including mobile cellular services.botswana telecommunications corporation111000110111000062 BTC ANNuAlrepOrt2009111000110111000062 BTC ANNuAlrepOrt2009The country has been divided into four areas (Area1 to 4) and the Corporation has been awarded a tender to build and operate a network in Areas 1, 2 and 3. BTC Group has started implementation in Area 2, and the area comprises 62 villages in the Kgalagadi, Kweneng, Kgatleng and Southern Districts. A ground breaking ceremony was held in Maubelo village, Kgalagadi District, on 13 February 2009 to symbolise the commencement of the project. priCe regulatiOnsunder the PTO licence, price controls are in place for public switched telephony call charges, including mobile cellular charges (both national and international) and exchange line rentals whilst the fixed network services such as leased lines and VPNs are subject to market forces. According to the licence, all new services and tariffs shall be approved by the BTA.regulatOry aCtiVitiesDuring the year, BTC Group made applications in regards to a number of promotions and business remodelling which were approved by the Authority. market COmpetitiOn Competition in the international call market intensified over the past year. The other PTOs have commissioned International Gateways thus enabling them to directly route international calls to and from their networks. Competition in the mobile cellular market has intensified with the launch of BTC Groups Mobile network, beMOBIlE. COrpOrate sOCial respOnsiBilityThe Corporation is and continues to be committed to Corporate Social Responsibility, and one such activity during the past year is the continuing collaboration with the university of Botswana (uB) established through a Memorandum of understanding signed on 08 June 2006. The collaboration includes areas such as research, award of prizes and a Master of Science (MSc Electrical and Electronic Engineering) scholarship to a deserving graduate in Electrical and Electronic Engineering. The scholarship is open to Botswana citizens only and the identification of the recipients is carried out by uB.priVatisatiOn Of BtCPrivatisation of BTC Group was approved by the Government in accordance with the PEEPA privatisation masterplan. Pursuant to such approval, PEEPA was appointed to undertake the transaction on behalf of the Government as it only has advisory but not implementation/executory powers in privatisation matters. PEEPA then contracted International Finance Corporation (IFC), a member of the World Bank, as a transaction advisor for privatisation of BTC Group. tHe way fOrwardIt is BTC Groups view that whatever form of privatisation that may be proposed or recommended should recognise the efficiency of the current network operated by BTC Group and its sustainability in the post privatisation era to ensure the realisation of the national Information Communication Technologies (ICT) goals and objectives as well as the Vision 2016 Pillars.regulatory report (continued)botswana telecommunications corporationbotswana telecommunications corporation630000111011000111BTC ANNuAlrepOrt2009 630000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000064 BTC ANNuAlrepOrt2009HuMAN RESOuRCES reViewbotswana telecommunications corporation111000110111000064 BTC ANNuAlrepOrt2009botswana telecommunications corporation650000111011000111BTC ANNuAlrepOrt2009 650000111011000111BTC ANNuAlrepOrt2009In a bid to realise the new business model, the Group made a strategic decision to converge all its businesses under one organisational management structure. BTC Groups traditional business unit (the fixed network), and the new mobile unit beMOBIlE and retail Internet Service Provider (ISP) arm, Botsnet, which was previously run as a separate company were brought together as part of the BTC Group. This resulted in the Corporation having to review its organisational structure to streamline the functions, staffing and competency requirements for the different business units within the Group.The revised organisational structure was approved by the Board of Directors in January 2009 and is organised on business and functional lines with a staff establishment of nine hundred and five (905). BTC Groups strategic aim remains to be the most sought after employer in Botswana.In a competitive market and complex technological world, developing and retaining talented human resources remains a strategic imperative and a challenge. The Corporation is focussing on acquisition and retention of talented resources through its own development programmes and recruitment in the open market.The staff complement as at 31 March 2009 was 905, a reduction from last years 1057. Almost 99 per cent of our staff is local. Out of the 905 staff at the end of the year, 326 (36.02%) were women and 579 (64%) were men. The Corporation is an equal opportunity employer. year ended 31 march 2009 2008 2007 Total employees at 31 March 905 1,057 1,067 Men 579 699 709 Women 326 358 358 ProductivityRevenue per employee 910 756 697 Value created by employee 574 514 465 Average employee cost (excl restructuring) 219 180 170 The revenue per employee and the value creation increased substantially, by over 20%, depicting the determined change to the new Business Model. Average costs, excluding retrenchment costs, too increased by 21.6 per cent to Pula 219,000. This was expected and reflects the technological market in which we are operating where we need to reward staff at market rates. The human resources market is no longer local as the mobility of educated and talented work force is now global.staff turnOVerA total of 77 employees exited the Corporation during the year under review, more than half of them on retrenchment. This represented a labour turn over of 9 per cent. Excluding the retrenchment and dismissal, the labour turnover remained within acceptable industrial norm. The revised organisational structure was approved by the Board of Directors in January 2009 and is organised on business and functional lines with a staff establishment of nine hundred and five (905). BTC Groups strategic aim remains to be the most sought after employer in Botswana.botswana telecommunications corporation111000110111000066 BTC ANNuAlrepOrt2009111000110111000066 BTC ANNuAlrepOrt2009safety, HealtH and enVirOnmentThe development of the Safety, Health and Environment program is taking shape with the initial draft of the SHE policy and procedures document completed. Training of over 200 employees in basic first aid and fire safety has been achieved. A successful commemoration of the Health and Wellness week was realised with more than 50% of employees doing various health tests.uniOn management relatiOnsThe industrial relations climate has been stable but experienced some difficult times. This could possibly be attributed to the delay in finalising the negotiations with the union. Quarterly meetings between Management and the two registered trade unions are conducted to share relevant information and consult on a number of staff issues to foster good employer/employee relationships.perfOrmanCe management, reCOgnitiOn and rewardsDuring the year under review the Board of Directors approved a rewards strategy with a view to improving the Corporations ability to attract retain and motivate its key talents. The strategy speaks to both short term and long term rewards strategies and its implementation has seen the recognition and celebration of significant milestone achievements by employees. pensiOnBTC Group operates a non-contributory pension scheme for all permanent staff. BTC Staff Pension Fund is a contribution defined and benefit scheme, where the pensions will be based on the performance of the Fund. At 31 March 2009, the fund stood at Pula 217.8 million with 1489 beneficiaries.The table below indicates the age demographic of beneficiaries as at 31 March 2009human resources review (continued)botswana telecommunications corporationresignatiOns deatH end Of COntraCt dismissal retirement retrenCHments 18 5 9 4 0 41memBersHip prOfileAge Analysis300250200150100500 30 65504025 604535 >6555active membersDeferred membersNumberofMembersAgesofMembersbotswana telecommunications corporation670000111011000111BTC ANNuAlrepOrt2009 670000111011000111BTC ANNuAlrepOrt2009The Industrial Class Employees are governed by the labour legislation which entitles them to severance pay for service in excess of five years, claimable every five years and calculated on a cumulative basis. Adequate provisions for these liabilities are made in the Financial Statements. It is optional for Industrial Class staff to convert their employment status to permanent and pensionable.trainingThe Corporation continues to strive to provide training that is targeted to identified business needs aligned to the Corporations strategic direction as well as development of one of its most valued assets, its human resources. Training was achieved in accounting, computing and other professional training programmes such as CIMA, ACCA, Cisco and Microsoft. Further training was realised in Next-Generation Networks, Operating Systems Administration, Juniper Networks and others.The Corporation spent P2.1 million on training distributed across divisions as indicated below.The Corporation also partnered with external service providers such as 3M, Torque-IT, Alcatel lucent, Ericsson and Commonwealth Telecommunication Organisation to conduct in-house training as part of the technical staff development strategy. In addition, the BTC Training School also conducts a significant amount of training in access network and switching courses, through internal instructors; to ensure that our employees and outsourcing partners have the necessary competencies to operate and maintain our network. This includes the administration of City and Guilds examinations for internal and external candidates.PercentageDistributionofTrainingExpenditurefortheyear2008/09ceo office 15%commercial 26%Finance 6% operations and technology 41%corporate affairs 12%botswana telecommunications corporation111000110111000068 BTC ANNuAlrepOrt2009111000110111000068 BTC ANNuAlrepOrt2009SuSTAINABIlITYrepOrtingbotswana telecommunications corporationbotswana telecommunications corporation690000111011000111BTC ANNuAlrepOrt2009 690000111011000111BTC ANNuAlrepOrt2009SuSTAINABIlITYrepOrtingbtc Groups technology provides infrastructure for enabling environmental improvements throughout the botswana economy. services such as internet, teleconferencing, videoconferencing, electronic commerce, and medi-conferencing are prime examples of the Groups technologies that directly and indirectly reduce energy and material consumption.botswana telecommunications corporation111000110111000070 BTC ANNuAlrepOrt2009SuSTAINABIlITY repOrtingbotswana telecommunications corporation111000110111000070 BTC ANNuAlrepOrt2009botswana telecommunications corporation710000111011000111BTC ANNuAlrepOrt2009 710000111011000111BTC ANNuAlrepOrt2009sustainaBle deVelOpmentSustainable corporate practices are getting recognition all over the world. Corporations growth not only hinge on its economic operations but also on the often less obvious social and environmental aspects. Good sustainability reporting is gaining stature in Botswana as various stakeholders such as Governments, consumer groups, suppliers, employees, public agencies are increasingly interested in BTC Groups conduct of its business in the environment in which we live.We believe that an efficient telecommunications system in Botswana is essential for the sustained economic success and human progress of this country. Information technology and telecommunications bring direct and indirect benefit to the community and the environment in which we live. On the whole, BTC Group is one of the significant facilitators in the environmental sustainability initiatives in Botswana and a lowest consumer of natural resources.Accordingly, in this report, prepared in line with the Global Reporting Initiative (GRI), we review our commitment to ICT development in Botswana, our practices and, in deed our achievement thus far in meeting those commitments. leadersHip COmmitmentWe are optimistic when it comes to developing a sustainable future for our country. We believe that we hold the power to deliver a world of shared promises to our children and generations that follow us. Delivering on that promise will not be easy. It requires an active approach to sustainable development. We must see to it that we run our businesses in ways that sustain the vital resources that enable us and the future generation to come to live in this planet.sustainaBility integratiOn step By stepBTCs technology provides infrastructure for enabling environmental improvements throughout the Botswana economy. Services such as Internet, teleconferencing, videoconferencing, electronic commerce, and medi-conferencing are prime examples of BTC Groups technologies that directly and indirectly reduce energy and material consumption.The Groups belief is that environmental protection and preservation of the natural systems is part of doing business and needs to be managed systematically under a continuous improvement process. From the inception, this has been part of our way of operations. We believe that an efficient and dependable telecommunications system in Botswana is essential for the sustained economic success and human progress of this country. Information technology and telecommunications bring direct and indirect benefit to the community and the environment in which we live.SuSTAINABIlITY repOrtingbotswana telecommunications corporation111000110111000072 BTC ANNuAlrepOrt2009sustainaBility reporting (continued)botswana telecommunications corporation111000110111000072 BTC ANNuAlrepOrt2009The process contains principles that support our commitment, varying from exercising due diligence to meeting or exceeding environmental legislations that applies to us, preventing pollution and promoting cost-effective initiatives that minimise resources and waste. We continue to commit to the improvements in developing our operations to become a major supporting player in the environmental sustainability initiatives in Botswana. This is a step by step integration initiative.To do this, we will meet or exceed all relevant legislation and regulations, and build on our current commitments, which include respect for the environment, commitment to future generations and above all provide benefits to the society in which we operate in. Creating a different kind Of COmpanyFor the Corporation, sustainable development means also creating good environmental and social results which are financially supportable. BTC Group will pursue its business in a profitable, safe and ethical manner, at the same time, demonstrating environmental awareness and social responsibility.Working towards sustainability makes a lot of sense for the Corporation. BTC Group has always been in the forefront of demonstrating its commitment to being a good Corporate Citizen. By demonstrating the benefits of our success, we will set standards in Botswana for other businesses to follow and encourage them to also take steps towards sustainability. Our principle, as a technology outfit, is that we support sustainable development in every facet of our operations, bearing in mind that people are at the centre of concern for sustainability. Through mindful application of the advances offered by technology in the industry, we work hard to promote self awareness and mutual understanding of the need for sustainable development in Botswana. The aim is to achieve an ecologically sustainable country, region and a world for the future generations.botswana telecommunications corporation730000111011000111BTC ANNuAlrepOrt2009 730000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporation111000110111000074 BTC ANNuAlrepOrt2009sustainaBility reporting (continued)CORPORATESOCIALRESPONSIBILITybotswana telecommunications corporation111000110111000074 BTC ANNuAlrepOrt2009Our COmmitment BTC Group is a leading telecommunications provider in Botswana, with a vision to provide world class service at affordable rates. BTC Group has a strong commitment to its customers, shareholders, employees and, in a wider context, society. We are proud that, we have continuously fulfilled our responsibility over the years with pride and dedication by demonstrating to be a responsible corporate citizen.Of course, for Group, corporate citizenship starts with running a successful communications company; producing the right solutions for customer needs, creating jobs for the citizens, generating financial return for the shareholder and keep investing the profits in new projects to create a sustainable telecommunications infrastructure.Our commitment to being a good corporate citizen goes beyond the economic realms of our operation. Today, our stakeholders look to us for leadership to make a difference in the communities in which we operate.BTC Group is committed to advancing education, strengthening communities and improving lives. Through our philanthropic initiatives and partnerships, BTC Group supports projects that create opportunities particularly in the field of education.Business and Our missiOnAs a major supplier and provider of communications services to Botswana, BTC Group plays a pivotal role in the development of the countrys telecommunications infrastructure. We recognise that telecommunications is a major driver in the socio and economic development of Botswana. We are a dedicated partner to the Government of Botswana to achieve its ICT vision (Maitlamo Initiative) as part of its Vision 2016 programme, and supports the development of a telecommunications infrastructure that reaches the remotest parts of the country.BtC and VisiOn 2016 - COnneCted: eduCated and infOrmed natiOn Botswanas National Information and Communications Technology (ICT) vision through its Maitlamo initiatives aim to make Botswana a globally competitive, knowledgeable and information society where lasting improvements in social, economic and cultural development is achieved through effective use of ICT by the year 2016.The Government of Botswana planned to achieve these through: Creation of an enabling environment for the growth of an ICT industry in the country; Provision of universal service and access to information and communication facilities in the country; and, Making Botswana a Regional ICT Hub so as to make the countrys ICT sector globally competitive.botswana telecommunications corporation750000111011000111BTC ANNuAlrepOrt2009 750000111011000111BTC ANNuAlrepOrt2009As Botswana is currently in the early stages of its national ICT programme, levels of ICT in homes, communities and businesses are relatively low, and ICT in healthcare, education and Government remain in their formative years. BTC Group has committed itself to support the initiatives, in collaboration with Government of Botswana, through the provision of an enabling network environment to connect communities, businesses, residential homes, Government offices, schools, hospitals and clinics anywhere in the country.BTC Group has built superior quality networks linking major centres around the country. Botswana has been credited by international institutions as having one of the best superior quality overall telecommunications infrastructure. The Group is continuing to build the backhaul networks, based on fibre connectivity to carry broadband traffic to most towns and villages. The existing fibre routes, the new Metropolitan Area Network, the ADSl connectivity in most cities and proposed Trans Kalahari Networks supplemented by the satellite links through VSAT services will form the backbone of the grand architecture. The already available copper and wireless access connections, currently in excess of 250,000 lines, will complete connectivity.As part of this initiative, almost all secondary schools throughout the country have been connected with broadband (ADSl) network coupled with internet services. Further, plans are also in the pipeline to connect the primary schools to broadband in the near future. This would be in-line with Vision 2016 - on providing an educated and informed nation that can only be achieved by giving the young children the opportunity to access information in a modernised way.Further, through Nteletsa Project a number of rural villages which did not have communications have been brought into service (see community relations).We are leading the internet revolution in Botswana. Through the international connectivity via our earth station and links through South Africa we connect Botswana to the world. In the near future, with the completion of the Eastern and Western African undersea cables, in some of which, we have taken a stake, we will bring even much higher capacity internet bandwidth to our door step. sustainaBility reporting (continued)botswana telecommunications corporation111000110111000076 BTC ANNuAlrepOrt2009enVirOnmental relatiOns and issuesWe are committed to operating in a way that advances sustainability and reduces the environmental impact. We carry out Environmental Impact Assessment for all major projects where communities in the areas are consulted, informed and their consent received before a project is undertaken. sustainaBility eVOlutiOn - Our strategyOur commitment to the evolution of the sustainability concept is guided by continuous improvements in: Eliminating waste and encouraging recycling of all materials we use; Increasing eco-efficiency by optimising resources use; Stimulating and using innovation, emerging technologies and alternative, renewable resources; Harnessing, where feasible, renewable energy sources such as solar; using innovative and lower impact environmentally friendly products; and, Disposing responsibly the products containing environmentally destructive substances.making tHe COnneCtiOnsThe Corporation respects the environment and is mindful of the support programmes designed to encourage environmental awareness and protection through effective resource management, energy efficiency, waste minimisation and recycling initiatives. We ensure that our systems and processes are environmentally friendly and the operations and products cause the minimum detrimental impact to the environment. We believe that we have an obligation towards future generations to have in place, processes that are both environmentally sound and sustainable.enVirOnmental impaCt assessment Of teleCOmmuniCatiOns deVelOpmentsThe Corporations policy is to comply with all relevant legislation, particularly the Environmental Impact Assessment Act. Environmental Impact Assessment Studies are conducted involving all stakeholders before any major project are implemented. Over the years, in whatever we do, we are mindful of the environment in which we operate - be it digging up trenches, cable installations or siting a microwave tower on a hill top. All our developments take into account minimal destruction to the environment.prOduCt apprOValBTC Groups products and services are type approved by BTA, the regulator. Where we sell or lease third party products such as customer equipment, mobile phones etc, are based on already type approved suppliers holding valid certificates.eQuipment standardsBTC Groups own equipment and materials used in its network are standardised; and based on the technical specifications approved by the BTC Tender Committee. BTC Group procures this equipment from typed approved suppliers based on international certification on radio frequency emissions, other environmental hazards etc. BTC Groups network, equipment and products have very little impact on the environment, including climate change, pollution, ozone layer depletion and radio activity. In contrast, BTC products and services normally help reduce the impact of the above.ENvIRONMENTALRELATIONSANDISSuES770000111011000111BTC ANNuAlrepOrt2009waste minimisatiOnBTC Group is mindful of its waste. Most equipment, such as vehicles, furniture, generators amongst others are disposed through public auction after its economical use. Computers are often refurbished and distributed to schools and the needy. Faulty customer equipment and excess materials to requirements on projects are recovered, serviced and reused.reCyCling Of materialsThrough our established programmes, we recover and sell copper and fibre cables, batteries, oil, used phones and integrated circuit boards etc. We believe that every material we recover and recycle can have some effect on the global resources utilisation initiatives. Further all packaging materials such as wooden crates, boxes, cable drums are also disposed of through auctions or other environmentally acceptable ways.energy COnsumptiOn Our systems do not consume significant amounts of electricity. BTC Groups power needs are carefully supplied giving priority to cost, dependability and back-up requirements. The Group has also been a pioneer in using solar energy in Botswana, particularly in the microwave repeater towers and fibre optic repeater stations in remote parts of Botswana. Recently, with the increased theft of solar panels and disruptions to the service, the Group was forced to switch to continuous power supplies. kilOwatt HOurs (kwHs) Value in pula perCentageDirect consumption 10,807,800 2,918,000 61%Indirect consumption 7,045,200 1,903,000 39%Total 17,853,000 4,821,000 100water COnsumptiOnsBTC Groups equipment and systems use minimal water. The following table summarises the water consumption for the year. kilOlitre (kl) Value in pula perCentageDirect consumption 2,100 23,000 7%Indirect consumption 30,300 324,000 93%Total 32,400 347,000 100sustainaBility reporting (continued)botswana telecommunications corporation111000110111000078 BTC ANNuAlrepOrt2009Value CreatiOnBTC Groups aim is to create value for its shareholders, customers and employees. The Groups revenue from sale of goods and services for the year was Pula 835.9 million. The Groups value addition has grown from Pula 461.4 million in 2004/05 to Pula 527.5 million in 2008/09. Of the value created during the year, Pula 219.0 million was paid to staff as salaries costs whilst a further Pula 22.7 million was reserved for redundancy cost. The Government received Pula 16.6 million and Pula 29.7 million in the form of licence fees and dividend respectively.ECONOMICPERFORMANCE-SHAREHOLDERSANDPROvIDERSOFCAPITALValue added statement 2009 2008 2007 2006 2005 P000 P000 P000 P000 P000Saleofgoodsandservices 835,900 799,173 743,843 685,957 641,809 Interestincome 45,873 59,252 59,526 53,097 46,278 Bought out cost of services (354,246) (315,049 ) (307,547 ) (247,970 ) (226,704 )valueadded 527,527 543,376 495,822 491,084 461,383 Employee cost (219,035) (285,574 ) (182,027 ) (170,170 ) (165,758 )Depreciation (151,653) (152,933 ) (146,928 ) (128,097 ) (120,860 )licence fees (16,658) (17,374 ) (17,559 ) (17,399 ) (16,108 )Earningsbeforeinterestandtax(EBIT)(afterretrenchment) 140,181 87,495 149,308 175,418 158,657 Interest (21,228) (29,168 (31,337 ) (36,524 ) (33,427 )Earnings 118,953 58,327 117,971 138,894 125,230 Dividend (29,738) (14,582 ) (29,493 ) (34,724 ) (31,308 )Retainedearnings 89,215 43,745 88,478 104,170 93,922 Numberofemployees 905 1,057 1,067 1,079 1,064 Revenue per employee 910 756 697 636 603 Value created per employee 574 514 465 455 434790000111011000111BTC ANNuAlrepOrt2009BTC Group employs 905 staff all over the country whilst creating indirect employment opportunities to a much larger community. The Groups staff numbers, did however, decline due to its restructuring programme which was necessitated by the technological changes and market forces.infrastruCture inVestmentsBTC Groups main line of business requires substantial investment in telecommunications infrastructure. Over the years, the Group has invested billions of Pula on infrastructure. The asset base of the Corporation relating to telecommunications network currently stands at Pula1.9 billion.rural teleCOmmuniCatiOns netwOrkBTC Group in partnership with the Government of Botswana has embarked upon telecommunications projects in rural areas which are considered not to be economically viable. These projects are called Nteletsa under which the Government of Botswana and BTC jointly fund based on an agreed cost sharing scheme. The amounts provided by the Government of Botswana are considered as grants. So far, the Group has received Pula 250.0 million for Nteletsa related projects as grants.netwOrk COVerageIn fixed communications, we already cover a population base of over 80%. beMOBIlE, our mobile product, launched with a very aggressive network deployment strategy. At its launch it covered the main A1 trunk from Ramatlabama to Ramokgwebana as well as all the major towns and villages. By the end of the year it should have covered at least 80% of the population. tOtal Quality CultureThe Group is a pioneering organisation in promoting a total quality culture in Botswana.In fixed communications, we already cover a population base of over 80%. beMOBIlE, our mobile product, launched with a very aggressive network deployment strategy. At its launch it covered the main A1 trunk from Ramatlabama to Ramokgwebana as well as all the major towns and villages. sustainaBility reporting (continued)botswana telecommunications corporation111000110111000080 BTC ANNuAlrepOrt2009Best and fair Business praCtiCeBTC Group is committed to best and fair business practice as outlined in the Corporations Value statement. This also guides the Corporation in its dealings with customers by providing policy guidelines for the provision and disconnection of services. The Group is also mindful of its prices and strives to maintain its affordability to most of its customers whilst remaining profitable. Wherever we do business, we see ourselves as members of the local society, and as a good corporate citizen, we actively contribute to the communities and the environment. prOduCts and serViCesBTC Group basic products (voice telephony and internet) are available in most population centres across Botswana. The availability of these services can be obtained almost instantaneously and the delivery period for these services have been curtailed. Once the creditworthiness of a customer is assessed positive, there are no barriers for obtaining basic telephone services. Prepaid services are available for fixed and mobile telephony services. Building CustOmer COnfidenCeWe have continued to benchmark ourselves against the worlds best communications operators to create a culture within the Corporation that is customer focused, quality conscious, innovative, enterprising and most of all responsible for its action.BTC Group also participates in a number of Trade Fairs in Botswana as part of its customer and society educational campaigns. We also use blitz at urban malls and engage villages through their traditional structures, such as the Kgotla, in promoting some of our products mainly beMOBIlE.CustOmer Care and after-sales serViCeAs a brand that is responsive and provides innovative and unique products, customer care is in the forefront of our customer care centres. We are able to service clients right across the country with BTC and beMOBIlE products and services. With a fully resourced and 24hr call centre, servicing our clients, we provide a unique and refreshing service experience to our customers. We operate a 24 hour fault reporting service.priCingTariffs for our main products are in the BTC Telephone Directory. A detailed tariff guide is available from our service centres nationwide, or from our website www.btc.bw. Changes in tariffs are regularly published in the media. Charges are mostly usage related and hence easily understood. They take into account the affordability of customer groups. It has special packages for old age pensioners whilst low income communities are, where possible, covered via mobile phones and payphones.CuSTOMERRELATIONS810000111011000111BTC ANNuAlrepOrt2009CustOmer COmplaintsCustomer complaints are received via the 24 hour call centres or any one of our offices. Such complaints can range from service delivery to service level, billing queries, misuses and abuses. There is a procedure in use for registering and resolving complaints. Most customer complaints are resolved within 72 hours of receipt. There is also an escalation process for those irate customers who need further investigations such as abuse of phones, vandalism etc.distriButiOn netwOrkOne of the cornerstones of the BTC and beMOBIlE products are the availability and accessibility of their products and services in all corners the country. The procedure for obtaining any one of the Groups operational areas are set out in the Botswana Telephone Directory.On the direct distribution front, our outlets countrywide and two beMOBIlE branded stores in Gaborone serve our clientele and provide the largest footprint. This is in-line with our objective of providing converged services through leveraging its expansive infrastructure and ensuring that the first real fruits of convergence would also be felt at the service level. On the indirect channel, the Group has dealers that distribute the prepaid products and service across the whole country and it is our intention to ensure that Batswana are adequately and timeously serviced. As we expand our network, the distribution channel would continue to grow commensurate with our coverage.CustOmer infOrmatiOn sHaringOur aim is to offer our customers the best technological solutions at affordable prices. We hold a number of seminars, product launches, information sharing forums such as Trade Fairs and Expos etc. These gatherings give us an opportunity to understand the customer requirements, emerging technological trends, level of customer satisfaction and dissatisfaction and give us insights into areas where we need further improvements.sustainaBility reporting (continued)botswana telecommunications corporation111000110111000082 BTC ANNuAlrepOrt2009COmmunity inVOlVementWe perceive community relationship as a core competency that adds value to our business. This includes building critical relationships, contributing to the well being of the communities, developing corporate image and enhancing corporate reputations.As a leading corporate citizen, during the year, the Group participated in a variety of community related initiatives: We sponsored the Botswana Premier Soccer league to the tune of Pula 5.0 million. This unprecedented level of sponsorship has increased soccer awareness among all ages of the society; We have donated Pula 1.35 million over a three year programme to the uB Foundation as part of the Co-operation and Mutual Assistance Programme between uB and the Corporation to promote research and development in telecommunications related fields; The Group continues to participate in events and fora to promote economic growth and attract investment into the country. The Group partly sponsored the first ever local Enterprise Authority Small Micro and Medium Enterprises fair and participated at the Botswana Confederation of Commerce, Industry and Manpower (BOCCIM) Northern Trade Fair and the Botswana Consumer Fair. In the context of learning, the Corporation takes proactive role in the skills development of Batswana with more focus in the area of Information and Communications Technology. During the year, the Group participated at the World Telecommunications Day celebrations at Kaudwane and donated eight computers to the community. At the BTC Annual Golf Day, which coincided with fund raising for Sponsor a Child Trust, at which event the Corporation matched the funds raised by Pula 40,000; Through its employees, we have identified the needy causes in the society and provided assistance. giVing BaCk tO tHe COmmunityIn our special emphasis to communities, we believe the future of our country is being determined today by our ability to enable our children to reach their full potential. As part of this initiative, we carried out the following activities: Through its Internet arm, Botsnet, has donated website solutions to two Non-Governmental Organisations - Gabane Home Based Care Centre and Mosadi - celebrating women through the arts. The Group has also supported primary school sponsored walks. Through BTC Directory Cover design competition, we develop and nurture the talents of artists in Botswana. The Group has donated over 200 computers so far to schools all over the country. The Corporation is also the proud sponsor of the National Mathematics and Science Fair conducted nationwide.COMMuNITyRELATIONS830000111011000111BTC ANNuAlrepOrt2009suppOrting spOrtBTC Group through its mobile network, beMOBIlE actively supports sport by sponsoring the Premier Football league to the tune of P5 million over a three year period. The biggest sponsorship in the annals of Botswana football has seen the game become very competitive to rival some of the top leagues. The league is now exciting and intriguing. In motor sport, beMOBIlE sponsored local racing hero, Atang Makgekgenene, in the Annual Toyota 1000 Desert race, the only Motswana in the sandmaster category, made the nation proud. prOmOting tHe artsThe Group donated P20 000 to Thapong Visual Arts Centre. In collaboration with the centre, the Group sponsored a competition to the tune of P20 000 inviting artists to design the cover for the 2010 Phone Book Directory. The Group also supports musicians by affording them an opportunity to share the platform and showcase their talent during promotions.state-Of-tHe-art teCHnOlOgy tO BOtswanaBTC Groups aim is to bring state-of-the-art technology where possible at affordable prices with an aim of achieving a balance between economy, ecology and society. In the telecommunications world today, it is important to be a provider of the latest and solid technological solutions to all customers in keeping with world standards. rural teleCOmmuniCatiOns deVelOpmentBotswana has a small population that is spread across a vast country. Where feasible BTC Group utilises its resources to provide services to remote villages that have a population of 250 or more. So far, the Group under the Nteletsa Project, has connected almost 200 villages around the country. Currently we have signed another contract for the provision of telecommunications to a further sixty two villages in the south-western part of Botswana. These projects were a partnership between the Government of Botswana and BTC Group where the Government funds the capital cost, whilst maintaining the infrastructure on an ongoing basis. The cost of the projects is in excess of Pula 240 million.netwOrk fOr puBliC purpOsesSpecifically BTC Group provides payphones, both cash and prepaid in urban and rural areas. However, with the advent of mobile telephony, the usage of these phones has drastically reduced. disseminating COrpOrate infOrmatiOn Corporate communications play an integral and vital role in disseminating information on the Corporation, whether on our performance, or on our principles and policies to our stakeholders. Dedicated public relations teams manage the flow of information to the media, the public, the customers and the other stakeholders. Customer service representatives through our front offices liaise with the customers in a friendly way. The Corporation website is ably managed by the public relations teams ensuring that a continuous flow of information reaches every stakeholder and interested party within and outside Botswana. Corporate communications play an integral and vital role in disseminating information on the Corporation whether on our performance or on our principles and policies to our stakeholders.sustainaBility reporting (continued)botswana telecommunications corporation111000110111000084 BTC ANNuAlrepOrt2009emplOyment pOliCy and emplOyee inVOlVementThe Corporation employees are key to the success of the business and, as a result, the Corporation pursues employment practices which are designed to attract, retain and develop this talent to ensure the corporation retains its strong market position with motivated and satisfied employees.The Executive Committee (EXCO) takes responsibility for employment matters and has established suitable policies and guidelines. Wherever possible, the Corporation seeks to benchmark itself against industry best practice.It is the Corporations intention to give all staff an opportunity to share in the future success of the business. Through the privatisation programme, BTC Group hopes that a suitable Employee Share Option Plan (ESOP) will be achieved.BTC Group adheres to all human rights legislation and upholds all human rights practices enshrined in Botswana labour legislation. Specifically, the Corporations minimum age for recruitment of permanent staff is eighteen years. rewards and remuneratiOnThe Executive Committee in conjunction with the Human Resources Committee, continuously reviews the reward and incentive schemes. The Performance Appraisal System has already been implemented with a 360 degree feedback from peers and subordinates. The output from the Performance Appraisal System is used as input for training employees and enhancing the reward system.BTC Group is an equal opportunity employer. Its rewards structure is competitive and matches the market. Temporary and casual employees are remunerated similar to permanent staff but without benefits such as housing allowance, transport concessions, pensions benefit, medical insurance etc. There are no differences in salary between male and female staff with similar responsibilities. training and deVelOpmentOur priority is to develop a comprehensive needs based futuristic training programme. Apart from the job related skills development, the Corporation also conducted a number of seminars, workshops and courses aimed to provide employees with broader personal development and improve their quality of life. In the telecommunications field where skills are relatively in short supply, BTC Group is committed to enhancing local skills through provision of technical and management training. Since its inception, the Corporation has spent millions training engineers, accountants, business graduates and artisans. The Group runs its own training school.safety and HealtHWe bear social responsibility towards our employees by promoting safety and health in the workplace. A Health and Safety Committee is currently being formed to which the heads of departments will appoint staff representatives. As such, all staff will have equal opportunity to be represented in such initiatives. EMPLOyEERELATIONS850000111011000111BTC ANNuAlrepOrt2009staff welfare and deVelOpmentIn support of our HR policy and development of teamwork, we believe that sport plays an important role. Participating at national level, we field teams for soccer, netball and volleyball. The Corporation also promotes inter-country sporting competitions amongst Botswana, lesotho, Swaziland and Namibia. We also make the creation of social interaction among employee families a priority, a factor we think impacts positively on employee motivation. COntriButiOn tO HiV/aids related aCtiVitiesBTC Group is a founding member of the Botswana Parastatal Aids Forum and also has an active Aids awareness programme in the work place. The Group commemorated the World AIDS day through the concept of Wellness Expo to promote employee wellness, to know their HIV/AIDS status and to discourage stigmatisation in the workplace.emplOyee BeHaViOurBTC Group strictly adheres to a code of ethical business conduct. All employment contracts are governed by elaborate Conditions of Employment which prohibit any corrupt behaviour, accepting substantial gifts and money laundering. staff retrenCHmentAs a result of changes in the market and business, certain rationalisation in human resources is necessary. All staff retrenchments are adequately discussed with relevant stakeholders, such as unions, Board, Ministry of labour before final decisions are made. So far, the Corporations retrenchments have been voluntary with the consent of the affected employees.infOrmatiOn sHaringEmployees receive regular updates on corporate performance and developments through various formal and informal channels of communication, including the Corporations website (intranet). This website contains all Group policies, functional procedures, forms, statutory information, job advertisements and other human resources issues. stakeHOlder relatiOnsWe value the opportunity to engage in dialogue with key stakeholders. Stakeholder engagement is increasingly recognised as creating value and contributing to the organisations resilience, choosing the right technology helps identify opportunities and create products and improves performance and better risk management. We are in continuous consultation with our stakeholders, the Government of Botswana through a number of its organs, the Ministry of Science, Communications and Technology, the Public Enterprises Evaluation and Privatisation Agency (PEEPA), Botswana Telecommunications Authority etc, to name a few. Through ongoing open dialogue and relationship of trust, integrity and respect, we chart the progress of the Corporation during the most critical times.gOVernmentThe Government of Botswana is the only stakeholder of BTC. under the current structure, BTC reports to the Ministry of Communications, Science and Technology which directs BTC in terms of overall communications industry policy decisions. A senior member of the Ministry is a member of the Board.Privatisation issues are co-ordinated by the Public Enterprise Evaluation and Privatisation Agency (PEEPA). Matters relating to regulations are dealt with through the Botswana Telecommunications Authority (BTA). sustainaBility reporting (continued)botswana telecommunications corporation111000110111000086 BTC ANNuAlrepOrt2009memBersHip tO natiOnal and internatiOnal BOdiesBTC is a member of Botswana Confederation of Commerce, Industry and Manpower. The Group also participates in activities of the International Telecommunications union and Commonwealth Telecommunications union as Botswana representative through Botswana Telecommunications Authority.stakeHOlder COntaCtsThe table below summarises our contacts with key stakeholders, frequency of our contacts and issues discussed.internet and internatiOnal COnneCtiVityIn a challenging environment, ADSl Broadband as a service has continued to perform well despite the low e-market penetration, adding almost 500 broadband customers each year. To date, broadband has a total of 3900+ standard broadband ADSl customers (through Botsnet) and almost 1300 Brobe bundle contract customers. like for like revenue growth has increased due to the fact that more IP based value added services were introduced and they all leverage on the current Broadband infrastructure. The customer base has grown year on year, in highly competitive markets. COrpOrate annual repOrtingBTC Group gives priority to the way it reports to the public. The annual report covers strategies and direction, business review, corporate governance, financial and management analysis, trends and analysis, annual financial statements and, of course the sustainability report.The Corporation sets good reporting standards to improve overall corporate reporting in Botswana. stakeHOlder type Of COntaCt freQuenCy key issuesGovernment Meetings On a required basis Policy matters, privatisation etcPEEPA Meetings Quarterly PrivatisationBTA Meetings and discussions On a daily basis Regulatory mattersCommunity Meetings On a required basis Community matters, environmental issues and assessmentsCustomers Personal contacts Daily Customer relationsSuppliers Personal contacts Daily Supplier relationsEmployee Personal contacts Daily Employee relations870000111011000111BTC ANNuAlrepOrt2009sustainaBility reporting (continued)botswana telecommunications corporation111000110111000088 BTC ANNuAlrepOrt2009Suppliers of technology are our prime supporters with whom we continuously engage to assess the market for newer technologies and solutions. Building sustainaBle allianCes and partnersHipsBTC Groups growth has depended greatly on our ability to initiate and build successful partnerships, forging highly valued relationship with a multitude of associates. Whether it is global giants or a local supplier of a service in a remote village, sustainability of relationships plays a pivotal role in our quest to provide world class service. This philosophy has enabled us to forge, secure and maintain unique partnerships throughout our existence.Our customers are varied, from major Governmental Departments to an individual in a rural village and businesses to residential. We have served them all with dedication and equity. Our Valued Business Partners cover a wide range of suppliers, principals, agents and institutions and these relationships are built over a number of years. From our initial relationship with Cable & Wireless to our latest, there lies a host of names Ericsson, Alcatel, Siemens, Cisco, Huiwei, Nera, Airspan, Alviron, Sun Systems, HP, Comverse NEC, Mitel etc.SuPPLIERRELATIONSIn the financial markets, we have worked with nearly all banking institutions in Botswana such as Barclays Bank, Standard Chartered Bank, First National Bank and Stanbic Bank who have throughout the years helped us with funds for various developments.suppOrting small and medium siZe enterprises and serViCe prOVidersBTC Group procurement policy encourages local manufacturers and service providers through a well defined and documented local preference scheme, where price preferences are given based on the level of local value addition and citizen participation.It is also the Groups procurement policy that certain construction and maintenance contracts are offered to citizen contractors whenever possible. These span across the fields of network construction and maintenance to non-core asset maintenance. The Corporation believes that through its engagement with small and medium size enterprises, it can empower them in their quest for growth and sustainability.We encourage citizen empowerment, where we employ a preference scheme in purchasing goods and supplies. By buying local goods and services, we promote an efficient supply industry.890000111011000111BTC ANNuAlrepOrt2009sustainaBility reporting (continued)botswana telecommunications corporation111000110111000090 BTC ANNuAlrepOrt2009tHe glOBal repOrting initiatiVes (gri) g 3 indeXThe Global Reporting Initiatives (GRI) provides a generally accepted framework for reporting on an organisations economic, environmental and social performance. BTC Group has used the GRI Sustainability Reporting Guidelines (G3) in the development of our 2009 Sustainability Report. This index provides a comprehensive listing of the GRI indicators reported by the Corporation. We have also used the telecommunications sector supplements on social and environmental performance. This index is used as a checklist for compliance and refers to this Sustainability Report 2009, as well as the other sections of the Annual Report 2009. The various sections of this Annual Report are classified under: Corporate Profile Performance Highlights Ten Year Review and Time line Board and Management Resume Chairmans and Chief Executives Reports Corporate Governance Report Business Review Risk Management Report Brand Management Report Regulatory Report Human Resources Report Corporate Sustainability Report Management Discussion and Financial Analysis Financial Statementswe have self assessed our report as a C C + B B + a a +mandatOry Self declared YesOptiOnal Third party checked No GRI checked No910000111011000111BTC ANNuAlrepOrt2009prOfile Criteria COntents wHere tO find it?1 strategy and analysis 1.1 Statement from the Chairman Chairmans Statement Corporate Report and Chief Executive Chief Executives Report1.2 Description of key impacts, risks Vision 2016 and BTC Sustainability Report and opportunities New business model Business Review Key targets and performances2 Organisational profile2.1 Name of the organisation Botswana Telecommunications BTC Corporate Profile Corporation2.2 Primary brands, products Communications products BTC Corporate Profile and / or services and services2.3 Operating structure BTC Organisation Chart BTC Corporate Profile2.4 location of the organisations Gaborone BTC Corporate Profile headquarters2.5 Number and name of countries Botswana BTC Corporate Profile with operations2.6 Nature of ownership and 100% State owned enterprise BTC Corporate Profile legal form2.7 Market served Entire Botswana covering business, BTC Corporate Profile government and individuals2.8 Scale of operating organisation Number of employees BTC Corporate Highlights, Net sales Management Discussion and Total capitalisation Financial Analysis Quantity of products and services provided Breakdowns of assets, sales / revenue, cost structure, employees 2.9 Significant changes during Entry into mobile, expansion of Business Review Management the reporting period broadband and internet, decline in Discussion and Financial Review voice telephony revenue, staff reduction etc2.10 Awards received Best Corporate Reporting Annual ReportsustainaBility reporting (continued)botswana telecommunications corporation111000110111000092 BTC ANNuAlrepOrt2009prOfile (continued) Criteria COntents wHere tO find it?3 report parameters3.1 Reporting period 1 April 2008 to 31 March 2009 About the Annual Report3.2 Date of most recent 31 March 2008 previous report3.3 Reporting cycle Annual About the Annual Report3.4 Contact point Chief Executive Officer About the Annual Report3.5 Report scope and boundary Stakeholder expectations About the Annual Report3.6 Boundary of the report Only the operations covered by BTC About the Annual Report3.7 limitation of scope / boundary Some market trade sensitive data About the Annual Report may be excluded from these reports 3.8 Basis for reporting on None excluded About the Annual Report subsidiaries, joint ventures, outsourced operations etc3.9 Data measurement techniques Only internationally accepted About the Annual Report and basis of calculations industry principles and practices are used 3.10 Restatements None, unless disclosed in About the Annual Report these reports3.11 Significant changes in reporting None, unless disclosed in About the Annual Report (scope, boundaries, these reports measurement methods etc)3.12 location of the Standard Strategy and analysis Annual Report 2009 Disclosures Organisational profile Report parameters Governance, commitments and engagements Disclosure of management approach Core performance indicators GRI additional indicators GRI sector supplement indicators930000111011000111BTC ANNuAlrepOrt2009 Criteria COntents wHere tO find it?4 governance, commitment and engagement4.1 Governance structure BTC organisation, board and Corporate Governance Report sub-committees, management structure 4.2 Chair of the highest Chairmans and Chief Executive Corporate Governance Report governance body Officer responsibilities Board Members Profile4.3 Highest Governance body and Independence of the members Corporate Governance Report its composition independence of the board4.4 Mechanism for stakeholders Shareholder relations BTC Sustainability Report and employees to provide Employee feed back mechanisms recommendations or direction Stakeholder relations to the Board4.5 Senior management Board compensation Corporate Governance Report compensation and Chief Executive compensation organisational performance Senior management compensation4.6 Avoidance of conflict of interest Disclosure requirements Corporate Governance Report4.7 Process for appointment Board member appointment Corporate Governance Report to Board (expertise) process4.8 Vision, Mission and Applicability and relevance to BTC Sustainability Report Value Statements organisation4.9 Boards procedure for overseeing Board meetings Corporate Governance Report and management of economic, Performance management and environmental and social frequency performance Corporate Sustainability Reporting Committee4.10 Process for evaluating Performance management Corporate Governance Report Board performance and frequency4.11 Precautionary approach Risk identification and management Risk Management Report or principles process4.12 Externally developed economic, licence conditions and fulfilment BTC Regulatory Report environmental and social charters, principles and other initiatives and BTCs compliancesustainaBility reporting (continued)botswana telecommunications corporation111000110111000094 BTC ANNuAlrepOrt2009prOfile (continued) Criteria COntents wHere tO find it?4 governance, commitment and engagement (continued)4.13 Membership and participation in BTC is a member of Botswana BTC Sustainability Report industry, national and Confederation of Commerce, Industry international advocacy bodies and Manpower. BTC through BTA participates in International Telecommunications union, Commonwealth Telecommunications Fora. 4.14 Stakeholder groups and Community and civil society BTC Sustainability Report engagements Customers BTC Human Resources Report Stakeholders and providers of capital Suppliers Employees, workers and trade union4.15 Basis for identification and Value and impact to BTC and the BTC Sustainability Report selection of stakeholders for country engagement4.16 Approach to stakeholders Continuous, and as and when BTC Sustainability Report engagement (frequency necessary and contents)4.17 Key issues and concerns from None BTC Sustainability Report stakeholders and resolution950000111011000111BTC ANNuAlrepOrt2009laBOur praCtiCes and deCent wOrk Criteria COntents wHere tO find it? employmentlA1 Total labour force and breakdown Total labour force at 31 March Human Resources Report 2009 was 905lA2 Employee turnover by age, A total of 77 left the employ of BTC. Human Resources Report group, gender and region This amounted to 9%lA3 Benefits provided to full-time Temporary employees are not entitled BTC Sustainability Report employees that are not provided for any additional benefits such as to temporary or part-time pensions, medical insurance, employees travelling concessions etc. labour management relationslA4 Percentage of employees 584 of the 905 employees belong to BTC Human Resources Report covered by collective bargaining staff unions covered under collective agreements bargaininglA5 Minimum notice periods Minimum notice periods are set out BTC Human Resources Report regarding operational changes, in the BTCs Conditions of Service. including whether it is specified usually, sufficient time is given in in collective agreements case of involuntary terminations Occupational Health and safetylA6 Percentage of total workforce Currently a Health and Safety BTC Sustainability Report represented in formal joint Committee is being formed. management worker health Heads of Departments can nominate and safety committees that help representatives to this Committee, monitor and advise on as such, entire staff has equal chance occupational health and safety of getting appointed to such initiatives programmeslA7 Rates of injury, occupational diseases, lost days and absenteeism and number of work related facilities by regionlA8 Education, training, counselling, BTC AIDS Policy BTC Sustainability Report prevention and risk control BTC Retrenchment Policy BTC Human Resources Report programmes in place to assist workforce members, their families, or community members regarding serious diseasessustainaBility reporting (continued)botswana telecommunications corporation111000110111000096 BTC ANNuAlrepOrt2009laBOur praCtiCes and deCent wOrk (continued) Criteria COntents wHere tO find it? Occupational Health and safety (continued)lA9 Health and Safety topics covered Health and Safety BTC Sustainability Report in formal agreements with trade Collective labour Agreements unions training and educationlA10 Average hours of training per Data currently not available year per employee by categorylA11 Programmes for skills BTC Training Programme BTC Sustainability Report management and lifelong learning that supports the continued employability of employees and assist them in managing career endingslA12 Percentage of employees All staff are subject to performance BTC Human Resources Report receiving regular performance reviews and career development reviews diversity and equal OpportunitylA13 Composition of governance BTC does not practice diversity BTC Human Resources Report bodies and breakdown of based policies employees per category according to gender, age group, minority group membership, and other indicators of diversitylA14 Ratio of basic salary of men to BTC Salary Structure BTC Human Resources Report women by employee category970000111011000111BTC ANNuAlrepOrt2009sOCiety perfOrmanCe indiCatOrs Criteria COntents wHere tO find it? CommunitySO1 Nature, scope and effectiveness All major projects are environmentally BTC Sustainability Report of any programmes and practices assessed for impact prior to that assess and manage the commissioning of the project impacts of operations on There are no practices that assess and communities, including entering, manage the impact of every operation operating and exiting CorruptionSO2 Percentage and total number of Internal Audit function closely BTC Ethical Values business units analysed for risk monitors all organs of BTC for any BTC Conditions of Service related corruption risk relating to corruption BTC Human Resources Policies BTCs ethical values do not tolerate corruptionSO3 Percentage of employees trained All staff are expected to adhere to BTC Ethical Values in organisations anti-corruption BTCs Human Policies and Conditions BTC Conditions of Service policies and procedures of Service BTC Human Resources PoliciesSO4 Action taken in response to Depending on the severerity of BTC Conditions of Service incidents of corruption offence an employee may be reprimanded or terminated public policySO5 Public policy position and BTC as a State Owned Entity, fully participation in public policy subscribes to Government Policies development and lobbying As such lobbying is not relevantSO6 Total value of financial and in-kind None contributions to political parties, politicians and related institutions by country anti-competitive BehaviourSO7 Total number of legal actions for None anti-competitive behaviour, anti- trust, and monopoly practices and their outcomes ComplianceSO8 Monetary value of significant fines None and total number of non-monetary sanctions for non-compliance with laws and regulationssustainaBility reporting (continued)botswana telecommunications corporation111000110111000098 BTC ANNuAlrepOrt2009prOduCt respOnsiBility perfOrmanCe indiCatOrs Criteria COntents wHere tO find it? Customer Health and safetyPR1 lifecycle stages in which health and safety impacts of products and services are assessed for improvements and percentage of significant products and services categories subject to such proceduresPR2 Total number of incidents of None BTC Regulatory Report non-compliance with regulations and voluntary codes concerning health and safety impacts of products and services during their life cycles, by type of outcome products and service labelingPR3 Type of product and service None. BTCs products are adequately Website www.btc.bw information required by described in product brochures, BTC Product Brochures procedures and percentage of leaflets and the BTC Telephone BTC Telephone Directory significant products and services Directory subject to such information requirementsPR4 Total number of incidents of None non-compliance with regulations and voluntary codes concerning product and service information and labelling by types of outcomesPR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction990000111011000111BTC ANNuAlrepOrt2009teleCOmmuniCatiOn seCtOr speCifiC indiCatOrs Criteria COntents wHere tO find it? internal OperationsIO1 Capital investment in Information available for country Financial Review and telecommunications network Management Discussion infrastructure broken down by country / regionIO2 Net costs for service providers The current BTC licence conditions do BTC Regulatory Report under the universal Service not impose any universal service Obligation when extending obligation service to geographical locations and new low-income groups, which are non-profitable. Describe relevant legislative and regulatory mechanismIO3 Practices to ensure health and BTCs working procedures adhere to BTC Human Resources Report safety of field personnel involved industry accepted standards on BTC Sustainability Report in installations, operation and Health and Safety including adequate maintenance of masts, base protection against exposure to radio stations, laying cables and other frequency outside plant. Related health and safety issues include working at heights, electric shock, exposure to EMF and radio frequency fields and exposure to hazardous chemicalssustainaBility reporting (continued)botswana telecommunications corporation1110001101110000100 BTC ANNuAlrepOrt2009teleCOmmuniCatiOn seCtOr speCifiC indiCatOrs (continued) Criteria COntents wHere tO find it? internal Operations (continued)IO4 Compliance with International BTC customer premises equipment BTC Sustainability Report Commission on Non-Ionising and handsets are type approved by Radiation Protection (INCIRP) BTA, or relevant international and standards on exposure to radio regional standards (such as ICASA) frequency (RF) emission from setting standards to which the handsets industry subscribe The equipment used in the network are in accordance with the BTC standards or those which are approved in the industryIO5 Compliance with International BTC Sustainability Report Commission on Non-Ionising Radiation Protection (ICNIRP) guidelines on exposure to radio frequency *(RF) emission from base stations.IO6 Policies and practices with respect None to Specific Absorption Rate (SAR) of handsets.IO7 Policies and practices on the An Environment Impact Assessment BTC Sustainability Report sitting of masts and transmission (EIA) is carried out involving all sites including stakeholder stakeholders prior to commencement consultation, site sharing, and of construction. The installation of initiatives to reduce visual impacts. such masts and transmission lines are Describe approach to evaluate subject to approval by the relevant consultations and quantify where Government bodies. possible.IO8 Number and percentages of All sites are owned by BTC. BTC Sustainability Report stand-alone sites, shared sites, and sites on existing structures.1010000111011000111BTC ANNuAlrepOrt2009 Criteria COntents wHere tO find it? providing accessPA1 Policies and practices to enable BTCs operations are carried out along BTC Sustainability Report the deployment of commercial lines which require that telecommunications infrastructure services are only provided to and access to telecommunications economically viable areas. The Group, products and services in remote however, in agreement with the and low population density areas Government, is implementing rural (explanation of a business model development programmes in low applied) population and uneconomical areas under a capital grant system PA2 Policies and procedures to There arent any barriers for services BTC Sustainability Report overcome barriers for access and except for availability of network use of telecommunications resources products and services including: language, culture, illiteracy, and lack of education, income, disabilities, and age. PA3 Policies and practices to ensure BTC products and services are BTC Sustainability Report availability and reliability of available in most population centres. telecommunications products Certain specialised services are catered and services and quantify, where for based on the basic demand and possible, for specified time periods justifiable solutions and location and downtimesPA4 Quantify the level of availability Most basic products are available to BTC Product Bouquet of telecommunications products most population (over 90%). However, BTC Telephone Directory and services in areas where BTC certain specialised products such as operates broadband, network services are only available in the major townsPA5 Number and types of low income users have access to BTC Tariff Policy telecommunications products prepaid products where no rentals BTC Telephone Directory and services provided and used are set with no barrier to entry by low and no income sectors of the populationPA6 Programmes to provide and BTCs services are part of essential maintain telecommunications services during disaster relief. BTC is products and services in committed to provide free services emergency situation and for during such periods. disaster relief.botswana telecommunications corporation1110001101110000102 BTC ANNuAlrepOrt20091110001101110000102 BTC ANNuAlrepOrt2009FINANCIAl reViewbotswana telecommunications corporationbotswana telecommunications corporation1030000111011000111BTC ANNuAlrepOrt2009 1030000111011000111BTC ANNuAlrepOrt2009FINANCIAl reViewthis Financial review and management Discussion reviews the results of operation, performance and financial conditions for the year ended 31 march 2009 in comparison with the previous two years. it explains the performances of various business segments using a variety of measures. it provides commentary on the revenue, the operating profit performance, asset basis, financing and capital structures of the corporation.botswana telecommunications corporation1110001101110000104 BTC ANNuAlrepOrt2009CAuTION REGARDING fOrward lOOking statementsbotswana telecommunications corporation1110001101110000104 BTC ANNuAlrepOrt2009botswana telecommunications corporation1050000111011000111BTC ANNuAlrepOrt2009 1050000111011000111BTC ANNuAlrepOrt2009Good Corporate Governance and stock market regulations encourage companies to disclose forward looking statements on objectives, plans, strategies, financial conditions and results of operations, cash flow and business outlook. These statements are forward looking because they are based on our current expectations, estimates and assumptions about the markets we operate in, the Botswana economic environments and our ability to attract and retain customers to manage network assets and operating costs.A statement we make is forward looking when it uses what we know and expect today to make a statement about the future. Forward looking statements may include words such as aim, anticipate, assumption, believe, could, expect, goal, guidance, intend, may, objective, outlook, plan, seek, should, strategy, strive, target and will. Forward-looking statements, by their nature, are subject to numerous risks and uncertainties and are based on several assumptions which give rise to the possibility that actual results could differ materially from our expectations expressed in or implied by such forward looking statements and that our objectives, strategic priorities and business outlooks may not be achieved. As a result, we cannot guarantee that any forward-looking statement will materialise. Risks that could cause our actual results to materially differ from our current expectations are discussed throughout this Financial Review and Management Discussion as well as in the section on Risk Management. Factors that could cause actual results to differ materially from our expectations expressed in or implied by our forward-looking statements include: general economic conditions; failure to achieve our business objectives; the intensity of competitive activity; our ability to respond to technological changes and rapidly offer new products and services; effects affecting the functionality of, and our ability to protect, maintain and replace, our networks, information technology (IT) systems and software: labour disruptions; the potential adverse effects on our internet business of the significant increase in broadband demand; our ability to raise capital needed to implement our business plan; the consummation of the privatisation initiatives of the Government of Botswana; litigation and changes in laws and regulations etc.Forward-looking statements are provided in this document for the purpose of allowing investors and others to get a better understanding of our operating environment. However, readers are cautioned that it may not be appropriate to use such forward-looking statements for any other purpose.Itisimportanttoknowthat: Forward looking statements in the BTCs 2009 annual report, including Financial Review and Management Discussion describe our expectation as at 21 September 2009. Our actual results could be materially different from what we expect if known and unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. As a result, we cannot guarantee that any forward looking statement will materialise and, accordingly, you are cautioned not to place undue reliance on these forward looking statements.CAuTION REGARDING fOrward lOOking statementsbotswana telecommunications corporation1110001101110000106 BTC ANNuAlrepOrt2009financial review andmanagement discussionbotswana telecommunications corporation1110001101110000106 BTC ANNuAlrepOrt2009 Forward looking statements do not take into account the effects that the transactions or non-recurring or other special items announced or occurring after the statements are made, may have on our business. For example, they do not include the latest liberalisation, licencing or privatisation arrangements and their impact on BTC, sale of assets or businesses, acquisitions assets write-downs or other changes announced or occurring after forward-looking statements are made. The financial impacts of such transactions and non-recurring and other special items can be complex and necessarily depends on the facts particular to each of them. Accordingly, the expected impact cannot be meaningfully described in the abstract or presented in the same manner as known risks affecting our business. We disclaim any intention and assume no obligation to update and forward looking statements even if information becomes available as a result of future events or for any other reason. This Financial Review and Management Discussion, reviews the results of operation, performance and financial conditions for the year ended 31 March 2009 in comparison with the previous two years. It explains the performances of various business segments using a variety of measures, some of which are not defined under IFRS, and therefore termed as non-GAAP measures. It provides commentary on the revenue, the operating profit performance, asset basis, financing and capital structures etc. of the Corporation and analyses it over operating segments or line of business / activities for the past three years. It also analyses the risks associated with the business, its view on those risks and the actions that are taken by the Corporation.This review is focused principally on the trading results of BTC Group before specific items. Specific items (such as Restructuring Costs, one-off retrenchment expenses etc.), by virtue of their size or nature, are excluded where necessary because they are predominantly transitional in nature. This is also consistent with the way that financial performance is measured by management as it allows a meaningful comparison to be made of the operating results of the Corporation. These financial statements, analysis and data include the operations of BTC including that of beMobile and its subsidiary Botsnet (Pty) ltd. The subsidiary is involved in internet retailing. beMobile, the BTCs arm of mobile telephony commenced its services in May 2008. Hence, this is the first year in which the revenue and operating costs are included in the financial statements. Our BusinessBTC is licensed as a Public Telecommunications Operator which enables the Corporation to offer services of any kind connected with public telecommunications. Currently, the Group is the one of the leading providers in Botswana of voice telephony, both, fixed and mobile as well as national and international, internet wholesaling and retailing, data services, virtual private networks and customer equipment to residential, government and business customers.BTC Groups main business is managed along the lines of revenue sources being national and international switched telephone services, local access service, data (including internet wholesaling) and provision of customer equipment. These divisions are designed to assist management in comparing meaningfully the operating results and financial performance. In order to better manage customers, they are grouped along size and type resulting in both small and medium enterprises, large corporates and government as well as residential users.botswana telecommunications corporation1070000111011000111BTC ANNuAlrepOrt2009 1070000111011000111BTC ANNuAlrepOrt2009Operating resultsThe Corporations results for the past three years are summarised below: 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Sales of goods and services 835.9 799.2 743.8 4.6% 7.4%Interest 45.9 59.2 59.5 (22.4% ) (0.3% )Revenue 881.8 858.4 803.4 2.7% 6.8%Cost of sales (396.3) (370.7 ) (367.7 ) 6.9% 0.8%Grossprofit 485.5 487.7 435.7 (0.4% ) 11.9%Other Income 23.2 21.6 1.2 7.4% 1700.0%Selling and distribution costs (12.4) (8.6 ) (9.6 ) (44.2% ) (10.4% )Administrative expenses (233.6) (220.2 ) (201.2 ) 6.1% 9.4%Other expenses (122.6) (98.1 ) (76.7 ) 1.7% 27.9%Operatingprofit 140.1 182.5 149.3 (10.6% ) 22.2%Financing costs incl preference dividend (21.2) (29.2 ) (31.5 ) (27.4% ) (7.3% )Profitbeforestaffretrenchmentcosts 118.9 153.3 117.8 (7.5% ) 30.1%Restructuring costs (95.0 ) (76.0% ) Profitattributabletoordinaryshareholders 118.9 58.3 117.8 (104.1% ) (50.5% )Basicearningspernotionalordinaryshare(thebe) 565 277 560 Dilutedearningspernotionalordinaryshare(thebe) 52 26 521110001101110000108 BTC ANNuAlrepOrt2009reView Of results The telecommunications revenue continued to grow during the financial year 2008/09. The revenue growth also reflected the shifting revenue sources, both retail and wholesale, as well as between voice and data. We are on course to create a entirely new business model for BTC Group in the coming year. Overall costs too have come down from the previous year reflecting a net profit of Pula 119.0 million as opposed to Pula 58.3 million in the previous year. BTC Groups revenue from product sales grew by Pula 36.8 million to Pula 835.9 million for the year, despite the difficult trading conditions owing to the world economic decline. The rate of growth was impressive, reflecting an increase of 4.6 per cent.Gross profit margin, excluding interest income, totaled Pula 485.5 million (55.1 percent) from Pula 487.71 million (2007/08) (53.6 per cent). The gross profit margin has remained above 50.0 percent during the last three years, which is impressive. The growth in the products revenue and the stability in the gross profit margin demonstrate that the exercise of re-balancing of tariffs carried over the last four years has achieved its main aim.The operating costs, which include the cost of sales, selling and distribution, administrative and other expenses increased to Pula 742.1 from Pula 697.6 million (2007/08) and Pula 655.2 million (2006/07). This reflects a healthy operating margin of 15.9 per cent as compared to 10.2 per cent and 11.9 per cent in the previous years. Although, the costs increased by 6.4 per cent, the results achieved are remarkable given the trading conditions experienced for most part of the year.BTC recorded a net profit of Pula 118.9 million (before retrenchment cost) down from Pula 153.3 million in the previous year, reflecting a decrease of 7.5 per cent. This is impressive and reflects the potential for future profitability.During the year, the stakeholder equity surpassed Pula 1.0 billion mark for the first time. Total stakeholders equity and reserves now amounts to Pula 1,127.0 million (2008 Pula 996.8 million and 2007 Pula 968.0, as compared to the assets of Pula 1,658.3 million (2008 Pula 1,643.2 million and 2007 Pula 1,601.7 million). In line with the progressive dividend policy of the stakeholder, this reflects an improving capitalisation ratio (or debt equity structure) for the corporation.botswana telecommunications corporationsales Of prOduCts and serViCesBTCs revenue sources include voice (both national and international calls), network (local access and data services including managed data network, ADSl and internet bandwidth wholesaling and retailing) and sale and rental of customer equipment. 2009 2008 2007 % changeSaleofGoodsandServices Pmill P mill P mill 09:08 08:07Voice revenue national calls 250.5 264.3 268.3 (5.2 ) (1.5 ) international calls 132.2 168.1 198.5 (21.3 ) (15.3 )Totalvoicerevenue 382.7 432.4 466.8 (11.5 ) (7.4 )Network revenue local access 94.2 83.5 59.2 12.8 41.0 data and private circuits 249.9 202.3 133.3 23.1 51.8Totalnetworkrevenue 344.1 285.8 192.5 20.4 48.5Equipmentsalesandrentals 65.8 52.9 44.9 24.4 17.8Otherservices 43.4 27.9 39.6 55.5 (29.5 )Totalrevenue 835.9 799.2 743.8 4.6 7.4financial review andmanagement discussion (continued)1090000111011000111BTC ANNuAlrepOrt2009Total product revenue rose to a record Pula 835.9 million, up 4.6 per cent from last year. This is impressive, given the global trend where revenue streams of traditional operators are under pressure. Network revenue which comprises the local access and data networks now accounts for 41.2 per cent depicting a significant shift demonstrating the new business model BTC Group is trying to achieve. The fact that the Group was able to grow its revenue around 5 7 per cent over the last two years in a competitive market indicates the resilience and the quality of services it provides. The Corporation is quite pleased with this trend considering the severe competition it faces from the other licensed operators, including the other two public telecommunication operators. tHe COmparatiVe reVenue distriButiOn is as fOllOws9008007006005004003002001000Operating reVenueSale of Goods and ServicesreVenue sOurCeyEARENDED31MARCHPulamillion2005 20072006 2008 2009Other sales and services local and access servicesCustomer premises equipment Telephone - internationalData and private circuits Telephone - nationalTelephone - national 30%Data and private circuits 30%Telephone - international 16%Customer premises equipment 8%local and access services 11%Other sales and services 5%p milliOn799.2835.9(36) 11(14) 4813152007/08revenuetelephoneinternationaltelephonenationallocalaccessDatacircuitscpe other 2008/09revenue1110001101110000110 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)VOiCe Call and line inCOmeVoice calls comprising the national and international call income is still the main source of income for BTC Group. Although, the income from voice calls decreased by 11.5 per cent, nearly half of all of the income, 57.1 per cent, is derived from these sources. 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Voice revenue national calls 250.5 264.3 268.3 (5.2 ) (1.5 ) international calls 132.2 168.1 198.5 (21.3 ) (15.3 )Network revenue local access 94.2 83.5 59.2 12.8 41.0Totalvoicerevenue 476.9 515.9 526.0 (7.5) (1.9)The drop in voice calls was expected. The introduction of mobile services reduced the impact of the drop in the national call income. The tariff rebalancing exercise where the local access rentals were increased to compensate for the reduction in the call charges also caused the voice call income to drop. Furthermore, due to the competition, some of the prices had to be dropped or bundled together with other services, resulting in a drop in revenue. On a national level, BTC Group still offers the cheapest tariff with a superior voice quality as compared to the other operators.International call income comprises of outgoing calls originated on BTC network and terminating charges for incoming calls from international operators and from the mobile networks. The world over, the advent of Voice Over Internet (VoIP), the international call income has suffered significant reductions. The trend continued in Botswana as well with the international call income decreasing by 21.3 per cent to Pula 132.2 million. A similar decline of 15.3 per cent was experienced last year. This trend is expected to continue for the foreseeable future.The international telephone call income as a percentage of all revenue reduced to 15.8 per cent as compared to 21.0 per cent and 26.7 per cent in the previous two years respectively. With the new carrier capacities and internet based communications, further reduction is anticipated.The access income increased by 12.8 per cent during the current year to Pula 94.2 million (2008 Pula 83.5 million and 2007 Pula 59.2 million). This was anticipated as the rebalancing of tariffs was expected to increase the access income whilst reducing the local call income.The number of fixed access lines has remained at around 144,195. The fixed lines are still the dependable and faster communication platform for ADSl, Metropolitan Area (fibre) Network and the rural network.In the voice market, we are seeing strong uptake from packages that bring together calls, lines, broadband and mobile through our bundled pricing. 1110000111011000111BTC ANNuAlrepOrt2009 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Network revenue - data and private circuits 249.9 202.3 133.3 23.1 51.8Totalnetworkrevenue 249.9 202.3 133.3 23.1 51.8 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Equipment sales and rentals 65.8 52.9 44.9 24.4 17.8Other services 43.4 27.9 39.6 55.5 (29.5 )Totalrevenue 109.2 80.8 84.5 4.6 7.4netwOrk serViCe and data reVenue Network service revenue includes local access rentals, data networks including managed data network, ADSl and internet bandwidth wholesaling and retailing.During the year, data revenue increased significantly, principally driven by the demand for ADSl and Internet. The new business model will have data services as the core of its development and revenue source. The income from data services registered a growth of 23.1 per cent and now accounts for 29.9 per cent (2007/08 25.3 per cent) of the overall revenue. High-speed internet access service provided through digital subscriber line (ADSl) technology for residential, Government and business customers was the main contributor in this revenue stream. BTC Group remained Botswanas preferred broadband (including DSl) and internet service provider. During the year under review, we included mobile broadband to this array of service. We also reduced the entry level prices and increased bandwidth size for existing customers, effectively reducing the internet prices. In Botswana, we are still the leading provider of wholesale network services to internet service providers, major commercial companies and the Government. We play a major role in helping other mobile operators manage their connections between their base stations. The Group considers data services as one of its future growth areas. BTC Group is establishing itself as a leading provider of managed network solutions that will enable our wholesale customers to serve their customers well. For that reason, the Corporation continues to invest in its broadband networks, expanding their capacity and reach. This expenditure, together with the increase in revenue, demonstrates the Corporations targeted shift from being a simple voice telephony provider to a composite solution provider where broad band networks are likely to be a leading revenue base in future. OtHer inCOme sOurCesThe other income sources comprise of sale and renting of customer premises equipment and other miscellaneous services.1110001101110000112 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)Operating COstsOperating Costs comprise costs of services and goods sold, direct selling and distribution costs, net employee costs (costs of retrenchments shown separately), depreciation and other operating costs. In this analysis, depreciation of equipment directly involved with the services provided and those which are in the ancillary functions are accumulated and included separately. Further, as the amortisation of development grants are linked to the costs of equipment, they are subtracted from the depreciation charge. The total operating costs including retrenchment costs and net of development grants for the year was Pula 741.6 million as compared to Pula 770.9 million in the previous year (see table below). However, excluding the costs of retrenchment, the overall costs accounted for Pula 718.8 million which compared favourably with that of the previous year (2007/08 Pula 675.9 million), growth of which is below the level of inflation. Management of costs is a significant element in the new business model.Almost all categories of operating costs were contained within reasonable limits, and within the overall increase in the average inflation of 12.0 per cent. 2009 2008 2007 % changeOperatingcosts Pmill P mill P mill 09:08 08:07Cost of goods and services 244.0 217.5 214.4 12.2 1.5Selling and distribution 12.3 8.6 9.6 43.0 (10.4 )Net employee costs 196.3 190.6 182.0 3.0 4.7Depreciation 151.7 152.9 146.9 (0.8 ) 4.1Other Operating Costs 137.3 106.3 101.1 7.7 5.1Operatingcostspriortorestructuring 741.6 675.9 654.0 6.3 3.3Restructuring costs 95.0 0.0 (76.0 ) 0.0Totaloperatingcosts 741.6 770.9 654.0 (3.8 ) 17.9900800700600500400 3002001000120100806040200COst struCture COst struCtureyEARENDED31MARCH yEARENDED31MARCHPulamillion%2005 20072006 2008 2009 2005 20072006 2008 2009Restructuring costs Employee costsInterest costs Selling and DistributionOther operating costsDepreciation net of amortisationCost of service / goodsRestructuring costs Employee costsInterest costs Selling and DistributionOther operating costsDepreciation net of amortisationCost of service / goods1130000111011000111BTC ANNuAlrepOrt2009COst Of gOOds and serViCesCost of goods and services as indicated above comprise mainly of costs directly attributable to international carriers and national operators on outbound and transit calls, licence fees and space segment rentals and other equipment and material costs (depreciation excluded). Payment to international and national carriers and operators increase by Pula 17.9 million to Pula 163.7 million (an increase of 12.2 per cent). The other category of costs which increased significantly was space segment rentals increasing from Pula 6.2 million to Pula 11.2 million as a result of purchase of increased bandwidth. net emplOyee COstsDespite reduction in staff numbers, net employee costs at Pula 196.3 million, after capitalisation for capital jobs, increased by Pula 5.7 million or 3.0 per cent from the previous year. The increase was similar to the one in the previous year and was as a result of salary adjustments, staff movements, promotions and filling up of vacant positions. The total number of employees at end of March 2009 was 905 as compared to 1,057 a year ago. retrenCHment COsts During the year, the Corporation completed its retrenchment plan with 148 employees who opted to terminate their services on a voluntary basis. selling and distriButiOn COstsThe direct selling and distribution costs only accounted for Pula 12.3 million in comparisons to Pula 8.6 million in the previous year.depreCiatiOnThe charge comprises of depreciation of land and building, plant and machinery directly related to providing services and other equipment. The following is an analysis of the respective depreciation charge. 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07land and building 3,269 3,822 3,348 (14.5 ) 14.2Plant and machinery 148,982 149,361 149,970 (0.2 ) (0.2 )Other equipment 21,203 19,679 10,532 7.8 86.9less: amortisation of development grant (21,801) (19,928 ) (16,922 ) 9.4 17.8Totalcharge 151,653 152,934 146,928 0.9 4.081110001101110000114 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)Depreciation of plant and machinery is a significant part of the operating costs and indicates the capital intensity of the operations. BTC Group is currently rationalising its investments through vendor partnerships, life cycle costing, competitive purchasing in capital assets with a view to reduce the costs applicable to purchase of equipment. OtHer Operating COstsThis category of costs includes other repairs and maintenance expenses on non-telecommunications equipment and other operating expenses including consultancy and legal costs, impairment provision relating to customer account balances etc. The other operating costs amounted to Pula 114.5 million (2007/08 Pula 106.3 million). The main reason for the increase in other operating expenses was attributable to additional impairment provision on customer account balances, consultancy costs relating to privatisation, mobile service and other performance improvement initiatives. These costs are essential and will result in benefits accruing to the Corporation in the coming years.grOss, Operating and net inCOme and marginsThe following table summarises the gross, operating and the net margins.grOss marginThe gross margin excluding interest income posted a steady performance, reflecting a healthy 52.7 per cent (2007/08 53.6 percent and 2006/07 51.4 percent). This performance of achievement above 50.0 per cent is encouraging and reflects the pricing policies adopted by the Corporation. BTC Group was able to maintain this trend despite the tariff rebalancing and the severe competition it faced during the past three years. Operating marginsThe operating margin before retrenchment costs, decreased to Pula 118.9 million as compared to Pula 123.3 million in the previous year. Expressed as a percentage of revenue, this improved to 11.3 per cent as compared to 3.5 per cent in the previous year. The total operating costs as a percentage of total telecommunications services income was 88.7 per cent in the current financial year as compared to 96.5 per cent in the previous year. 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Gross margin (excl interest income) in Pula 440.2 428.7 382.6 2.7 12.0 % 52.7 53.6 51.4 Operating margin prior to restructuring costs (excl interest income) in Pula 94.3 123.3 89.8 (5.0 ) 37.3 % 11.3 18.0 12.1Operating margin after restructuring costs (excl interest income) in Pula 94.3 28.2 89.8 234.4 (68.6 ) % 11.3 3.5 12.1 Net margin in Pula 118.9 58.3 118.0 104.1 (50.6 ) % 14.2 7.3 15.91150000111011000111BTC ANNuAlrepOrt2009The operating margin after retrenchment costs was Pula 94.3 million in the current year as compared to Pula 28.2 million in the previous year. interest inCOme and finanCing COstsinterest incomeThe interest income declined to Pula 45.9 million as compared to Pula 59.3 million and Pula 59.0 million in the previous years, resulting from the reduced bank balances. The bank balances averaged Pula 400 million yielding approximately 11.5 per cent per annum.The cash position decreased due to the increased level of capital expenditure on the projects such as the Trans Kalahari Fibre Optic Network, BTC mobile network and the eastern and western international cable projects.The income received and the corresponding cash balances can be analysed as follows for the two years: 2009 2008 2007 % changeInterestearnedon Pmill P mill P mill 09:08 08:07 on short term deposits 45.9 59.3 55.8 (22.6 ) 6.3 on Bank of Botswana Certificates 0 0 3.7 0 (100.0 )TotalInterestIncome 45.9 59.3 59.5 (22.6) (0.3)Cashbalances Cash at bank 83.8 62.4 193.4 (67.7 ) (67.7 ) Cash at bank (short term deposits) 315.9 341.7 401.3 (14.9 ) (14.9 )Totalcashbalances 399.7 404.1 594.7 (32.0) (32.0)14012010080604020060.0%50.0%40.0%30.0%20.0%10.0%0.0%Operating inCOme(Before interest income and restructuring costs)margins(Gross, Operating and Net Margins)yEARENDED31MARCH yEARENDED31MARCHPulamillion%2005 20072006 2008 2009 2005 20072006 2008 2009Gross marginOperating marginNet margin1110001101110000116 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)finanCing COstThe financing cost, at Pula 21.2 million, compared with Pula 29.2 million in the previous year was within budget. This comprises of Pula16.5 million (2008 Pula 22.1 million) on account of the unwinding of interest costs on the interest free loan from the Government of Botswana, not involving any movement of funds. The balance of Pula 4.8 (2008 Pula 6.9 million) was on account of the Corporations long term bonds. Net income before financing costs stood at P 140.2 million and the interest cover recorded of 6.6 times indicates that the Corporation is generating sufficient revenues to cover interest expenses. There were no exceptional finance expenses resulting from application of International Accounting Standard (IAS 39) OtHer inCOmeOther income contribution to revenue accounted from disposal of properties, plant, machinery and equipment. The other income accounted for only Pula 1.4 million for the year.Capital eXpenditureCapital expenditure for the year under review was Pula 167.7 million much lower than the previous year of Pula 372.0 million. With the completion of the Trans Kalahari Fibre Optic Project, most part of the expenditure for the current year was on the mobile network and Intelligent Network platforms.The capital expenditure expressed as a percentage of the cash available during the year amounted to 46.6 per cent as compared to 125.6 per cent and 194.5 per cent in the preceding two years, indicating that the balance (i.e. 53.4 per cent) was financed through cash resources accumulated over years. The expenditure also expressed in multiples of Earnings before Interest, Depreciation, Taxation and Amortisation (EBIDTA) accounted for 0.5 times dropping from 1.9 times in the previous years. We achieved a capital expenditure at 46.6 per cent of revenue as compared to 17.6 per cent and 15.6 per cent the previous two years. The completion of the Trans Kalahari Project and investment in the mobile network contributed to this exceptionally high figure. Future capital expenditures will, however, be targeted to previously set range of 25% - 40 % of the revenue depending on the cash generated through the business. 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Profit before financing costs (P mill) 140.2 87.5 149.3 60.2 (14.8 )Financing costs (P mill) 21.2 29.2 31.5 (27.4 ) (14.1 )NetIncomeafterfinancingcosts(Pmill) 119.0 53.3 117.8 123.3 (15.0)InterestCover(times)Profitbeforefinancingcosts:interest 6.6 3.0 4.71170000111011000111BTC ANNuAlrepOrt2009 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Cash flow available for investment during the year (Pula mill) 162.4 173.3 157.2 (6.3% ) 10.2%Capital Expenditure (Pula mill) 167.7 372.0 125.2 (54.9% ) (197.1% )Self-financing ratio (%) 96.8% 46.6% 125.6% EBIDTA (Pula mill) 268.7 179.3 236.9 60.5% (24.3% )EBIDTA : Capital expenditure multiple 1.60 0.5 1.9 Capital Expenditure to operating revenue (%) 19.4% 46.5% 16.8% The amount of cash flow available for investment during the year is arrived at after taking into account the financing income and costs, the proceeds from sale of property, plant and equipment and the repayment of loans.CreatiOn Of sHareHOlder Value and return On sHareHOlders fundsOne of BTC Groups stated objectives is for a comparable market based return on the shareholders funds, with potential for future growth. return on shareholders fundsShareholders equity, at end of 31 March 2009, was Pula 1,127.0 million as compared to 2008 - Pula 967.9 million and 2007 - Pula 967.9 million. This reflect a growth of approximately 16.4 per cent a year over the previous year and an average of 9.0 percent per annum increase over the last three years. The stakeholders, the Government of Botswanas dividend policy helps BTC Group to achieve this growth as 75 per cent of the net profit is retained in the Corporation. Return on average shareholders equity increased from 5.9 per cent in 2007/08 to 11.2 per cent in 2008/09. As the capital base increase and the earnings get diluted, the return on shareholders funds is likely to come under pressure. The challenge for the Corporation is to find alternative and new sources of revenue growth which could maintain or increase the profit margin.160140120100806040200300250200150100500net inCOme eBidta - net Operating CasH flOw(Earnings before interest Depreciation and taxation)yEARENDED31MARCH yEARENDED31MARCHPulamillionPulamillion2005 20072006 2008 2009 2005 20072006 2008 20091110001101110000118 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)Basic earnings per share (including retrenchment costs) increased from 277 thebe to 565 thebe per share whilst the diluted earning per share also increased from 26 thebe to 52 thebe this year. The improved performance has brought back the previous trend in earnings which took a dip owing to high retrenchment costs. earnings, dividends and share valueNet income attributable to Government of Botswana on ordinary shares for the current financial year was Pula 118.9 million as compared to Pula 58.3 million and Pula 117.8 million in the previous two years. As per the Government directive, the Corporation will pay a dividend totalling 25 per cent of the profit. On that basis, a dividend of P 29.7 million will become payable (141 thebe per ordinary share basic) in the financial year 2009/10. An additional payment of Pula 0.2 million (8 thebe per share) is payable on the preference shares. return on capital employed and total assetsReturn on average Capital Employed decreased to 7.6 per cent, down from 7.9 per cent. The current return is well below the target of estimated weighted average cost of capital of the Corporation, at 18.0 per cent. The return on total assets also decreased from 7.0 per cent to 6.7 per cent during the year. These ratios are calculated on average balances and based on the net income prior to financial costs. It is always the aim of the Corporation to achieve a return of 18 % on its capital employed.finanCing and Capital managementBTCs financing strategy remained unchanged during the financial year i.e. to provide adequate resources for expansion. The investment in capital assets was financed by grants from the government and from the internally generated cash. Hence, no new loans were acquired. Cash flowThe Corporation continues to remain cash positive. The cash provided by the operation was Pula 210.5 million as compared to Pula 201.7 million in the previous year. BTC Groups operational strength is demonstrated by its ability to generate on average Pula 200 million of cash flow from operations per year over the past few years.However, owing to heavy capital expenditure this year, the Corporation suffered a deficit in its free cash flow for the first time in the last four years. However, its operational capability to generate cash flow combined with the well-managed conservative debt structure ensures that BTC Group has significant capital capacity that can be tapped quickly and effectively as new opportunities emerge. 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07Net cashflow from operations 210.5 201.7 187.2 4.4 7.7Net cash flow used in investing activities (120.4) (311.0 ) (64.0 ) (61.3 ) (385.9 )Freecashflow 90.1 (109.3 ) 123.2 82.4 (188.7 )Cash flow from financing activities (95.4) (89.0 ) (91.3 ) 7.2 (2.5 )Increaseordecreaseincashresources (5.4) (198.3 ) 31.9 97.3 (721.6 )1190000111011000111BTC ANNuAlrepOrt2009liquidityCash flows provided by operating activities of continuing operations, prior to working capital changes and dividend payment, totalled Pula 200.9 million (2008: Pula 230.1 million). BTC Group believes that its internal resources coupled with the unutilised borrowing capacity, is sufficient to finance its operating requirements, anticipated capital expenditure, and dividend payments during the financial year 2009/10. 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07long term debt including current portion 107.3 200.8 238.7 (46.5 ) (15.9 )Total Shareholders Equity 1,127 996.8 967.9 13.0 3.0TotalCapitalEmployed 1463.9 1438.3 1485.9 1.8 (3.2)TotalAssets 1658.3 1643.2 1601.7 0.1 2.6Gearing(DebttoEquityratio)% 9.5 20.1 24.7Solidity(Equitytototalassets)% 68.0 60.7 60.44003002001000-100-2001086420free CasH flOw rOCeReturn on Capital Employed (prior to restructuring costs)yEARENDED31MARCH yEARENDED31MARCHPulamillion%2005 20072006 2008 2009 2005 20072006 2008 2009Free Cash FlowCapexROCE1110001101110000120 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)financial positionThe total debt, including that payable within a year, decreased by Pula 93.5 million from Pula 200.8 million in March 2008 to Pula 107.3 million in March 2009, mainly as a result of the payment of a major loan from the Government of Botswana and the repayment of the bond amounting to Pula 50.0 million.The total interest bearing debt as at 31 March 2009, inclusive of the short-term portion, was 9.5 per cent of the shareholders equity, an improvement from 20.1 per cent from the previous year. It is the Corporations objective to contain the level of debt and the resulting gearing (or leverage) within 25 % of equity.The solidity, which reflects the financing of the assets of the Corporation, expressed as the ratio of total shareholders equity to total assets, was 68.0 per cent as at 31 March 2009 as compared to 60.7 % in the previous year, reflecting a healthy financing structure. The Corporations recorded current liabilities (excluding current portion of loan term loans) was Pula 183.5 million, as at end of the financial year. The current assets however, maintained at the same level as that of the previous year at Pula 592.7 million. The cash and cash equivalents also remained at the same level at Pula 399.7 million whilst the trade and other receivables decreased by 14.8 per cent or Pula 22.5 million to Pula 128.5 million. Various assets and liabilities including cash and short-term debt can fluctuate significantly on a month-to-month basis depending on short-term liquidity needs.2000150010005000Shareholders equity Shareholders equityGrants and deferred revenue Grants and deferred revenueDebt Debt100806040200Capital struCture CapitalisatiOn ratiOyEARENDED31MARCH yEARENDED31MARCHPulamillion%2005 20072006 2008 2009 2005 20072006 2008 20091210000111011000111BTC ANNuAlrepOrt2009net debtBTC financial positions have been strong over the past few years with the company not operating with any net debt. BTC Groups debts will be maturing within the next two years and expected to be settled fully. The Group has no current plans to defer or negotiate any new debts. Off-Balance sheet arrangementsAs discussed in the financial statements, there are no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on the Corporations financial conditions, changes in financial position, results of operation, liquidity, capital expenditure or capital resources with the exception of the following: Operating leases (note 23) Capital commitments and guarantees (note 22) Banking facilities (note 20.2.1)retirement Benefit COsts and pensiOn fundAs stated in the financial statements, the Corporation operates a defined contribution pension fund called BTC Staff Pension Fund for its eligible citizen employees. The pension fund is a separate legal entity managed by trustees appointed by the BTC Board and staff union representatives. The Corporation contributes to the fund 14 per cent of the pensionable earnings of the members with members contributions limited to voluntary basis to the pension fund directly. Pension contributions on behalf of employees are charged to income statement in the year to which they relate to and as the related service are provided. BTC Group also set aside 14 per cent of the pensionable earnings for those staff who were transferred from the Government of Botswana to BTC on 1 April 1980, the date of commencement of the Corporation. These staff members opted to remain under a separate Government pension plan which was a defined benefit plan. In March 2008, the Group made a final settlement to the Government of Botswana an amount of Pula 29.5 million being the liability in respect of these staff members.At the balance sheet date, the Group has no further financial obligations to the staff except for any unpaid current contributions. 2009 2008 2007 % change Pmill P mill P mill 09:08 08:07long-term debt including current portion 107.3 200.8 238.7 (46.5 ) (15.9 )Cash and bank 83.8 62.4 193.4 34.3 (67.7 )Short-term deposits 315.9 341.7 401.3 (7.5 ) (14.9 )Totalcashandshort-termdeposits 399.7 404.1 594.7 (1.1) (32)Net debt Nil Nil Nil1110001101110000122 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)finanCial risk managementBTC Group holds financial instruments mainly to finance its operation; to finance capital development; for the temporary investment of short term funds; and to manage currency and interest rate risks that may arise. The Groups principal financial liabilities comprise bonds, preference shares, trade payables and government loans. The main purpose of these financial liabilities is to raise finance for the Corporations operations. BTC Group has various financial assets such as trade receivables and cash and short-term deposits, which arise directly from its operations.BTC Group has a centralised treasury operation whose primary role is to manage liquidity, funding, investments and manage risks that may arise from interest rate and currency exchange rate.The main risks arising from the Corporations financial instruments are cash flow, interest rate risk, liquidity risk, foreign currency risk and credit risk.foreign exchange risk managementA significant proportion of BTC Groups current revenue is invoiced in Botswana Pula, and a significant element of our operations and costs arise within Botswana. The Corporation undertakes certain transactions denominated in foreign currencies with international operators and other foreign suppliers. As a result, an exchange rate risk exist when fluctuations in currency rates occurs. BTC Group hedges part of the risk by holding foreign currency (uS Dollar) deposit accounts.The Corporation is mainly exposed to South African Rand, uS Dollar and SDR (Special Drawing Rights). At the end of the year, the net exposure to foreign currencies amounted to Pula 48.4 million with a 10 per cent increase or decrease in all rates to have an effect equivalent to Pula 4.8 million. BTC Groups exposure to foreign currency liabilities and assets are set out in note 26.3 of the Annual Financial Statements.interest rate risk managementBTC Group has interest bearing financial assets and financial liabilities which exposes it to interest cash flow or fair value volatility. As far as possible, the Group locks its interest rates to Pula denominated fixed rate loans. At the end of the year, the Corporations loans consist of interest free loans of Pula 120.0 million from the Government of Botswana and a fixed rate (13.75 per cent). There were no significant loans obtained during the year. At the same date, the Corporations assets which are subject to interest rate risk amounted to Pula 83.8 million of cash and bank balances (variable interest rate deposits) and Pula 315.9 million in short-term deposits.During the year, the Group received Pula 45.9 million in interest income whilst the interest expenses amounted to Pula 21.2 million. The volatility arising from 1 per cent change in either direction of the interest rate could increase or decrease the net interest income by Pula 3.1 million. Credit risk managementBTC Groups exposure to credit risk arises mainly from its trading related receivables and liquid funds with banks. Trade receivables (Pula 117.8 million at end of March 2009) consists of a large number of customers, spread across diverse industries and geographical areas. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.BTC Group does have significant credit risk exposure to single counterparty or groups of counter parties having similar characteristics (being the Government of Botswana and its various operating agencies). However, the Government possesses high credit rating.On the other hand, the credit risk on liquid funds (Pula 399.8 million) is similarly limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.1230000111011000111BTC ANNuAlrepOrt2009liquidity risk managementBTC Group ensures that its liquidity is maintained by entering into short and medium term financial instruments to support operational and other funding requirements. Short-term funding requirements are reviewed on a monthly basis through cash flow forecasts. At end of March 2008, the Corporation also had Pula 70.0 million in un-drawn facilities with various banks (see note 20.2.1 Annual financial statements). In the coming year, BTC Group is planning to retire loans totaling Pula 60.0 million with Government of Botswana from its cash resources. risks tHat COuld affeCt BtC Businessstrategies, plans and OperationThe Group plans to achieve its business goals through various strategies. Our strategic direction involves significant changes in our internal process, how we service the customers and building of the converged network platforms to develop and offer services. Our market is unpredictable and characterised by rapid technological changes and evolving standards, and, if we fail to address changing market conditions, our business and operating results will be harmed. Because of the above reasons, it is difficult to predict its potential size of future growth rate. Our success in generating revenues in this market will depend on, among other things: Maintaining an up-to-date technology in the provision of services; Maintaining and enhancing our relationship with our customers; and, Our ability to accurately predict and develop our product range to meet the industry standards.Our future success depends on our ability to increase the revenue volumes from existing and new products and decrease our costs to offset the anticipated declines in the telecommunications tariffs and, if we are unable to realise greater volumes of traffic and lower costs, our operating results may suffer.The inability to reduce expenses and contain our costs in the required areas could harm our business. Additional measures to contain costs and reduce expenses may be undertaken if revenues and market conditions do not continue to improve. A number of factors could preclude us from successfully bringing the costs and expenses in line with our revenues, such as our inability to accurately forecast business and demand or deterioration of our revenue. If we are unable to continue to reduce expenses and contain costs, this could harm our operating results. privatisationThe Honourable Minister for Communications, Science and Technologys announced that the Corporation is to be privatised. The method suggested for privatisation includes a selection of a suitable Strategic Equity Partner (SEP) up to the limit of 49 per cent of the controlling interest. Although, the details of the plans are yet to be implemented, selection of a suitable SEP who has the same vision and business goals are important. With up to 49 per cent of the controlling interest, the management is likely to be in the hands of this SEP. The selection of a partner remains key as the intention should be in harmony with that of the Government.The privatisation also includes share offerings under an Employee Share Option Plan under which they will be able to obtain up to 5 per cent of the share offer. In the event of a dispute with employees as to the allocation of this tranche, services could be disrupted and this will have a negative impact on the image, operations and profitability of the Group. Further, privatisation of the Corporation will also result in taxation on BTC Groups future profits and this will have a significant impact on the profitability and the free cashflow available for the Corporation.1110001101110000124 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)economic and market ConditionWe are exposed to risks associated with worldwide economic slowdowns and related uncertainties. Our business is dependent on the major business customers whose demand is driven by the general economic conditions. During periods of a decline in economic growth and commercial activity, the demand for our products may decline. Weak economic conditions may negatively affect our profitability and cash flows from operation resulting from weaker demand and uncertainty in collecting receivables.CompetitionWe face intense competition from existing licensed operators (traditionally identified as mobile). With the introduction of service neutral licences (i.e. Public Telecommunications Operator licence), existing licensed operators and new entrants may enter the market in the international telephony and Voice Over Internet (VoIP) segments. Some of these services do not require significant capital outlays. Technology substitutions, for VoIP in particular, has reduced barriers to entry in the industry. This will allow new players to enter the market with relatively lower investments in financial, marketing, personnel and technological resources to rapidly launch new products and gain market share. In fact, the operators have already begun to offer international telephony independent of BTC networks and introduced 3G mobile network which can carry higher capacity of data. Although BTC Group has just entered the mobile market, Botswana has also achieved one of the highest penetration rates in terms of mobile phones and, it will not be easy to break into such market. Some of these competitors will also have better flexibility in corporate governance and in pricing their products and services at competitive rates. In the mobile sector, the competition in the market may become fierce if Mobile Number Portability is implemented. This could mean that we may lose some of the existing mobile customers to other operators. Other operators have also introduced new products and services including 3G handsets, fixed rate subscriptions, installment sales for handsets etc.We expect BTC Group will be able match some of these strengths of existing and proposed entrants through better prices and quality. It is difficult to predict the extent of competition at this early stage. Whilst competition may improve business climate it will also affect some of our existing lines of business.Increased competition will also lead to declines in the prices that can be charged and expected to lead to further price declines in the future. The competitive factors suggest that BTCs voice calls volume will further decline in the future. The voice calls revenue expressed as a percentage of total revenue declined from 62.8 percent two years back to 54.1 percent last year and to 45.7 percent this year. The trend is expected to continue although the gains in be-Mobile could limit this decline. Revenue too reflected a decrease from Pula 466.8 million two years back to Pula 432.5 million last year and to Pula 382.7 in the current year.Price declines will also could limit our ability to acquire new subscribers to our mobile network, and retention of existing subscribers, or may lead to diminishing Average Revenue Per Customer (ARPu) or an increase in costs and expenses.Furthermore, in the mobile market, if the Number Portability becomes mandatory, we could lose customers to other networks whilst also providing the opportunity to gain customers from other operators.In the event of further significant decline in the future, this will lead to reduced economies of scale in those lines of businesses and, in turn, higher costs and lower margins. The Corporations strategies are to mitigate these declines by shifting to new growth businesses for newer services, such as broadband data and internet. The Group has also introduced bundled packages which offer significant benefit to customers. If the legacy services decline faster than the rate of growth of our newer services, our financial performance could be negatively and materially affected. 1250000111011000111BTC ANNuAlrepOrt2009technological Changes Technologies are prone to become obsolete. Introduction of new technologies could be delayed for reasons beyond BTCs control such as regulatory approval or availability of technology and radio spectrum in the market we operate. Substantial investments usually need to be made before new technologies prove to be commercially viable. There is significant risk that the current regulations could delay launch of new services and restrict the Groups ability to market these services (eg. pricing procedures, bundling or marketing restrictions etc). BTC Group is in the process of moving their core circuit-based infrastructure to IP technology. As part of this move, The Group may also plan to discontinue certain services that are based on the current infrastructure. In some cases, this could be delayed or prevented by regulatory actions. If the Corporation is not able to offer these new technological changes or discontinue with the services as planned, they will not be able to achieve improvements expected.There is no assurance that we will be successful in developing, implementing and marketing new technologies, products, services or enhancements in a reasonable time, or that they will have a market. There is also no assurance that efficiencies will increase as expected. New products or services that use or evolving technologies could make our existing products unmarketable or can cause their prices to fall.network securityBTC Network performance depends on how well it is maintained and protected from misuse. If our network or facilities were to experience catastrophic loss, our operations would be seriously harmed. The network is proned to fire, natural disasters, power loss, hacking, and computer viruses, cyber attacks, hacking, unauthorised access act of wars and terrorism and thefts. Any such occurrences could completely disrupt our operations, delay service delivery and result in large expenses to repair or replace the facility. Whilst we have obtained insurance to cover most potential losses, after reviewing the costs and limitations associated with such insurances. We can not assure you that our existing system of insurance coverage will be adequate against all possible losses.There have been instances in which millions of computers worldwide were infected by viruses through the internet. Similar incidences could occur on our network. If such events occurs, our systems could fail and may take time to clean up the systems. This could lead to customers loosing confidence in our services and could leave us. We have put in place measures to detect such violations, however, these can not prevent all such unauthorised attacks.Recently, thefts of cable and solar panels have been common occurrences at BTC. BTC Groups operations are also dependent on timely replacement and maintenance of networks and equipment. Any of these events could cause our operations to be seriously disrupted. Customers concernsMedia and other reports have suggested that electric wave emissions from wireless handsets may adversely affect the health of mobile phone users. While these reports have not been conclusive, the customer perception of wireless telecommunications health risks could adversely affect our financial conditions if customers decide to abandon our services.Changes in laws and regulationsThe Botswana telecommunications industry has been undergoing regulatory reform in many areas. Because we operate on radio frequency spectrum allocated by the Botswana Telecommunications Authority, our operations particularly the mobile telephone is highly susceptible to any changes. It is difficult to predict with certainty if any of the above changes, and if they are made, the extent to which our business will be affected. 1110001101110000126 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)supply arrangementsWe depend on limited source suppliers for some of the key components of our network, which makes us susceptible to supply shortages or price fluctuations that could adversely affect our business. Although, we have developed long term partnership arrangements with some of these suppliers, there is no guarantee that we will obtain the required equipment in a timely manner in the future. We may experience difficulties in identifying alternative sources of supply for our equipment or we would experience further delays in identifying an alternative source of supply.radio spectrum allocationOur operations critically depend on radio spectrum allocation by the Botswana Telecommunications Authority, the amount of frequency spectrum made available to BTC could negatively affect our ability to maintain and improve our service quality. One of the principal limitations on a cellular communications networks capacity is the availability of radio spectrum it needs. If any limitations are placed on them, our service quality may decline causing capacity limitations and low call completions.software and system upgradesMany aspects of the Groups business including, but not limited to, the provision of telecommunication services and customer billing, depend to a large extent on various IT systems and software, which must be improved and updated on a regular basis and replaced from time to time. The implementation of system and software upgrades and conversions is a very complex process, which may have several adverse consequences including billing errors and delays in customer service. Any of these events could significantly hurt our customer relationships and businesses and have a material and adverse effect on our image and results of operation.performance improving processes and Cost ContainmentWe use a number of rolling forecasts based on anticipated demand from customers. It is very important that we accurately predict both the demand for our products and the lead times required to provide the necessary solutions. We depend on our suppliers for most of our equipment, installation and software. If we underestimate the lead times for delivery or if the suppliers experience problems with the delivery, it may negatively impact on our revenue, business or operating results. The Corporation continues to implement a number of processes and productivity improvement programmes expected to speed up service delivery and its quality to customers and reduce or contain costs of operation. Many improvement plans require capital expenditure to implement new systems and automate existing processes. There is no assurance that these investments will be effective in delivering the planned productivity improvements.reputation BTC Groups reputation should be the Corporations most valuable asset; loss of that reputation could be its greatest risk. Bad reputation can affect raising capital, loss of customers and revenue, loss of licence to operate or public boycott of products etc. loss of reputation could also create employee apathy and could make recruitment and retention of talented people difficult. We mitigate this risk by building goodwill, using best practices, ensuring transparency, complying with laws and regulations. Human resourcesWe depend on skilled personnel to operate our business effectively in a rapidly changing market, and if we are unable to retain existing or hire additional personnel when needed, our ability to develop and sell our products could be harmed which in turn will affect our ability to grow our business.1270000111011000111BTC ANNuAlrepOrt2009revenue generationOur future success depends on our ability to develop and successfully introduce new and enhanced products that meet the needs of our customers. Our current range of products address a broad range of customer needs but the demand for our current products is uncertain. Future revenue growth will depend to a great degree on continued technological solutions and introduction of new or enhanced products. If this does not continue, sales of our products may decline and our business will be harmed.Some of the new markets BTC Group is entering such as mobile are mature ones and it will be difficult to break into them. Only service quality and pricing can provide significant breakthrough. There is no guarantee that the Group will achieve its desired predictions in terms of revenue and profits.A significant amount of revenue earned by the Group comes from a small number of major customers. If we lose contracts with these major customers and cannot replace them, it could have a material and negative effect on our financial results.liquidity managementIn general, BTC Group can finance the capital needs in four ways: From cash generated by operations Borrowing from commercial banks and Government (debt financing) Borrowing in the capital markets (debt financing) From Government for development of rural areasBTC Groups plan is to generate enough cash from operations to pay for capital expenditure and dividends. If the actual results are different from the business plan or if the assumptions in the business plan change, the Group may have to raise money through Government Funding or debt financing (i.e. issuing debt instruments or borrow from syndicated bank loans). This could have material and negative impact on the cashflow from operations.In the coming year, BTC Group plans to redeem its long standing bond as it has become expensive with the changes in the market interest rates.An increased level of debt financing could lower our credit ratings, increase our borrowing costs and give us less flexibility. Our ability to raise finance depends on our ability to access capital markets and the syndicated loan market. The cost of funding depends largely on market conditions, and the outlook for our business and credit ratings.If our credit ratings are down graded, our cost of funding could significantly increase. There may also be internal policy limitation of the lender on the amount they will be able to offer. BTC Group has unused and renewable credit facilities with various financial institutions (see note 20.2.1 of the Annual Financial Statements 2009). There is no assurance that these facilities will be renewed on the same or favourable terms.litigation, regulatory matters and Changes in lawsThe Corporation operates under a Public Telecommunications Operator (PTO) licence issued in 2006, valid for a period of up to 15 years and renewable subject to conditions prevailing at that time. Decisions by the regulators (Botswana Telecommunications Authority) regarding the granting, amendment, or renewal of licences, approval of pricing for products and services can have impact on the Corporations future operations. In addition, decisions by regulators and new legislation, such as those relating to international roaming charges and call termination rates, could affect the pricing for such services and the overall revenue.Pending or future litigation, regulatory initiatives or regulatory rulings could have a material and negative impact on BTC Groups business, operating results and financial condition. Changes in assumptions underlying the carrying values of BtC groups assets could result in impairmentThe carrying values of the Group assets are based on certain assumptions including whether they can be supported by the net present value of future cash flows derived from such assets. An annual review is carried out to determine whether the underlying assumptions which are made in arriving at the net carrying values are appropriate. 1110001101110000128 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)This includes assessment of discount rates and long-term growth rates, future technological developments and the timing and quantum of future capital expenditure as well as the revenue streams that arise from the assets. Whilst impairment does not involve any cash flow, it does result in a non-cash-charge in the income statement. As such, no assurance can be given that the future impairments would not affect the profitability of BTC Group. accounting policies and estimatesunder International Financial Reporting Framework, we are required to make estimates when we account for and report assets, liabilities, revenues and expenses, and to disclose contingent assets and liabilities in our financial statements. We are also required to continually evaluate the estimates that we use.We base our estimates on past experience and on other factors that we believe are reasonable under the circumstances. Because this involves varying degrees of judgement and uncertainty, the amounts currently reported in the financial statements could, in future, prove to be inaccurate.We consider the estimates described in this section to be an important part of understanding our financial statements because they rely heavily on management judgement and are based on factors that are highly uncertain.future prOspeCtsBTC Groups revenue expectations for the year ahead reflect its drive for growth, particularly in broadband services, internet and mobile communications. We hope to make the foundation for the fixed-mobile convergence during the coming year, which will enable the Group to provide a number of new products. Capital expenditure will include completion costs for mobile network and the upgrade of Next-Generation Network. The Free Cash Flow too is expected to return to positive territory.With the advent of new products and services worldwide, the telecommunications market in Botswana is expected to grow even further. This will be evidenced by the demand for high speed internet access, proliferation of consumer end products which uses broadband and the introduction of various solutions combining fixed line and mobile communications. BTC Group is on the right path. It has superior quality networks and access coverage. The strategy which the Corporation put in the recent past is beginning to pay off. As we go forward, some traditional revenue sources will shrink. The Group hopes that its strategies based on Fixed-Mobile Convergence will yield the right services and revenue. The Corporation will also continue to move forward on internal process reforms which will transform its business and financial capabilities by improving operating efficiency and expanding into new line of businesses. about forward looking statementsGood Corporate Governance and stock market regulations encourage companies to disclose forward looking statements on objectives, strategies, financial conditions and results of operations and cash flow. These statements are forward looking because they are based on our current expectations, estimates and assumptions about the markets we operate in, the Botswana economic environments and our ability to attract and retain customers to manage network assets and operating costs. It is important to know that: Forward looking statements in the BTCs 2009 annual report, including Financial Review and management discussion describe our expectation as at 21 September 2009. Our actual results could be materially different from what we expect if known and unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. As a result, we can not guarantee that any forward looking statement will materialise and, accordingly, you are cautioned not to place undue reliance on these forward looking statements.1290000111011000111BTC ANNuAlrepOrt2009 Forward looking statements do not take into account the effects that the transactions or non-recurring or other special items announced or occurring after the statements are made may have on our business. For example, they do not include the latest liberalisation, licencing or privatisation arrangements and their impact on BTC, sale of assets or businesses, acquisitions assets write-downs or other changes announced or occurring after forward-looking statements are made. The financial impacts of such transactions and non-recurring and other special items can be complex and necessarily depends on the facts particular to each of them. Accordingly, the expected impact can not be meaningfully described in the abstract or presented in the same manner as known risks affecting our business. We disclaim any intention and assume no obligation to update and forward looking statements even if information becomes available as a result of future events or for any other reason.Risks that could cause our actual results to materially differ from our current expectations are discussed throughout this Financial Review and Management Discussion and as well as in the section on Risk Management.The following terms do not have any standardised meanings prescribed by the International Financial Reporting Standards. These terms are consistently used in the BTC Annual Reports from year to year.eBidtaEarnings before Interest, Taxation, Depreciation and Amortisation (EBIDTA) is considered by the Group as one of the important indicators measuring the operating performance of our business without the effects of amortisation, depreciation, restructuring costs as well as non-operating factors, such as the historical costs of capital assets. EBIDTA, also sometimes known as Operating Cash Flow allows us to compare our operating performance on a consistent basis. We believe, the financial markets and analysts use EBIDTA to measure a companys ability to service debt and to meet other payment obligations, or as a common valuation measurement in the industry. EBIDTA is composed of operating income plus income from investments and depreciation and amortisation.results before restructuring CostsBTC Group use operating income / profit before restructuring costs to assess the operating performance of the Groups ongoing business without the effects of restructuring and other items. We exclude these items because they affect the comparability of the financial results and could potentially distort the analysis of trends on business performance.free Cash flowThe term free cash flow is an important indicator of the financial strength and performance of our business because its shows how much cash is available to repay debt and reinvest in the Corporation. This is the cash from operations less capital expenditure.net debtNet debt consist of loans and other borrowings (both current and non-current), less current asset investments and cash and cash equivalents. The Corporation considers net debt to be an alternative performance measure as it is not defined in IFRS. The measures indicate the net indebtedness that provides an indicator of the Groups overall balance sheet strength. It is also a single measure that can be used to assess both the cash position and the indebtedness.1110001101110000130 BTC ANNuAlrepOrt2009botswana telecommunications corporationfinancial review andmanagement discussion (continued)adoption of international financial reporting standards (ifrs) BTC Groups financial statements have been prepared consistently with those used in the previous years and in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and the interpretations issued by the International Financial Reporting Interpretation Committee of the IASB. The following is a summary of operating results for the year for the major business lines. fiXed line mOBile BrOadBand 2009 2009 2009 Revenue 826.8 9.6 15.3 Other income 68.9 0.0 0.2 Operating expenses (757.2) (61.7) 7.7Finance charge (21.2) 0.0 0.0Netprofit/(Loss) 117.4 (52.1) 1.6 Consolidatedassets/equity 1,646.5 11.8 4.7Capitalexpenditure 167.2 0.21310000111011000111BTC ANNuAlrepOrt2009botswana telecommunications corporationreport of the finance and audit committeememBersHipThe Finance and Audit Committee is a committee of the Board and comprises in majority the non-executive members and selected external experts who are independent of the management and free from any business or other relationship which could interfere with the exercise of their independent judgment.During the year, membership of the Committee was as follows:-Mr.OabileMabusaChairmanMs.ShirleySegokgoMember Mr.ThapeloLippe Chief Executive Officer, appointed 1st October 2008 All of the above with the exception of the Chief Executive Officer are considered by the Board to be independent. The Board considers that Mr. Mabusa has relevant financial experiences.The Committee invites others, including external auditors, the Chief Internal Auditor, the General Manager Finance and other Managers to attend its meetings as appropriate. The Board Secretary is the Secretary to the Committee.meetingsDuring the period under review the Committee met four times. Details of attendance at each meeting are shown in the Corporate Governance report on page 36.The external and internal auditors have unrestricted access to the Committee.rOle, respOnsiBilities and terms Of referenCeThe Committees role is to assist the Board in the effective discharge of its responsibilities for financial reporting and internal control.The Committee operates within agreed terms of reference as set out in the Corporate Governance report on page 37.The Committees, during the commencement of the financial year to the date of this report carried out the following: Reviewed the annual and interim financial statements and other formal announcements on Corporations financial performance; Reviewed the Corporations accounting policies; Monitored and reviewed the Corporations systems of internal control and risk management including the Risk register; Reviewed and approved the Corporations Internal Audit Plan and reporting; Discussed and oversaw the relationship with the external auditors, including the approval of their remuneration, agreeing the scope of audit engagement, assessing their independence, monitoring the provision of non-audit services, and considering their reports on the Corporations financial statements and systems of internal control and risk management; Reviewed the Corporations Strategic and Business Plan, and; Reviewed and approved Corporations financing plans for the year. internal auditThe Internal Audit Departments activities and conducts are governed by an audit charter agreed by the Board. The Chief Internal Auditor reports to the Chief Executive Officer and has adequate access to this Committee and the Board. The Committee has continued to review the requirement and effectiveness of the internal audit function within the Corporation. The Internal Audit Department provides reports on its activities to the Committee and Board on a quarterly basis. 1110001101110000132 BTC ANNuAlrepOrt2009botswana telecommunications corporationreport of the finance and audit committee (continued)independenCe Of eXternal auditOrsErnst & Young were appointed as external auditors in 2005 under a mandate given by the Auditor General of Botswana. The auditors have direct access to the Committee should they need to raise any concerns.The Committee keeps under review the relationship with the external auditors including; The independence and objectivity of the external auditors, taking into account the relevant regulatory requirements and the relationship with the auditor as a whole, including the provision of non-audit and consulting services; and Consideration of audit fees and any fees for non-audit and consulting services.The Committee monitors and recommends to the Board the provision of non-audit and consulting services by the auditors, and ensures that the provision of such services does not impair the external auditors independence and objectivity. During the year, no such services were offered by the external auditors.The Committee considers its own performance during the year as satisfactory.mr. O. mabusaChairman of the Finance and Audit CommitteeDate: 21 September 2009 for the year ended 31 March 2009financial indexBoard Approval ofthe Annual Financial Statements 134Report of the Independent Auditors 135Consolidated Income Statement 136Consolidated Balance Sheet 137Consolidated Cash flow Statement 138Consolidated Statementof Changes in equity 139Accounting Policies 140Notes to the Consolidated Financial Statements 156botswana telecommunications corporationbotswana telecommunications corporation Notes 2009 2008 P000 P000CASH FLOWS FROM OPERATING ACTIVITIES: Operating profit before working capital changes 20.1 200,850 230,073 Working capital adjustments: Increase in inventories (22,488 ) (13,036 ) Decrease/(increase) in trade and other receivables 22,467 (14,666 ) Increase in trade and other payables 24,439 28,923 Cash generated from operations 225,268 231,294 Ordinary dividend paid to Government 14 (14,582 ) (29,447 ) Interest on preference shares paid 14 (184 ) (184 ) Net cash from operating activities 210,502 201,663 CASH FLOWS USED IN INVESTING ACTIVITIES: Investment to expand operations: Purchase of property, plant and equipment 7 (167,727 ) (371,994 ) Proceeds from disposal of property, plant and equipment 1,410 1,793 Interest income 4.1 45,873 59,252 Net cash used in investing activities (120,444 ) (310,949 ) CASH FLOWS FROM FINANCING ACTIVITIES: Grants received during the year 15 35,625 Finance costs 4.2 (21,044 ) (28,984 ) Repayment of long term borrowings 16 (110,000 ) (60,000 ) (95,419 ) (88,984 ) Decrease in cash and cash equivalents (5,361 ) (198,270 ) Net foreign exchange difference 1,003 7,666 Net cash and cash equivalents at beginning of the year 404,076 594,680 Cash and cash equivalents at end of the year 20.2 399,718 404,076 consolidated cash flow statementfor the year ended 31 March 20091330000111011000111BTC ANNuAlrepOrt2009 1330000111011000111BTC ANNuAlrepOrt2009ANNuAl FINANCIAl statementsbotswana telecommunications corporation1110001101110000134 BTC ANNuAlrepOrt2009The Members of the Board are responsible for the annual financial statements in accordance with International Financial Reporting Standards.The independent auditors are responsible to give an independent opinion on the fairness of the annual financial statements based on their review of the affairs of the Corporation.The Finance and Audit Committee, which consists of three members of the Board and the Chief Executive Officer, meets at least twice a year with the internal and external auditors, as well as members of senior management, to evaluate matters concerning accounting, internal controls, auditing and financial reporting.The Members of the Board, supported by the Finance and Audit Committee, are satisfied that management introduced and maintained adequate internal controls to ensure that dependable records exist for the preparation of the annual financial statements, to verify and maintain accountability of assets of the Corporation to prevent and detect mismanagement and loss of the assets of the Corporation. Nothing has been brought to the attention of the Board to reasonably indicate any breakdown in the functioning of these controls, procedures and systems have occured during the period under review.The financial statements have been prepared on the going concern basis, since the Members of the Board have every reason to believe that the Corporation has adequate resources in place to continue in operation for the foreseeable future.Against this background, the Members of the Board accept responsibility for the financial statements and the information on pages 136 to 185 which were approved on 21 September 2009 are signed on its behalf byl m makwinJaChairman tHapelO lippe ChiefExecutiveOfficerBoard approval of the annual financial statementsbotswana telecommunications corporation1350000111011000111BTC ANNuAlrepOrt2009TOTHEMEMBERSOFBOTSWANATELECOMMuNICATIONSCORPORATIONPuRSuANTTOSECTIONS20(2)AND(3)OFTHEBOTSWANATELECOMMuNICATIONSCORPORATIONACT(CAP72:02)We have audited the accompanying consolidated financial statements of Botswana Telecommunications Corporation, set out on pages 136 to 185, which comprise the balance sheet as at 31 March 2009, and the income statement, statement of changes in equity and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes on behalf of the Auditor General.MEMBERSOFTHEBOARDSRESPONSIBILITyFORTHEFINANCIALSTATEMENTSThe Corporations Members of the Board are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in compliance with the Botswana Telecommunications Corporation Act (CAP 72:02).This responsibility includes: designing, implementing and maintaining internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.AuDITORSRESPONSIBILITyOur responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.OPINIONIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the consolidated Corporation as of 31 March 2009, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Botswana Telecommunications Corporation Act (CAP 72:02).certified public accountantsDate: 24 September 20092nd Floor, uN Place Khama CrescentPO Box 41015Gaborone, Botswanareport of theindependent auditorsbotswana telecommunications corporation1110001101110000136 BTC ANNuAlrepOrt2009 Notes 2009 2008 p000 P000Sale of goods and services 1 835,900 799,174 Interest income 4.1 45,873 59,252 revenue 881,773 858,426 Cost of services and goods sold 2.1 (396,268) (370,717 ) Gross Profit 485,505 487,709 Other Income 3 23,211 21,644 Selling and distribution costs 2.2 (12,348) (8,599 )Administrative expenses 2.3 (233,620) (220,163 )Other Expenses 2.4 (122,567) (193,096 ) Operating profit 140,181 87,495 Finance costs 4.2 (21,228) (29,168 ) profit for the year 118,953 58,327 Attributable to Government of Botswana 118,953 58,327 Earnings per notional ordinary share: Basic (thebe): 6 565.5 277.3 Diluted (thebe): 6 52.0 25.5 Dividend per notional share 141.4 69.3 consolidated income statementfor the year ended 31 March 2009 botswana telecommunications corporation1370000111011000111BTC ANNuAlrepOrt2009 Notes 2009 2008 p000 P000assets non current assets Property, plant and equipment 7 1,049,961 1,029,852 Deferred lease 8 15,844 16,586 1,065,805 1,046,438 Current assets Inventories 9 64,271 41,783 Trade and other receivables 10 128,469 150,936 Cash and cash equivalents 20.2 399,718 404,076 592,458 596,795 total assets 1,658,263 1,643,233 eQuity and liaBilities Capital and reserves Notional Share Capital 11 21,919 21,919 Equity application account 12 207,858 207,858 Revaluation reserve 13 69,621 45,855 Accumulated profits 827,612 721,184 1,127,010 996,816 non current liabilities Development grants 15 134,894 121,070 long term borrowings 16 47,273 90,813 Preference shares-liability portion 11 1,416 1,416 Deferred revenue 17 93,326 118,231 276,909 331,530 Current liabilities Trade and other payables 18 183,494 153,202 Provisions 19 10,666 51,501 Interest payable on preference shares 14 184 184 Current portion of long term borrowings 16 60,000 110,000 254,344 314,887 total equity and liabilities 1,658,263 1,643,233 At 31 March 2009 consolidated Balance sheetbotswana telecommunications corporation1110001101110000138 BTC ANNuAlrepOrt2009 Notes 2009 2008 p000 P000CasH flOws frOm Operating aCtiVities: Operating profit before working capital changes 20.1 200,850 230,073 Working capital adjustments: Increase in inventories (22,488) (13,036 ) Decrease/(increase) in trade and other receivables 22,467 (14,666 ) Increase in trade and other payables 24,439 28,923 Cash generated from operations 225,268 231,294 Ordinary dividend paid to Government 14 (14,582) (29,447 ) Interest on preference shares paid 14 (184) (184 ) Net cash from operating activities 210,502 201,663 CasH flOws used in inVesting aCtiVities: Investment to expand operations: Purchase of property, plant and equipment 7 (167,727) (371,994 ) Proceeds from disposal of property, plant and equipment 1,410 1,793 Interest income 4.1 45,873 59,252 Net cash used in investing activities (120,444) (310,949 ) CasH flOws frOm finanCing aCtiVities: Grants received during the year 15 35,625 Finance costs 4.2 (21,044) (28,984 ) Repayment of long term borrowings 16 (110,000) (60,000 ) (95,419) (88,984 ) Decrease in cash and cash equivalents (5,361) (198,270 ) Net foreign exchange difference 1,003 7,666 Net cash and cash equivalents at beginning of the year 404,076 594,680 Cash and cash equivalents at end of the year 20.2 399,718 404,076 consolidated cash flow statementfor the year ended 31 March 2009 botswana telecommunications corporation1390000111011000111BTC ANNuAlrepOrt2009 Notional Equity Share Application Revaluation Accumulated Notes Capital Account Reserve Profits Dividends Total P000 P000 P000 P000 P000 P000Balanceat1April2007 21,919 207,858 47,912 690,247 967,936 Depreciation transfer for land and buildings 13 (2,057 ) 2,057 Net income and expense for the year recognised directly in equity (2,057 ) 2,057 Profit for the year 58,327 58,327 Total income and expense for the year (2,057 ) 60,384 58,327 Ordinary dividend declared (29,447 ) 29,447 Ordinary dividend paid during the year (29,447 ) (29,447) Balanceat31March2008 21,919 207,858 45,855 721,184 996,816 Depreciation transfer for land and buildings 13 (2,057 ) 2,057 Revaluation adjustment arising during the year 13 25,823 25,823Net income and expense for the year recognised directly in equity 23,766 2,057 25,823 Profit for the year 118,953 118,953Total income and expense for the year 23,766 121,010 144,776Ordinary dividend declared 14 (14,582 ) 14,582 Ordinary dividend paid during the year 14 (14,582 ) (14,582) Balanceat31March2009 21,919 207,858 69,621 827,612 1,127,010 consolidated statement of changes in equityfor the year ended 31 March 2009 botswana telecommunications corporation1110001101110000140 BTC ANNuAlrepOrt2009presentatiOn Of finanCial statementsThe financial statements are presented in Botswana Pula. The functional currency is also the Botswana Pula. All values are rounded to the nearest thousand (P000) except when otherwise indicated.COrpOrate infOrmatiOnBotswana Telecommunications Corporation is incorporated and domiciled in Botswana. The headquarters is situated at Megaleng, Khama Crescent, Gaborone, Botswana.Basis Of preparatiOnThe financial statements have been prepared on a historical cost basis, except as modified by the revaluation of certain financial instruments to fair value and the revaluation of certain assets as indicated in the notes below, and on the going concern basis. StatementofcomplianceThe financial statements have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) and the requirements of the Botswana Telecommunications Corporation Act (Cap 72.02).BasisofconsolidationThe consolidated financial statements comprise the financial statements of the Corporation and its subsidiary as at 31 March each year. The accounting policies of the subsidiary are in line with those of the Corporation.All intra - group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions are eliminated in full on consolidation.Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Corporation obtains control, and continue to be consolidated until the date that such control ceases. Control is achieved where the Corporation has the power to govern the financial and operating policies of an investee enterprise so as to obtain benefits from its activities. ChangeinaccountingpolicyThe accounting polices adopted are consistent with those of the previous year, except that during the current financial year the Corporation has adopted and implemented the following standards and amendments to standards that are mandatory for financial years on or after 1 January 2008.The changes in accounting policies result from the adoption of the following new standards and amendments to the standards:iFric12, service concession arrangements The interpretation provides guidance on the recognition and measurement of the various aspects of service concession arrangements from an operators perspective. The interpretation is not applicable to the Corporation. iFric 14, the limit on a Defined benefit asset, minimum Funding requirements and their interaction The interpretation provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. This interpretation does not have any impact on the Corporations financial statements as only defined contribution scheme is offered by the Corporation. aCCOunting pOliCiesfor the year ended 31 March 2009 botswana telecommunications corporation1410000111011000111BTC ANNuAlrepOrt2009aCCOunting pOliCies (continued)for the year ended 31 March 2009 iFrs 7 (amendment), Financial instruments: Disclosures The standard requires that in the event of reclassification of Financial Assets, additional disclosures are required and include the following: The amount reclassified into and out of each category. The carrying amounts and fair values of all financial assets reclassified in the current or previous reporting periods. If the financial asset has been reclassified based on the rare circumstances, exception, details of those circumstances. The fair value gain or loss recognised in profit or loss for the reporting period in which reclassification occurs and in the previous period. In the period of reclassification and in subsequent periods until the financial asset is derecognised, the gain or loss that would have been recognised in profit or loss had the financial asset not been reclassified, and the actual gain, loss, income and expense recognised in profit or loss.The effective interest rate and estimated cash flows the entity expects to recover as at the date of reclassification of the financial asset. The amendments are effective 1 July 2008 and are not applicable to the Corporation. international Financial reporting standards (iFrss) issued but not yet effective during the year. The IASB issued amendments to some of its standards in May 2008 as part of the Boards annual improvements to standards. They become effective on 1 January 2009. The Corporation does not intend early adopting any of the listed items. Changes and potential impacts are highlighted as follows:ias 39 (amendment), Financial instruments: recognition and measurement effective from 1 July 2009This amendment clarifies that it is possible to have movements into and out of the fair value through profit or loss (FVTPl) category where a derivative commences or ceases to qualify as a hedging instrument in cash flow or net investment hedge. The definition of financial asset or financial liability at fair value through profit or loss as it relates to items that are held for trading is also amended. The standard clarifies that a financial asset or liability that is part of a portfolio of financial instruments managed together with evidence of an actual recent pattern of short term profit taking is included in such a portfolio on initial recognition. The amendment also removes the example of a segment where hedge accounting is to be applied at segment level so that the guidance is consistent with IFRS 8, Operating segments, which requires disclosure for segments to be based on information reported to the chief operating decision maker. The standard also requires the use of the revised effective interest rate, rather than the original effective interest rate when re-measuring a debt instrument on the cessation of fair value hedge accounting. The Corporation does not intend early adopting ias 1 (amendment), presentation of Financial statements This amendment clarifies that some rather than all financial assets and liabilities classified as held for trading in accordance with IAS 39, Financial instruments: Recognition and measurement are examples of current assets and liabilities respectively not automatically classified as current in the balance sheet.iFrs 5 (amendment), non-current assets held-for-sale and discontinued operations (and consequential amendment to iFrs 1, First-time adoption) effective 1 July 2009.The amendment clarifies that all of a subsidiarys assets and liabilities are classified as held for sale if a partial sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of discontinued operation is met. A consequential amendment to IFRS 1 states that these amendments are applied prospectively from the date of transition to IFRSs. These amendments are not expected to have any impact on the activities of the corporation.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1110001101110000142 BTC ANNuAlrepOrt2009ias 16 (amendment), property, plant & equipment (and consequential amendment to ias 7, statement of cash flows) applicable for periods beginning on or after 1 January 2009. The change requires that the term net selling price be replaced with fair value less cost to sell, to be consistent with IFRS 5 and IAS 36, Impairment of Assets. The change is not expected to have any impact on the operations of the Corporation. The amendment also requires that entities whose ordinary activities comprise renting and subsequently selling the assets, present the proceeds from the sale of those assets as revenue and should transfer the carrying amount of the assets to inventories when the assets become held for sale. A consequential amendment to IAS 7, states that cash flows arising from the purchase, rental and sale of those assets are classified as cash flows from operating activities. The change will not have an impact on the operations of the Corporation because none of the Corporations activities comprise renting and subsequently selling assets. ias 36 (amendment), impairment of assetsThe standard requires that where fair value less cost to sell is calculated on the basis of discontinued cash flows, disclosures equivalent to those for value-in-use calculation should be made. These amendments are not expected to be relevant in the current financial year. ias 27 (amendment), consolidated and separate Financial statements effetive date is 1 January 2009. The amendment states that, when a parent entity accounts for a subsidiary at fair value in accordance with IAS 39 in its separate financial statements, the treatment should continue when the subsidiary is subsequently held for sale. The change will not be applicable to Corporation in the current period. ias 29 (amendment), Financial reporting in Hyperinflationary economies effective from 1 January 2009. The change revises the reference to the exception to measure assets and liabilities at historical cost, such that it notes property, plant and equipment as being an example, rather than implying that it is a definitive list. The Corporation does not operate in a hyperinflationary economy and therefore this change is not expected to have any impact on its operations. ias 31 (amendment), interest in Joint Ventures (and consequential amendments to ias 32 & iFrs 7) effective from 1 January 2009. The amendment requires that where an investment in joint venture is accounted for in accordance with IAS 39, only certain rather that all disclosure requirements in IAS 31 need to be made in addition to disclosures required by IAS 32, Financial Instruments: Presentation, and IFRS 7, Financial Instruments: Disclosures. The amendment will not have an impact on the operations of the Corporation as there are no interest held in joint ventures.ias 19 (amendment), employee benefits effective from 1 January 2009.The amendment clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to reductions in benefits related to past services (negative past service cost) and to exclude reductions in benefits related to future services that arise from plan amendments. The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation. The distinction between short term and long term employee benefits will be based on whether benefits are due to be settled within or after 12 months of employee service being rendered. botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1430000111011000111BTC ANNuAlrepOrt2009The amendment revises the definition of short-term and other long-term employee benefits to focus on the point in time at which the liability is due to be settled. IAS 37, Provisions, contingent liabilities and contingent assets, requires contingent liabilities to be disclosed, not recognised. IAS 19 has been amended to be consistent. This amendment will have no impact on the Corporations financial statements or position as only defined contribution scheme is offered by the Corporation. ias 38 (amendment), intangible assets effective from 1 January 2009. The amendment requires that expenditure on advertising and promotional activities should be recognised as an expense when the Corporation has the right to access the goods or has received the service. The amendment deletes the wording that states that there is rarely, if ever, support for the use of a method of amortisation than the straight line method. The Corporation intends to review all its advertising and promotional contracts to determine the point at which the Corporation has the right to access the goods or has received the service, as well as determine the best method to reflect the pattern of consumption of future benefits.ias 40 (amendment), investment property (and consequential amendments to ias 16) effective from 1 January 2009. The amendment requires that property that is being constructed or developed for future use as an investment property, be classified as investment property. If an entity is unable to determine the fair value of an investment property under construction, but expects to be able to determine its fair value on completion, the investment under construction will be measured at cost until such time as fair value can be determined or construction is complete. The amendment will have no impact on the Corporations operations as there is no investment properties held by the Corporation. ias 41, (amendment), agriculture effective from1 January 2009 The standard requires the use of a market based discount rate where fair value calculations are based on discounted cash flows and the removal of the prohibition on taking into account biological transformation when calculating fair value. The Corporation is not involved in any agricultural activities and therefore the change bears no relevance to its operations. ias 23 (amendment), borrowing costsThe definition of borrowing costs has been amended so that interest expense is calculated using the effective interest method defined in IAS 39 Financial instruments: Recognition and measurement. This eliminates the inconsistency of terms between IAS 39 and IAS 23. The adoption of the amendment in future will have no material financial impact on the financial statements of the Corporation.ias 28 (amendment), investment in associates (and consequential amendments to ias 32, Financial instruments: presentation, and iFrs 7, Financial instruments: Disclosures) effective from 1 January 2009. The amendment requires that where an investment in associate is accounted for at fair value in accordance with IAS 39, only the requirement of IAS 28 to disclose the nature and extent of any significant restrictions on the ability of the associate to transfer funds to the entity in the form of cash or repayment of loans applies. The amendment is not expected to be relevant for the activities of the Corporation.ias 20 (amendment), accounting for government grants and disclosure of government assistance effective from 1 January 2009. The amendment requires that the benefit of a below market rate or non interest government loan should be accounted for as a government grant in accordance with IAS 20. botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1110001101110000144 BTC ANNuAlrepOrt2009Interest is to be imputed on loans granted with below market interest rates, thereby being consistent with IAS 39. The amendment will have an impact on the Corporations operations as the grants received from the Government are interest free, however the changes will only be applicable to grants received in the future.iFric 13 - customer loyalty programmesThis interpretation is required to be applied for annual periods beginning on or after 1 July 2008, The interpretation states clearly that it applies to customer loyalty award credits that an entity grants to its customers as part of a sales transaction, that is a sale of goods, rendering of services or use by a customer of entity assets. It applies to schemes whereby the award credits offered to customers derive from a past transaction. This means that it does not apply to the distribution of money off vouchers or other schemes that do not involve an initial sales transaction. There were no loyalty programmes as at year end.iFric 15-agreements for the construction of real estateThis interpretation is required to be applied for annual periods beginning on or after 1 January 2009. IFRIC 15 standardises accounting practice across jurisdictions for the recognition of revenue by real estate developers for sales of units, such as apartments or houses, off plan, that is before construction is complete. The fundamental issue is whether the developer is selling the completed apartment or house or is selling a construction service as contractor engaged by the buyer. The interpretation is not expected to be relevant for activities of the Corporation.iFric 16-Hedges of net investment in a Foreign operationThis interpretation is required to be applied for annual periods beginning on or after 1 October 2008. IFRIC 16 clarifies the accounting treatment in respect of net investment hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation currency. The effects of IAS 21, The effects of changes in foreign exchange rates, do apply to the hedged item. This interpretation is not expected to be relevant for the activities of the Corporation.iFrs 8 (amendment), operating segments effective from 1 January 2009.This standard is required to be applied for annual periods beginning on or after 1 January 2009. The amendment requires that segments should be disclosed based on the information that management uses to make decisions about operating matters. The standard sets out requirements for disclosure of information about an entitys operating segments and also about an entitys products & services, the geographical locations in which it operates, and its major customers. IFRS 8 further requires the entity to disclose factors used to identify the entitys operating segments and type of products and services from which each operating segments derives its revenues. The impact of the interpretation is currently being evaluated.ias 23 (amendment), borrowing costs effective from 1 January 2009. The revision to IAS 23 removes the option of immediately recognising the borrowing costs as an expense, that are directly attributable to the acquisition, construction or production of a qualifying asset. An entity is, therefore, required to capitalise such borrowing costs as part of the cost of the asset. The directors anticipate that the adoption of this revision in future periods will have no material financial impact on the financial statements of the Corporation.iFrs 2 (amendment) Vesting conditions and cancellations effective from 1 January 2009. The IASB published an Amendment to IFRS 2 Share-based Payment Vesting Conditions and Cancellations. botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1450000111011000111BTC ANNuAlrepOrt2009The Amendment clarifies the definition of vesting condition, introducing the term non-vesting condition for conditions other than vesting conditions and prescribes the accounting treatment of an award that is effectively cancelled because a non-vesting condition is not satisfied. Previously, IFRS 2 dealt only with situations where the entity cancels an award. This amendment should not have an impact on the Corporation, as the Corporation does not have any share-based payments.iFrs 3 business combinations (revised) and ias 27 Consolidated and Separate Financial Statements (Revised)The revised standards were issued in January 2008 and become effective for financial years beginning on or after 1 July 2009. IFRS 3(Revised) introduces a number of changes in the accounting for business combinations that will impact the amount of goodwill recognised, the reported results in the period that an acquisition occurs, and future reported results. IAS 27(Revised) requires that a change in the ownership interest of a subsidiary is accounted for as an equity transaction. Therefore, such a change will have no impact on goodwill, nor will it give raise to a gain or loss. Furthermore, the amended standard changes the accounting for losses incurred by the subsidiary as well as the loss of control of a subsidiary. The changes introduced by IFRS 3(Revised) and IAS 27(Revised) must be applied prospectively and will affect future acquisitions and transactions with minority interests.ias 1 revised presentation of Financial statementsThe revised IAS 1 Presentation of Financial Statements was issued in September 2007 and becomes effective for financial years beginning on or after 1 January 2009. The Standard separates owner and non-owner changes in equity. The statement of changes in equity will include only details of transactions with owners, with all non-owner changes in equity presented as a single line. In addition, the Standard introduces the statement of comprehensive income: it presents all items of income and expense recognised in profit or loss, together with all other items of recognised income and expense, either in one single statement, or in two linked statements. The Corporation is still evaluating whether it will have one or two statements.amendments to ias 32 and ias 1 puttable Financial instrumentsAmendments to IAS 32 and IAS 1 were issued in February 2008 and become effective for annual periods beginning on or after 1 January 2009. The amendment to IAS 32 requires certain puttable financial instruments and obligations arising on liquidation to be classified as equity if certain criteria are met. The amendment to IAS 1 requires disclosure of certain information relating to puttable instruments classified as equity. The Corporation does not expect these amendments to impact the financial statements of the Corporation.iFrs 1 and ias 27 amendmentsIFRS 1 has been amended to allow for the use of a deemed cost for investments in subsidiaries, associates and joint ventures. Such deemed cost will be either the fair value at the date of transition to IFRS or an amount used in terms of the entitys previous GAAP. As the Corporation had already adopted IFRS previously, this amendment will have no impact. IAS 27 has been amended to no longer distinguish between pre- and post-acquisition dividends. However, the entity must now consider if the receipt of such a dividend is a possible indicator of impairment. The impact (if any) of this amendment on the Corporation will be assessed at a later stage. The amendment to IFRS 1 and IAS 27 is effective 1 January 2009.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1110001101110000146 BTC ANNuAlrepOrt2009signifiCant aCCOunting Judgements and estimatesEstimatesandJudgementsThe preparation of financial statements in conformity with International Financial Reporting Standards requires the use of certain critical accounting estimates and judgments concerning the future. Estimates and judgments are continually evaluated and are based on historical factors coupled with expectations about future events that are considered reasonable. In the process of applying the groups accounting policies, management has made the following estimates and judgments that have a significant risk of causing material adjustment to the carrying amount of assets and liabilities as they involve assessments or decisions that are particularly complex or subjective within the next year. EquityapplicationaccountThe money set aside through the equity application account is recognised as equity at the fair value of the consideration received by the Corporation. This equity account does not have any rights to dividends as the rights and obligations attached thereto have not been constituted.DevelopmentgrantsGrants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Initial capitalisation of costs is based on managements judgment that the attached conditions will be complied with. Revaluationoflandandbuildingsland and buildings are carried at a revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Management consider that valuations are performed frequently (after every three years) enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.LeaseclassificationThe Corporation has entered into property lease arrangements. The Corporation has determined, based on an evaluation of the terms and conditions of the arrangements, that it retains all the significant risks and rewards of ownership of these properties and so accounts for the contracts as operating leases. RelatedpartiesGovernment, parastatals, key management personnel and the Botsnet subsidiary are considered as being related to the Corporation. Significant management judgment is required to determine as to who qualifies for being a related party, based on the type of the relationship.ProvisionsandallowancesThe amount recognised as a provision is the best estimate of the expenditure to settle the obligation at the balance sheet date. The Corporation has made significant judgements and estimates relating to the labour disputes and retrenchment costs. Further details are given in Note 19.AllowancesforslowmovinginventoryBased on prior management practice, stock that has not moved for a 12-month period is considered to have no normal sale value. Obsolete and discontinued products are considered to have no value. The provision is raised based on the full cost or net realisable values of the product.DepreciationChargesandResidualvaluesFor depreciation purposes, a significant component defined as equal to or greater than 20% of the total cost of the asset and each significant component with different useful lives are depreciated separately. The useful life of assets is determined with reference to its design life as prescribed by internal experts. The depreciation method reflects the pattern in which economic benefits attributable to the asset flows to the entity. The useful lives of these assets can vary depending on a variety of factors, including but not limited to technological obsolescence, maintenance programs, refurbishments, product life cycles and the intention of management.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1470000111011000111BTC ANNuAlrepOrt2009Residual values of an asset are determined by estimating the amount that the entity would currently obtain from the disposal of the asset after deducting the estimated cost of disposal, if the asset were already of age and in the condition expected at the end of its useful life. The estimation of the useful life and residual values of an asset is a matter of judgment based on the past experience of the Corporation with similar assets and the intention of management.AllowancesfordoubtfuldebtsThis allowance is created where there is objective evidence, for example the probability of insolvency/bankruptcy or significant financial difficulties of the debtor, that the Corporation will not be able to collect all the amounts due under the original terms of the invoice. An estimate is made with regards to the probability of insolvency and the estimated value of debtors who will not be able to pay. Financial assets that are assessed not to be impaired individually are subsequently assessed for impairment on a collective basis.PensionandpostemploymentbenefitsThe cost of defined benefit pension plans is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long term nature of these plans, such estimates are subject to significant uncertainty. Further details are given in Note 24.Impairmentofnon-financialassetsThe Corporation assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Other non-financial assets are tested for impairment when there are indicators that the carrying amounts may not be recoverable. When value in use calculations are undertaken, management must estimate the expected future cash flows from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present value of those cash flows. FairvalueoffinancialInstrumentsFinancial instruments have been valued based on the expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics. This valuation requires the Corporation to make estimates about expected future cash flows and discount rates, and hence they are subject to uncertainty. Further details are given in note 26.5. retirement Benefit COstsThe Corporation operates a defined contribution pension fund for its eligible citizen employees. The fund is registered under the Pension and Provident Funds Act (Chapter 27:03). The Corporation contributes to the fund 14% of the pensionable earnings of the members. Pension contributions on behalf of employees are charged to profit or loss in the year to which they relate to and as the related service is provided. Those citizen employees who were transferred from Government in 1980 are covered under a separate scheme applicable to Government employees to whom the Corporation contributes 14% of their pensionable earnings. The Corporation set aside 14% of the Ex P&T employees pensionable earnings to meet their proportion of the Ex P&T liability.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1110001101110000148 BTC ANNuAlrepOrt2009In terms of their conditions of employment, expatriate and contract employees receive gratuities at the end of the contract. The cost of short-term employee benefits is recognised during the period the employee render services, unless the entity uses the services of employee in the construction of an asset and the benefits received meet the recognition criteria of an asset, at which stage it is included in as part of the related item of property, plant and equipment item. Other than the regular contributions made, the Corporation does not have any further liability in respect of its employees pension arrangements, other than referred to in note 24.reVenue reCOgnitiOnRevenue, which excludes value added tax, comprises the value of national & international telephone services, local and access services (rentals & installations), sale of equipment to customers, data communications and other services. Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Corporation and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received, excluding discounts, rebates and other sales taxes or duty. The Corporation provides telephone and data communication services under post paid and prepaid payment arrangements. The various revenue categories are explained below:National&InternationalTelephoneservices comprise of the following product and or services:Prepaidproductsupon purchase of an airtime scratch and dial card the customer receives the right to make outgoing voice and data calls to the value of the airtime scratch and dial card. On initial recognition, the amount received is deferred and revenue is recognised as the customer utilises the airtime available or upon expiration of the usage period, whichever comes first.Interconnect-nationalandinternationalNational and international interconnect revenue is recognised on the usage basis.CustomerPremisesEquipment comprise of the following products and or services:SaleofgoodsRevenue is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer.LocalandAccessServices comprise of the following products and or services:Subscriptions,connectionsandotherusageRevenue includes fees for installation and activation which are recognised as revenue upon activation.DataandPrivateCircuits comprise of the following products and or services:RentalincomeRevenue is recognised on a straight line basis over the lease term on ongoing leases. The revenue recognised here is classified under other services.RenderingofservicesRevenue is recognised upon performance of services inclusive of recovery of disbursements, net of trade discounts. unexpired airtime is recorded in the financial statements under trade and other payables until they are utilised by the customers when they are transferred to revenue.OtherServices comprise of the following products and or services:botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1490000111011000111BTC ANNuAlrepOrt2009beMOBILEIncomebeMOBIlEs bouquet of services to the matured Botswana market include voice, data, voicemail, caller identification, call forwarding, short message services, interconnect and roaming services. The two segments at the center of the business are contract and prepaid subscribers. InterestincomeRevenue is recognised as the interest accrues, taking into account the effective yield on the asset unless collectability is doubtful.DirectoryservicesRevenue is recognised when paper directories are released for distribution, as the significant risks and rewards have passed at that point. The revenue recognised here is classified under other services.ConstructioncontractsContract revenue and contract costs are recognised as revenue and expenses, respectively, when the outcome of a construction contract can be estimated reliably.Revenue arising from fixed price contracts is recognised in accordance with the percentage of completion method. The stage of completion is measured by reference to costs incurred to date as a percentage of total estimated costs for each contract. Revenue recognised here is categorised under other services.inVentOriesInventories comprise items of equipment used in the construction or maintenance of plant (work in progress), and consumable stores and other inventories. Inventories are stated at the lower of cost, determined on the weighted average basis, and estimated net realisable value after due consideration for slow moving and obsolete items.Work-in-progress includes contracts carried out for customers and is stated at cost less provisions for any foreseeable losses. Advance payments in respect of such work-in-progress are included under trade and other payables.BOrrOwing COstsBorrowing costs are recognised as an expense when incurred.prOperty, plant and eQuipmentProperty, plant and equipment is stated at historical cost or valuation less accumulated depreciation and subsequent accumulated impairment loss, where applicable. Plant and equipment includes all direct expenditure and costs incurred subsequently, to add to, replace part of, or major inspection thereof if the recognition criteria are met. Cost in respect of other network services equipment comprises expenditure up to and including the last distribution points and includes materials, direct labour and other resources incurred in the construction of self-constructed assets; if the recognition criteria are met, qualifying assets are capitalised under plant and equipment in the course of construction.Subsequent costs are included in the assets carrying amount or recognised as a component, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the corporation and the cost of the item can be measured reliably. All other repairs and maintenance expenditures are charged to the income statement during the financial period in which they are incurred.The corporations policy is not to provide for dismantling and restoration costs relating to equipment as management consider there is no legislated or constructive obligation to incur such cost.An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement in the year the asset is derecognised.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1110001101110000150 BTC ANNuAlrepOrt2009land and buildings are revalued independently by professional valuers using the open market value method. Revaluations are conducted at intervals of three years. Any revaluation increase arising on the revaluation of such land and buildings is credited to the revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognised as an expense, in which case the increase is credited to the profit or loss to the extent of the decrease previously charged. A decrease in the carrying amount arising on the revaluation of such land and buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the properties revaluation reserve relating to a previous revaluation of the asset. The revaluation reserve is amortised over the expected useful lives of land and buildings and an amount equal to the depreciation charge attributable to the revaluation portion of such land and buildings, is transferred from the capital reserve to accumulated profits. On subsequent sale or retirement of a revalued property, the attributable revaluation surplus remaining in the properties revaluation reserve is transferred to accumulated profits. Improvements to assets held under operating leases are capitalised and depreciated over the remaining lease term. Capital work in progress (plant and equipment in the course of construction) comprises costs incurred in constructing property, plant and equipment that are directly attributable to the construction of the asset. Assets remain in capital work in progress until they have been put into use or are commissioned, whichever is the earlier date. At that time they are transferred to the appropriate class of property, plant and equipment additions. depreCiatiOnFor depreciation purposes, a significant component defined as equal to or greater than 20% of the total cost of the asset and each significant component with different useful lives are depreciated separately. Depreciation is not provided on freehold land as it is deemed to have an indefinite life and plant and equipment in the course of construction as they are not yet available for use.Depreciation is provided on other property, plant and equipment on a straight line basis. This is from the time they are available for use, so as to write off their cost over the estimated useful lives taking into account any residual values. The residual value of an asset may be equal to or greater than the assets carrying amount. If it is the case, the assets depreciation charge is zero until its residual value subsequently decreases to an amount below the assets carrying amount.The estimated useful lives assigned to groups of property, plant and equipment are: Buildings 40 years leasehold landand buildings unexpired portion of lease or 50 years, whichever is shorterPlant and equipment 5 to 20 years Other equipment 3 to 10 years Where the expected useful lives of property, plant and equipment have changed due to technological change or market conditions, the rate of depreciation is adjusted so as to write off their cost or valuation over the remaining estimated useful lives of such property, plant and equipment.The useful lives, residual values and depreciation methods of property, plant and equipment are reviewed at each financial year end, and adjusted in the current period if expectations differ from the previous estimates. botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1510000111011000111BTC ANNuAlrepOrt2009Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or is included in a disposal group that is classified as held for sale or the date that the asset is derecognised.impairment Of nOn-Current assetsAt each balance sheet date, the Corporation reviews the carrying amounts of its assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indications exist, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss, if any. Where it is not possible to estimate the recoverable amount of an individual asset, the Corporation estimates the recoverable amount of the cash-generating unit to which it belongs. An assets recoverable amount is the higher of an assets or cash generating units fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.Managements estimates of future cash flows are subject to risk and uncertainties. It is therefore reasonably possible that changes could occur which may affect the recoverability of the Corporations assets. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. Impairment losses are recognised as an expense immediately, unless the relevant asset is land or buildings, in which case the impairment loss is treated as a decrease in the revaluation reserve to the extent of the value of this reserve relating to this particular asset.An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or have decreased. Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised as income immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as an increase in the revaluation reserve after reversing the portion previously in profit or loss through the income statement.nOn - Current assets Held fOr saleNon-current assets and disposal groups are classified as held for sale if their carrying amount will principally be recovered through sale rather than continuing use. For an asset to be classified as held for sale it must be available for immediate sale in its present condition and the sale must be highly probable. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Non - current assets held for sale are measured at the lower of the assets carrying value before being classified as held for sale and its fair value less cost to sell. Fair value will be a price that is deemed reasonable in an arms length transaction. While a non - current asset is classified as held for sale it is not depreciated (or amortised). Interest and other expenses attributable to the liabilities of an asset held for sale continues to be recognised.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1110001101110000152 BTC ANNuAlrepOrt2009fOreign CurrenCy translatiOnTransactions in currencies other than Botswana Pula are initially recorded at the rates of exchange prevailing on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are translated at the rates of exchange approximating those ruling at the balance sheet date. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Profits and losses arising on translation of foreign currencies attributable to the Corporation are dealt with in the income statement in the year in which they arise.The International Telecommunications union uses Gold Francs as the currency to settle international operator debts. The Gold Franc is linked to the Special Drawing Rights (SDR) rate, which is fixed at 3.061:1 (Gold Franc: Pula). deVelOpment grantsGrants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. Grants received by the Corporation to specifically fund the acquisition or construction of property, plant and equipment are reflected as development grants and classified as non current liabilities. Grants that are going to be used in the next financial year are classified as current liabilities. Where the grant relates to an asset, the fair value of the grant is credited to a deferred income account and is released to profit or loss on a systematic basis over the expected useful lives of such property, plant and equipment. deferred reVenueAs per certain rental agreements, certain amounts of revenue are received in advance. Revenue received in advance for the renting of plant and equipment is recognised as income over the remaining life of the plant and equipment utilised.nOtiOnal sHare CapitalThe Corporation is constituted in terms of the Botswana Telecommunication Corporation Act CAP 72:02. The Act does not provide for share capital. However, by agreement with the Government of Botswana, the Corporation has created notional share capital being P21 033 733. These shares have not been registered under the Companys Act nor have they been recorded by the Registrar of Companies. Notional share capital is recognised at the fair value of the consideration received by the Corporation. unless varied by legislation passed by the Government notional share capital is recognised at the notional par value subject to amendment by the Board. The notional share capital does not have any rights and obligations and this constitutes an equity contribution by the government of Botswana. The notional shares do not have any right to dividends and the rights and obligations attached thereto have not been constituted. However dividends are paid based on a Government directive CAB 40/2004 and are not linked to the share capital. eQuity appliCatiOn aCCOuntBy agreement with the Government of Botswana, the Corporation made an application to create an equity application account being loans convertible to equity of P207 858 215. The money set aside through the equity application account is recognised at the fair value of the consideration received by the Corporation. unless varied by legislation passed by the government, the equity is recognised at a notional par value subject to amendment by the Board. The equity application account does not have any rights and obligations and this constitutes an equity contribution by th government of Botwana. The equity does not have any rights to dividends as the rights and obligations attached thereto have not been constituted.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1530000111011000111BTC ANNuAlrepOrt2009related party transaCtiOnsThe Government of the Republic of Botswana and its various local authorities and Parastatals constitute a significant portion of the Corporations revenues. The other related parties are the Corporations subsidiary, Botsnet (Proprietary) limited and members of key management personnel. Services to Government, other local authorities, Parastatals and subsidiaries, are provided at arms length. For further information refer to Note 25.finanCial instrumentsFinancial assets and financial liabilities are recognised on the balance sheet when the Corporation has become a party to the contractual provisions of the instrument. When financial instruments are initially recognised, they are measured at fair value plus in the case of instruments not at fair value through profit or loss, directlty attributable transactions costs.All regular way purchases and sales of financial instruments are recognised on the trade date, which is the date that the Corporation commits to purchase the instrument.FinancialAssetsThe Corporations principal financial assets are cash and cash equivalents and trade and other receivables.CashandcashequivalentsCash and cash equivalents in the balance sheet comprise cash at banks and on hand and short term deposits with an original maturity of three months or less. Cash on hand and cash equivalents is carried at amortised cost. TradeandotherreceivablesThese are classified as loans and receivables. Subsequent to initial recognition, trade receivables and loans are recognised at amortised cost, which approximates the original invoice amount less an allowance for any uncollectible amounts. Gains and losses are recognised in the income statement when the loan and receivable is derecognised or impaired as well as through the amortisation process.GainsandLossesforFinancialAssetsGains and losses are recognised in the income statement when the loan and receivable is derecognised or impaired as well as through the amortisation process. GainsandLossesforFinancialLiabilitiesGains and losses are recognised in the income statement when the loan and receivable is derecognised or impaired as well as through the amortisation process. FinancialLiabilitiesandEquityInstrumentsFinancial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. Significant financial liabilities include long term borrowings, the liability portion of preference shares and trade and other payables.CompoundfinancialinstrumentsThe Corporation evaluates the terms of each non derivative financial instruments issued by the Corporation to determine whether it contains both a liability and an equity component. Where the financial instrument is determined to be a compound financial instrument, such components are classified separately as financial liabilities, and/or equity instruments in accordance with the requirements of IAS 32. As at year end, the Corporation had in issue, preference shares that were considered to be a compound financial instrument. The Corporation determines the carrying amount of the liability component by measuring the fair value of the liability by discounting future contractual dividend payments for the preference shares at the risk adjusted interest rate. The carrying amount of the equity instrument, represented by the option of the Corporation to redeem the preference shares, is then determined by deducting the fair value of the financial liability from the fair value of the compound financial instrument as a whole. The liability portion of the preference shares are carried at amortised cost.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1110001101110000154 BTC ANNuAlrepOrt2009InterestbearingloansandborrowingsInterest-bearing loans, borrowings and interest bearing bonds are initially recognised at fair value of the consideration received less directly attributable transaction costs. After initial recognition all interest -bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate method.Finance charges, including premium payable on settlement or redemption, are accounted for on an accruals basis and are added to the carrying amount of the instrument to the extent that they are not settled in the period in which they arise.Interest-freeloansThe Corporation recognised financial liabilities (loans) that required no payment of interest over the entire period of their existence to the due date. These have been restated to fair value by discounting the loans at the prevailing market lending rate available to the Corporation. The notional interest arising therefrom is dealt with in the profit or loss (Note 16).Tradeandotherpayablesliabilities for trade and other payables are subsequently measured at amortised cost which is the present value of the consideration to be paid in the future for goods and services received, whether or not billed to the Corporation.EquityinstrumentsEquity instruments are recorded net of direct issue costs.Offsetting of financial assets and financial liabilities (Interconnect balances)Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously.DerecognitionoffinancialassetsandliabilitiesThe corporation derecognises a financial asset when it loses control over the contractual rights that comprise the asset and consequently transfers the substantive risks and benefits associated with the asset.A financial liability is derecognised when it is legally extinguished.ImpairmentoffinancialassetsThe Corporation assesses at each balance sheet date whether a financial asset or group of financial assets is impaired. A provision of impaired debts is made when the agreed credit terms are not adhered to and the debtor is disputing the billed amount or was declared insolvent.AssetscarriedatamortisedcostIf there is objective evidence that an impairment loss on loans and receivables carried at amortised cost has been incurred, the amount of the loss is measured as the difference between the assets carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial assets original effective interest rate (i.e. the effective interest rate computed at initial recognition). The carrying amount of the asset is reduced either directly or through use of an allowance account. The amount of the loss is recognised in profit or loss. The Corporation first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually or collectively for financial assets that are not individually significant. If it is determined that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, the asset is included in a group of financial assets with similar credit risk characteristics and that group of financial assets is collectively assessed for impairment. Assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognised are not included in a collective assessment of impairment.botswana telecommunications corporationaccounting policies (continued)for the year ended 31 March 2009 1550000111011000111BTC ANNuAlrepOrt2009If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss is recognised in the profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date. diVidendsThe policy of the Board is to pay 25% of its profit as a dividend annually to the government of Botswana. The government of Botswana reserves the right to vary the rate of the dividend. Dividends proposed after the balance sheet date is shown as a component of capital and reserves and not as a liability.prOVisiOnsProvisions are recognised when the Corporation has a present legal or constructive obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. A past event is deemed to give rise to a present obligation if, taking into account all of the available evidence, it is more likely than not that a present obligation exists at balance sheet date.leasesThe determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement and requires an assessment of whether the fulfillment of the arrangement is dependent on the use of specific asset or assets and the arrangement conveys a right to use the asset.CorporationasalesseeOperating lease payments are recognised as an expense in the Income Statement on a straight-line basis over the lease term.Corporationaslessorleases where the Corporation retains substantially all the risks and benefits of ownership of the asset are classified as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same bases as rental income. Contingent rents are recognised as revenue in the period in which they are earned.botswana telecommunications corporation1110001101110000156 BTC ANNuAlrepOrt2009 2009 2008 p000 P0001 sale Of gOOds and serViCes Telephone - national 250,469 264,295 Telephone - international 132,203 168,152 local and Access Services 94,162 83,542 Data and Private circuits 249,859 202,311 Customer Premises Equipment 65,830 52,943 Other Services 43,377 27,930 835,900 799,174 2 Operating COsts 2.1 Costofservicesandgoodssold: Payment to International carriers and local operators 163,868 146,007 Depreciation land and buildings 3,269 3,822 Plant and Machinery 148,982 149,361 Equipment and material costs 47,679 47,541 Costs of inventories recognised as an expense - Note 9 4,594 425 license fee - BTA 16,658 17,374 Space segment rentals and other licence fees 11,218 6,187 Total cost of services and goods sold 396,268 370,717 2.2 Sellinganddistributioncosts: Installation of Customer Premises Equipment 4,818 4,350 Product Marketing costs 7,531 4,249 12,348 8,599 2.3 Administrativeexpenses Employee costs: Salaries and wages 172,241 167,589 Pension fund and group life contributions 14,448 14,995 Training costs 4,388 3,411 Other related costs 6,739 6,522 Total employee costs 197,817 192,516 Employee costs relating to assets constructed capitalised (1,542) (1,960 ) Total employee costs charged to income statement 196,274 190,556 nOtes tO tHeCOnsOlidated finanCial statementsfor the year ended 31 March 2009 botswana telecommunications corporation1110001101110000156 BTC ANNuAlrepOrt2009notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1570000111011000111BTC ANNuAlrepOrt2009 2009 2008 p000 P0002 Operating COsts (continued) Depreciation - Other equipment 21,203 19,679 Repairs and maintenance - Non Telcom equipment 16,142 9,929 Total Administrative expenses 233,620 220,163 2.4 Otherexpenses Retrenchment costs 95,017 Other operating expenses 122,567 98,079 Total other expenses 122,567 193,096 Total operating costs 764,803 792,575 Operating costs include the following items: Audit fees - Current year 745 760 Board members fees 113 114 Consultancies and legal costs 20,754 11,143 Debtors impairment 12,548 14,669 Marketing and publicity 36,868 1,716 Operating lease charges - rentals 1,706 2,360 Write-down of inventories recognised as an expense 4,594 Foreign exchange net gains (4,727) (10,593) 3 OtHer inCOme Development grant recognised as income - Note 15 (21,801) (19,928 ) Profit on disposal of property, plant and equipment (1,410) (1,716 ) (23,211) (21,644 ) notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000158 BTC ANNuAlrepOrt2009 2009 2008 p000 P0004 interest inCOme / finanCe COsts 4.1 Interestincome: Call Accounts (45,873) (59,252) (45,873) (59,252)4.2 Financecosts: long term borrowings: Government - Note 16 16,460 22,102 Bond 4,584 6,882 21,044 28,984 Preference shares interest 184 184 21,228 29,168 5 taXatiOn under the provisions of the Income Tax Act (Chapter 52:01), Second Schedule, the Corporation is exempt from income tax. 6 earnings per nOtiOnal Ordinary sHare The calculation of earnings per notional ordinary share is based on 21 033 733, (2008; 21 033 733) notional ordinary shares in issue throughout the year and net income attributable to the notional ordinary shareholder (after deducting the 8% redeemable preference share dividends). Diluted earnings per notional ordinary share is calculated by dividing the profit for the year attributable to the notional shareholder (after deducting dividends on redeemable preference shares) by the weighted average number of notional ordinary shares outstanding during the year of 228 891 948 notional shares (adjusted for the effects of 207 858 215 potential notional ordinary shares to be issued from the equity application account - Note 12). Profit attributable to ordinary notional shareholder for basic and diluted earnings per share 118,953 58,327notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1590000111011000111BTC ANNuAlrepOrt20097 prOperty, plant and eQuipment 31March2009 Plantand Equipmentin Land& Plant& Other thecourseof Buildings Equipment Equipment Construction Total P000 P000 P000 P000 P000 Costorvaluation At beginning of the year 81,559 2,206,874 330,519 38,190 2,657,142 Additions 167,727 167,727 Transfers 17,319 167,271 16,633 (201,223 ) Adjustments (8 ) 22 14 Disposals (61 ) (2,001 ) (2,062) Revaluation at 31 March 2009 25,823 25,823 At end of the year 124,693 2,374,084 345,173 4,694 2,848,644 AccumulatedDepreciation At beginning of the year (6,649 ) (1,363,254 ) (257,388 ) (1,627,291) Charge for the year (3,269 ) (148,982 ) (21,203 ) (173,454) Disposals 61 2,001 2,062 At end of the year (9,918 ) (1,512,175 ) (276,590 ) (1,798,683) Netbookvalue At beginning of the year 80,890 843,620 67,150 38,192 1,029,852 At end of the year 114,775 861,909 68,583 4,694 1,049,961 land and buildings were revalued at 31 March 2009 by an accredited independent valuer, on an open market existing basis.The valuation assumed that the poperties have marketable and unencumbered titles, free of any undisclosed restrictions and charges. Commercial properties were measured on gross internal areas basis only and residential properties on gross external area only in accordance with the Code of Measuring Practice applicable in Botswana.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000160 BTC ANNuAlrepOrt20097 prOperty, plant and eQuipment (continued) 31March2008 Plantand Equipmentin Land& Plant& Other thecourseof Buildings Equipment Equipment Construction Total P000 P000 P000 P000 P000 Costorvaluation At beginning of the year 79,560 1,870,377 320,460 18,326 2,288,723 Additions 2,033 336,520 13,575 19,866 371,994 Disposals (34 ) (23 ) (3,516 ) (3,573) At end of the year 81,559 2,206,874 330,519 38,192 2,657,144 Accumulateddepreciation At beginning of the year 3,119 (1,213,911 ) (247,134 ) (1,457,926) Depreciation charge for the year (3,822 ) (149,361 ) (19,679 ) (172,862) Disposals 34 18 3,444 3,496 At end of the year (669 ) (1,363,254 ) (263,369 ) (1,627,292) Netbookvalue At beginning of the year 82,679 656,466 73,326 18,326 830,797 At end of the year 80,890 843,620 67,150 38,192 1,029,852 The carrying amount of land and buildings that would have been included in the financial statements, had certain of these not been revalued and were carried at cost less depreciation is: 2009 2008 p000 P000 Cost less reduction due to impairment 91,440 91,440 Depreciation (41,740) (38,471 ) Carrying amount 49,700 52,969 8 deferred lease Balance at the beginning of the year 16,586 16,468 New lease arrangements 37 19 usage in the current period (779) Originating in current period for existing contracts 99 15,844 16,586Deferred leases arise from the difference between the straight lining of operating leases on the Corporation sites in accordance IAS 17 and the actual payments made in accordance with the lease agreement.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1610000111011000111BTC ANNuAlrepOrt2009 2009 2008 p000 P0009 inVentOries Comprising: Consumable stores 40,349 29,509 Customer premises equipment 22,122 10,541 Other inventories 1,800 1,733 64,271 41,783 The above inventory is disclosed at lower of cost and estimated net realisable value. The cost of inventories recognised as an expense is P4,593,859 (2008 - P425,544). 10 trade and OtHer reCeiVaBles Trade receivables 47,666 39,812 Receivables from related parties 14,075 40,764 Trade receivables from traffic balances 20,172 27,593 Staff advances 1,526 2,306 Interest receivable 3,024 Other receivables 31,320 19,950 117,783 130,425 Prepayments and deposits 10,686 20,511 128,469 150,936 The Corporations trade and other receivables are non-interesting bearing. For terms and conditions relating to related party receivables, refer to Note 25. Trade, receivables from traffic balances and other receivables are generally 30 to 90 days terms, interest free, unsecured and settlement occurred in cash. Staff advances may be up to six months.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000162 BTC ANNuAlrepOrt2009 2009 2008 p000 P00010 trade and OtHer reCeiVaBles (continued) Tradeandotherreceivablesat31March2009 Neither past due nor impaired 30,030 50,056 Past due but not impaired less than 30 days 39,896 19,183 between 30 days and 60 days 235 10,427 between 60 days and 90 days 1,911 18,004 more than 90 days 45,711 32,755 Netcarryingamount 117,783 130,425 The movement in the provision for impairment of trade and other receivables is set out below. Individually Collectively Impaired Impaired Total At31March2009 P000 P000 P000 At beginning of year 37,755 32,787 70,542 Charge for the year 2,043 420 2,463 At end of year 39,798 33,207 73,005 At31March2008 At beginning of year 25,207 30,147 55,354 Charge for the year 12,548 2,640 15,188 At end of year 37,755 32,787 70,542 2009 2008 p000 P000 11 nOtiOnal Ordinary sHare Capital Ordinaryshares 21 033 733 ordinary shares of P1 each, held by the Government of the Republic of Botswana 21,034 21,034 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1630000111011000111BTC ANNuAlrepOrt2009 2009 2008 p000 P00011 nOtiOnal Ordinary sHare Capital (continued) Preferenceshares 2 301 000 - 8% redeemable cumulative preference shares of P1 each, held by the Government of the Republic of Botswana Total nominal value 2,301 2,301 less: liability portion of preference shares included under non current liabilities (1,416) (1,416 ) Equity portion of preference shares disclosed as part of notional share capital 885 885 21,919 21,919 The preference share interest is cumulative and the preference shares are are redeemable at the option of the Corporation. 12 eQuity appliCatiOn aCCOunt Balance at the beginning and end of the year 207,858 207,858 The shareholder has determined that the above will be allotted as follows:P1 ordinary shares are to be issued for the loans converted to equity amounting to P190,939,000.0% preference shares of P1 each are to be issued for the Gantsi-Mamuno project funding amounting to P16,919,215 which will be convertible into ordinary shares after the life of the project on 1 April 2009. However the conversion has not yet taken place as at 1 April 2009.13 reValuatiOn reserVe Properties revaluation reserve Balance at the beginning of the year 45,855 47,912 Revaluation adjustment arising during the year 25,823 Depreciation transfer for land and buildings (2,057) (2,057 ) Balance at the end of the year 69,621 45,855 Total reserves 69,621 45,855 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000164 BTC ANNuAlrepOrt2009 2009 2008 p000 P00014 diVidends and preferenCe sHare interest Preference share interest Amount paid to the Government of the Republic of Botswana on Preference share interest owing at the beginning of the year 184 184 8% redeemable cumulative preference shares - declared during the year 184 184 Amount paid during the year (184) (184 ) Amount payable at end of year 184 184 Equity dividends: Dividend proposed for approval (not recognised as a liability) 29,738 14,582 Total dividends 29,922 14,766 The current preference dividend amounting to P184,000 is payable as approved by the Board of the Corporation. The preference shares are a compound financial instrument comprising an equity portion and a liability portion. Consequently, they have been split into the equity and liability components (Note 11). The dividends on preference shares have been classified as interest cost and are included as part of finance cost (Note 4.2). The dividend is payable at the beginning of the next financial year, bears no interest and it is unsecured.Dividends amounting to 25% of the Corporations profits are payable to the Government in line with the requirements of the Government directive CAB 40/2004. 15 deVelOpment grants Balance at the beginning of the year 121,070 140,998 Grants received during the year 35,625 Recognised as income during the year (21,801) (19,928 ) Balance at end of the year 134,894 121,070 The cumulative grants received to date of P250 423 679 (2008: P214 798 900). These grants are for the purpose of funding the Corporations expansion in rural districts in terms of National Development Plan 8. The portion of the grants recognised as income during the year is based on the useful life of plant and equipment which was funded by the above grants.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1650000111011000111BTC ANNuAlrepOrt2009 2009 2008 p000 P00016 lOng term BOrrOwings Government of the Republic of Botswana Balance at the beginning of the year 150,813 188,711 Repayment of long term borrowings (60,000) (60,000 ) unwinding the finance costs - Note 4.2 16,460 22,102 107,273 150,813 The Government loan is unsecured, interest free and is repayable over a five year period commencing at the end of the current three year programme which started in May 2003, or in its entirety on privatisation, whichever is sooner. The loan is being used to upgrade the telecommunications network throughout the country. unsecured puttable bond Balance at the beginning of the year 50,000 50,000 Repayment of the bond (50,000) 50,000 unsecured puttable bonds (BTC001) were issued by the Corporation bearing interest at 13.75% per annum, repayable semi-annually in arrears, maturing on 30 November 2008. The bonds were puttable by the investors at 95% on 30 November 2003. Investors were given an option to redeem the bonds as at 30 November 2003,however none exercised that right. The bond has been fully paid as at November 2008. Total long term borrowings 107,273 200,813 less: amounts repayable within one year included under current liabilities (Government loan) (60,000) (60,000 ) less: amounts repayable within one year included under current liabilities (unsecured bond) (50,000 ) Total current portion of long term borrowings (60,000) (110,000 ) Balance at the end of the year 47,273 90,813 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000166 BTC ANNuAlrepOrt2009 2009 2008 p000 P00017 deferred reVenue Balance at beginning of the year 131,430 144,629 Deferred revenue recognised as income - fibres (502) (502 ) - mini links (154) (154 ) - Network upgrade - Government of Botswana (GOB) (18,396) (12,543 ) Balance at end of the year 112,378 131,430 Current portion of deferred revenue - Note 18 19,052 13,199 Non-current portion of deferred revenue 93,326 118,231 112,378 131,430The deferred revenue comprises an amount received from the Water utilities Corporation of P7,059,000 (2008:P7,059,000) for the sole usage of four fibres from Mmamashia to letsibogo Dam for a period of 25 years, an amount received from other licensed operators of P1,538,000 (2008: P1,538,000) for the use of mini links for a period of 10 years, and an amount received from other licensed operators and Botswana Police of P257,000 (2008:257,000) for the use of Power sites for a period of 10 years. The ownership of the equipment utilised to provide these services vests with the Corporation. The deferred revenue is recognised in income over the life of the plant and equipment utilised. 18 trade and OtHer payaBles Trade payables 79,297 50,996 Accrued expenses 1,893 13,156 Short-term employee benefits 44,413 36,186 Traffic administration balances 9,165 10,024 Interest on long term borrowings 1,225 Other payables 29,674 28,416 Current portion of deferred revenue - Note 17 19,052 13,199 183,494 153,202 Trade payables are non interest bearing and are normally settled on 30-60 day terms and are not secured. Other payables are non-interest bearing and have an average term of three months and are not secured.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1670000111011000111BTC ANNuAlrepOrt2009 2009 2008 p000 P00019 prOVisiOns Balance at the beginning of the year 51,501 4,300 Released during the year (40,835) (1,500 ) Arising during the year 48,701 Balance at the end of the year 10,666 51,501 The balance at year end is for retrenchments costs not yet utilised by voluntary employees who are due to leave the Corporation during the financial year 2009/2010.20 CasH flOw statement 20.1Operatingprofitbeforeworkingcapitalchanges: Net profit before financing costs 140,181 87,495 Adjustment for non cash movements: Depreciation 7 173,454 172,862 Profit on disposal of property, plant and equipment 3 (1,410) (1,716 ) Interest income 4.1 (45,873) (59,252 ) Interest receivable 2,291 Exchange loss unrealised (1,016) (7,666 ) Development grant recognised as income 15 (21,801) (19,928 ) Deferred revenue recognised as income - fibres (502) (502 ) - mini links (154) (154 ) - Network upgrade - GOB (18,396) (12,543 ) Finance costs: Government interest free loan 16 16,460 22,102 Deferred lease 8 742 (118 ) Decrease in provisions (40,835) 47,201 Operating profit before working capital changes 200,850 230,073 For the purpose of the consolidated cash flow statement the working capital changes arising from trade and other receivables and trade and other payables take into account the cash effects of the interest receivable and payable at both the beginning and end of the year.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000168 BTC ANNuAlrepOrt2009 2009 2008 p000 P00020 CasH flOw statement (continued) 20.2 Netcashandcashequivalentsatendoftheyear: Cash at bank and on hand 83,832 62,370 Short term deposits 315,886 341,706 Net cash and cash equivalents at end of the year 399,718 404,076 The call deposits had effective interest rates of between 1.50% and 10.70% for the year (2008 between 3.75% and 11.30%). At year end the short term deposits were maturing within 90 days (2008:30 days).20.2.1BankingFacilities The Corporation has facilities with its bankers amounting to P70,000,000 (2008:P70,000,000) in respect of letters of credit and guarantees. The banking facilities are unsecured.21 COntingent liaBilitiesIn the ordinary course of business, the Corporation is a defendant in various litigation arising from trade claims. Although there can be no assurances, the corporation believes, based on information currently available, that the ultimate resolution of these legal proceedings would not likely have a material adverse effect on the results of its operations, financial position or liquidity of the corporation. 22 Capital COmmitments Contracted but not paid 236,347 98,337 Authorised but not contracted 258,946 132,832 Total capital commitments 495,293 231,169 These commitments will be financed by equity contributions, development grants, long term borrowings and internally generated funds.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1690000111011000111BTC ANNuAlrepOrt2009 2009 2008 p000 P00023 Operating lease COmmitments - COrpOratiOn as lessee Future minimum rentals payable under non-cancellable operating leases as at 31 March 2009 are as follows: Operating leases 851 3,846 Balance due within one year 826 Balance due between two and five year 25 2,046 Balance due after five years 416 851 2,462 Operating lease COmmitments - COrpOratiOn as lessOr Future minimum rentals receivable under non-cancellable operating leases as at 31 March 2009 are as follows: Operating leases 35,681 54,374 Balance due within one year 8,920 6,510 Balance due between two and five years 26,761 34,844 Balance due after five years 13,020 35,681 54,374 In addition to the above, the Corporation has entered into a number of service and maintenance contracts with third parties.The majority of the operating leases are in respect of sites on which radio site premises have been built and sub-let by the Corporation to its customers. These leases comprise of fixed rentals payable on a monthly basis with annual escalations of 10% per annum generally with a one month notice period. notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000170 BTC ANNuAlrepOrt200924 emplOyee retirement BenefitsIn 1980 the Corporation employed former Government employees who transferred to the Corporation. These comprised the Post and Telecommunications (P&T) employees that had formerly been employed by the Posts and Telecommunications Corporation.These ex P&T employees were members of a defined benefit plan and opted not to become members of the Botswana Telecommunications Corporation Staff Pension Fund which is a defined contribution plan set up by the Corporation for its own employees, but to remain on the Governments pension plan.The Corporation was required to refund the Government for the pensionable benefits paid to these fund members relating to the time the members worked at the Corporation.The Corporation set aside 14% of the employees pensionable earnings which is the same rate as for the Corporations Staff Pension Fund and was paid across to a defined contribution plan to fund this.At 31 March 2007, the date of the last audit of the Fund, the total assets attributable to the Ex P&T members amounted to P29 481 499. An actuarial valuation of the Corporation share of the Ex P & T fund liability was carried out as at 31 March 2007, and this revealed a fund liability of P28 807 737 to the Ex P&T members, relating to the period of their employment with the Corporation.Management made a final settlement of the Ex P&T liability by way of a lump sum payment of P29 481 499 during March 2008 to the Government of Botswana from funds the Corporation had set aside. 2009 2008 p000 P000Changesinthepresentvalueofthedefinedbenefitobligationareasfollows: Defined benefit obligation at 1 April 28,808 Settlement (29,481 ) (Gains)/losses on obligation 673 Defined benefit obligation at 31 March Changesinthefairvalueofplanassetsareasfollows: Fair value of plan assets at 1 April 29,481 Benefits paid Contributions by employer Gains/(losses) Settlement (29,481 ) Fair value of plan assets at 31 March notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1710000111011000111BTC ANNuAlrepOrt200924 emplOyee retirement Benefits (continued)The overall expected rate of return on assets is determined based on the market prices prevailing. There has been a significant change in the expected rate of return on assets due to the improved stock market scenario. 25 related party transaCtiOns Related parties are parties under common control of the Government of the Republic of Botswana. Tradingtransactions The following related party transactions were on an arms length basis: Revenuebilled Balancedue 2009 2008 2009 2008 P000 P000 P000 P000Salestorelatedparties The Government of the Republic of Botswana 224,231 191,599 12,372 36,536 Parastatals 34,702 54,652 1,704 4,228 Botsnet (Proprietary) limited 6,837 3,839 1,519 1,451 265,770 250,089 15,595 42,215 Purchasesfromrelatedparties Parastatals 83,972 67,102 36,016 9,827The sales to and purchases from related parties are made at normal market prices. Outstanding balances at the year end are unsecured, interest free and settlement occurs in cash. There have been no guarantees provided or received for any related party receivables or payables. For year ended 31 March 2009, the Corporation made an allowance for doubtful debts relating to amounts owed by related parties of P1,937,366 (2008:P 1,791,407). This assessment is undertaken every financial year through examining the financial position of the related party and the market in which the related party operates. notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000172 BTC ANNuAlrepOrt2009 2009 2008 p000 P00025 related party transaCtiOns (continued) Compensation of key management personnel Short term benefits 513 4,595 Other long term benefits 4,533 1,152 5,046 5,747The remuneration for key management staff is determined by the remuneration committee and that of directors is consistent with Government rates.The non-executive members of the Board do not receive pension entitlement from the Corporation.26 finanCial risk management 26.1Financialriskmanagementobjectivesandpolicies The Corporations principal financial liabilities, comprise bonds, preference shares, trade payables and government loans received. The main purpose of these financial liabilities is to raise finance for the Corporations operations. The Corporation has various financial assets such as trade receivables and cash and short-term deposits, which arise directly from its operations.The main risks arising from the Corporations financial instruments are cash flow interest rate risk, liquidity risk, foreign currency risk and credit risk. The Board of Directors reviews and agrees policies for managing each of these risks which are summarised below.Exposure to currency, liquidity, interest rate and credit risk arises in the normal course of the Corporations business.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1730000111011000111BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.2Currencyrisk:The Corporation undertakes certain transactions denominated in foreign currencies with international operators and other foreign suppliers. Hence, exposure to exchange rates fluctuationss arise. The carrying amount of the Corporations foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: ExchangeRates AmountinForeign CurrencyCurrency 2009 2008 2009 2008Liabilities: Euro 0.095 0.094 348,311 1,411,788Rand 1.213 1.203 12,681,422 5,540,981SDR 0.092 0.092 44,455,839 6,219,942Sterling 0.088 0.074 9,450 4,170uS Dollar 0.126 0.148 13,789,709 2,305,503Assets: SDR 0.092 0.092 77,069,274 3,173,497Euro 0.098 0.098 51,962uS Dollar 0.131 0.155 6,487,470 906,387notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000174 BTC ANNuAlrepOrt200926 finanCial risk management (continued) The Corporations currency risk exposure is partly hedged by uSD deposit accounts held, which at 31 March 2009 amounted to uSD 1,182,331 (2008:uSD 1,177,316).26.3ForeignCurrencysensitivityanalysisThe Corporation is mainly exposed to the currencies of South Africa (Rand), the united States (uS Dollar) and the SDR (Special Drawing Rights) which is a potential claim on the freely usable currencies of International Monetary Fund members.The following table details the Groups sensitivity to a 10% increase and decrease in the Pula against the relavant foreign currencies. 10% is the sensitivity rate when reporting foreign currency risk internally to key management personnel and represents managements assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for a 10% change in foreign currency rates. A positive number below indicates an increase in profit.PreTaxProfit/(Loss) 2009 200810%decrease Pula PulaEuro 1,173,971 1,456,911Rand 383,363 666,303 Special Drawing Rights (SDR) 3,065,598 3,315,598 Sterling 6,808 5,608 united States Dollar 214,877 214,377 NetEffect 4,844,617 5,658,797 10%increase Euro (1,173,971) (1,456,911 )Rand (383,363) (666,303 )Special Drawing Rights (SDR) (3,065,598) (3,315,598 )Sterling (6,808) (5,608 )united States Dollar (214,877) (214,377 )NetEffect (4,844,617) (5,658,797 ) notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1750000111011000111BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.4CreditRiskCredit risk refers to the risk that a counterpary will default on its contractual obligations resulting in a financial loss to the Corporation. Trade receivables consist of a large number of customers, spread across diverse industries and geographical areas. Management has a credit policy in place and the exposure to credit risk is monitored an an ongoing basis. Credit evaluations are performed on all customers requiring credit. SignificantconcentrationsofcreditriskThe Corporation does have significant credit risk exposure to single counterparty or groups of counterparties having similar characteristics. The Corporation defines counterparties as having similar characteristics if they are related entities and this include sectors such Corporate clients, Government clients, etc. The credit risk related to these counterparties or groups of counterparties is however limited since the counterparties are Government agencies or businesses possessing high credit ratings. The credit risk on liquid funds is similarly limited because the counterparties are banks with high credit ratings assigned by international credit-rating agencies.Except as detailed in the following table, the carrying amount of the financial assets recorded in the financial statements, which is net of impairment losses, represents the Corporations maximum exposure to credit risk. The Corporation holds no collateral with which to secure its financial assets. 2009 2008Financialassetsandothercreditexposures P000 P000Trade debtors and other receivables 117,783 130,425 Short term call deposits 315,886 341,706 Cash and bank 83,832 62,370 517,501 534,502notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000176 BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.5FairvalueoffinancialinstrumentsManagement considers that the carrying amounts of financial assets and financial liabilities recorded in the financial statements to approximate their fair values. For this reason, no valuation methods have been employed in order to determine fair value. The respective carrying amounts and fair values of the Corporations financial assets and liabilities are shown in the following table. Carrying Fairvalue Carrying Fairvalue Amount Amount 2009 2009 2008 2008 P000 P000 P000 P000Financialassets Trade and other receivables 117,783 117,783 130,425 130,425 Short term call deposits 315,886 315,886 341,706 341,706 Cash and cash equivalents 83,832 83,832 62,370 62,370 517,501 517,501 534,502 534,502 Financialliabilities unsecured long term bonds 50,000 50,000 Government of the Republic of Botswana loan 107,273 107,273 150,814 150,814 Trade and other payables 164,442 164,442 138,778 138,778 Preference share - liability portion 1,416 1,416 1,416 1,416 Interest payable on preference shares 184 184 184 184 Guarantees given to financial institutions in respect of staff loans 1,355 1,355 2,067 2,067 274,670 274,670 343,259 343,259 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1770000111011000111BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.6 Categoriesoffinancialinstruments Loansand Heldto Receivables Maturity Total2009 P000 P000 P000Financialassets Trade and other receivables 117,783 117,783 Short term call deposits 315,886 315,886 Cash at bank and on hand 83,832 83,832 201,615 315,886 517,501 AtAmortisedCost Fairvalue Total P000 P000 P000Financialliabilities Government of the Republic of Botswana loan 107,273 107,273Trade and other payables 164,442 164,442 Preference share - liability portion 1,416 1,416Interest payable on preference shares 184 184 Guarantees given to financial institutions in respect of staff loans 1,355 1,355 1,355 274,670 1,355 274,669 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000178 BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.6 Categoriesoffinancialinstruments(continued) Loansand Heldto Receivables Maturity Total2008 P000 P000 P000Financialassets Trade and other receivables 130,425 130,425 Short term call deposits 341,706 341,706 Cash at bank and on hand 62,370 62,370 192,795 341,706 534,501 AtAmortisedCost Fairvalue Total P000 P000 P000Financialliabilities unsecured long term bonds 50,000 50,000Government of the Republic of Botswana loan 150,814 150,814 Trade and other payables 138,778 138,778 Preference share - liability portion 1,416 1,416 Interest payable on preference shares 184 184 Interest payables unsecured long term loans 6,876 6,876Guarantees given to financial institutions in respect of staff loans 2,067 2,067 348,068 2,067 350,13526.7 Financialinstrumentsdesignatedatfairvaluethroughprofitandloss At the reporting date the Corporation held no financial instruments designated at fair value through for profit and loss (FVTPl). 26.8 FinancialassetsheldorpledgedascollateralAt the reporting date the Corporation held or received no financial assets as collateral or had pledged any of its financial assets as collateral.notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1790000111011000111BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.9 Interestincomeandexpensebyfinancialinstrumentcategory Loansand Heldto Amortised Receivables Maturity Cost Total 2009 P000 P000 P000 P000 Interest income (27,693 ) (18,180 ) (45,873) Interest expense 21,228 21,228 Net interest (income) / expense (27,693 ) (18,180 ) 21,228 (24,645 ) 2008 Interest income (38,525 ) (20,728 ) (59,252) Interest expense 29,168 29,168 Net interest (income) / expense (38,525 ) (20,728 ) 29,168 (30,084 ) 26.10 Liquidityandinterestriskmanagement liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.Management has built an appropriate liquidity risk management framework for the management of the Corporations short, medium and long-term funding and liquidity management requirements. liquidity risk is managed by maintaining adequate reserves, banking facilities and reserve borrowing facilities, by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial assets and liabilities. The following table details the Corporations expected maturity for its financial assets. The tables below have been drawn up based on the undiscounted contractual maturities of the financial assets including interest that will be earned on those assets except where the group anticipates that the cash flow will occur in a different period. Less 1-3 3mnths than mnths to1yr 1-5yrs 5+yrs Total 1mnth P000 P000 P000 P000 P000 FinancialAssets 2009 Trade and other receivables 96,085 21,698 117,783 Variable interest rate instruments 83,832 83,832 Fixed interest rate instruments 315,886 315,886 83,832 411,971 21,698 517,501 Netliquidity 83,832 217,530 -8,302 -121,355 171,704 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000180 BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.10 Liquidityandinterestriskmanagement(continued) Less 1-3 3mnths than mnths to1yr 1-5yrs 5+yrs Total 2008 1mnth P000 P000 P000 P000 P000 Trade and other receivables 2,522 98,004 29,899 130,425 Variable interest rate instruments 62,370 62,370 Fixed interest rate instruments 341,706 341,706 64,892 439,710 29,899 534,502 Netliquidity 38,245 294,142 -53,723 -122,067 -1,416 155,181 The following table detail the Corporations remaining contractual maturity of its financial liabilities. The tables have been drawn up based on the discounted cash flows of financial liabilities based on the earliest date on which the Corporation can be required to pay. The table includes both interest and principal cash flows. Weighted Average Effective Interest Less 1-3 3mnths Rate than mnths to1yr 1-5yrs 5+yrs Total % P000 P000 P000 P000 P000 FinancialLiabilities 2009 Trade and other payables 164,442 164,442 Non-interest bearing instruments 30,000 30,000 120,000 180,000 Institutions in respect of staff loans 1,355 1,355 194,442 30,000 121,355 345,797 2008 Trade and other payables 26,647 112,131 138,778 Non-interest bearing 30,000 30,000 120,000 180,000 Fixed interest rate instruments 13.75% 3,438 53,622 1,416 58,476 Guarantees given to financial institutions in respect of staff loans 2,067 2,067 26,647 145,569 83,622 122,067 1,416 379,321 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1810000111011000111BTC ANNuAlrepOrt200926 finanCial risk management (continued) 26.11 InterestratesensitivityanalysisThe table below has been determined based on the exposure of financial instruments to interest rates at the balance sheet date. For variable rate liabilities, the analysis is prepared assuming the amount of the liability outstanding at the balance sheet date was outstanding for the whole year. A 1% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents managements asssessment of the reasonably possible change in interest rates.If the Corporations interest rates had been 1% higher/lower and all other variables were held constant, the change in the Corporations profit and equity reserves would be as shown in the table below: Increase/ (decease) inpretax profit/(loss) fortheyear 2009 P000 Interestraterisk Change in interest rate +1% -1% 2008 Interestraterisk Change in interest rate +1% 3,132 -1% (3,132 )notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000182 BTC ANNuAlrepOrt200927 Capital risk managementThe Corporation manages its capital to ensure continuity as a going concern for all the subsidiaries while at the same time maximising the shareholders return through the optimisation of the debt and equity balance. The Corporation has access to financing facilities, the total unused portion amounting to P70 million at the balance sheet date. The Corporation expects to meet its other obligations from operating cash flows and the proceeds of maturing financial assets. The Corporation expects to maintain current debt to equity ratio, within 20-25% limits increasing to 25%. This will be achieved through the issue of new debt and increased use of bank loan facilities. The capital structure of the Corporation consists of debt, which includes borrowings (Note 16), trade and other payables(note 18), cash and cash equivalents (note 20.2), Share capital, reserves and retained earnings. 2009 2008 Debt P000 P000 Trade and other payables 183,494 131,427 long term borrowings 107,273 200,813 Preference shares liability portion 1,600 1,600 Total debt 292,366 333,840 less cash and short term deposits (399,718) (404,076 ) Net debt (107,352) (70,236 ) Equity Notional share capital 21,919 21,919 Equity application account 207,858 207,858 Revaluation reserve 69,621 45,855 Accumulated profits 827,612 721,186 Total equity 1,127,010 996,818 Total capital 1,819,095 1,734,735 Net debt to equity ratio 10% 7% Total capital is derived by adding total equity and total debt less cash and short term deposits. notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1830000111011000111BTC ANNuAlrepOrt2009 2009 2008 P000 P00028 segment repOrting Eliminations represent the inter-segmental transactions that have been eliminated against segment results. BusinessSegment Consolidated operating revenue 835,900 799,174 Fixed-line 817,232 794,240 Mobile 9,599 Broadband 15,325 11,631 Elimination 6,256 6,697 Consolidated other income 69,083 80,896 Fixed-line 68,915 80,754 Broadband 168 142 Consolidated operating expenses 764,803 792,575 Fixed-line 695,506 773,893 Mobile 61,652 14,084 Broadband 7,645 4,598 Consolidated finance charges Fixed-line 21,228 29,168 SegmentResults-Netprofit/(Loss)reported 118,953 58,327 Fixed-line 169,414 71,933 Mobile (52,053) (14,084 ) Broadband 1,592 478 notes to theconsolidated financial statements (continued)for the year ended 31 March 2009 botswana telecommunications corporation1110001101110000184 BTC ANNuAlrepOrt2009 2009 2008 P000 P00028 segment repOrting (continued) BusinessSegment(continued) Profit/(loss) attributable to equity holders Fixed-line 169,414 71,933 Mobile (52,053) (14,084 ) Broadband 1,592 478 Consolidated assets Fixed-line 1,646,418 1,643,233 Mobile 11,845 Broadband 4,689 2,752 Total assets 1,662,952 1,645,985 Consolidated equity & liabilities Fixed-line 1,646,417 1,643,233 Mobile 11,845 Broadband 4,689 2,752 Total liabilities 1,662,951 1,645,985 1850000111011000111BTCANNuAlREPORT2009botswana telecommunications corporation Notes 2009 2008 P000 P000ASSETS Non current assets Property,plantandequipment 7 1,049,961 1,029,852Deferredlease 8 15,844 16,586 1,065,805 1,046,438Current assets Inventories 9 64,271 41,783Tradeandotherreceivables 10 128,469 150,936Cashandcashequivalents 20.2 399,718 404,076 592,458 596,795 Total assets 1,658,263 1,643,233 EQUITY AND LIABILITIES Capital and reserves NotionalShareCapital 11 21,919 21,919Equityapplicationaccount 12 207,858 207,858Revaluationreserve 13 69,621 45,855Accumulatedprofits 827,612 721,184 1,127,010 996,816Non current liabilities Developmentgrants 15 134,894 121,070longtermborrowings 16 47,273 90,813Preferenceshares-liabilityportion 11 1,416 1,416Deferredrevenue 17 93,326 118,231 276,909 331,530Current liabilities Tradeandotherpayables 18 183,494 153,202Provisions 19 10,666 51,501Interestpayableonpreferenceshares 14 184 184Currentportionoflongtermborrowings 16 60,000 110,000 254,344 314,887 Total equity and liabilities 1,658,263 1,643,233 consolidated balance sheetAt31March2009 2009 2008 p000 P00028 SEGMENT REPORTING (continued) business segment (continued) other segment information Capitalexpenditureforproperty,plantandequipment 167,727 371,994 Fixed-line 167,241 371,875 Broadband 486 119 Depreciation 173,454 172,862 Fixed-line 173,265 172,733 Broadband 189 129Abusinesssegmentisagroupofassetsandoperationsengagedinprovidingproductsorservicesthataresubjecttorisksandreturnsthataredifferentfromthoseofotherbusinesssegments.OnthebasisoftheCorporationsorganisationalandreportingstructure,managementconsidersthatthereareprimarilythreeoperatingsegment,namelyfixed-linetelephonyactivities,mobileservicesandbroadbanddataservices.Ageographicalsegmentisengagedinprovidingproductsorserviceswithinaparticulareconomicenvironmentthataresubjecttorisksandreturnsthataredifferentfromthoseofsegmentsoperatinginothereconomicenvironments.ThecorporationonlyhassignificantoperationsinBotswanahenceageographicalsegmentanalysishasnotbeenprovided.Therevenueisallcomingfromexternalcustomers.29 EVENT AFTER THE BALANCE SHEET DATE Therewerenosubsequentevents. botswana telecommunications corporationnotes to theconsolidated financial statements (continued)fortheyearended31March2009 botswana telecommunications corporation botswana telecommunications corporation Notes 2009 2008 P000 P000Saleofgoodsandservices 1 835,900 799,174Interestincome 4.1 45,873 59,252Revenue 881,773 858,426Costofservicesandgoodssold 2.1 (396,268 ) (370,717)GrossProfit 485,505 487,709OtherIncome 3 23,211 21,644Sellinganddistributioncosts 2.2 (12,348 ) (8,599)Administrativeexpenses 2.3 (233,620 ) (220,163)OtherExpenses 2.4 (122,567 ) (193,096) Operating profit 140,181 87,495 Financecosts 4.2 (21,228 ) (29,168)Profit for the year 118,953 58,327 AttributabletoGovernmentofBotswana 118,953 58,327 Earningspernotionalordinaryshare: Basic(thebe): 6 565.5 277.3 Diluted(thebe): 6 52.0 25.5 Dividendpernotionalshare 141.4 69.3NET BORROWINGS / DEBT Netinterestbearingdebt/liabilitieslessliquidfundsandinterestbearingreceivables (seealsoFinancialReview).CAPITAL EMPLOYED Totalassetslesscurrentliabilities,whichequalsshareholdersfundspluslongtermliabilitiesFIXED CAPITAL Ordinaryshareholdersequityinterest.TOTAL ASSETS Property,plantandequipment,assetsunderconstruction,investmentsandcurrentassets.OPERATING ASSETS Totalassetslessinvestmentandcash.TOTAL LIABILITIES Sumofallinterestandnon-interestbearingliabilities.NET ASSET VALUE PER SHARE Ordinaryshareholdersfundsdividedbythenumberofordinarysharesinissueatyear-end.OPERATING INCOME Netincomebeforeaddinginvestmentincomeanddeductingfinancingcost.EARNINGS (PROFITS) Netincomeattributabletoordinaryshareholdersasdisclosedintheincomestatement.EARNINGS PER SHARE Netincomeattributabletoordinaryshareholdersdividedbyweightedaveragenumber ofordinarysharesinissueduringtheyear.NET OPERATING CASH FLOW (EBIDTA) Operatingincomeplusincomefrominvestmentsanddepreciationandamortisation (EBIDTA).Itisnotthesameascashflowfromoperatingactivitiesinthestatementofcash flow(seealsoFinancialReview). KEY BUSINESS RATIOGROSS MARGIN Operatingincomebeforedepreciationexpressedasapercentageofoperatingrevenue.OPERATING MARGIN Operatingincomeafterdepreciationexpressedasapercentageofoperatingrevenue.NET MARGIN (PROFIT MARGIN) Netincomeafterfinancingcostsexpressedasapercentageofoperatingrevenue.INTEREST COVERAGE RATE Operatingincomeafterdepreciationplusinvestmentincomedividedbyfinancingcosts.DIVIDEND COVER Netincomeattributableperordinarysharedividedbyordinarydividendpershare.RETURN ON CAPITAL EMPLOYED Operatingincomeafterdepreciationplusinvestmentincomeadjustedforfinancingcost onshorttermportionsofloansandoverdraftsexpressedasapercentageofaverage capitalemployed.RETURN ON SHAREHOLDERS EQUITY Netincomeattributabletoordinaryshareholdersdividedbyaveragetotalassets.SELF-FINANCING RATIO Cashavailablefromoperatingactivities(availableforinvestments)dividedbycapital expenditurefundedbyBTC.GEARING RATIO (DEBT / EQUITY) Interest-bearingliabilities/debtdividedbyadjustedshareholdersequity. BalancesonDevelopmentGrantsareexcluded.SOLIDITY RATIO (EQUITY / ASSET) ShareholdersequityexpressedasapercentageoftotalassetsCURRENT RATIO Currentassetsdividedbycurrentliabilities.LIQUIDITY RATIO TradeandotherreceivablesandcashbalancesdividedbycurrentliabilitiesCAPITALISATION RATIO Debtdividedbydebtplusequity.FREE CASHFLOW RATIO Profitaftertaxplusinterestplusinterestplusdepreciation,lesscapitalexpenditure, lessincreaseinnetworkingcapital.consolidated income statementkey business termsbotswana telecommunications corporation annual financial statementsfortheyearended31March2009BOTSWANA TELECOMMUNICATIONS CORPORATIONMegaleng Khama CrescentPlot 50350P O Box 700Gaborone, Botswanawww.btc.bw

Recommended

View more >