Annual Report 2012/2013 - Telecom Report- 2012_20… · Page | 8 Telecom Namibia annual Report...

Annual Report2012/2013

“…the new brand, tn mobile, stands for “caring for you and your world,” through which it brings alive people’s aspirations

and dreams in line with the Group’s brand promise, Sharing your world.”

Hon. Joel KaapandaMinister of Information and Communication Technology

Telecom Namibia Annual Report 2012/2013 Page | 1

Page | 2 Telecom Namibia Annual Report 2012/2013

High Level Statements

Telecom Namibia (TN) is the country’s incumbent telecommunication service provider. TN is the national ICT solutions provider and the leading broadband and backbone infrastructure services provider in the country.

As a fully integrated solutions provider, TN offers a full range of ICT services in the areas of voice, data, broadband, wholesale, enterprise and mobile services. One of the key strategic objectives is to drive broadband-based consumer and enterprise services by expanding the broadband footprint via core and access technology projects.

Vision

To be Namibia’s high performance, most preferred information communication technology (ICT) service provider of world-class standards.

Mission

To anticipate, understand and satisfy the telecommunications/information needs and wants of our customers. We will address these demands through the development of solutions, sales and support of quality electronic, voice, data, image and text services at competitive rates.

Values

• Integrity• Care• Commitment• Accountability• Empowerment• Teamwork• Mutual respect


Moving towards changing the future…

Namibia’s future growth trajectory is strongly appended to the infrastructure competencies of the country, of which the TN’s advanced national backbone infrastructure is a core facilitator. By cohesively extending and upgrading the national and international backbone network and transport layer through carrier grade technology and fibre optic architecture, TN is well placed to capture significant synergies in the longer term.

The unmatched capabilities of TN’s NGN infrastructure would help articulate a multi-layered ICT platform that would convey Voice, Networking, Data Hosting, Managed Services and Cloud Computing options.

By providing integrated solutions for large scale corporates while simultaneously supporting the growing SME segment and the public sector through extensive broadband connectivity, TN aims to convey meaningful value and nation-wide economic progress.

Epitomising the “Visionary nation on the move towards Vision 2030” watchword, TN expects to build on these core competencies to render a truly VISIONARY nation on par with world standards.


Extending Our Broadband Footprint...

TN is investing in infrastructure for the future. We believe that broadband Internet will be the basis for digital invention and innovation, the creation of jobs, growth, productivity and, ultimately, long-term economic competitiveness in a digital world.

It remains our commitment to expand broadband Internet service coverage by deploying the latest generation of wireless technology to areas that are not served by our wired network. Expanding the broadband footprint will ultimately help to empower all our customers – public, business and public sector - to achieve a better future and conquer the world for Namibia.

In the past 3 years, TN was able to extend our broadband Internet footprint to many corners of the country, using our mobile, fixed and fixed wireless network capabilities to connect customers, including remote communities, schools, hospitals, rural businesses and government service centres.


Table of Contents

Technical & Financial Highlights....................................................................................................... 6

Telecom Network Coverage Map....................................................................................................... 7

DWDM Map....................................................................................................................................... 8

Organisational Structure..................................................................................................................... 9

Board of Directors.............................................................................................................................. 10

Executive Management...................................................................................................................... 11

Chairperson’s Review......................................................................................................................... 12

Managing Director’s Report............................................................................................................... 17

Chief Financial Officer’s Report......................................................................................................... 20

Industry Trends and Corporate Strategy............................................................................................. 25

Commercial Review........................................................................................................................... 34

Technical Operations.......................................................................................................................... 39

Human Resources............................................................................................................................... 42

Corporate Social Responsibility......................................................................................................... 47

Annual Financial Statements.............................................................................................................. 55


Technical & Financial Highlights for the years 2008 to 2013

Technical 2008 2009 2010 2011 2012 2013Port Capacity (Network Switch Capacity) 233,903 231,760 229,947 249,544 222,344 215,150

Percentage Digital 100% 100% 100% 100% 100% 100%

Direct Exchange Lines (DEL’s)

Analogue, ISDN & DID slots 145,294 148,606 157,037 159,059 168,482 180,110

(Including public telephones)

Manual 66 66 26 - - -

TOTAL (DELs) 145,360 148,672 157,063 159,059 168,482 180,110

Waiting List 2,829 1,410 629 645 117 842

DEL Penetration 6.6% 6.6% 7.3% 7.3% 7.6% 7.6%

Population 2,190,589 2,247,544 2,143,410 2,184,091 2,225,708 2,385,380

# of Public Phones 3,860 3,726 2,949 2,824 2,500 1,000

Public phones per 1000 1.8 1.7 1.4 1.3 1.1 1.0

Number of Households (projected) 414,647 425,428 405,725 413,426 421,304 450,884

Penetration per Households 35.1% 34.9% 38.7% 38.5% 40.0% 39.3%

Financial 2008 2009Restated

2010Restated

2011Restated

2012 2013

Company N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

Revenue 1,080,491 1,129,828 1,133,588 1 144 924 1,222,976 1,309,513

Operating profit/(Loss) 102,967 58,536 103,964 105 021 121,060 (59,047)

Total Comprehensive (Loss)/Income for the year 46,943 25,598 69,712 51 707 60,826 (85,827)

Tangible & Intangible Assets 1,593,404 1,598,143 1,600,530 1 602 609 1,638,543 1,831,117

Long-term Liabilities 157,817 200,998 546 871 522 510 486,088 457,000

Equity 1,062,370 1,087,968 1,157,680 1 191 640 1,252,466 1,166,639

Capital Expenditure 260,649 167,297 159,350 176 296 235,116 445,356

Comparative Growth


Telecom Network Coverage Map


DWDM Map

Ruacana

Opuwo

Swakopmund

Walvis Bay

Henties Bay

Oshikango KTX

Rundu

Kamanjab

Khorixas Outjo

Otjiwarongo

Tsumeb GFN

Okakarara

Oshakati

KBT

Caprivi

Oshivello

Omaruru

Leonardville

Omitara

Rehoboth

Okahandja

WINDHOEK

Rehoboth

Karibib Usakos

Uis

Witvlei Arandis

Stampriet

Aranos Kalkrand

Asab

Koes

MRL

Gochas

Tses

Oranjemund

Lüderitz

Rosh Pina

Bethanien

Aus

Karasburg Grünau

KHP

Ariamsvlei

Aroab

Warmbad

Noordoewer

Auas

Buitepos

Otavi

Oshifo

Eenhana

Ondangwa

Gerus

Epukiro

Nkurenkuru

Seeheim

Helmeringhausen

Bagani

Tsumispark

Schlip

Hoachanas

Otjinene

Omburu

Omatjette

Oamseb

Bulwana

Gaibis

Grenslyn

Dawiab

Stinkdoorn

Kokerboom

Kais

Trekkopje

Rupara

Rundu

Olifantsput

v

Nyangana

v

Okamatapati

Okonjatu

OVMtn

Gobabis

Gibeon

Maltahöhe

Roeland

Astra

Omahere

Outapi

Ohangwena

Otjitwekwa

Scorpion

Chamias

Mururani

Omega

Kongola

Otjituru DWDM Network

DWDM on TN Fibre

DWDM on NP Fibre

Ngoma

DWDM BTC

SDH into RSA

WACS into RSA

Bontos

NP Fibre not utilised

Kalahari Ring Planned


Organisational Structure

Board of Directors

HR & CompensationCommittee

Managing Director

Senior ManagerCorporate Communications

& Public Relations

Head CorporateGovernance, Legal &

Regulatory Affairs

Head Internal Audit& Risk Management

Risk MananagementCommittee

ICT SteeringCommittee Audit Committee

Chief Strategy Officer Chief CommercialOfficer

Chief Human Resources Officer

Chief OperationsOfficer

ChiefFinancial Officer

ChiefMobile Officer


Board of Directors

Dr Catherine M. Beukes-AmissIndependent Non-Executive Chairman

Frans J.P. NdoromaExecutive Director

Feitjie Veldskoen Independent Non-Executive

Director

Roger GertzeIndependent Non-Executive

Director

Immanuel P. AweneIndependent Non-Executive

Director


Executive Management

Executive Committee

Support Functions

Frans NdoromaManaging Director

Heiko TrostChief Commercial Officer

Patience Kangueehi-KanaleloHead: Corporate Governance, Legal Services & Regulatory

Affairs

Andrew KanimeChief Human Resources

Officer

Heinrich BaderChief Operations Officer

Dr Ben van der MerweHead: Internal Audit & Risk

Management

Theo KleinChief Strategy Officer

Chris KeepingChief Mobile Officer

Robert OffnerChief Financial Officer

Oiva AngulaSenior Manager:

Corporate Communications & Public Relations


Chairperson’s Review

On behalf of the Board of Directors, it is my pleasure as current

Chairperson to present the Annual Report and consolidated financial

statements of Telecom Namibia (TN) for the year ended 30 September

2013. TN continued to establish a firm foundation for the future while

managing through short-term challenges which impacted our profitability

in 2012/13. We remain confident in our strategic direction and in our

TN team to execute on the strategy to deliver strong operational

and financial results in the future.

STRaTEGiC REFOCuSSiNG Significantly, during the year under review the Board approved an updated medium term Corporate Strategy and the Business Plan 2018. This Plan is re-setting the

focus from TN’s internal transformation to exploitation of external business and market opportunities.

After years of ongoing transformation it was necessary to change focus to outward looking and to growing revenue and managing cost. This is clearly reflected in the company’s

strategic objective to become the market leader in the country by 2016. In order to achieve the necessary double-digit revenue growth

and defined EBITDA margins, we have set the company’s corporate strategy on five pillars:

• Playing along the ICT value chain with IP and IT services and products as TN’s new anchor products.

• Integrating fixed and mobile service offerings – built on a very strong tn mobile™ offering and FMC products and services.

• Becoming a Tier-2 Carrier – i.e. becoming a significant regional player and the carrier of choice in the domestic market.

• To become a lean Telco based on an all-IP and converged networks.• Enhancing network quality and customer service, i.e. becoming

customer centric and service driven.

Going forward, ensuring the realisation of the above strategic objectives will be the key pre-occupation of the Board, management and all employees.


BOaRD MEMBERSHiPTN’s achievements, particularly since the adoption of the transformation strategy to fundamentally focus on reshaping the business so that it continually meets customers’ needs in the future, was a great contribution by the previous Board. Our sincere appreciation goes to the outgoing Board of Directors, especially to the Chairman who stepped down after 20 years of dedicated service to TN.

In addition to me joining the TN Board as Chairperson, we have had the pleasure of welcoming non-executive director Immanuel P. Awene to the Board. I am confident that his wealth of knowledge and experience will contribute greatly to the advancement of the company.

CORPORaTE GOVERNaNCEThe Board remains committed to maintaining and implementing best practices throughout the Group and within the industry by ensuring that the highest standards of business integrity, transparency, professionalism and ethics are practised throughout the organisation.

Without a doubt, our strategies comply with good corporate governance practices as spelled out in the King III Report on Corporate Governance.

RiSk MaNaGEMENTTN accepts that risk is an essential feature of any business. For the period under review 19 strategic risks were identified and the percentage completion was 88%.

TN’s Risk Management Policy and practices ensure effective analysis, management and control of existing and potential risks. TN maintains a programme, which is approved by the Board, for the identification, assessment, monitoring and management of risk to the business. Monitoring and control processes, including the establishment of appropriate key risk indicators (KRI’s) and key performance indicators (KPI’s), are put in place to ensure that risks profiles managed are within policy limits.

The Board has overall responsibility for the internal controls with the Board Audit Committee being responsible for reviewing its effectiveness.

TN has engaged Deloitte as external auditors. The Board approves the annual audit plan of both the internal auditors and external auditors. Effective risk management provides greater assurance that TN’s vision and strategy will be achieved without surprises.


LEGaL aND REGuLaTORy DEVELOPMENTSIt was indeed a very busy year in respect of regulatory announcement with the issuance of two (2) additional service and technology neutral licenses to operators, bringing it to a total of ten (10) licensed operators since the inception of the Communication Regulatory Authority of Namibia (CRAN). Furthermore TN has been declared as having the dominant position based on the fact that it holds more than 35% of market share based on revenue and also controls infrastructure that is necessary for the provision of telecommunications service. In terms of its dominant position TN now has a duty, amongst others, to provide other operators non-discriminatory access to network elements on an unbundled basis.

A proud achievement is the relinquishing of the Powercom licence and integrating the GSM business into TN. The brand name tn mobile™ was reserved to be trademarked for TN.

A general policy guideline on universal access and service in communications also came into effect on 8 April 2013 in terms whereof all operators, including TN are obligated to contribute. Contributions are payable on an annual basis and will be calculated based on the audited percentage of revenue. TN is in support of the objectives of the Fund which is to increase access and service to all Namibians as it will put an obligation on all other operators.

TN will continue to embrace all efforts aimed at creating an effective and conducive regulatory management environment in the telecommunications sector of Namibia and will continue to engage Government, CRAN, operators and other stakeholders to shape a fair and strong legal and regulatory environment in the interest of all involved.

CORPORaTE SOCiaL RESPONSiBiLiTyAs a socially responsible company, TN ensures that its corporate social responsibility (CSR) is fully discharged through the initiatives of its Corporate Communications and Public Relations Department. Our CSR pillars are based on protecting the environment, supporting education and helping to improve and create a healthy society for communities and employees.

In 2013, a large part of the funding went towards training and education, business entrepreneurship and sports development. We have also contributed towards promoting and facilitating access to ICT tools and the Internet in partnership with various institutions, organisations and community-based projects.

PEOPLE STRaTEGyTN continued to invest in its human capital in 2012/13, with ongoing implementation of the People Strategy 2025. The move to new offices has resulted in more productivity, energy and collaboration to


the working environment, promoting the one team, one location strategy. Our focus is very much on creating a motivating and positive workplace, and supporting each member of staff with a specifically tailored individual development programme.

In 2012, the budget allocated to staff development amounted to more than N$13 million. A total of 3 165 employees attended various courses offered locally, regionally and internationally.

All employees are required to have a training and development plan focusing on development and growth, and this is monitored during their performance management process.

TN is committed to providing a safe workplace and has promoted a higher degree of health and safety consciousness in the workplace. This has involved monthly hazard review processes being undertaken at key sites throughout the country. Over the past financial year, the company recorded zero fatalities, with a total of three serious injuries and eleven minor injuries. The company continues to focus on performance management as a key platform for ensuring the company’s success. The performance management process focuses managers and employees on performance targets. The performance bonus is calculated according to a pre-determined and agreed formula.

aPPRECiaTiONLastly, I would like to express appreciation to my predecessor, Joseph Iita, as well as the following directors: Feitjie Veldskoen and Roger Gertze, who served on the Board during the past year, for their invaluable contribution to TN. I welcome our new director to the company and look forward to working in harmony as a team even amidst challenging circumstances as we steer the TN ship from now on into the future.

I am immensely privileged to be Chairperson of the TN Board at such an exciting, yet challenging time in its history. Our sincere appreciation to the management team, particularly the Managing Director Frans Ndoroma for leading the company with sincere professionalism and dedication. A special appreciation goes to all employees, the movers and shakers of the company. Thank you all for your loyalty and continued support thus far and in the future.

In an environment fraught with economic uncertainties and fierce competition, business and growth is as much a challenge for TN as it is for other businesses. We remain confident that, with our forward looking vision and the commitment of our management team and employees, we shall be able to achieve results that will benefit all our stakeholders and continue to create value for our shareholder.


Fy2013/14 aND BEyONDWith our refreshed corporate strategy, TN will focus on addressing the most critical internal and external factors, impacting the achievement of our medium to long-term objectives. We are committed to achieving our targets of double-digit growth in revenue and 30% EBITDA margin. We expect the components of our revenue growth strategy (improving On-net customer mix, growing mobile penetration and growth in IP and IT Business) also to contribute to our profitability. The potential opportunities from the international and business segment, as well as the mobile and IP businesses remain significant.

We expect the balance of our profitability target to be delivered through both operational efficiencies and other management measures. TN fully intends to be the ICT market leader in Namibia by 2016.

DR CaTHERiNE M. BEukES-aMiSSCHaiRPERSON


Managing Director’s Report

The past year was an important period for Telecom Namibia (TN) and tn mobile™

in which we successfully delivered on our infrastructure expansion programme,

completing the construction of international points of presence (PoPs), expanding

the national MPLS network to four towns, building direct connections to

neighbouring countries, upgrading our national backbone network to 10Gbps

capacity and extending the broadband access network to eight towns. In addition,

TN won a significant contract with the Government to implement Regional

Government Network Service Hubs to enable seamless government

service delivery in all regions.

Before going any further with the report, I wish to inform our customers that the Board of the company has changed during the year with long serving Chairman Joseph Iita stepping down from the Board. I would like to thank him and record our appreciation for his invaluable contribution over the years. The company has transformed and grown during his leadership. I am delighted to welcome Dr Catherine M. Beukes-Amiss as the new Board Chairperson, as well as Immanuel P. Awene, who was appointed to the Board with effect from 30 September 2013.

STRaTEGiC OBjECTiVES 2016/18Overall, the 2012/13 financial year marked the last year of TN’s strategic transformation from a traditional Telco to a modern state-of-the-art ICT service provider whose business model is built on IT and data and no longer on traditional voice services. While the strategic direction set in 2010 still applies, it was necessary during the year to further develop, simplify and re-focus the corporate strategy, to include the mobile business and centre the entire business approach even more firmly on customers and cost-efficiency, among others.

TN’s strategy for 2016/18 resets the focus from transformation onto the attainment of business strategies. The overarching mid-term strategic objective is to re-gain market leadership and aggressively grow revenue while staying profitable and efficient. TN’s position is to be Namibia’s leading ICT service provider, offering the widest variety of products


and services to the private, business and wholesale segments. This must be reflected in the company’s financial results. Explicitly, the company aims to be the biggest player in the market in terms of turnover. To achieve this, double-digit growth rates are required to take over leadership from competing operators in the market.

BuiLDiNG FuTuRE-PROOF NETWORkSTN’s network is evolving with our customers’ bandwidth needs. We have developed a digital infrastructure to help people get more out of life today while providing for the services they will need tomorrow. One of TN’s on-going priorities is to extend fibre deployment for the benefit of both business and residential customers.

The demand for bandwidth has kept on increasing in recent years. Over the last year the demand almost doubled (84.7%) with more data traffic. TN also implemented a Dense Wavelength Division Multiplexing (DWDM) transport platform, a national backbone network to provide for high capacity long distance routes. The national backbone network was extended and upgraded to 10 gigabits per second (Gbps) capacity. In addition, Points-of-Presence (PoPs) were installed in Johannesburg, Cape Town, London and Frankfurt, thus enhancing redundancy and diversity of connection. In order to further improve the resiliency of international connectivity, TN is connected to three undersea fibre-optic cable projects: WACS, SEACOM and EASSy.

TN showed the same commitment to building and reinforcing our core assets in our access networks. With data traffic on the Internet backbone multiplying rapidly, we expanded the capacity of our national Internet network, connecting more and more towns and villages across the country. We also continue to redefine our residential broadband network around fibre with the innovative FTTH network, which takes fibre all the way to customers’ homes. Not only will FTTH transform our customers’ broadband experience, it also is far more efficient than the legacy copper network. Customers at the Omeya estate near Windhoek are being connected via the Fibre-to-the-Home system and TN aims to connect new such housing developments in future. FTTH system will be able to handle connected devices, such as computers, smartphones, high-definition TVs, game players and DVRs.

TN believes that innovation in networks is the foundation for growth across the whole industry. Our strength rests on having the best, most reliable mobile, fixed, wireless, broadband and global Internet networks, and over the years we have consistently invested our capital to reinforce and extend our lead and get ahead of the trends that are driving growth in the industry.


GROWiNG a FuLL SERViCES PORTFOLiOWe have strategically invested in building multiple service offerings over the last decade and made them function in a synchronised manner. This has helped the company to position itself as an integrated full service player in the ICT services space. It is important that we continually extend our coverage and upgrade our networks and technologies to service our customers better.

During the year, TN continued to provide customised and innovative products and services which are supported by our state-of-the-art broadband infrastructure. Our suite of Speedlink broadband product was overwhelmingly received by residential and business customers, resulting in year-on-year growth of 28%. In particular, new digital services such as International Express Routes, Global Carrier Ethernet and Global MPLS VPN will soon be launched on the strength of our newly acquired international footprint. These new enterprise services will solve customer needs and strengthen TN’s position in all relevant business segments. We also anticipate launching fixed mobile convergence (FMC) products and services in 2014.

aPPRECiaTiONSIt is my pleasure to thank the Board of Directors for their valuable guidance and advice, extended readily to me and the executive management alike. I have received the unstinted support of the senior management who have committed their vast knowledge and skills, and their time, to mould our shared vision for TN. My sincere appreciation is extended to every single member of the TN team, whose individual contribution is much valued. In the same vein, I would like to thank our customers and suppliers for their support during the year.

OuTLOOkThe revenue growth opportunities are very positive, however in order to ensure TN’s sustainability. CAPEX, OPEX and Cost of Sales must be managed diligently. Initiatives are in place to drive down the OPEX which is primarily driven by staff costs. Interest rates are expected to remain subdued given the low macro growth forecasts, however the volatile exchange rate is expected to remain a challenge, especially when balancing CAPEX costs and growth.

The momentum we have achieved already through our CAPEX programme has positioned us well to build a company that is destined for growth and prosperity.

FRaNS jP NDOROMaMaNaGiNG DiRECTOR


Chief Financial Officer’s Report

With the Namibian GDP expected to average around 4%, the year on year

growth in turnover of 7.25% is encouraging. The volatile exchange rates,

particularly the U$ and Euro are proving to be a challenge for the ambitious

capital program both in the year under review and for the outlook. The N$ has

depreciated by 19% against the U$ (8.5 to 10.11). Interest rates remained flat for

the year under review.

TuRNOVERTurnover for the group for the year ended 30th September 2013 amounted to N$ 1,312 billion, an increase of N$ 89 million on 2012. Double digit growth was achieved in Data, Mobile and IP revenues in line with the overall group strategy. Fixed voice revenues declined by N$59 million which was more than the forecasted decline year on year. The extent of migration of traditional voice services to Mobile and VOIP is accelerating in line with international trends. This should support the tn mobile™ outlook in coming years.

Other income remains meaningful with the reimbursements of the cable landing station costs adding to the viability of owning our own

cable station in Swakopmund.

DiSTRiBuTiON COSTS In line with the groups move to increase international and regional capacity, these costs increased from N$291 million to N$386 million mainly as a result of an increase in leasing and bandwidth costs due to the establishment of our regional and international links and Points of Presence. This has resulted in an increase in IP and Infrastructure costs totalling N$58 million. Due to the delay in implementation coupled with sluggish sales of products and services on these links, the returns are behind schedule with the numbers

expected to materialise in 2014.


OPERaTiNG ExPENSES Operating expenses increased from N$733 million in 2012 to N$810 million in 2013, an above inflation increase of 10%. Of concern is that the actual costs exceeded budget by N$62 million, mainly driven by over expenditure of Staff costs (N$21 million), the newly introduced CRAN levy of 1.5% on turnover (N$22 million) and consulting fees (N$10 million). Cost management focus will be placed on staff costs, property and service level agreements.

OPERaTiNG PROFiTS Group operating profits reduced significantly from a profit of N$117 million to a N$140 million loss. As a result of the first consolidation of the results of Powercom, losses are reported, albeit that Powercom incurred lower operating losses than previously. Other significant expense items are as follows:

CRaN levies: N$22 million (first year and an ongoing item)

impairment losses: Group: N$49 million (related to the 44% shareholding in Mundo Startel, Angola)

Company: N$99.6 million

additional distribution costs: N$95 million (first year of additional regional and international capacities)

additional administrative costs: N$64 million (mainly driven by the two entities cost structures)

iNVESTMENTS iN FOREiGN VENTuRESMundo StartelThe sale of the shareholding in MST has dragged on since August 2012. With the opening of a TN bank account in Luanda, this process will hopefully gain momentum with respect to the payment to TN of U$2 million.

Given the continued uncertainty, lack of information regarding future shareholding and business plan at company reporting level, coupled with the lack of business urgency, an impairment of the U$12 million preference shares (still to be issued), (N$99,6 million) was deemed appropriate. This impairment was a material effect on the losses before tax for both the company and the group.


NeotelThe business turnaround appears to be gaining traction with the company reporting an EBT profit for the financial year ended 31st March 2013. Subsequently Management has reported bottom line profits.

Vodacom has indicated a potential desire to acquire 100% of the shareholding. A due diligence is currently under way. This process is being closely monitored and pending a firm offer acceptable to TN, consideration will be given to exiting this investment.

Purchase of Powercom The 100% acquisition took effect in November 2012 for a N$2 consideration. Upon transfer an amount of N$60 million was advanced by way of a shareholder loan in order for Powercom to repay capital loans owing to Nedbank/Investec. Subsequently, leased line charges owing to TN for GSM backhauling have been capitalised to the shareholder’s loan, as has the tower sale from TN to Powercom. These sales, advances and capitalisations total N$146, 5 million by year end. Subsequent to year end, the GSM operations were sold as a going concern to TN. The shareholders loan will be repaid through the supply of tower space, sale of GSM handsets and any other business which is non-core to TN.

PROPERTy, PLaNT aND EquiPMENT As part of the 5 year N$2 billion Capital Investment Plan, projects in excess of N$600 million were approved during the year with a total of N$445 million expensed during the year. The key projects include GSM Core and Access network, fibre backhauling and upgrades on the national backbone. As at 30th September 2013, work in progress totalled N$439 million. The GSM core went live in November 2013, with the completion of the radio access networks expected to be fully functional by December 2013.

As a result of the replacement of the GSM network to a new state of the art 3G/4G/LTE network, the GSM and other related assets were impaired in Powercom during the year.

The net book value of the TN infrastructure totals N$1,8 billion.

TREaSuRyThe capital programme has been funded through the use of short term facilities which are to be refinanced by way of medium/long-term commercial funding which is expected to be in place by the end of the financial year 2014.


The total amount on overdraft totalled N$338 million at year end. The Banking short-term limits amount to N$455 million.

A total amount of N$92 million of long-term funding was repaid during the year under review and no long term funding raised.

Our Fitch rating of BBB- was reaffirmed in 2013.

SHORT TERM LiaBiLiTiESDue to the intensive capital program, trade creditors amounted to N$253 million.

OuTLOOkThe growth prospects in the local data and IP markets and those regionally are very encouraging and focus is on improved service delivery and sales in order to ensure TN’s sustainability. Savings on OPEX with a primary focus on labour costs, property and SLA’s are being aggressively pursued. Interest rates are expected to remain subdued given the low macro growth forecasts, however, the volatile exchange rate is expected to remain a challenge, especially when balancing CAPEX costs and growth.

ROBERT P. OFFNERCHiEF FiNaNCiaL OFFiCER


industry Trends and Corporate Strategy

From a strategic point of view, 2012/13 was a decisive year in Telecom Namibia’s history. The

company’s medium-term Corporate Strategy was crafted and critical strategic projects were

successfully accomplished ensuring TN’s sustainable and profitable future. Five major events stand out:

The formulation of the Corporate Strategy and Business Plan 2018; this also includes the establishment

of the new Group Structure and embedding the “lean Telco” concept based on an all-IP and converged

network.

On the strategy implementation side, GSM business finally went live opening access to the mobile voice and data market; the international network coverage was extended, the technology upgraded enabling TN to offer one-stop-solutions globally to all corporate and international customers; and TN was chosen to be Government’s partner in building up sophisticated Government networks as a first step on the way to implement comprehensive e-Government in the country. Amidst all these, the company’s growth showcased a sound growth rate of 7.25% in the year increasing turnover from N$ 1.223 billion to N$ 1.312 billion.

BaSiS OF THE CORPORaTE STRaTEGyTN’s strategy defines the framework for the company’s long-term success. It seeks to exploit opportunities in growth areas based on market developments and key trends in technology and society. At the same time, TN operates under guidelines and directions from the Government, through the Ministry of Information and Communication Technology.

kEy TRENDS TRaNSLaTiNG iNTO aCCOMPLiSHMENTS 2012/13The rise of data and IP-servicesTraditionally, the key driver to Telco business was voice minutes. Critical demand in today’s world however is for Internet access. This manifests itself in the increasing demand for internet connectivity and bandwidth.

Certainly, there is a growing importance of broadband and IP services in the Namibian market. Residential customers require broadband access and continuously faster data speeds at home, on their smartphones and other devices. Enterprises are in demand of secure and cost-efficient corporate networks including Internet connectivity.

The post WACS era enabled TN to successfully launch real broadband products to its customers on a large scale. The unlimited packages guarantee an affordable user experience and have caused a staggering


surge in demand for broadband products over the past financial year. There is no doubt that broadband has become the growth engine among fixed and mobile operators world-wide and certainly has become the new anchor product in TN’s communication service bundle.

By Sept 2013, the number of cities, towns and rural communities covered by TN broadband services reached 120. They are covered with different technologies installed at 256 different sites (DSLAM’s and towers). Additional technologies are bringing broadband to any remote site in the country.

In April 2013, the company announced its first fibre-to-the-home (FTTH) deployment, at Omeya golf resort and residential estate, a greenfield site 30km south of Windhoek. Once completed, the network will offer Internet from 100 Mbps to Gbps, voice and value added services to residents and visitors via FTTH, Wi-Fi and 3G/4G mobile. New products in development will focus on higher-speed broadband starting from 10 Mbps onwards for the residential customer.

The increasing importance of data and the relative decline in the traditional voice market did however not only require completely new technologies, but also a new approach to business.

On the continent, TN has been an early adopter of the new technologies required and the new business model applicable. Over the past years, the company proudly and successfully mastered the challenges of commoditisation of voice by diversifying away from traditional fixed line voice telephony to re-positioning itself as a true ICT service provider; fully embracing all-IP networks and venturing deeper into the ICT value chain.

At the close of the year, a reported revenue share from voice services of just over 40% of total turnover demonstrates remarkably well how far TN’s repositioning has already advanced. The result is even more pronounced taking into consideration a growth in turnover of 7.25%, including N$30 million that was generated by new products launched in the year, while the sub-segment ‘Voice’ recorded a decline of 11.6%.

In order to manage and curb the technologically induced decline of voice traffic via the traditional TDM network, TN launched a number of campaigns and initiatives such as ‘Talk International’ and ‘Talk Home’ to stimulate usage of home phones.

Convergence Communications and Informations TechnologyThe continual evolution of the telecommunications value chain means that traditional telcos need to both be aware of, and create, new areas of ICT business. A full service company like TN will not only provide fast secure connectivity but also VAS such as content. The prime area of development is moving towards content management and cloud services supplemented by IT customer services and data security. Data


centre services, hosting, co-location and IT services are a natural continuation of the network business and already part of TN’s product portfolio. Unlike initial plans, not all IT products and services have yet been launched having led to moderate sales results. An internal project group is investigating feasible business opportunities in the field of content management, including IPTV.

Since 2007, TN has been providing enterprises with customised IP solutions, i.e. end-to-end packaged and tailored services - via the national fibre-optic IP backbone/scalable MPLS network. The company also received contracts to manage the entire IT services for external customers such as Ministry of Health. A highlight in 2013 certainly was the launch of video-conferencing solutions for Government and corporate customers.

iWay services were re-designed and re-launched altogether. To increase competitiveness and attractiveness of the products, features and capacities and volumes were adjusted based on customer research data.

For the public sector TN will be prodding the core infrastructure for e-government allowing all Namibians to get the same access to public services where-ever they may be. Implementing network elements and services were the main focus during 2012/13. Tailor-made applications and services will follow later but, as indicated, new video-conferencing solutions were introduced for several Ministries already during the year.

Convergence Fixed and MobileAnother major trend is the convergence of fixed and wireless networks and services. With the awarding of a service neutral license in May 2011 and, more importantly, the acquisition of PowerCom in November 2012, TN can now participate in the growth area of GSM mobile voice and data services and further develop combined fixed and mobile services to support TN’s future market position as an integrated fixed and mobile operator.

After having successfully deployed a turnaround strategy for PowerCom, the new tn mobile™ brand was officially launched on 28 August 2013, with a full suite of GSM and LTE mobile voice and data products. The launch of Long Term Evolution (LTE) technology is bringing high speed broadband – mobile data services of up to 100 Mbps - for USB modems and tablet computer users signaling TN’s competitiveness over currently dominating operators in the mobile space. Greater Windhoek, the Coast and the North covering Ondangwa, Ongwediva, Oshakati, Ohangwena and Oshikango area have already been covered.

Digital technology is becoming increasingly prevalent in many areas of life, products and services are becoming more personalised and people are more mobile than ever before. TN is therefore focusing on


an integrated portfolio of products. The fixed-mobile-convergence (FMC) strategy is TN’s medium-term answer to the steady fixed-mobile substitution trend that has seen the company losing a significant number of customers cutting their cord on home voice services over the past years. FMC product development started in year and a new billing system is being deployed to act as a key-enabler for converged fixed/mobile services.

Network Modernisation and Upgrades for the Integrated PortfolioZTE was contracted to roll out a converged IP core (IMS) and 2G/3G/4G mobile network across the country in January 2013. Service bundles of popular Speedlink product and mobile offers were launched in December 2012. However, more sophisticated services need to be added so that the customers experience can significantly alter and the value of the entire bundle made effectively higher than the sum of its components. The real potential is planned to unfold from 2014 onwards.

Obsolete mobile voice CDMA technology was decommissioned and customers migrated to GSM. For EvDO services, a phased approach was chosen, e.g. to only switch off the customers after the new data network is fully operational.

GlobalisationFinally, globalisation is advancing, too – to the benefit of TN’s International wholesale business.

In the African context, most Internet traffic is routed to and from Europe and North America. Some of this volume of intercontinental Internet traffic may be taken over by increased establishment of data centres in Africa driven by initiatives to keep traffic within Africa. Certainly, initiatives to generate more African genuine content will also take off and increase data volumes produced on the continent. However, substantial traffic will still be routed to and from North America.

Landlocked African countries need access to sea-cable landing points and all countries need route diversity and route redundancy. This presents opportunities to all network operators who are able to provide backbone connectivity to cable landing stations not necessarily in-country. The reason for route diversity is the frequency of cable cuts and the economic damage it causes to economic activities dependent on permanent real-time connections. TN tries to strategically encompass all dimensions of the data/Internet connectivity business. It was a milestone in the prior financial year when Namibia connected to the first direct international submarine cable, the 5.1 Tbps West African Cable System (WACS) which went live in May 2012, marking the starting point for improving the formerly underdeveloped wholesale broadband sector in the country.


While bandwidth cost stood at a premium in the country because of the lack of connection to an international backbone, direct access to the undersea cables resulted in substantial reductions in the price of bandwidth. In order to capitalise on these developments, TN has invested in the national fibre networks. It is expected that with the increased availability of quality bandwidth at cost-effective prices, the adoption of ICT offerings such as managed services, cloud and hosting services will reach mainstream proportions while the FY 2012/13 already saw respectable growth rates.

In addition to the WACS cable launch, Namibia has been gaining access to additional broadband capacity via other routes. The equity share in Neotel (South Africa) provides TN with direct access to SEACOM at the African East Coast. To ensure full route protection, contracts are in place for capacity on SAT3 from Telkom SA and EASSy at the East Coast.

Understanding this context, the expansion of TN’s network into Europe and South Africa with 4 10Gbps Points of Presence (PoPs) was an equally important milestone achieved in 2012/13. The PoPs enables the company to fully participate and compete in the international IP connectivity space. Any carrier in the world wanting to bring IP to any part in Southern Africa - be it for transit or for actual IP connectivity - can get the services from TN at competitive rates. TN will also ensure that all regional traffic is routed to any place in the world within own contract.

A target-partner-system was defined in the past financial year and agreements are already in place with a number of upstream suppliers, namely PCCW, Telkom SA, Cogent, Level 3, BICS, MTN, De-CIX and NAP Africa to ensure global connectivity. Neotel and WIOCC are peering partners.


The picture below depicts the international footprint of TN’s network in 2012/13.

TN is now capable to provide end-to-end management for TDM and IP services

specifically demanded by Government, corporates and domestic and international

carriers. During the year, the company tightened business links with Zambia and

Botswana and has been in negotiations with operators and service providers in Angola,

Zimbabwe and Malawi.

Under the Motto of “Unlock the potential of Telecoms in Namibia“ TN had exhibition

stands at the AfriCom 2013 in Cape Town as well as at the world-renowned “Capacity”

trade fair in Amsterdam. The company proudly showcased all products and services and

positioned itself as the ‘partner in Southern Africa’ for operators worldwide.

TN is now capable to provide end-to-end management for TDM and IP services specifically demanded by Government, corporates and domestic and international carriers. During the year, the company tightened business links with Zambia and Botswana and has been in negotiations with operators and service providers in Angola, Zimbabwe and Malawi.

Under the Motto of “Unlock the potential of Telecoms in Namibia“ TN had exhibition stands at the AfriCom 2013 in Cape Town as well as at the world-renowned “Capacity” trade fair in Amsterdam. The company proudly showcased all products and services and positioned itself as the ‘partner in Southern Africa’ for operators worldwide.


In June 2013 the Government of Namibia approved the transfer of submarine bandwidth capacity on WACS from direct government ownership to TN, in exchange for regional infrastructure, WACS maintenance, government network upgrading and free Internet connectivity.

In order to remain the “carrier of choice” in the domestic market, and curb current trends of self-provisioning by other carriers and service providers in the market such as ISPs, mobile operators and VAS service providers, TN has developed suitable products and packages for local carriers and ISPs such as TDM Data Connect in 2012/13. TN’s ISP Data Connect product is designed for ISP’s to interconnect their infrastructure to the TN nearest POP in Namibia in an optimised way. The product includes one local loop at customer end and requires at the ISP side an ISP hub which means a STM1 interconnect plus co-location.

The TDM backhauling product is specifically designed for operators and service providers to connect to the nearest PoP in an optimised way. This product is optimised for connecting base stations and aggregation devices. An operator hub which means a STM1 interconnect plus colocation is required at the TN PoP. National Express Routes are providing fast and reliable transport of high capacity to the main business centres at very attractive pricing.

Today, the wholesale business is showing remarkable growth. It contributed around a third of TN’s total revenue in 2012/13, a clear success story!

Cost PressureKey trends for operators include the continuing need to respond to cost pressure. While expanding product portfolio and growing the revenue line, there is a need to reduce operational expenditure. TN seeks to balance investment in next-generation and mobile networks that will protect the long-term viability, on the one hand, and the pressure to cut costs and deliver services in a more efficient way, on the other hand. To get this balance right, the company is adopting the “lean Telco” concept which is inherently a component and a driver for NGN infrastructure.

Lean Telco is a concept designed to manage a business most efficiently while ensuring a required quality level and a maximum flexibility to offer new services. Lean Telco entails a strategic objective to reduce production cost and ultimately unit cost of services, thereby leading to more favourable pricing options to increase competitive advantage. It is based on principles such as:

• Consequent usage of economies of scale• Product agnostic production platform• Modular products and processes• Minimum number of independent pre-products


• Market demand driven product-portfolio consequently composed of available pre-products• High degree of automation • Cost transparency per service to assure target costing approach

After a year of reporting an operating loss of N$ 140.2 million, the new initiatives will bring a turnaround for the coming financial years. A new TN Group Structure was implemented in 2012/13. In order to exploit synergies and economies of scale, a new operating structure has been developed and came into force on 1 October 2013. At its core stands the merger of the two businesses, GSM mobile business and TN ICT business. The mobile operations’ network-related functions and support were transferred and integrated. Taking cognisance of the fact that ‘mobile business culture’ is varying from ‘fixed-line-business culture’, commercial activities will be kept separate and under the position of a Chief Mobile Officer which was institutionalised.

PowerCom became a 100% subsidiary of TN on 28 November 2012. TN acquired the mobile business from PowerCom on 3 October 2013. The non-core activities were outsourced/transferred to PowerCom so that TN can focus all resources on achieving the strategic objectives and business targets set out for 2016 and 2018 respectively. Services that were transferred to PowerCom include towers, directory and PABX services.

As part of a wider re-structuring effort aimed at concentrating the resources on the domestic market, TN announced in September 2012 that a deal was concluded for the sale of the 44% shareholding in Angola’s Mundo Startel.

aREaS OF GROWTHThe growing importance of broadband in both fixed and mobile networks is a key driver for TN’s future success, especially the SME segment. There are two important components: increase pure connectivity and penetration rates in the market and, secondly, by adding value added services to offer more attractive and competitive products and services and increase ARPU.

The future growth in the Corporate and Government segments lies in ICT solutions, tailor-made and customer specific. Value-added services should be offered on top of the basic broadband service.

Having mobile on board is certainly the most vital component to regain ICT market leadership by 2016. The target is to have a 35% market share for mobile services by 2018; especially understanding that the market is of a duopolistic nature with tn mobile™ being a late entrant. Increasing adoption of mobile


data services as well as network coverage in underserved and remote areas will drive this.Providing transport and carrier services to regional and international corporates and service providers is another vital growth area for the company. TN strives to become the preferred service provider for international carrier and corporate customers in Southern Africa and from Southern Africa to the rest of the world. This will be enabled by the international network platform and via strong partnerships with world class Tier-1 Carriers. What makes this positioning extremely attractive is the fact that TN can tap into international markets where capacity demands exceed the domestic market dimensions by far.

The IT services market is projected to record the highest consolidated annual gross revenue (CAGR) over the next 5 years. Hence, TN is entering this new business area with investments and partnerships. Within the IT sector, cloud services are growing increasingly important. TN’s focus will be on offering cloud services primarily tailored to the needs of the Namibian small and medium-sized business customer.

Not to forget that advances in the strategic areas of operation – service and efficiency - are having a positive and direct effect on TN’s key growth areas.


Commercial Review

Telecom Namibia’s commercial operations are focusing on three distinct business units: International

and Wholesale business, Corporate business and Retail business. The division also includes

Marketing which consists of Pricing & Tariffs, Product Management, Market Research and Marketing

Communications.

TN thus provides a full range of fixed and mobile telecommunication services, including voice, broadband and value added services and covers all segments of the market.

REGiONaL FOCuSThe International and Wholesale business has intensified its focus on the regional market with Zambia still as the main target market. The contract with the Zambian incumbent Zambia Telecommunication Corporation (Zamtel) was renewed for another year and the chances are good for long term business relationships. Besides other customers in Zambia, Zamtel is now one of the major customers using our WACS capacity as well as making use of the TN Points-of-Presence (PoPs) in London and Frankfurt.

TN managed to connect the Zimbabwean incumbent operator TelOne and provide the latter with IP upstream capacity directly from the TN PoPs. This is another milestone as both the governments of Namibia and Zimbabwe were supportive of this initiative.

Botswana Telecommunication Corporation (BTC) transferred the current agreement for transporting WACS capacity to the Botswana border to Botswana Fibre Network Pty Ltd (Bofinet) which expressed interest to grow the relationship further. TN and Bofinet are to sign a cooperation agreement soon.

VOiCE TRaFFiC The company’s main partners for voice traffic remains the South African operators like Telkom SA, Neotel and MTN SA. The others are Liquid, BTC, Zamtel and Telco214. Outgoing minutes dropped by 2% during the year, which is 3% favourable compared to the world-wide voice decline of 5%.

ESTaBLiSHiNG GLOBaL CONNECTiViTyFurthermore, a partnership with New Telco SA enabled TN to interconnect its PoPs to the world’s largest internet exchange, the DE-CIX in Germany. This interconnection will provide TN with the ability to provide a speedy, reliable and robust connectivity to European digital ecosystem and beyond. It also dramatically improved routing efficiency and the quality of the Internet experience for end-users. Other


upstream suppliers which are providing IP to Telecom Namibia are SAIX, MTN for SA traffic, and Cogent, Level3, BICS and DE-CIX for the traffic

Our partnership with New Telco SA is a pioneering step in connecting Africa to the world, removing the reliance on third parties to connect internationally and driving down the cost of communications for the continent. This is just the first step in revolutionising telecommunications in Namibia.

TN took part in regional and international events like Capacity Africa, AfricaCom, Capacity Europe and the ITW to position itself as a strong player in the Southern African market.

iMPROViNG CuSTOMER SERViCEA complete new structure was implemented for Corporate Sales department, with regional offices in the North, Coast, South and Windhoek to enhance services to corporate customers by being closer to their operations throughout the country. Importantly, a dedicated team was appointed to serve Government ministries and departments as a way of enhancing service to the public sector.

More than 70% of staff in Corporate Sales received training on Key Account Management. Pre-sales consultants will now advise and assist customers with customised solutions to strengthen the company’s position in these business sub-segments. Already major solutions were provided to a number of customers with great results to customers.

TELESHOPSTN expanded the network of Teleshop to over 50, representing an expansion of over 25%. TN’s strategy is to bring services closer to our customers and the enhancement of positive customer experience across touch points. Knowing its customers and ensuring positive interactions with them throughout their lifecycle is a core competence to compete in a competitive marketplace.

The company is busy modernising the Teleshop network by designing flagship stores to build the TN brand, with a focus on the look-and-feel, product presentation, friendlier staff and a new customer experience in terms of product interaction. All former Leo mobile shops were converted into Teleshops to ensure a seamless customer experience.

The establishment of new outlets involves the integration of people, products, systems and processes so that all existing TN CDMA customers and GSM customers received the best customer service. A new billing platform is on the cards and customers can be assured of world class assistance whereby our people will have a 360 degree view of a customer and process new requirements in an almost


automated environment. The addition of the self-care portal will enhance the overall experience by allowing customers to interact with TN for most of the queries by simply logging online and be able to self-provision certain services or track queries.

iNDiRECT SaLES CHaNNELSTN designed a model to ensure that all its bulk and small network of resellers of pre-paid products continue to provide pre-paid products outside our established Teleshop network. These channels operate on a distribution model where products and services are brought within the reach of many customers around Namibia. Our overall strategy is to ensure that our products are available to our customer at most locations anytime and everywhere.

CuSTOMER CONTaCT CENTREThe Customer Contact Centre will see the introduction of a customer-centric hosted solution that allows all our agents to offer improved services to customers by having access to a customer relationship management portal with accurate customer information. There will be a centralised after-sales support centre for both fixed and mobile customers, reinforced with other over-the-top and social media applications accessible from fixed and mobile devices.

NEW PRODuCTS aND SERViCESFollowing finalisation of a comprehensive and forward-looking service offering portfolio roadmap, new innovative products and services were developed during the financial year to address the needs of various market segments. These include advanced value added services such as email2fax, outlook sms, web2sms and modification of TN’s entire iWay product portfolio to make it more competitive and value adding to end-users. The introduction of iBIZ brought greater advantage for SMEs who can now access their IT services from a centralised point. The upgrade of TN’s backbone network nationally and its expansion regionally and internationally resulted in the introduction of suitable product solutions for our corporate and wholesale segments.

TaRiFFS aDjuSTMENTDuring the year focus was on monitoring profitability levels of TN’s products and services through established costing and pricing tools for the various products and services. A number of tariff changes aimed at stimulating usage of telecommunication services were also introduced.


In terms of new “Regulations regarding the submissions of Interconnect Agreements and Tariffs”, TN filed its annual tariffs adjustments with the Regulator, CRAN for approval. Tariffs amendments included reduction in fixed to mobile call tariffs, CallMaker charges and international call charges for a number of international destinations such as RSA mobile, Angola, Germany, UK, Portugal, Netherlands, Sweden, Switzerland, Spain, Australia, France, Kenya, US and Rest of the world and an increase in call charges to Zimbabwe mobile.

As a result thereof, customers making use of our fixed line services can also enjoy cheaper calling by subscribing to our newly introduced promotional call plans on the fixed line voice products. The following voice call plans were introduced during the financial year under review:

• TalkNet & TalkNet Plus Packages: the packages enabled fixed line post-paid customers to make free and unlimited on-net, off peak and weekend calls and the packages also include fixed line phones.

• Best Friends: the package made it possible for fixed line post-paid residential customers to receive discount on their telephone account for calls made to frequently dialed local, national and mobile numbers.

• MultiTalk: the package enabled fixed line residential customers (post-paid) to apply for more than one landline for different family members in the same or different towns under one name on the same account and benefit from free calls between package numbers and savings on subscription fees.

• Talk international: the call plan allowed fixed post-paid residential customers to sign up for a three months contract and make calls to selected international destinations at special per minute call tariffs.

iCT SuMMiT 2013TN successfully played host to the ICT Summit 2013, an event that brought together leading ICT players and international speakers. The annual event organised by TN and seen to be growing bigger since 2007 took place in Windhoek from 7-8 August 2013.

This year’s summit was anchored on the theme “ICT – New Horizons”. The theme was designed keeping in mind the great need for focusing on issues where industry can play a greater role in nation building, create an enabling social and business environment that will impact not only job creation with multiplier effect and bring technologies to schools, government agencies and businesses to help them become socially and financially inclusive and globally competitive. The summit was attended by 1,074 delegates and 19 exhibitors.


NEW MOBiLE BRaNDTN successfully unveiled the new identity for the GSM network formally known as Leo following the acquisition of the latter earlier in the financial year. The brand name “tn mobile” was officially unveiled by Honourable Joel Kaapanda, Minister of Information and Communication Technology, at Ongwediva on 22 August 2013.

This unveiling was followed by celebrations country-wide and brand activation initiatives at various trade fairs. Initiatives such as revamping our customer touch points, products, signages, outdoor, etc were followed through in a phased approach to ensure final completion in the new year.

PRODuCT PERFORMaNCEThe voice product group recorded a negative growth of 11.6% compared to the previous financial year. The downward trend in voice revenue is also experienced internationally due to increase in data usage and general decline in voice tariffs among others. This product group is composed of traditional prepaid and post-paid fixed line voice services including value added services.

The data product group recorded a positive growth of 28% compared to the previous year. This product group is mainly composed of layer 2 transport services. Positive growth was also recorded for IP product groups with year-on-year growth rates of 10.5%. The IP product group is mainly composed of layer 3 transport services, broadband access and other internet access services. The IT product group are recorded a decline and is composed of traditional ISP value added services, fax2email, email2fax, outlook sms, web2sms and other new IT services. The CDMA based mobile services recorded a decline in revenue compared to the previous year. TN took a strategic decision to acquire a GSM network in order to offer competitive mobile products and services. Other services such as CPE, structured cabling, directory, co-location and site-sharing recorded a combined positive growth of 30.6%.


Technical Operations

Continuous network improvements which enhance coverage, improve quality and increase network capacity are vitally important both in terms of delivering a great experience for our

customers and ensuring our businesses are positioned to capture value from growth opportunities in the digital era.

NaTiONaL aND iNTERNaTiONaL BaCkBONE NETWORk & TRaNSPORT LayERWith the commissioning of the West Africa Cable System (WACS) at the landing station at Swakopmund earlier in 2012, the newly gained international connectivity and capacity needed to be taken into the national network to all stations and end-users as well as to neighbouring countries. That was the main focus in all projects during the year under review.

The national Optical Transport Network and Dense Wavelength Division Multiplexing (OTN/DWDM) network and system was expanded with the Stage C to additional regions in the country and simultaneously upgraded to 10 gigabit per second (Gb/s) capacity. That provided for 10Gb/s network capacity from south to north and east to west of the country’s borders. In parallel, the national Internet Protocol/Multiprotocol Label Switching (IP/MPLS) network was expanded with new POPs at Aus, Gobabis, Otjiwarongo and Grootfontein. The MPLS system was also upgraded to 10Gb/s capacity to interconnect directly to the Optical Transport Network OTN/DWDM national network.

With the upgraded and expanded national transport network in place, the network and services were expanded beyond the borders of the country. International points of presence (POPs) were established in London (United Kingdom) and in Frankfurt (Germany) and in Johannesburg and Cape Town (South Africa). These four POPs were directly connected with the national network via high capacity STM-4 links. Direct connections and link capacity upgrades to operators in Zambia (Zamtel and Zesco) and Zimbabwe (TelOne) expanded the WACS capacities into the SADC Region.

The connectivity to Botswana Telecommunications Corporation (BTC), also a WACS investment partner, was upgraded to STM-64 at both Buitepos and Ngoma border posts.

TN not only took the network and services further abroad and closer to international customers, the company is also able to manage and monitor the network from our own Network Operations Centre (NOC) up to the international POPs.


With this new state-of-the-art and powerful transport network, TN is well connected to three major submarine fibre cable routes (WACS, SAT3, SEACOM) for international connectivity and to carry the traffic demand and volume on national level.

aCCESS NETWORkIn order to guarantee the connectivity of customers to the modern backbone network, specific fit-for-purpose access networks are required country wide. Digital Subscriber Line Access Multiplexers (DSLMs) are still the main infrastructure to provide the Asymmetric Digital Subscriber Line (ADSL) broadband services in about all towns in the country. Throughout the year, port and backhauling capacities were continuously expanded on demand to cope with increasing connectivity demand and growing traffic volume.

Broadband services in rural areas are provided by Worldwide Interoperability for Microwave Access (WiMAX) radio technology so that high data speed services can be delivered over extreme long distances. WiMAX base stations were commissioned and taken into service at Alpha, Okahao, Eenhana, Omuthiya, Katima Mulilo, Okahandja, Kamanjab NBC and Aminuis. WiMAX connections for Speedlink packages in rural and farming areas are still extremely popular and in high demand.

Other WiMAX stations are in different stages of planning and implementation/ construction.

A newcomer in our access network infrastructure is the MSAN (Multi Services Access Node). The first MSAN node was installed with great success for the 11th Session of the Conference of the Parties (COP 11) to the United Nations Convention to Combat Desertification was held in Windhoek from the 17 to 27 September. The same technical solution which was installed for the World Adventure Travel Summit held at Swakopmund from 26 to 31 October.

MSAN is now utilised to provide high speed broadband services to residents of Omeya Estate, south of Windhoek. This is the first case in which the MSAN is utilised for a local access network infrastructure together with fibre cabling.

MSAN will over time replace old technologies like Digital Subscriber Line Access Multiplexers (DSLAMs), Optical Fibre Distribution Closures (OFDCs) and Universal Modular Carriers (UMCs).

SCaDaAcross the country and over two phases, a Supervisory Control and Data Acquisition (SCADA) system was rolled out and serving 250 stations with remote supervision and alarming functionalities. All relevant domestic alarms are connected to the Network Operations Centre (NOC) for 24/7 station supervision.


With the takeover of the Leo mobile base stations, the Phase 3 rollout was activated to add another 118 stations to the SCADA infrastructure.

BiLLiNG aND WORkORDER MaNaGEMENT SySTEMSThroughout the year the testing and fine tuning of the new billing platform continued. The platform will provide a new and integrated billing and CRM system for fixed and mobile services. The new billing system, together with the CRM module, will bring along many new functions and procedures which will allow TN to serve customers well in the fixed and mobile arena. While the fixed service module is expected to go live during November 2013, the mobile module will be activated in early 2014.

The implementation of a Workforce/Workorder Management System was started during the year. The system will provide TN with capabilities to ensure that service deliveries (service orders) are well managed and co-ordinated to speed up service delivery to customers and enhancing productivity. Several design and planning workshops were concluded. The platform will be implemented during Q1/2014.

MOBiLE NETWORkWith the take-over of Leo in November 2012, the main focus during the year was to upgrade and expand the mobile GSM network and to integrate the former Leo team and all operations into TN. On 22 August 2013 the tn mobile™ brand was officially launched.

The new GSM network is scheduled to be officially inaugurated on 28 November 2013 to cover Windhoek, the entire coastal area (Erongo) and the Far North area (Oshakati, Ondangwa, Ongwediva, Oshikango). The new GSM/ISM core network and base stations will provide mobile 2G voice and 3G as well as 4G LTE data services. This will be the first time for TN to introduce GSM mobile technology and business and to migrate out of the obsolete CDMA technology.


Human Resources

The full-time staff complement of TN stood at 1090 as at 30 September 2013. In addition, 117 students

were employed as engineers-in-training, technicians-in-training, IT and IP trainees, Telecom

trainees, experiential learners and in-house students. We had 121 contracts employees in various fields

for a fixed term period.

Of the full-time workforce, 87% represented designated groups of which 34% were women and 0.36% people with disabilities.

In the same period, 23 new appointments were made and 57 employees were promoted to various levels of management in the business, while 53 employees separated from TN.

Termination Numbers as % of the workforce as % of total employee separation

Resignation 26 2.3% 49%

Death 2 0,18% 3.8%

Dismissal 3 0,27% 5.6%

Retirement 11 1,01% 21%

Retirement to Ill Health 1 0.09% 1.9%

Voluntary Separation 10 0.9% 19%

53

With the ongoing re-organisation process, 95% of employees were redeployed in line with the re-aligned organisational structure as from Level 1 to 6.

TN was issued with an Affirmative Action Compliance Certificate for 2012/2013 in accordance with the Affirmative Act, Act 29 of 1998.

TRaiNiNG aND DEVELOPMENTAs the ICT industry is subject to rapid technological changes, employees have to continuously upgrade their skills and competencies, and TN therefore invests heavily in people development. Employees have the opportunity to follow relevant training to expand their knowledge-base and to develop their capabilities.

During the year, TN invested N$13.1 million towards training and development, which is about 2.8% of the company’s wage bill.


Over 3,165 employees attended various courses offered locally, regionally and internationally. The training provided was to upgrade employees skills and competencies to support the full range of NGN services and solutions the company provides to the market. Besides, TN continued to support employees to upgrade their educational and professional qualifications. In this regard, 11 employees benefited from an interest-free study loan this year, bringing the number of employees participating in the scheme to 21.

Namibia is facing an acute skills shortage, particularly in engineering and information communication technology. Our company continues to give educational opportunities to young Namibians to pursue studies in telecommunications, engineering, computer sciences, IT and IP, among others. In the year, 13 deserving school leavers were awarded TN bursaries. This brought the total number of current bursary recipients to 59. Our talent pipeline scheme is growing on an annual basis with 15 graduates recruited to join the company’s Graduate Development Scheme (GDP). To date, 50 graduates are GDP participants.

Apart from the face-to-face training managed by the Training Centre, the in-house training team continues to enhance the e-learning platform, which offers learning opportunities to a wide number of employees both on-the-job and off-the-job.

REMuNERaTiON aND ORGaNiSaTiONaL DEVELOPMENTStaff Employment CostsTN has a significant financial investment in its employees. Effective growth is dependent on the quality, commitment, innovation and drive of these employees. TN aims, in a competitive market, to achieve the appropriate balance between managing overall remuneration costs and investing in its employees.

Labour costs were managed to remain within budget and this was achieved through strict controls on filling of vacancies on the revised organisational structure and significant savings through cut in the use of casual labour which resulted in savings of up to 16%.

A key index monitored through the year was ratio of staff costs to revenue. The target set was for staff costs not to exceed 34% of revenue. The company remained on par relative to plan for the year at 34.63%.

During the year, TN successfully implemented a Post-Medical Retirement Benefit Buyout.

Performance ManagementA high performance ethic is the embodiment of the company’s vision underpinned by performance-anchored organisational values of teamwork, commitment, and accountability in employee and


organisational performance. A continuing rendition in employee survey feedback has been an ardent yearning for more recognition of their performance. While top performers are honoured at the TN Awards ceremony annually, the company took steps to further refine the performance recognition awards scheme by introducing team awards for outstanding teams. This was a significant paradigm shift from the more parochial recognition of individual performance which negated the value of teamwork in performance and service delivery in our service process value-chain.

During the year, the company for the first time implemented an aspect of its remuneration philosophy, which places an accent on the imperative to align the level of remuneration to individual performance in an event where results relative to performance targets are achieved. TN awarded performance–based increments on remuneration to the top 20% performers in each division. This measure was well received, as it placed substance to our quest for high performance through our most valued resource - our employees. 263 employees received the performance-based increment in 2013.

Succession and Talent ManagementThe need for the company to develop employees for mission critical positions is formally articulated in the Succession and Talent Management Policy. The first phase towards succession planning was started this year. Employees interested in being considered for candidate successors to Executive Committee (EXCO) level jobs were invited to apply. The applicants were screened and assessed by an external consultant and interviews were also held to appreciate the candidates’ aspirations relative to their potential. A final list of eight candidates to be placed on executive development programmes were submitted for approval to the Board of Directors.

Employee Career PathsEmployee Career Paths enable employees to develop and progress in job competence, knowledge and qualification and to become eligible for promotion without requiring placement into another job. The Career Paths model encourages specialisation in non-managerial or supervisory roles, and seeks to allow employee progression based on pre-defined criteria per job. The previous model of Career Ladders was confined to Technical positions in the C-band and ignored specialised job roles in the non-technical field and jobs outside the C-band. The exclusive nature of the scheme inherently begets the need to replace it with a more inclusive model.

All eligible job positions were identified and a set of criteria for each position was formulated during the year. Employee assessment shall be undertaken in the coming year for implementation.

Organisational Re-AlignmentThe final phase of organisational re-alignment was completed. This phase sought to achieve the following objectives:


• designing an organisation structure that fits into next generation technology work processes• realising a more customer-centric organisation • eliminating duplication of processes in technology• establishing more clearly defined synergy between the commercial functions, support

departments and technical operations.

Focus in the final implementation phase was on establishing job sub-grades for new jobs and revised job roles through a process of job evaluation. In order to streamline the job evaluation process, the tradition two-tier process of grading followed by evaluation was put on hold. A joint forum of the Validation Committee and Corporate Job Grading Committee was established. This did not only reduce time to finalise job gradings but also allowed for appeals to be attended to expeditiously during the year.

EMPLOyEE WELLNESSEmployee wellness and Health & Safety are high on the Company’s agenda and several wellness programmes aimed at promoting employee health were organised during the year. Medical Surveillance was carried out, in addition to exit and pre-employment medical examinations.

TN continues to support employees who suffer from HIV/AIDS, through its managed care programme, totaling 101 employees currently.

The company’s corporate social responsibility arm, Nova Vita Rehabilitation Centre, continues to offer a valuable service for both employers and members of the public battling with alcohol and substance abuse.

Employees continue to have access to in-house counseling on personal matters to ensure pro-active management of issues before affecting productivity. At least 760 visits to our on-site clinic located at the Windhoek head offices were recorded.

Several sports and recreational programmes were organised for employees and their families including soccer, netball and volleyball tournaments. Such activities are of considerable value in bringing staff of all levels together. Most of these activities were organised through the TN Sport Club.

During the period under review, no fatalities were recorded – except for the three serious injuries and 11 minor injuries. Overall compliance to TN Index and Health and Safety Requirements rose to 104%. To make health and safety a joint responsibility, an Agreement on Occupational Health and Safety was signed between TN and Namibia Public Workers Union (NAPWU) and will come into effect in 2014.


EMPLOyEE RELaTiONSTN strives to ensure that our employment policies meet relevant social, statutory and regulatory conditions and practices across our market, and remain committed to building and maintaining strong collective relationships and agreements.

We have an employee relations presence providing regulatory support in our business, ensuring greater alignment of our people-governance policies while also promoting flexible employment practices. Creating a workplace that endorses diversity and recognises the generational differences of our growing multi-generational workforce remains a key priority for us. Almost 27% of our workforce is under 30.

In 2013, we developed a more consistent global approach to the management of misconduct cases and improved employee risk management through the accelerated completion and management of old disciplinary hearings and grievance cases. This has resulted in improved turnaround times and reduction of prevalence rate. In addition, the company strengthened internal communications across the business, improving collaboration and good practice, by engaging openly with the Office of the Full-time Shop Steward.

A review of our IR Policy is currently underway, with a view of aligning them to national legislative changes and best practice.

TN continued to improve employee awareness and understanding of our Grievance Procedures, which enables staff to confidentially report concerns about misconduct and dissatisfaction, as part of our focus on ensuring fair and sustainable employee relations.

The negotiations for salary annual salary increases were concluded within a record two days, which is an indication of the maturity and improved relations with the Union leadership.

IR Training for a combined group of supervisors, shop stewards and managers was conducted and similar training session will be done in 2014.


Corporate Social Responsibility

CORPORaTE SOCiaL RESPONSiBiLiTyAs the largest telecommunication company in the country, TN recognises and welcomes its responsibilities to our employees and the wider community. For us, corporate social responsibility (CSR) is a long-term management strategy that recognises these responsibilities and puts us in the best position to meet the challenges facing our organisation and society at large. Our CSR strategy also has the potential to bring important commercial benefits by improving our competitive advantage in the marketplace. TN is committed to operating in a socially and environmentally responsible manner and structures its policies and practice accordingly. That is why TN is investing in new infrastructure, technology, services and social programmes to make a contribution to both society and the environment.

WOMEN EMPOWERMENTFor over a decade, TN has assisted women entrepreneurs with knowledge and skills as one of the best ways to fight both poverty and inequality. Key initiatives in this regard during the year included the following:

• Namibian Businesswoman of the Year Award 2013: At a night full of glitz and glamour, the 16th Namibian Businesswoman of the Year was crowned at a gala banquet held on 11 October 2013. Ericah Shafudah, Permanent Secretary in the Ministry of Finance, received the accolades as yet another woman who has made her mark on the local business scene. Five awards were up for grabs during the night, including the Business Owner Award won by Cynthia Martin-Haihambo; the Private and Corporate Sector Award, won by Jantje Daun; the Community and Government Award, won by Ericah Shafudah; the Young Business Women’s Award, won by Natasja Beyleveld, owner of NaMedia. The biannual Namibian Businesswoman Awards acknowledge and celebrate women’s contribution in business and pays tribute to the hard work, determination and creativity of women within large corporations, and individuals who have left an indelible mark in the local economy and society.

• Economist Businesswomen Conference: The event, attended by 145 delegates from the northern regions (as far as Tsumeb) representing 123 businesses, took place in Ongwediva on 8 August 2013. Specialists in various fields presented papers on more general topics like healthcare, business etiquette, and the role of women in business. At scheduled break-away sessions, professionals from a full spectrum of business gave more practical and hands-on instruction on business finance, legal matters, constitutional issues, partnerships, procurement, agencies, management issues, and the Internet. The aim of the conference is to create an opportunity


for women to share their expertise and skills, make new contacts, support one another and to create worthwhile business relationships whereby they can be held accountable for their regions. Together all women create a business-driven membership network that encourages entrepreneurship and promote personal development and management skills.

• Katuka Mentorship Programme: The 12th edition of mentorship programme took place, with 28 mentors and mentees completing the programme for 2013. The programme has produced significant results in the careers of the participating mentees. To date 263 entrepreneurs and businesswomen have completed the programme. The programme aims to empower and encourage entrepreneurs, business and professional women to achieve success in their careers through mentorship by seasoned business and professional women.

• Networking Breakfast: Six networking breakfast events were held during the year. The format of the breakfast provides women with an opportunity to network with other members as well as a presentation aimed to encourage personal development and the management skills of women. An average of 85 women per breakfast attended the 6 sessions for 2013 held in Windhoek.

DiGiTaL iNCLuSiONAs the incumbent national operator, TN has an important social role to play in building an information society accessible to all. Our network investments will combat digital exclusion by ensuring that state-of-the-art telecommunication infrastructure reaches even the remotest parts of Namibia. In 2013, we extended broadband Internet access to rural areas. Providing broader access to digital communication tools means not only investing in infrastructure but also breaking down social barriers to the use of new technologies.

Namibia Knowledge Portal (NKP) is a collaboration with the Polytechnic of Namibia and the Ounongo Technology Centre (OTC) to support rural schools’ curricular and extra-curricular activities, out of school youth innovative service design as well as rural community knowledge creation and dissemination processes through web portals and mobile applications. One of the main objectives is to promote the use of local languages and local content creation to be anchored in further educational and socio-economic endeavours. The project was launched in February 2013.

During the year, TN carried out a series of activities, namely:


• A 2-day Wikipedia Training was held in Gobabis in February 2013 and was attended by15 teachers and principals of the pilot schools, as well as the Gobabis community librarian and OTC staff. Facilitated by Peter Gallert of the Polytechnic’s School of Information Technology, the aim of the training was to introduce Wikipedia to the participants with outcomes of basic Wikipedia editing skills, expanded the article on Witvlei in English and Afrikaans and adding a few short entries to the Otjiherero Wikipedia.

• A 3-day Wikipedia and Social Media Training was conducted in Epukiro in June 2013. The training was facilitated by Peter Gallet and Rlabs trainers. Among the 20 participants were teachers from Epukiro JSS and community members from Epukiro. The training content included Introduction to Gmail, Facebook, and Wikipedia with the outcomes for participants to create email and Facebook accounts, introduction to navigating Facebook, Basic Wikipedia editing skills and creating an article on Epukiro JSS.

• In August 2013, 20 days of technical support was provided in Otjinene to teachers from Gustav Kandjii JSS and community members by two interns from the Polytechnic’s School of Information Technology. The aim of the technical support was to maintain existing hardware and introduce participants to computer literacy and hardware skills to become locally independent.

• A 5-day Social Media Training was conducted to introduce twenty participants present from Gustav Kandjii JSS and community members from Otjinene to Gmail and Facebook. A two day Wikipedia training took place to introduce three participants present from Gustav Kandjii JSS and community members from Otjinene to Wikipedia.

• The SAIS Innovation Fair took place in Windhoek in August 2013 and was attended by 57 people, including exhibitors. NKP was one of the exhibitors and hosted a parallel workshop on Indigenous Knowledge Education, Technologies and Innovation: An Idea Creation Workshop. A total of 19 people attended this session, with various dignitaries. The purpose of the workshop was to raise awareness and promote the integration of indigenous African knowledge into school curricula and the public domain (through Wikipedia).

• The NKP Stakeholder Workshop, officially opened by the Deputy Minister of Education Mrs. Sylvia Magone, took place in Gobabis in October 2013. Besides demonstrating technical solutions, the workshop served as a platform of communication and joint planning in order to ensure a successful and sustainable outcome of the project. Challenges such as the unequal equipment and information access of the schools were expressed, while special needs were identified in terms of equipment, training and further support. A major plea was the proper coordination of timing, frequency and


continuity of the interventions. The need to extend the 18 month sponsorship initiative was expressed to ensure all schools are brought up to the same level and be able to benefit from and contribute to the world information and knowledge repository.

Supported by TN, NKP participated as an exhibitor at the Africa E–Learning Conference held in Windhoek in May 2013, as well as the ICT Summit in Windhoek in August 2013, where NKP exhibited project goals and activities.

CONNECTiViTy FOR EDuCaTiON aND RESEaRCH iNSTiTuTiONS One of TN’s key CSR commitments is to provide accessible and affordable bandwidth to educational and health institutions, and since launching Swakopmund WACS Landing Station, we have delivered on this by supplying various public service with discounted bandwidth connectivity. The Xnet Development Alliance Trust, or Xnet, plays a critical role in managing the process of rolling out Internet connectivity to schools, local universities and research institutions, enabling their connection to high-speed Internet.TN, together with Xnet, Ministry of Education, University of Namibia and the Polytechnic of Namibia continued with discussions regarding the education and research network. TN provided updated pricing to Xnet which were considerably lower than prices offered previously. In addition to the price decrease, the discount on broadband packages was increased to 4Mbps. Previously the TN subsidy was offered up until 512Kbps. As a result of this, new education packages are being developed with TN’s assistance.

During the year, a joint TN, Xnet and UNAM bid to supply bandwidth to the Cherenkov Telescope Array (CTA), through Xnet’s education and research partners Delivery of Advanced Network Technology to Europe (DANTE). Namibia was identified as one of three Southern Hemisphere countries where the telescope could be erected. Feedback on our bid is yet to be received. Should Namibia be chosen as the successful candidate to host the telescope, this would positively impact on the overall national bandwidth pricing as the quantities required by the telescope would be in excess of 10Gbps of data monthly.

TN put forward a bid to the UbuntuNet Alliance to provide bandwidth to education and research institutions in Namibia and Zambia via WACS. A few education and research institutions were connected through the EASSY cable on the East Coast but Namibia and Zambia were not connected through the West Coast. A TN team flew to Uganda to present and defend TN’s proposal and as a consequence, pricing on the East Coast was greatly reduced thanks to TN’s participation.

The education network was further refined in 2013 and TN presented a final design in the third quarter of 2013. The new design allows for greater control and management over bandwidth for the education sector whilst streamlining operations. The TN Data Centre is expecting delivery of new storage racks, two of which are earmarked for the Xnet ISP.


The Ministry of Education upgraded all existing broadband connections to schools from 384Kbps to 1Mbps. This was as a result of the pricing discount offered by TN on broadband. The Ministry also placed an order with Xnet for the installation of broadband at 300 new schools between November 2013 and January 2014. This project is still ongoing.

The Polytechnic of Namibia will migrate all their regional centre links to Xnet from 1 December 2013. This is a total of 11 sites across the country with links ranging from 1Mbps to 7Mbps. This is the first time the Polytechnic has migrated all their sites to Xnet and, with time, it is expected that UNAM and the International University of Management will follow suit.

The role TN sees itself playing on the journey towards creating a Namibian ‘Knowledge Society’ is in reducing the cost of bandwidth connectivity, improving the access to information, enabling knowledge to be shared, stimulating innovation through research, creating new opportunities for employment, and providing a catalyst for multi-stakeholder efforts to e-education.

SPORT DEVELOPMENTSports play an indispensable role both culturally and socially in bringing together individuals and communities as well as in crossing social boundaries. As a responsible corporate citizen, TN has understood its corporate responsibility to empower sports and support activities of organisations that attempt to uplift sports talent in Namibia.

HockeyThrough the Namibia Hokey Union, TN is involved in hockey development. The 2013 TN Indoor League was held during the first four months of 2013 - with a premier, first league and second league section for both the men and women. The 2013 TN Field League was played from June to September 2013. The premier league comprised a men’s and ladies premier league and a men’s and ladies reserve league. Partly thanks to TN’s involvement as a sponsor, Namibia Hockey was short-listed as the Development Programme of the Year at the Sports Awards in 2013 and is making great strides in growing the game of hockey in Namibia. On the international stage, NHUis sending two sides to compete in the Junior Olympic Qualifiers in Zambia in March 2014 and have secured hosting the Indoor World Cup Qualifiers in Windhoek in April 2014.

Boxing TN has been a great supporter of boxing development in the country, both professional and Olympic Style boxing. Today boxing is a very successful sport in the country. The sport plays an important role in our communities for both elite performers and grassroots boxers. The aim of TN’s involvement is to get young people boxing, keep them motivated, changing lives and helping promising athletes to enjoy


the sport and fulfil their potential. In line with this, we have staged a number of events with Kinda Promotions, Warriors Promotions and Harry Simon Onkugo Promotions – all for the paid ranks. In collaboration with the Namibia Boxing Federation, the TN Elite Boxing Championships 2013, togother with the Namibia Youth Boxing Championships 2013, were staged in Rundu.

City RunTN sponsored the second edition of the Windhoek City Run, following the successful staging of the first edition last year. Over 700 people took part in the 2013 event compared to 500 the previous last year. TN has made a 3-year commitment to sponsor the event that focuses on family and community health in order to deliver sustainable, long-term benefits for local communities.

The TN Windhoek City Run is arranged in partnership with Windhoek Harriers and OTB Sport in celebration of the City of Windhoek. The run routes have been designed so as to showcase the best the City has to offer, with the 21.1km and full marathon winding their way past the Old State House, Independence Memorial, Supreme Court, Parliament, Tintenpalast, Gibeon Meteorites, Hochland Trails, the Christus Kirche, Zoo Park and other interesting sites of Windhoek.

NetballAs a long-time supporter of netball development in the country, TN has enjoyed a long-standing relationship with the All-Namibia Netball Association (ANNA). The coming year will see the relationship evolve to new levels with TN sponsoring a wide range of development programmes across the regions.

iNTERNaTiONaL EVENTSIn July 2013, TN hosted the 7th Africa Service and Network Operators (SNO), held under the auspices of the International Telecommunications Union - Telecommunication (ITU-T). The SNO forum is the only event in the telecommunications industry that focuses only on service and network operations and strives to drive standards bodies and industry organisations by being the “voice of service and network operations”.

TN deployed a high-performance wireless local area network (LAN) connectivity meeting international standard, to a number of high profile events hosted in Namibia:

• The 8th International Conference on ICT for Development, Education and Training, eLearning

Africa 2013, convened from 29th to 31st May in Windhoek, under the overall theme of tradition, change and innovation. TN served as the communication partner of the Continent’s largest gathering of high-level policy makers, decision makers and practitioners from education, business and government. The key networking event for developing eLearning capacities on the Continent,


eLearning Africa 2013 will take Serving as a pan-African platform, eLearning Africa is a must for those who want to develop multinational and cross-industry contacts and partnerships, as well as enhance their knowledge, expertise and abilities.

• From October 26-31, approximately 650 delegates gathered in Namibia, to explore, learn, be inspired and to invest in creating a more sustainable adventure travel industry. TN provide WiFi connections to the Adventure Travel World Summit 2013.

• In the bid also to showcase the power of its digital telecommunications infrastructure, TN provided free WiFi connectivity to the Eleventh Session of the Conference of the Parties (COP 11) to the

United Nations Convention to Combat Desertification (UNCCD) held from 16 to 27 September 2013 in Windhoek. Organised under the theme “A Stronger UNCDD for a Land-Degradation Neutral World”, the results of the second and third UNCCD scientific conferences were analysed, as well as the progress the Parties to the Convention made during the first half of the period covered by the 10-Year Strategy of the UNCCD (2008-2018).

ENViRONMENTaL COMMiTMENTTN is committed to promoting sustainability. Concern for the environment and promoting a broader sustainability agenda are integral to TN’s professional activities and the management of the organisation. We aim to follow and to promote good sustainability practice, to carry out our operations in a way which manages and minimises any adverse environmental impacts from our activities and to help our clients and partners to do the same.

TP aims to be an innovator, limiting our impact on the planet and providing new, eco-efficient telecoms solutions. The company is committed to encouraging the use of teleconferencing or video-conferencing to avoid unnecessary journeys. TN also encourages the reuse or recycling of office waste, including paper, computer supplies and redundant equipment. Wherever possible TN ensures that waste materials are disposed of in an environmentally safe manner and in accordance with regulations. TN is committed to reducing the energy consumptions of office equipment by purchasing energy efficient equipment and by good housekeeping.


Telecom Namibia Limitedand its subsidaries

annual Financial Statementsfor the year ended 30 September 2013


telecom Namibia limitedAnnual Financial StatementsTELECOM NAMIBIA LIMITED

1

GENERAL INFORMATION Registration number: 92/282Registered address: Telecom Building

9 Lüderitz Street

Windhoek

Postal address: PO Box 297

Windhoek

Auditors: Deloitte & Touche

Windhoek

Bankers: Standard Bank Namibia Limited CONTENTS Page Corporate governance statement 2 - 9Statement of responsibility by the board of directors 10Independent auditor’s report 11Statements of financial position 12Statements of profit or loss and other comprehensive income 13Statements of changes in equity 14 - 15Statements of cash flows 16Notes to the annual financial statements 17 - 55Annexure A - Standards and Interpretations 56 - 57

No directors’ report is presented as the Group is a wholly-owned subsidiary of Namibia Post and Telecom Holdings Limited, a company incorporated in Namibia.

TELECOM NAMIBIA LIMITED

2

CORPORATE GOVERNANCE STATEMENT Introduction Telecom Namibia Limited (Telecom Namibia) is committed to the principles of good corporate governance, it ensures shareholder interests are protected and enhances corporate performance through ethical, professionalism, transparency, responsibility and accountability. Telecom Namibia aspires to the highest standards of corporate governance and has put in place a set of well-defined processes in accordance with generally accepted corporate practices and in keeping with Telecom Namibia and its subsidiaries (Group) policies and the laws of Namibia. Approach for Corporate Governance The values we share at Telecom Namibia form the foundation of our corporate governance practices. Our practices seek to balance the interests of our key stakeholders: our customers, our shareholder and our employees and provide an integrated strategic framework to operate in the best interests of its profitability, environment and communities. Compliance with King III Code of Governance of South Africa The Telecom Namibia Board, committees and management believe compliance, with the best business practices as contained in the King Codes of Governance, while not mandatory, is key in maintaining the company’s values. The company supports the provisions and principles of corporate governance as defined by King II and King III and complied in all material respects with the Code of Corporate Practices and Conduct. Board of Directors Composition and appointment

The Board aims for an appropriate mix of skills, experience and personalities to ensure effective leadership and sound governance. As a truly Namibian company we support and actively drive transformation in everything we do, and we are proud that all of our board members are historically disadvantaged Namibians. The board currently comprises of 5 directors:

• Four independent non-executive directors, of which one is the chairman.

• One executive director, namely the managing director (MD).

The composition of the board that served during the year and who are directors at the date of this report is reflected as follows:

Directors Independent Non-Executive Qualifications

JS Iita (Chairman) * Ordinary Diploma in Electrical and Mechanical Engineering (UK) 1983;�A higher diploma in Electrical and Electronic Engineering (UK) 1990;�Masters Degree in Public Policy and Administration.

Dr CM Beukes-Amiss #

MSc (Electronic Information Management), Robert Gordon University (RGU), Aberdeen, Scotland, 2001 BA (Library and Records Management), UNAM, 1999 HED.SEC (Higher Education Diploma Secondary), UNAM, 1995.

R Gertze ^ B.Com Degree UNAM, 1992; Master of Business Leadership UNISA 2003. MDP 2001, EDP Stellenbosch Business School (2003).

F Veldskoen ^ Bachelor of Accounting (UNAM) 2001; Postgraduate Certificate in Forensic and Investigative Auditing (SA) 2007; Postgraduate Certificate in Taxation (SA) 2007.

IP Awene #

B.Com (Unam). Hons.B.Compt (Unisa). Certificate in Administration of Estates. Chartered Accountant.

57 - 6465666768

69 - 7071

72 - 110111 - 112


2

responsibility and accountability. Telecom Namibia aspires to the highest standards of corporate governance and has put in place a set of well-defined processes in accordance with generally accepted corporate practices and in keeping with Telecom Namibia and its subsidiaries (Group) policies and the laws of Namibia. Approach for Corporate Governance The values we share at Telecom Namibia form the foundation of our corporate governance practices. Our practices seek to balance the interests of our key stakeholders: our customers, our shareholder and our employees and provide an integrated strategic framework to operate in the best interests of its profitability, environment and communities. Compliance with King III Code of Governance of South Africa The Telecom Namibia Board, committees and management believe compliance, with the best business practices as contained in the King Codes of Governance, while not mandatory, is key in maintaining the company’s values. The company supports the provisions and principles of corporate governance as defined by King II and King III and complied in all material respects with the Code of Corporate Practices and Conduct. Board of Directors Composition and appointment The Board aims for an appropriate mix of skills, experience and personalities to ensure effective leadership and sound governance. As a truly Namibian company we support and actively drive transformation in everything we do, and we are proud that all of our board members are historically disadvantaged Namibians. The board currently comprises of 5 directors:

� Four independent non-executive directors, of which one is the chairman. � One executive director, namely the managing director (MD).

The composition of the board that served during the year and who are directors at the date of this report is reflected as follows: Directors Independent Non-Executive Qualifications

JS Iita (Chairman) * Ordinary Diploma in Electrical and Mechanical Engineering (UK) 1983; A higher diploma in Electrical and Electronic Engineering (UK) 1990; Masters Degree in Public Policy and Administration.


PhD (Computer Integrated Education (CiE), University of Pretoria, 2012 MSc (Electronic Information Management), Robert Gordon University (RGU), Aberdeen, Scotland, 2001 BA (Library and Records Management), UNAM, 1999 HED.SEC (Higher Education Diploma Secondary), UNAM, 1995.



IP Awene #




1

GENERAL INFORMATION Registration number: 92/282Registered address: Telecom Building

9 Lüderitz Street

Windhoek

Postal address: PO Box 297

Windhoek

Auditors: Deloitte & Touche

Windhoek

Bankers: Standard Bank Namibia Limited CONTENTS Page Corporate governance statement 2 - 9Statement of responsibility by the board of directors 10Independent auditor’s report 11Statements of financial position 12Statements of profit or loss and other comprehensive income 13Statements of changes in equity 14 - 15Statements of cash flows 16Notes to the annual financial statements 17 - 55Annexure A - Standards and Interpretations 56 - 57

No directors’ report is presented as the Group is a wholly-owned subsidiary of Namibia Post and Telecom Holdings Limited, a company incorporated in Namibia.


2

CORPORATE GOVERNANCE STATEMENT Introduction Telecom Namibia Limited (Telecom Namibia) is committed to the principles of good corporate governance, it ensures shareholder interests are protected and enhances corporate performance through ethical, professionalism, transparency, responsibility and accountability. Telecom Namibia aspires to the highest standards of corporate governance and has put in place a set of well-defined processes in accordance with generally accepted corporate practices and in keeping with Telecom Namibia and its subsidiaries (Group) policies and the laws of Namibia. Approach for Corporate Governance The values we share at Telecom Namibia form the foundation of our corporate governance practices. Our practices seek to balance the interests of our key stakeholders: our customers, our shareholder and our employees and provide an integrated strategic framework to operate in the best interests of its profitability, environment and communities. Compliance with King III Code of Governance of South Africa The Telecom Namibia Board, committees and management believe compliance, with the best business practices as contained in the King Codes of Governance, while not mandatory, is key in maintaining the company’s values. The company supports the provisions and principles of corporate governance as defined by King II and King III and complied in all material respects with the Code of Corporate Practices and Conduct. Board of Directors Composition and appointment

The Board aims for an appropriate mix of skills, experience and personalities to ensure effective leadership and sound governance. As a truly Namibian company we support and actively drive transformation in everything we do, and we are proud that all of our board members are historically disadvantaged Namibians. The board currently comprises of 5 directors:

• Four independent non-executive directors, of which one is the chairman.

• One executive director, namely the managing director (MD).

The composition of the board that served during the year and who are directors at the date of this report is reflected as follows:

Directors Independent Non-Executive Qualifications

JS Iita (Chairman) * Ordinary Diploma in Electrical and Mechanical Engineering (UK) 1983;�A higher diploma in Electrical and Electronic Engineering (UK) 1990;�Masters Degree in Public Policy and Administration.


MSc (Electronic Information Management), Robert Gordon University (RGU), Aberdeen, Scotland, 2001 BA (Library and Records Management), UNAM, 1999 HED.SEC (Higher Education Diploma Secondary), UNAM, 1995.



IP Awene #



2

responsibility and accountability. Telecom Namibia aspires to the highest standards of corporate governance and has put in place a set of well-defined processes in accordance with generally accepted corporate practices and in keeping with Telecom Namibia and its subsidiaries (Group) policies and the laws of Namibia. Approach for Corporate Governance The values we share at Telecom Namibia form the foundation of our corporate governance practices. Our practices seek to balance the interests of our key stakeholders: our customers, our shareholder and our employees and provide an integrated strategic framework to operate in the best interests of its profitability, environment and communities. Compliance with King III Code of Governance of South Africa The Telecom Namibia Board, committees and management believe compliance, with the best business practices as contained in the King Codes of Governance, while not mandatory, is key in maintaining the company’s values. The company supports the provisions and principles of corporate governance as defined by King II and King III and complied in all material respects with the Code of Corporate Practices and Conduct. Board of Directors Composition and appointment The Board aims for an appropriate mix of skills, experience and personalities to ensure effective leadership and sound governance. As a truly Namibian company we support and actively drive transformation in everything we do, and we are proud that all of our board members are historically disadvantaged Namibians. The board currently comprises of 5 directors:

� Four independent non-executive directors, of which one is the chairman. � One executive director, namely the managing director (MD).

The composition of the board that served during the year and who are directors at the date of this report is reflected as follows: Directors Independent Non-Executive Qualifications

JS Iita (Chairman) * Ordinary Diploma in Electrical and Mechanical Engineering (UK) 1983; A higher diploma in Electrical and Electronic Engineering (UK) 1990; Masters Degree in Public Policy and Administration.


PhD (Computer Integrated Education (CiE), University of Pretoria, 2012 MSc (Electronic Information Management), Robert Gordon University (RGU), Aberdeen, Scotland, 2001 BA (Library and Records Management), UNAM, 1999 HED.SEC (Higher Education Diploma Secondary), UNAM, 1995.



IP Awene #




3

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Composition and appointment (continued)

Executive

FJP Ndoroma (MD)

BSc (Hons) degree in Mineral Engineering in 1981 Leeds University in London; Management Development Programme (MDP) at the University of South Africa (UNISA) 1989; Executive Development Programme (EDP) at the University of Witwatersrand (WITS) in 1994; Telecommunications Management Course through TEMIC in Canada 2003.

* Resigned 30 September 2013 # Appointed on 26 August 2013 ^ Reappointed on 26 August 2013 Non-executive directors are appointed by the shareholder for specific terms and re-appointment is not automatic. Non-executive directors are appointed by means of a public process of calling for expression of interest. As suggested in King II, the shareholder establishes a Nomination Committee that nominates the short listed candidates, after an interview. The prospective directors are selected and shortlisted on their merits and the specific skills that are required within the Board. The advertisements calling for candidates to nominate themselves have express criteria and skills mix that are required. The appointments are then made at the annual general meeting of the shareholders. Functions

The Board is the focal point of Telecom Namibia’s corporate governance system, which has ultimate accountability and responsibility for the company’s performance and affairs. The Board oversees the business affairs for Telecom Namibia. It assumes responsibility for the company’s overall strategic plans and performance objective, financial plans and annual budget, key operational initiatives, major funding and investment proposals, financial performance reviews, compliance and accountability systems, and corporate governance practices. The board also appoints the MD and Executive Committee (EXCO), approves the policies and guidelines for remuneration. Telecom Namibia has established financial authorisation and approval limits for operating and capital expenditure, the procurement of goods and services and the acquisition and disposal of investments through the Delegation of Authority Policy. Apart from matters that specifically require board approval, such as dividend payment and other returns to the shareholder, the Board approves transactions exceeding certain threshold limits, while delegating authority for transactions below those limits to Board committees and EXCO so as to optimise operational efficiency and speed of decision making.

Accountability

There is a clear distinction in Telecom Namibia between the roles and responsibilities of the chairman and the MD to ensure no one has unfettered powers of decision-making. The chairman, who is an independent, non-executive director, leads the Board and is responsible for the Board’s workings and proceedings. The MD is in charge of the company as a whole and is directly responsible to the Board. Among other things, he is responsible for ensuring that the company achieves its strategic and financial objectives and for monitoring its day-to-day operational matters. In line with assuring responsibility over the overall strategic plan, the Board introduces strategic quarterly review sessions with EXCO as a means to monitor and review implementation of the overall company strategy. Access to information

We believe open communication with our directors is priority in ensuring directors’ accountability. Therefore all material information is disseminated to them between Board meetings.


4

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Access to information (continued)

Prior to each Board meeting, Telecom Namibia’s management provides the Board with information relevant to matters on the agenda for the Board meeting. The Board also receives regular reports pertaining to the operational and financial performance of the company. Such reports enable the directors to keep abreast of the key issues and developments in the company and industry in general, as well as challenges and opportunities for the company. The Board has separate and independent access to members of the executive committee and the company secretary at all times. The company secretary attends all Board and Board committee meetings and is responsible for, among other things, ensuring that Board procedures are observed and that applicable rules and regulations are complied with. Procedures are in place for directors and Board committees, where necessary, to seek independent professional advice, paid for by Telecom Namibia. Board meetings

The Board meets regularly and sets aside time at each scheduled Board meeting to meet without the presence of management. Board meetings include presentations by senior executives on strategic issues relating to specific business areas. In addition to scheduled meetings each year, the Board meets as and when warranted by particular circumstances. Five Board meetings were held during the financial year ended 30 September 2013. A record of the directors’ attendance at Board meetings is set out below. Directors are required to act in good faith and in the interest of Telecom Namibia.

Attendance Register

Member Appointed to Board

Schedule of Board Meetings

28/11/2012 18/03/2013 19/06/2013 15/07/2013 30/09/2013

JS Iita (Chairman) 01/09/1992 v • • • n/a

FJP Ndoroma (MD) 01/11/2002 v v v v v

Dr CM Beukes-Amiss (Chairperson)

26/08/2013 n/a n/a n/a n/a v

R Gertze 21/09/2007 v v v v v

F Veldskoen 21/09/2007 v v • v v

IP Awene 26/08/2013 n/a n/a n/a n/a v

v Attended Apologies

Remuneration Telecom Namibia’s MD is an executive director and is therefore remunerated as part of the senior management. He does not receive directors’ fees. The fees for non-executive directors for the financial year ended 30 September 2013 comprised a basic retainer fee, attendance fees for board meetings and a travel allowance for directors who were required to travel out of town of residence to attend Board meetings and Board Committee meetings. The fees were benchmarked against fees paid by other comparable companies in Namibia and the holding company. The directors also receive subsidised services of the company. Any changes to fees are recommended by the Board and submitted to the shareholder at the Annual General Meeting (AGM) for approval prior to implementation and payment. In line with generally accepted governance practices, non-executive directors are not members of the company’s pension, medical aid or housing schemes and are not given incentive awards.



5

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Remuneration (continued) Non-executive directors’ remuneration for the year ended 30 September 2013 is summarised below:

Name Fees for Services N$ JS Iita --

R Gertze 168 008

F Veldskoen 125 054

CM Beukes-Amiss 11 612

IP Awene 7 854

Total 312 528

Mr. JS Iita did not receive any payment as he is in full-time service of the Government of the Republic of Namibia and the State-Owned Enterprises Governance Act 2006 prohibits such employees from being remunerated when sitting on boards of state-owned enterprises. Board Committees The Board has appointed five committees to assist in effectively discharging its responsibilities. All committees fulfill their responsibilities within clearly defined written terms of reference, which deal explicitly with their purpose and function, reporting procedures and written scope of authority. These are:

• Risk Management Committee

• Human Resources and Compensation Committee

• Audit Committee

• Information Technology (IT) Steering Committee

• Executive Committee Risk Management Committee Telecom Namibia undertakes a continuous process of risk identification, monitoring, management and reporting of risks throughout the organisation to provide assurance to the Board and stakeholders. The Risk Management Committee assists the Board in the oversight of the company’s risk profile and policies, effectiveness of the company’s risk management system including the identification and management of significant risks and reports to the Board and any material matters, findings and recommendations pertaining to risk management. The identification and management of risk is delegated to the Executive Committee (EXCO). EXCO is responsible for the effective implementation of the risk management strategy, policies and processes to facilitate the achievement of business plans and goals. Risk assessment and mitigation strategy is an integral part of the company’s annual business planning. Close monitoring and control processes, including the establishment of appropriate key risk indicators and key performance indicators, are put in place to ensure that risk profiles managed are within policy limits. Human Resources and Compensation Committee The main responsibilities of the Human Resources and Compensation Committee are to approve the company’s policies on employment terms, promotion, remuneration and benefits for employees of all grades, and to administer and review any other incentive schemes of Telecom Namibia. The duties and responsibilities of the committee are:

• Determine, develop and recommend to the Board the general policy and the fee structure for the Board and all its sub committees.


6

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Human Resources and Compensation Committee (continued)

• Determine, develop and recommend to the Board the general policy and broad framework of the remuneration for the MD, the senior management team and all other employees. Remuneration policies are to be competitive enough to ensure that sufficiently skilled employees are attracted to the company, retained in the company and kept motivated at all times. In determining such policy, the Committee takes into account all factors which it deems necessary.

• The objective of such policy shall be to ensure that members of the senior management team of the company and all other employees are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the company.

• Employee relations with the Union as a stakeholder. Audit Committee The Audit Committee has explicit authority to investigate any matter within its terms of reference and has the full cooperation of and access to management. It has direct access to the internal and external auditors and full discretion to invite any director or executive committee member to attend its meetings. The main responsibilities of the committee are to assist the Board in discharging its statutory and other responsibilities relating to internal controls, financial and accounting matters, compliance and business and financial risk management. The committee reports to the Board on the audits undertaken by the internal and external auditors, the adequacy of disclosure of information, and the appropriateness and quality of the system of risk management and internal controls. It reviews the management accounts and annual financial statements with senior management and the external auditors, reviews and approves the annual audit plans for the internal and external auditors, and reviews the internal and external auditors’ evaluation of the company’s system of internal controls. The committee is responsible for evaluating the cost-effectiveness of audits, the independence and objectivity of the external auditors and the nature and extent of the non-audit services provided by the external auditors. It also makes recommendations to the Board on the appointment or re-appointment of the external auditors. In addition, the committee reviews and approves the Telecom Namibia Internal Audit Charter to ensure the adequacy of the internal audit function. At the same time, it ensures that the internal audit function is adequately resourced and has appropriate standing with Telecom Namibia. The external auditors attend the meetings of the Audit Committee by invitation and have access to the Audit Committee Chairman. The company’s internal audit and risk management function carries out reviews and internal control advisory activities which are aligned to the key risks in the company’s business to provide independent assurance to the Audit Committee on the adequacy and effectiveness of the risk management, financial reporting process and internal control and compliance system. The head of Internal Audit reports directly to the Chairman of the Audit Committee with a dotted line of responsibility to the MD. The directors are responsible for preparing the financial statements and other information presented in the annual report in a manner that fairly presents the state of affairs and the results of operations and cash flows of Telecom Namibia and the Group. The financial statements set out on pages 12 to 57 have been prepared by management in compliance with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB. The financial statements incorporate full and reasonable disclosure and are based on appropriate accounting policies which, apart from the implementation of new and revised standards, have been consistently applied and are supported by reasonable and prudent estimates and judgements.



5

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Remuneration (continued) Non-executive directors’ remuneration for the year ended 30 September 2013 is summarised below:

Name Fees for Services N$ JS Iita --

R Gertze 168 008

F Veldskoen 125 054

CM Beukes-Amiss 11 612

IP Awene 7 854

Total 312 528

Mr. JS Iita did not receive any payment as he is in full-time service of the Government of the Republic of Namibia and the State-Owned Enterprises Governance Act 2006 prohibits such employees from being remunerated when sitting on boards of state-owned enterprises. Board Committees The Board has appointed five committees to assist in effectively discharging its responsibilities. All committees fulfill their responsibilities within clearly defined written terms of reference, which deal explicitly with their purpose and function, reporting procedures and written scope of authority. These are:

• Risk Management Committee

• Human Resources and Compensation Committee

• Audit Committee

• Information Technology (IT) Steering Committee

• Executive Committee Risk Management Committee Telecom Namibia undertakes a continuous process of risk identification, monitoring, management and reporting of risks throughout the organisation to provide assurance to the Board and stakeholders. The Risk Management Committee assists the Board in the oversight of the company’s risk profile and policies, effectiveness of the company’s risk management system including the identification and management of significant risks and reports to the Board and any material matters, findings and recommendations pertaining to risk management. The identification and management of risk is delegated to the Executive Committee (EXCO). EXCO is responsible for the effective implementation of the risk management strategy, policies and processes to facilitate the achievement of business plans and goals. Risk assessment and mitigation strategy is an integral part of the company’s annual business planning. Close monitoring and control processes, including the establishment of appropriate key risk indicators and key performance indicators, are put in place to ensure that risk profiles managed are within policy limits. Human Resources and Compensation Committee The main responsibilities of the Human Resources and Compensation Committee are to approve the company’s policies on employment terms, promotion, remuneration and benefits for employees of all grades, and to administer and review any other incentive schemes of Telecom Namibia. The duties and responsibilities of the committee are:

• Determine, develop and recommend to the Board the general policy and the fee structure for the Board and all its sub committees.


6

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Human Resources and Compensation Committee (continued)

• Determine, develop and recommend to the Board the general policy and broad framework of the remuneration for the MD, the senior management team and all other employees. Remuneration policies are to be competitive enough to ensure that sufficiently skilled employees are attracted to the company, retained in the company and kept motivated at all times. In determining such policy, the Committee takes into account all factors which it deems necessary.

• The objective of such policy shall be to ensure that members of the senior management team of the company and all other employees are provided with appropriate incentives to encourage enhanced performance and are, in a fair and responsible manner, rewarded for their individual contributions to the success of the company.

• Employee relations with the Union as a stakeholder. Audit Committee The Audit Committee has explicit authority to investigate any matter within its terms of reference and has the full cooperation of and access to management. It has direct access to the internal and external auditors and full discretion to invite any director or executive committee member to attend its meetings. The main responsibilities of the committee are to assist the Board in discharging its statutory and other responsibilities relating to internal controls, financial and accounting matters, compliance and business and financial risk management. The committee reports to the Board on the audits undertaken by the internal and external auditors, the adequacy of disclosure of information, and the appropriateness and quality of the system of risk management and internal controls. It reviews the management accounts and annual financial statements with senior management and the external auditors, reviews and approves the annual audit plans for the internal and external auditors, and reviews the internal and external auditors’ evaluation of the company’s system of internal controls. The committee is responsible for evaluating the cost-effectiveness of audits, the independence and objectivity of the external auditors and the nature and extent of the non-audit services provided by the external auditors. It also makes recommendations to the Board on the appointment or re-appointment of the external auditors. In addition, the committee reviews and approves the Telecom Namibia Internal Audit Charter to ensure the adequacy of the internal audit function. At the same time, it ensures that the internal audit function is adequately resourced and has appropriate standing with Telecom Namibia. The external auditors attend the meetings of the Audit Committee by invitation and have access to the Audit Committee Chairman. The company’s internal audit and risk management function carries out reviews and internal control advisory activities which are aligned to the key risks in the company’s business to provide independent assurance to the Audit Committee on the adequacy and effectiveness of the risk management, financial reporting process and internal control and compliance system. The head of Internal Audit reports directly to the Chairman of the Audit Committee with a dotted line of responsibility to the MD. The directors are responsible for preparing the financial statements and other information presented in the annual report in a manner that fairly presents the state of affairs and the results of operations and cash flows of Telecom Namibia and the Group. The financial statements set out on pages 12 to 57 have been prepared by management in compliance with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB) and the interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB. The financial statements incorporate full and reasonable disclosure and are based on appropriate accounting policies which, apart from the implementation of new and revised standards, have been consistently applied and are supported by reasonable and prudent estimates and judgements.

67 to 112



7

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Audit Committee (continued) External Auditors

The external auditors are responsible for carrying out an independent examination of the financial statements in accordance with International Standards on Auditing and reporting their opinion thereon. Their report is set out on page 11. Telecom Namibia’s external auditors carry out a review of the company’s material internal controls to the extent of the scope as laid out in their audit plan to comply with International Standards on Auditing. Any material non-compliance and internal control weaknesses, together with the external auditors’ recommendations to address them, are reported to the Audit Committee. Telecom Namibia’s management, with the assistance of Telecom Namibia Internal Audit, follows up on the external auditor’s recommendations as part of their role in reviewing the company’s system of internal controls. The Board is responsible for the initial appointment of external auditors. The shareholder then approves the appointment at Telecom Namibia’s AGM. The external auditors hold office until their removal or resignation. The Audit Committee assesses the external auditors based on factors such as the performance and quality of their audit and the independence of the auditors, and recommends their re-appointment to the Board. However, external auditors act independent of the Audit Committee. The current auditor for Telecom Namibia, Deloitte & Touche, was appointed with effect from the financial year ended 30 September 2008. Information Technology (IT) Steering Committee As Telecom Namibia is an integrated ICT service provider, an IT Steering Committee was established in August 2009, as a subcommittee of the Board, to guide the Company on IT service provisioning. The objectives of the committee are to:

• Provide guidance (IT Strategy) to the application of IT resources in order to meet the company’s strategic objectives. • Review and participate in the development of the Company’s strategic and functional plans for information technology.

• Oversee the development of quality assurance mechanisms and monitor feedback on the quality of IT services within Telecom Namibia.

• Review and provide feedback on IT policies as they are developed or amended.

• Continuously develop the IT Architecture Plan in terms of data, applications and infrastructure.

• Agree on IT standards for hardware, applications and storage.

• Align future technologies to the Architecture Plan and to approve deviations from such a Plan.

• Continuously develop vendor strategy.

• Continuously align IT Procurement Policy to IT Standards.

• Identify skills and integration gaps before technology is procured. The committee consists of two members of the Board of Directors, the Chief Operating Officer and the Head of ICT and convenes at least quarterly. Executive Committee The Executive Committee (EXCO) is chaired by the MD and currently comprises all senior management members with designated corporate staff members in attendance. It meets formally every month and informally when required. EXCO is mandated, empowered and held accountable for implementing the strategies, business plans and policies determined by the Board; managing and monitoring the business affairs of Telecom Namibia in line with approved plans and budgets; prioritising the allocation of capital and other resources as approved by the Board and establishing best management and operating practices.


8

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Executive Committee (continued) EXCO is also responsible for structured and transparent management succession planning and the identification, development and advancement of the company future leaders. Also, within EXCO’s ambit is setting operational standards, codes of conduct and corporate ethics. EXCO is responsible for the following, amongst others:

• Implement strategies and policies of the company.

• Manage the business and affairs of the company, including finance and administration, human resources and strategic training, sales and marketing, international business ventures, information communication technology and corporate business solutions, strategy, special projects, network provisioning and assurance, service provisioning and assurance, internal audit and risk management functions, legal regulatory and company secretarial functions and corporate communications and public relations.

• Prioritise the allocation of capital, technical and human resources.

• Establish best management practices and functional standards.

The composition of EXCO is reflected as follows:

FJP Ndoroma Managing Director

A Kanime Chief Human Resources Officer

R Offner Chief Financial Officer

T Klein Chief Strategy Officer

HP Bader Chief Operations Officer

H Trost Chief Commercial Officer

Board Committees Attendance Register For the period 1 October 2012 to 30 September 2013:

Board of Directors Risk Management Committee Composition – Attendance Four meetings held during the year

HR and Compensation Committee Composition – Attendance Four meetings held during the year

Audit Committee Composition – Attendance Four meetings held during the year

IT Steering Committee – Attendance Four meetings held during the year

F Veldskoen Chairperson 4 Chairperson 4 In attendance 2 Member 4

FJP Ndoroma Member 4 Member 4 Member 4 Member 4

R Gertze In attendance 2 Member 4 Chairperson 4 Chairperson 3

JS Iita # # # #

# JS Iita did not serve on any of the board committees. Sustainability Telecom Namibia is committed to environmental sustainability. By harnessing the scale of our network to deliver more sustainable solutions, we connect people and businesses seamlessly, increasing efficiency, minimising impact and strengthening our connection to the world we all share.

66



7

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Audit Committee (continued) External Auditors

The external auditors are responsible for carrying out an independent examination of the financial statements in accordance with International Standards on Auditing and reporting their opinion thereon. Their report is set out on page 11. Telecom Namibia’s external auditors carry out a review of the company’s material internal controls to the extent of the scope as laid out in their audit plan to comply with International Standards on Auditing. Any material non-compliance and internal control weaknesses, together with the external auditors’ recommendations to address them, are reported to the Audit Committee. Telecom Namibia’s management, with the assistance of Telecom Namibia Internal Audit, follows up on the external auditor’s recommendations as part of their role in reviewing the company’s system of internal controls. The Board is responsible for the initial appointment of external auditors. The shareholder then approves the appointment at Telecom Namibia’s AGM. The external auditors hold office until their removal or resignation. The Audit Committee assesses the external auditors based on factors such as the performance and quality of their audit and the independence of the auditors, and recommends their re-appointment to the Board. However, external auditors act independent of the Audit Committee. The current auditor for Telecom Namibia, Deloitte & Touche, was appointed with effect from the financial year ended 30 September 2008. Information Technology (IT) Steering Committee As Telecom Namibia is an integrated ICT service provider, an IT Steering Committee was established in August 2009, as a subcommittee of the Board, to guide the Company on IT service provisioning. The objectives of the committee are to:

• Provide guidance (IT Strategy) to the application of IT resources in order to meet the company’s strategic objectives. • Review and participate in the development of the Company’s strategic and functional plans for information technology.

• Oversee the development of quality assurance mechanisms and monitor feedback on the quality of IT services within Telecom Namibia.

• Review and provide feedback on IT policies as they are developed or amended.

• Continuously develop the IT Architecture Plan in terms of data, applications and infrastructure.

• Agree on IT standards for hardware, applications and storage.

• Align future technologies to the Architecture Plan and to approve deviations from such a Plan.

• Continuously develop vendor strategy.

• Continuously align IT Procurement Policy to IT Standards.

• Identify skills and integration gaps before technology is procured. The committee consists of two members of the Board of Directors, the Chief Operating Officer and the Head of ICT and convenes at least quarterly. Executive Committee The Executive Committee (EXCO) is chaired by the MD and currently comprises all senior management members with designated corporate staff members in attendance. It meets formally every month and informally when required. EXCO is mandated, empowered and held accountable for implementing the strategies, business plans and policies determined by the Board; managing and monitoring the business affairs of Telecom Namibia in line with approved plans and budgets; prioritising the allocation of capital and other resources as approved by the Board and establishing best management and operating practices.


8

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Executive Committee (continued) EXCO is also responsible for structured and transparent management succession planning and the identification, development and advancement of the company future leaders. Also, within EXCO’s ambit is setting operational standards, codes of conduct and corporate ethics. EXCO is responsible for the following, amongst others:

• Implement strategies and policies of the company.

• Manage the business and affairs of the company, including finance and administration, human resources and strategic training, sales and marketing, international business ventures, information communication technology and corporate business solutions, strategy, special projects, network provisioning and assurance, service provisioning and assurance, internal audit and risk management functions, legal regulatory and company secretarial functions and corporate communications and public relations.

• Prioritise the allocation of capital, technical and human resources.

• Establish best management practices and functional standards.

The composition of EXCO is reflected as follows:

FJP Ndoroma Managing Director

A Kanime Chief Human Resources Officer

R Offner Chief Financial Officer

T Klein Chief Strategy Officer

HP Bader Chief Operations Officer

H Trost Chief Commercial Officer

Board Committees Attendance Register For the period 1 October 2012 to 30 September 2013:

Board of Directors Risk Management Committee Composition – Attendance Four meetings held during the year

HR and Compensation Committee Composition – Attendance Four meetings held during the year

Audit Committee Composition – Attendance Four meetings held during the year

IT Steering Committee – Attendance Four meetings held during the year

F Veldskoen Chairperson 4 Chairperson 4 In attendance 2 Member 4

FJP Ndoroma Member 4 Member 4 Member 4 Member 4

R Gertze In attendance 2 Member 4 Chairperson 4 Chairperson 3

JS Iita # # # #

# JS Iita did not serve on any of the board committees. Sustainability Telecom Namibia is committed to environmental sustainability. By harnessing the scale of our network to deliver more sustainable solutions, we connect people and businesses seamlessly, increasing efficiency, minimising impact and strengthening our connection to the world we all share.



9

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Sustainability (continued) Our environmental sustainability commitment is based on three pillars:

• Minimising our own environmental impact in our day to day operations.

• Ensuring that ICT products and services enable customers to increase energy efficiency and productivity while also reducing carbon emissions.

• Harnessing our technology and innovation to develop forward-looking technologies that meet environmental needs in unique ways.

Black Economic Empowerment (BEE) Our BEE procurement policy is the cornerstone of the company’s approach to transformation and empowerment. Telecom Namibia is committed to BEE that is broad-based as a form of empowerment. We support the participation of historically disadvantaged Namibians in the economy, through the procurement of goods and services from BEE-listed companies as well. Conflict of Interest Telecom Namibia has a conflict of interest policy that applies to all directors, management and employees in regulating conditions which could or do constitute a conflict. The primary objectives of this policy are to:

• Provide guidance on the behavior expected in accordance with the company’s values;

• Promote transparency and avoid business-related conflicts of interest;

• Ensure fairness in dealing with the interests of all employees, other affected individuals, and the company;

• Document the process for disclosure, approval and review of activities that may amount to actual, potential or perceived conflict of interest and;

• Provide a mechanism for the objective review of personal outside interests. Code of Conduct of Practice Telecom Namibia also has a code of conduct and business ethics that applies to all employees. The code sets out principles to guide employees in carrying out their duties and responsibilities to the highest standard of personal and corporate integrity when dealing with its competitors, customers, suppliers and the community. The code of conduct covers areas such as conduct in the workplace, business conduct, protection of the company’s assets, confidentiality, non-solicitation of customers and employees, conflict of interest and corporate opportunities. The code is posted on an internal website. The staff manual maps out policies and standards by which employees are expected to conduct themselves in the course of their employment. In line with the value of honest responsibility, compliance with the company’s code of ethics is monitored by the Head Internal Audit and the Company Secretary. Ethical behavior is encouraged throughout the company by communicating regularly with employees, using a number of different communication channels. Formal disciplinary measures are in place to deal with any identified incidents of corruption, fraud and dishonest practices or other similar matters. In addition to Telecom Namibia’s other compliance and enforcement activities, a reporting hotline (whistle-blowing) is in place through which all stakeholders can report suspected theft, corruption, conflict of interest, contraventions of Telecom Namibia’s values or other reportable irregularities, with guaranteed anonymity. Details of the reporting mechanisms: Hotline: 0800 20 35 79. Alleged irregularities reported on the hotline are fully investigated. Some have resulted in criminal prosecution and /or disciplinary enquiries.


10

STATEMENT OF RESPONSIBILITY BY THE BOARD OF DIRECTORS The directors are required by the Namibian Companies Act, to maintain adequate accounting records and are responsible for the content and integrity of the financial statements and related financial information included in this report. It is their responsibility to ensure that the financial statements fairly present the state of affairs of Telecom Namibia and the Group as at the end of the financial year and the results of its operations and cash flows for the year then ended, in conformity with International Financial Reporting Standards. The external auditors are engaged to express an independent opinion on the financial statements. The financial statements are prepared in accordance with International Financial Reporting Standards and are based upon appropriate accounting policies consistently applied and supported by reasonable and prudent judgements and estimates. The directors acknowledge that they are ultimately responsible for the system of internal financial control established by the Group and place considerable importance on maintaining a strong control environment. To enable the directors to meet these responsibilities, the board of directors sets standards for internal control aimed at reducing the risk of error or loss in a cost effective manner. The standards include the proper delegation of responsibilities within a clearly defined framework, effective accounting procedures and adequate segregation of duties to ensure an acceptable level of risk. These controls are monitored throughout the Group and all employees are required to maintain the highest ethical standards in ensuring the Group’s business is conducted in a manner that in all reasonable circumstances is above reproach. The focus of risk management is on identifying, assessing, managing and monitoring all known forms of risk across the Group. While operating risk cannot be fully eliminated, the Group endeavours to minimise it by ensuring that appropriate infrastructure, controls, systems and ethical behaviour are applied and managed within predetermined procedures and constraints. The directors are of the opinion, based on the information and explanations given by management that the system of internal control provides reasonable assurance that the financial records may be relied on for the preparation of the financial statements. However, any system of internal financial control can provide only reasonable, and not absolute, assurance against material misstatement or loss. The going concern basis has been adopted in preparing the financial statements. The directors have no reason to believe that the Group will not be a going concern in the foreseeable future based on forecasts and available cash resources and facilities. The viability of the Group is supported by these financial statements. The financial statements have been audited by the independent external auditors, Deloitte & Touche, which was given unrestricted access to all financial records and related data, including minutes of all meetings of the shareholders and the board of directors. The directors believe that all representations made to the independent auditors during their audit were valid and appropriate. The auditor’s report is presented on page 11. The financial statements set out on pages 12 to 57 were approved and authorised for issue by the board of directors on _____________ 2014 and are signed on their behalf by: ………….……………………….. ………………………………….… Chairperson Managing Director



9

CORPORATE GOVERNANCE STATEMENT (continued) Board of Directors (continued) Board Committees (continued) Sustainability (continued) Our environmental sustainability commitment is based on three pillars:

• Minimising our own environmental impact in our day to day operations.

• Ensuring that ICT products and services enable customers to increase energy efficiency and productivity while also reducing carbon emissions.

• Harnessing our technology and innovation to develop forward-looking technologies that meet environmental needs in unique ways.

Black Economic Empowerment (BEE) Our BEE procurement policy is the cornerstone of the company’s approach to transformation and empowerment. Telecom Namibia is committed to BEE that is broad-based as a form of empowerment. We support the participation of historically disadvantaged Namibians in the economy, through the procurement of goods and services from BEE-listed companies as well. Conflict of Interest Telecom Namibia has a conflict of interest policy that applies to all directors, management and employees in regulating conditions which could or do constitute a conflict. The primary objectives of this policy are to:

• Provide guidance on the behavior expected in accordance with the company’s values;

• Promote transparency and avoid business-related conflicts of interest;

• Ensure fairness in dealing with the interests of all employees, other affected individuals, and the company;

• Document the process for disclosure, approval and review of activities that may amount to actual, potential or perceived conflict of interest and;

• Provide a mechanism for the objective review of personal outside interests. Code of Conduct of Practice Telecom Namibia also has a code of conduct and business ethics that applies to all employees. The code sets out principles to guide employees in carrying out their duties and responsibilities to the highest standard of personal and corporate integrity when dealing with its competitors, customers, suppliers and the community. The code of conduct covers areas such as conduct in the workplace, business conduct, protection of the company’s assets, confidentiality, non-solicitation of customers and employees, conflict of interest and corporate opportunities. The code is posted on an internal website. The staff manual maps out policies and standards by which employees are expected to conduct themselves in the course of their employment. In line with the value of honest responsibility, compliance with the company’s code of ethics is monitored by the Head Internal Audit and the Company Secretary. Ethical behavior is encouraged throughout the company by communicating regularly with employees, using a number of different communication channels. Formal disciplinary measures are in place to deal with any identified incidents of corruption, fraud and dishonest practices or other similar matters. In addition to Telecom Namibia’s other compliance and enforcement activities, a reporting hotline (whistle-blowing) is in place through which all stakeholders can report suspected theft, corruption, conflict of interest, contraventions of Telecom Namibia’s values or other reportable irregularities, with guaranteed anonymity. Details of the reporting mechanisms: Hotline: 0800 20 35 79. Alleged irregularities reported on the hotline are fully investigated. Some have resulted in criminal prosecution and /or disciplinary enquiries.


10


66

67 to 11226 February 2014


10




11

INDEPENDENT AUDITOR’S REPORT TO THE MEMBER OF TELECOM NAMIBIA LIMITED We have audited the consolidated and separate annual financial statements of Telecom Namibia Limited, which comprise the consolidated and separate statements of financial position as at 30 September 2013 and the consolidated and separate statements of profit or loss and other comprehensive income, consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes as set out on pages 12 to 57. Directors’ Responsibility for the Financial Statements

The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Namibian Companies Act and for such internal controls as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion

In our opinion, the financial statements, present fairly, in all material respects, the consolidated and separate financial position of Telecom Namibia Limited as at 30 September 2013 and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Namibian Companies Act. DELOITTE & TOUCHE Registered Accountants and Auditors Chartered Accountants (Namibia) Deloitte Building Maerua Mall Complex Jan Jonker Avenue Windhoek NAMIBIA ICAN Practice Number 9407 Per R.H. Mc Donald Partner Regional Executives: LL Bam (Chief Executive) Resident Partners: ET Tjipuka (Managing Partner) A Swiegers (Chief Operating Officer), RH McDonald, J Kock, H de Bruin, GM Pinnock J Cronjé, A Akayombokwa Director: G Brand


12

STATEMENTS OF FINANCIAL POSITION as at 30 September 2013

Notes Group

2013 �N$’000

Group 2012

�N$’000

Company 2013

�N$’000

Company 2012

N$’000ASSETS Non-current assets Property, plant and equipment 3 1 902 501 1 592 544 1 787 576 1 592 544Intangible assets 4 74 108 45 999 43 541 45 999 Goodwill 5 -- -- -- --Investment in subsidiary 6 -- -- 527 386 527 352Investment in associates 7 -- -- -- --Finance lease receivable 9 25 362 5 633 19 310 5 633Amounts owing by fellow subsidiaries 12 w -- 60 000 --

2 001 971 1 644 176 2 437 813 2 171 528

Current assets Inventories 10 45 704 49 439 48 016 49 439Trade and other receivables 11 256 469 249 062 237 809 249 062Current tax asset 20 1 796 -- 1 796 --Derivative financial instruments 8 2 616 4 331 2 616 4 331Amounts owing by fellow subsidiaries 12 2 833 143 90 370 143Amounts owing by holding company 12 1 11 1 11Short-term portion of finance lease receivable 9 15 012 15 753 15 639 15 753Cash and cash equivalents 13 60 910 22 238 58 470 22 188

385 341 340 977 454 717 340 927

Non-current assets classified as held for sale 14 20 220 65 757 20 220 116 266

Total assets 2 407 532 2 050 910 2 912 750 2 628 721

EQUITY

Capital and reserves attributable to the company’s equity holders

Share capital 15 154 530 154 530 154 530 154 530Retained earnings 354 148 520 125 1 012 109 1 097 936

Total equity 508 678 674 655 1 166 639 1 252 466

LIABILITIES Non-current liabilities Post-retirement medical benefit obligations 16 45 572 45 722 45 572 45 722Long-term liabilities 17 517 000 486 088 457 000 486 088Deferred tax 18 396 408 421 865 403 815 421 865Deferred revenue 21 87 991 33 593 87 991 33 593

Rental payable – straight line basis adjustment 3 743 -- -- --

1 050 714 987 268 994 378 987 268

Current liabilities Trade and other payables 19 329 182 229 122 303 857 229 122Current tax liability 20 -- 2 854 -- 2 854Short-term of post-retirement medical benefit obligations 16 -- 9 054 -- 9 054Short-term portion of long-term liabilities 17 429 031 33 067 363 944 33 067Amount owing to fellow subsidiaries 12 13 191 5 070 10 841 5 070Amount owing to holding company 12 -- 39 000 -- 39 000Deferred revenue 21 76 736 70 820 73 091 70 820

848 140 388 987 751 733 388 987

Total liabilities 1 898 854 1 376 255 1 746 111 1 376 255

Total equity and liabilities 2 407 532 2 050 910 2 912 750 2 628 721

67 to 112.



11

INDEPENDENT AUDITOR’S REPORT TO THE MEMBER OF TELECOM NAMIBIA LIMITED We have audited the consolidated and separate annual financial statements of Telecom Namibia Limited, which comprise the consolidated and separate statements of financial position as at 30 September 2013 and the consolidated and separate statements of profit or loss and other comprehensive income, consolidated and separate statements of changes in equity and consolidated and separate statements of cash flows for the year then ended, a summary of significant accounting policies and other explanatory notes as set out on pages 12 to 57. Directors’ Responsibility for the Financial Statements

The directors are responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and in the manner required by the Namibian Companies Act and for such internal controls as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement whether due to fraud or error. Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion

In our opinion, the financial statements, present fairly, in all material respects, the consolidated and separate financial position of Telecom Namibia Limited as at 30 September 2013 and its consolidated and separate financial performance and consolidated and separate cash flows for the year then ended in accordance with International Financial Reporting Standards and in the manner required by the Namibian Companies Act. DELOITTE & TOUCHE Registered Accountants and Auditors Chartered Accountants (Namibia) Deloitte Building Maerua Mall Complex Jan Jonker Avenue Windhoek NAMIBIA ICAN Practice Number 9407 Per R.H. Mc Donald Partner Regional Executives: LL Bam (Chief Executive) Resident Partners: ET Tjipuka (Managing Partner) A Swiegers (Chief Operating Officer), RH McDonald, J Kock, H de Bruin, GM Pinnock J Cronjé, A Akayombokwa Director: G Brand


12

STATEMENTS OF FINANCIAL POSITION as at 30 September 2013

Notes Group

2013 �N$’000

Group 2012

�N$’000

Company 2013

�N$’000

Company 2012

N$’000ASSETS Non-current assets Property, plant and equipment 3 1 902 501 1 592 544 1 787 576 1 592 544Intangible assets 4 74 108 45 999 43 541 45 999 Goodwill 5 -- -- -- --Investment in subsidiary 6 -- -- 527 386 527 352Investment in associates 7 -- -- -- --Finance lease receivable 9 25 362 5 633 19 310 5 633Amounts owing by fellow subsidiaries 12 w -- 60 000 --

2 001 971 1 644 176 2 437 813 2 171 528

Current assets Inventories 10 45 704 49 439 48 016 49 439Trade and other receivables 11 256 469 249 062 237 809 249 062Current tax asset 20 1 796 -- 1 796 --Derivative financial instruments 8 2 616 4 331 2 616 4 331Amounts owing by fellow subsidiaries 12 2 833 143 90 370 143Amounts owing by holding company 12 1 11 1 11Short-term portion of finance lease receivable 9 15 012 15 753 15 639 15 753Cash and cash equivalents 13 60 910 22 238 58 470 22 188

385 341 340 977 454 717 340 927

Non-current assets classified as held for sale 14 20 220 65 757 20 220 116 266

Total assets 2 407 532 2 050 910 2 912 750 2 628 721

EQUITY

Capital and reserves attributable to the company’s equity holders

Share capital 15 154 530 154 530 154 530 154 530Retained earnings 354 148 520 125 1 012 109 1 097 936

Total equity 508 678 674 655 1 166 639 1 252 466

LIABILITIES Non-current liabilities Post-retirement medical benefit obligations 16 45 572 45 722 45 572 45 722Long-term liabilities 17 517 000 486 088 457 000 486 088Deferred tax 18 396 408 421 865 403 815 421 865Deferred revenue 21 87 991 33 593 87 991 33 593

Rental payable – straight line basis adjustment 3 743 -- -- --

1 050 714 987 268 994 378 987 268

Current liabilities Trade and other payables 19 329 182 229 122 303 857 229 122Current tax liability 20 -- 2 854 -- 2 854Short-term of post-retirement medical benefit obligations 16 -- 9 054 -- 9 054Short-term portion of long-term liabilities 17 429 031 33 067 363 944 33 067Amount owing to fellow subsidiaries 12 13 191 5 070 10 841 5 070Amount owing to holding company 12 -- 39 000 -- 39 000Deferred revenue 21 76 736 70 820 73 091 70 820

848 140 388 987 751 733 388 987

Total liabilities 1 898 854 1 376 255 1 746 111 1 376 255

Total equity and liabilities 2 407 532 2 050 910 2 912 750 2 628 721



13

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 30 September 2013

Notes Group

2013 �N$’000

RestatedGroup

2012 �N$’000

Company 2013

�N$’000

RestatedCompany

2012 �N$’000

Revenue 1 311 677 1 222 976 1 309 513 1 222 976

- Sale of goods 41 179 19 520 20 013 19 520

- Services rendered 1 270 498 1 203 456 1 289 500 1 203 456

Other operating income 37 582 44 759 34 994 44 759

Distribution costs (386 443) (290 807) (351 498) (290 807)

Administrative expenses (690 200) (625 944) (680 668) (625 900)

Impairment loss (49 148) -- (99 657) (12 744)

Regulatory levies (22 204) -- (19 918) --

Other operating expenses (341 438) (234 214) (251 813) (217 224)

Operating (loss)/profit 22 (140 174) 116 770 (59 047) 121 060Finance income 23 746 18 439 746 1 999Finance costs 23 (53 529) (41 451) (47 099) (41 451)Share of results of associates after tax 7 -- (16 440) -- --

(Loss)/profit before tax (192 957) 77 318 (105 400) 81 608 Taxation 25 25 348 (24 964) 17 941 (24 964)

(Loss)/profit for the year (167 609) 52 354 (87 459) 56 644

Other comprehensive income for the year net of tax 1 632 4 182 1 632 4 182

Remeasurement of defined benefit obligation 16 2 472 6 336 2 472 6 336Taxation related to components of other comprehensive income

(840) (2 154) (840) (2 154)

Total comprehensive (loss)/income for the year (165 977) 56 536 (85 827) 60 826

(Loss)/profit for the year attributable to: Equity holders of the company (167 609) 52 354 (87 459) 56 644

Total comprehensive (loss)/profit for the year attributable to:

Equity holders of the company (165 977) 56 536 (85 827) 60 826


14

STATEMENT OF CHANGES IN EQUITY for the year ended 30 September 2013

Group

Share Retainedcapital earnings Total

Notes N$’000 N$’000 N$’000 Balance at 01 October 2011 154 530 463 589 618 119 Total comprehensive income for the year -- 56 536 56 536

Profit for the year – restated 34 -- 52 354 52 354Other comprehensive income for the year – restated 34 -- 4 182 4 182

Balance at 30 September 2012 - restated 154 530 520 125 674 655 Total comprehensive loss for the year -- (165 977) (165 977)

Loss for the year -- (167 609) (167 609)

Other comprehensive income for the year -- 1 632 1 632

Balance at 30 September 2013 154 530 354 148 508 678

No dividends were paid or declared during the year (2012: Nil).



13

STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME for the year ended 30 September 2013

Notes Group

2013 �N$’000

RestatedGroup

2012 �N$’000

Company 2013

�N$’000

RestatedCompany

2012 �N$’000

Revenue 1 311 677 1 222 976 1 309 513 1 222 976

- Sale of goods 41 179 19 520 20 013 19 520

- Services rendered 1 270 498 1 203 456 1 289 500 1 203 456

Other operating income 37 582 44 759 34 994 44 759

Distribution costs (386 443) (290 807) (351 498) (290 807)

Administrative expenses (690 200) (625 944) (680 668) (625 900)

Impairment loss (49 148) -- (99 657) (12 744)

Regulatory levies (22 204) -- (19 918) --

Other operating expenses (341 438) (234 214) (251 813) (217 224)

Operating (loss)/profit 22 (140 174) 116 770 (59 047) 121 060Finance income 23 746 18 439 746 1 999Finance costs 23 (53 529) (41 451) (47 099) (41 451)Share of results of associates after tax 7 -- (16 440) -- --

(Loss)/profit before tax (192 957) 77 318 (105 400) 81 608 Taxation 25 25 348 (24 964) 17 941 (24 964)

(Loss)/profit for the year (167 609) 52 354 (87 459) 56 644

Other comprehensive income for the year net of tax 1 632 4 182 1 632 4 182

Remeasurement of defined benefit obligation 16 2 472 6 336 2 472 6 336Taxation related to components of other comprehensive income

(840) (2 154) (840) (2 154)

Total comprehensive (loss)/income for the year (165 977) 56 536 (85 827) 60 826

(Loss)/profit for the year attributable to: Equity holders of the company (167 609) 52 354 (87 459) 56 644

Total comprehensive (loss)/profit for the year attributable to:

Equity holders of the company (165 977) 56 536 (85 827) 60 826


14


Group





Loss for the year -- (167 609) (167 609)





14


Group





Loss for the year -- (167 609) (167 609)






15


Company


Notes N$’000 N$’000 N$’000 Balance at 01 October 2011 154 530 1 037 110 1 191 640 Total comprehensive income for the year -- 60 826 60 826


Balance at 30 September 2012 - restated 154 530 1 097 936 1 252 466 Total comprehensive loss for the year -- (85 827) (85 827)

Loss for the year -- (87 459) (87 459)Other comprehensive income for the year -- 1 632 1 632

Balance at 30 September 2013 154 530 1 012 109 1 166 639



16

STATEMENTS OF CASH FLOWS for the year ended 30 September 2013

Notes Group

2013�N$’000

Group 2012

�N$’000

Company 2013

�N$’000

Company 2012

�N$’000Cash flow from operating activities Operating (loss)/profit (140 174) 116 770 (59 047) 121 060

Adjustment for : Post-retirement benefit obligation 4 136 12 418 4 136 12 418

Movement on derivative financial instrument 1 715 2 685 1 715 2 685

Loss on scrapping of assets 10 364 5 698 10 364 5 698Impairment of investment 6.1 -- -- -- 12 744Impairment of non-current asset held for sale 14 49 148 -- 99 657 --Impairment of goodwill 5 -- 16 990 -- --Straight-line adjustment of rent payable 3 743 -- -- --Unrealized forex gain on asset held for sale 14 (3 611) (8 616) (3 611) (8 616)Depreciation of plant & equipment 3 259 597 176 950 190 506 176 950Amortisation of intangible assets 4 31 418 8 643 15 077 8 643Profit on disposal of property, plant and equipment 22 (22 871) (5 377) (22 581) (5 377)Working capital changes 26.1 97 805 (7 708) 10 470 (7 708)

Cash generated from operations 291 270 318 453 246 686 318 497Interest received 23 746 18 439 746 1 999Interest paid 23 (61 145) (47 314) (54 715) (47 314)Subsidies paid on post-retirement medical benefit liability

16 (1 864) (1 883) (1 864) (1 883)

Taxation paid 20 (5 599) (30 264) (5 599) (30 264)

Net cash flow from operating activities 223 408 257 431 185 254 241 035 Cash flow from investing activities Movement on finance lease receivable (18 988) 5 215 (13 563) 5 215Plant and equipment acquired 3 (445 363) (235 116) (445 356) (235 116)Intangible assets acquired 4 (5 387) (918) (5 387) (918)Proceeds on disposals – property, plant, equipment and intangible assets

42 514 20 049 22 583 20 049

Acquisition of subsidiary 27 4 616 -- -- --Increase in loan to subsidiary company 6 -- -- (34) (44)Increase in loan to associate company -- (16 440) -- --Loans repaid by associate company -- 420 194 -- --Preference shares issued by associate company -- (420 194) -- --

Net cash flow used in investing activities (422 608) (227 210) (441 757) (210 814)

Cash flow from financing activities Post-retirement obligation termination buy out 16 (9 004) (39 674) (9 004) (39 674)Long-term loans repaid (91 927) (28 184) (31 927) (28 184)

Net cash flow used in financing activities (100 931) (67 858) (40 931) (67 858)

Net decrease in cash and cash equivalents (300 131) (37 637) (297 434) (37 637)Cash and cash equivalents at beginning of year 22 238 59 875 22 188 59 825

Cash and cash equivalents at end of year 13 (277 893) 22 238 (275 246) 22 188


14


Group





Loss for the year -- (167 609) (167 609)






15


Company


Notes N$’000 N$’000 N$’000 Balance at 01 October 2011 154 530 1 037 110 1 191 640 Total comprehensive income for the year -- 60 826 60 826


Balance at 30 September 2012 - restated 154 530 1 097 936 1 252 466 Total comprehensive loss for the year -- (85 827) (85 827)

Loss for the year -- (87 459) (87 459)Other comprehensive income for the year -- 1 632 1 632

Balance at 30 September 2013 154 530 1 012 109 1 166 639



16

STATEMENTS OF CASH FLOWS for the year ended 30 September 2013

Notes Group

2013�N$’000

Group 2012

�N$’000

Company 2013

�N$’000

Company 2012

�N$’000Cash flow from operating activities Operating (loss)/profit (140 174) 116 770 (59 047) 121 060

Adjustment for : Post-retirement benefit obligation 4 136 12 418 4 136 12 418

Movement on derivative financial instrument 1 715 2 685 1 715 2 685

Loss on scrapping of assets 10 364 5 698 10 364 5 698Impairment of investment 6.1 -- -- -- 12 744Impairment of non-current asset held for sale 14 49 148 -- 99 657 --Impairment of goodwill 5 -- 16 990 -- --Straight-line adjustment of rent payable 3 743 -- -- --Unrealized forex gain on asset held for sale 14 (3 611) (8 616) (3 611) (8 616)Depreciation of plant & equipment 3 259 597 176 950 190 506 176 950Amortisation of intangible assets 4 31 418 8 643 15 077 8 643Profit on disposal of property, plant and equipment 22 (22 871) (5 377) (22 581) (5 377)Working capital changes 26.1 97 805 (7 708) 10 470 (7 708)

Cash generated from operations 291 270 318 453 246 686 318 497Interest received 23 746 18 439 746 1 999Interest paid 23 (61 145) (47 314) (54 715) (47 314)Subsidies paid on post-retirement medical benefit liability

16 (1 864) (1 883) (1 864) (1 883)

Taxation paid 20 (5 599) (30 264) (5 599) (30 264)

Net cash flow from operating activities 223 408 257 431 185 254 241 035 Cash flow from investing activities Movement on finance lease receivable (18 988) 5 215 (13 563) 5 215Plant and equipment acquired 3 (445 363) (235 116) (445 356) (235 116)Intangible assets acquired 4 (5 387) (918) (5 387) (918)Proceeds on disposals – property, plant, equipment and intangible assets

42 514 20 049 22 583 20 049

Acquisition of subsidiary 27 4 616 -- -- --Increase in loan to subsidiary company 6 -- -- (34) (44)Increase in loan to associate company -- (16 440) -- --Loans repaid by associate company -- 420 194 -- --Preference shares issued by associate company -- (420 194) -- --

Net cash flow used in investing activities (422 608) (227 210) (441 757) (210 814)

Cash flow from financing activities Post-retirement obligation termination buy out 16 (9 004) (39 674) (9 004) (39 674)Long-term loans repaid (91 927) (28 184) (31 927) (28 184)

Net cash flow used in financing activities (100 931) (67 858) (40 931) (67 858)

Net decrease in cash and cash equivalents (300 131) (37 637) (297 434) (37 637)Cash and cash equivalents at beginning of year 22 238 59 875 22 188 59 825

Cash and cash equivalents at end of year 13 (277 893) 22 238 (275 246) 22 188



17

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 1. Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated and company financial statements are set out below. Basis of preparation The annual financial statements are prepared in accordance with and comply with International Financial Reporting Standards (IFRS). These financial statements have been prepared on the historical cost basis as modified by the revaluation of derivative financial instruments, available-for-sale investment securities and financial assets and liabilities held-for-trading. The principal accounting policies adopted in the preparation of these annual financial statements are set out below and are consistent with those of the previous year unless otherwise stated. In the current year, the Group has applied IAS 19 ‘Employee Benefits’ (as revised in 2011) and the related consequential amendments for the first time. The amendment required the recognition of all actuarial gains and losses immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statements of financial position to reflect the full value of the plan deficit or surplus. These changes had an impact on the amounts recognised in profit or loss and other comprehensive income in prior year. All other standards and interpretations effective and adopted for the current year had no impact on the financial position, results for the year or cash flows. Property, plant and equipment Plant and equipment are included at cost less accumulated depreciation and accumulated impairment losses. Cost includes all costs directly attributable to bringing the assets to working condition for their intended use. Capital work-in-progress is carried at cost less any recognised impairment loss. Depreciation of these assets, on the same basis as other plant and equipment commences when the assets are ready for their intended use. All other fixed assets, including capitalised leased assets, are depreciated at rates calculated to write off the cost of the assets on a straight-line basis over their expected useful lives. Minor items of plant and equipment, individually costing less than N$1 000 are expensed in full in the year of acquisition in profit and loss. Appropriate direct labour and development costs are capitalised to capital work-in-progress. Depreciation is recorded by a charge to operating profit computed on a straight-line basis so as to write off the cost of the assets to their residual values over their expected useful lives. The estimated useful lives, residual values and depreciation method are reviewed at each year end, with the effect of any changes in estimate accounted for on a prospective basis. Rates of depreciation currently applied are as follows:

• Motor vehicles 20%

• Furniture and fittings 10% - 33,3%

• Computer equipment 33,3%

• Telecommunication installations and equipment 2,22% - 20%

Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Gains and losses on disposal or retirement of plant and equipment are determined by reference to the proceeds and their carrying amounts and are taken into account in determining profit and loss. Intangible assets An intangible asset is an identifiable non-monetary asset without physical substance. It includes certain costs of purchase and installation of major IT systems (including packaged software), frequencies, spectrum and the ‘085’ number. Intangible assets are initially recognised at cost if acquired separately or internally generated or at fair value as part of a business combination. If assessed as having an indefinite useful life, the intangible asset is not amortised but tested for impairment annually and impaired if necessary. If assessed as having a finite useful life, it is amortised over their useful life (generally three to seven years) using a straight-line basis and tested for impairment if there is an indication that they may be impaired. The frequencies, spectrum and the ‘085’ number is amortised over 20 years. Research costs are recognised in profit or loss when incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products or processes, is capitalised if the product or process is technically and commercially feasible and the Group has sufficient resources to complete the development. The expenditure capitalised includes the cost of material, direct labour and an appropriate proportion of overheads. Other development expenditure is recognised in the profit and loss in the period in which it is incurred. Capitalised development expenditure is stated at cost less accumulated amortisation and impairment losses. Subsequent expenditure on capitalised intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other subsequent expenditure is expensed when incurred. Amortisation is charged to profit and loss on a straight-line basis over the estimated useful lives of the intangible assets. Amortisation commences when the project generating the intangible assets has been completed.


18

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued)

Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined on a weighted average basis, and includes transport and handling costs. The cost of finished goods and work-in-progress comprises raw materials, direct labour, other direct costs, but excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business less the costs of completion and selling expenses. Where necessary, provision is made for obsolete, slow moving and defective inventories. Taxation Current tax

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax

Deferred tax is recognised on differences between carrying amounts of assets and liabilities in the financial statements and the recognised tax bases used in the computation of taxable profit and are accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences, and deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. Deferred tax liabilities are recognised for taxable temporary differences associated with the investments in subsidiaries and associates except where the Group is able to control the reversal of the temporary differences and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and that they are expected to reverse in the foreseeable future. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at tax rates that are expected to apply in the period in which the liability is settled or the asset is realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the reporting date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Financial Instruments Initial recognition and measurement

All financial instruments, including derivative instruments, are recognised on the statement of financial position. Financial instruments are initially recognised when the Group becomes party to the contractual terms of the instruments and are measured at cost, which is the fair value of the consideration given (financial asset) or received (financial liability or equity instrument) for it. Financial liabilities and equity instruments are classified according to the substance of the contractual agreement on initial recognition. Subsequent to initial recognition these instruments are measured as set out below. Fair value methods and assumptions

The fair value of financial instruments traded in an organised financial market are measured at the applicable quoted prices, adjusted for any transaction costs necessary to realise the assets or settle the liabilities. The fair value of financial instruments not traded in an organised financial market is determined using a variety of methods and assumptions that are based on market conditions and risks existing at reporting date, including independent appraisals and discounted cash flow methods. The fair value determined is adjusted for any transaction costs necessary to realise the assets or settle the liabilities. The carrying amounts of financial assets and liabilities with a maturity of less than one year are assumed to approximate their fair values due to the short-term trading cycle of these items. De-recognition of assets and liabilities

Financial assets (or a portion thereof) are derecognised when the Group realises the rights to the benefits specified in the contract, the rights expire or the company surrenders or otherwise loses control of the contractual rights that comprise the financial asset. On derecognition, the difference between the carrying amount of the financial asset and proceeds receivable and any prior adjustment to reflect fair value that has been reported in equity are included in profit or loss. Financial liabilities (or a portion thereof) are derecognised when the obligation specified in the contract is discharged, cancelled or expires. On derecognition, the difference between the carrying amount of the financial liability, including related unamortised cost, and amounts paid for it are included in profit and loss.



19

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued) Financial Instruments (continued) Effective interest rate method

The effective interest rate method is a method of calculating the amortised cost of a financial instrument and of allocating the interest income/expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments/receipts through the expected life of the financial instrument, or, where appropriate, shorter period. Financial assets

Financial assets are classified into the following categories: financial assets as at fair value through profit or loss (FVTPL), held to maturity investments, available-for-sale (AFS) financial assets and loans and receivables. The classification depends on the nature and purpose of the financial assets and is determined at the time of initial recognition. The Company’s and the Group’s principal financial assets are group-company loans, investments and loans advanced, trade and other receivables and bank and cash balances. Financial assets at FVTPL

Financial assets are classified as at FVTPL where the financial asset is either held for trading or is designated as at FVTPL. Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the financial asset. Held-to-maturity investments

Financial assets with fixed or determinable payments and fixed maturity dates that the Group has positive intent and ability to hold to maturity are classified as held-to-maturity investments. Held-to-maturity investments are recorded at amortised cost using the effective interest rate method less impairment, with revenue recognised on an effective yield basis. Available-for-sale financial assets

Unlisted shares held by the Group, whose fair value cannot be reliably determined are classified as being AFS and are stated at cost. These assets are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after initial recognition of the asset, the estimated future cash flows of the investment have been impacted. Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest rate method less any impairment. Interest income is recognised by applying the effective interest rate except for short-term receivables when the recognition of interest would be immaterial. Impairment of financial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each reporting date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. Trade and other receivables originated by the Group are stated at their cost less a provision for impairment. An estimate of impairment is made based on a review of all outstanding amounts at reporting date, and posted against a provision account. When the trade receivable is uncollectible, it is written off against the provision account. Bad debts are written off during the period in which they are identified. Bank and cash balances

Bank and cash balances represent funds on call and short-term deposits all of which are available to the Group unless otherwise stated. Classification of debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contract agreement. Financial liabilities

Financial liabilities are classified as either financial liabilities at FVTPL or other financial liabilities. The Group’s principal financial liabilities are interest-bearing debt, non-interest-bearing debt, trade and other payables, bank overdrafts and other short-term borrowings:


20

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued) Financial Instruments (continued) Financial liabilities (continued) Financial liabilities at FVTPL

Financial liabilities are classified as FVTPL where the financial liability is either held for trading or is designated as at FVPTL. The Group has no financial liabilities held for trading under this category. A financial liability is classified as held for trading if:

• It has been incurred principally for the purpose of repurchasing in the near future; or

• It is a derivative that is not designated and effective as a hedging instrument. Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. Other financial liabilities

Interest-bearing debt

Interest-bearing debt is recognised at amortised cost, namely original debt less principal repayments and amortisations. Non-interest-bearing debt

Non-interest-bearing debt is recognised at original debt less principal repayments.

Trade and other payables

Trade and other payables are stated at cost. Bank overdrafts and other short-term borrowings

Interest-bearing bank overdrafts and other short-term borrowings are recorded at the proceeds received, net of direct issue costs. Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue cost. Derivative financial instruments

Derivative financial instruments, principally forward foreign exchange contracts, interest rate and currency swap agreements are used by the Group in its management of financial risks. Therefore, the Group’s objective in using derivative financial instruments is to reduce the uncertainty over future cash flows arising from movements in currency and interest rates. The risks being hedged are exchange losses due to unfavourable movements between the Namibian dollar and foreign currencies and the movements in interest rates. Currency and interest exposure is managed within Board approved policies and guidelines. As a matter of principle, the Group does not enter into derivative contracts for speculative purposes. Derivative financial instruments are initially recorded at cost and are re-measured at subsequent reporting dates. The fair value of foreign exchange contracts, interest and currency rate swaps represents the estimated amounts the Group would receive, should the contracts be terminated at the reporting date, thereby taking into account the unrealised gains or losses. Cash and cash equivalents Cash and cash equivalents are carried in the statement of financial position at cost. For the purpose of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks and investments in money market instruments, net of bank overdrafts. In the statement of financial position, bank overdrafts are included in borrowings in current liabilities. Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Government grants Government grants are not recognised until there is reasonable assurance that the Group will comply with the conditions attaching to them and that the grants will be received.



21

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued) Government grants (continued) Government grants are recognised in profit or loss on a systematic basis over the period in which the Group recognises as expenses the related costs for which the grants are intended to compensate. Specifically, government grants whose primary condition is that the Group should purchase, construct or otherwise acquire non-current assets are recognised as deferred revenue in the statement of financial position and transferred to profit or loss on a systematic and rational basis over the useful lives of the related assets. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Group with no future related costs are recognised in profit or loss in the period in which they become receivable. The benefit of a government loan at a below-market rate of interest is treated as a government grant, measured as the difference between proceeds received and the fair value of the loan based on prevailing market interest rates. Leases A Group company is the lessee

Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. A Group company is the lessor

When assets are leased out under a finance lease, the present value of the lease payments is recognised as a receivable. The difference between the gross receivable and the present value of the receivable is recognised as unearned finance income. Lease income is recognised when significant risks and rewards of ownership is transferred to the lessee. Operating lease payments are recognised as an expense in profit or loss on a straight line basis over the lease term. Dividends Dividends are recorded in the Group’s financial statements in the period in which they are declared by the board of directors. Post-employment benefit costs Retirement benefits

The policy of the Group is to provide retirement benefits for its employees, the assets of which are held in a separate trustee administered fund. The contribution paid by the companies in the Group to fund obligations for the payment of retirement benefits is charged to profit or loss in the year incurred. The Napotel Pension Fund, which is a defined contribution fund, covers all the company employees and is governed by the Namibian Pension Funds Act. Powercom (Proprietary) Limited is a participating employer of Benchmark Retirement Fund administered by Retirement Fund Solutions, which is a defined contribution fund governed by the Namibian Pension Funds Act. Defined contribution plans

Contributions in respect of defined contribution plans are recognised as an expense in the year to which they relate. Medical benefits

Qualifying employees in the Group companies are entitled to certain post-retirement medical benefits. The Group’s obligation for post-retirement medical aid benefits to past and current employees is actuarially determined in respect of current and retired employees and is provided for in full. The cost of providing the benefits is determined using the projected unit credit method, with actuarial valuations being carried out at each reporting date. The movement has been expensed in profit or loss. Revenue Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration receivable, excluding discounts, rebates, and other sales taxes or duty. The following specific recognition criteria must also be met before revenue is recognised: Post-paid products

Post-paid products may include deliverables such as a SIM-card, a handset and a fixed period service and are defined as arrangements with multiple deliverables. The arrangement consideration is allocated to each deliverable based on the fair value of each deliverable on a standalone basis as a percentage of the aggregated fair value of the individual deliverables.


22

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued) Revenue (continued) Post-paid products (continued)

Revenue allocated to the identified deliverables in each revenue arrangement and the cost applicable to these identified deliverables are recognised based on the same recognition criteria of the individual deliverable at the time the product or service is delivered.

• Revenue from connect packages, which includes activations, SIM-cards and phone, is recognised over the period of the contract.

• Revenue from SIM-cards, representing activation fees, is recognised upon activation of the SIM-card by the post-paid customer.

• Revenue from handsets is recognised when the product is delivered.

• Monthly service revenue received from the customer is recognised in the period in which the service is rendered.

• Airtime revenue is recognised on the usage basis. Pre-paid products

Pre-paid products may include deliverables such as a SIM-card, a handset and airtime and are defined as arrangements with multiple deliverables. The arrangement consideration is allocated to each deliverable based on the fair value of each deliverable on a standalone basis as a percentage of the aggregated fair value of the individual deliverables. Revenue allocated to the identified deliverables in each revenue arrangement and the cost applicable to these identified deliverables are recognised based on the same recognition criteria of the individual deliverable at the time the product or service is delivered. - Revenue from SIM-cards, representing activation fees, is recognised upon activation of the SIM-card by the pre-paid customer. - Airtime revenue is recognised on the usage basis. The unused airtime is deferred in full. - Deferred revenue related to unused airtime is recognised when utilised by the customer. Upon termination of the customer contract, all deferred revenue for unused airtime is recognised in revenue. Deferred revenue and costs related to unactivated starter packs, which do not contain any expiry date, is recognised in the period when the probability of these starter packs being activated becomes remote. Data service revenue

Revenue net of discounts, from data services is recognised when the Group has performed the related service and depending on the nature of the service, is recognised either at the gross amount billed to the customer or the amount receivable by the Group as commission for facilitating the service. Prepayments received for services rendered is deferred and released to profit and loss as services are rendered. Sale of equipment

Revenue from equipment sales is recognised when the product is delivered and acceptance has taken place. Revenue from equipment sales to third party service providers is recognised when delivery is accepted. No rights of return exist on sale to third party service providers. Prepayments received for the sale of goods are deferred until such time that the product is delivered and acceptance has taken place. Other revenue and income:

Interconnect and international revenue

Interconnect and international revenue is recognised on the usage basis. Interest

Revenue is recognised as interest accrues (using the effective interest method that is the rate that exactly discounts estimated future cash receipts through the expected life of the financial instrument to the net carrying amount of the financial asset). Rental income

Rental income arising from leasing out space on the Company’s base stations to other operators on an operating lease basis and other equipment is recognised on a straight-line basis over the lease term. Basis of consolidation The consolidated financial statements incorporate the financial statements of the company and enterprises controlled by the company. Control is achieved when the Company:

• has power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

• has the ability to use its power to affect its returns.



23

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued) Basis of consolidation (continued)

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:

• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• potential voting rights held by the Company, other vote holders or other parties;

• rights arising from other contractual arrangements; and

• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the holding company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the company controls another entity. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Company. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are recognised in profit or loss as incurred. Identifiable assets acquired and liabilities that meet the conditions for recognition, and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated and considered an impairment indicator of the asset transferred. Where necessary, adjustments are made to the financial statements of the subsidiaries to bring their accounting policies in line with those used by other members of the Group.

Transactions and minority interest

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the statement of comprehensive income. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or when the investment is classified as held for sale. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The investment (including goodwill) is tested for impairment when necessary by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the statement of comprehensive income and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.


24


Associates (continued)

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognised in profit and loss. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed in subsequent periods. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Foreign currency translation: Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Namibia Dollar (N$) rounded to the nearest thousand which is the Company’s functional and presentation currency. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the available-for-sale reserve in equity. Borrowings Borrowing costs that relate to acquisition, construction or production of qualifying assets (i.e. those assets which take a considerable period of time before they are ready for sale or their intended use) are capitalised as part of the costs of those assets. Any interest earned on borrowed funds pending application on the qualifying assets’ construction, production or acquisition is set off against the borrowing costs ultimately capitalised as part of the cost of the qualifying asset. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are expensed when incurred.



23


The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:

• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• potential voting rights held by the Company, other vote holders or other parties;

• rights arising from other contractual arrangements; and

• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance. When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation. Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the holding company has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the company controls another entity. Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control over the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Company. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange. Costs directly attributable to the acquisition are recognised in profit or loss as incurred. Identifiable assets acquired and liabilities that meet the conditions for recognition, and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. Inter-company transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated and considered an impairment indicator of the asset transferred. Where necessary, adjustments are made to the financial statements of the subsidiaries to bring their accounting policies in line with those used by other members of the Group.

Transactions and minority interest

The Group applies a policy of treating transactions with minority interests as transactions with parties external to the Group. Disposals to minority interests result in gains and losses for the Group that are recorded in the statement of comprehensive income. Purchases from minority interests result in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary. Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. An investment in an associate is accounted for using the equity method from the date on which the investee becomes an associate. The Group discontinues the use of the equity method from the date when the investment ceases to be an associate or when the investment is classified as held for sale. On acquisition of the investment in an associate, any excess of the cost of the investment over the Group’s share of the net fair value of the identifiable assets and liabilities of the investee is recognised as goodwill, which is included within the carrying amount of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognised immediately in profit or loss in the period in which the investment is acquired. The investment (including goodwill) is tested for impairment when necessary by comparing its recoverable amount (higher of value in use and fair value less costs to sell) with its carrying amount. Any impairment loss recognised forms part of the carrying amount of the investment. Any reversal of that impairment loss is recognised to the extent that the recoverable amount of the investment subsequently increases. The Group’s share of its associates’ post-acquisition profits or losses is recognised in the statement of comprehensive income and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.


24


Associates (continued)

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses arising in investments in associates are recognised in profit and loss. Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary/associate at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed in subsequent periods. For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination. A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal. Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date. Foreign currency translation: Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in Namibia Dollar (N$) rounded to the nearest thousand which is the Company’s functional and presentation currency. Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges. Changes in the fair value of monetary securities denominated in foreign currency classified as available for sale are analysed between translation differences resulting from changes in the amortised cost of the security, and other changes in the carrying amount of the security. Translation differences related to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in equity. Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale are included in the available-for-sale reserve in equity. Borrowings Borrowing costs that relate to acquisition, construction or production of qualifying assets (i.e. those assets which take a considerable period of time before they are ready for sale or their intended use) are capitalised as part of the costs of those assets. Any interest earned on borrowed funds pending application on the qualifying assets’ construction, production or acquisition is set off against the borrowing costs ultimately capitalised as part of the cost of the qualifying asset. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation. All other borrowing costs are expensed when incurred.



25

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued) Critical accounting estimates and judgements The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed below: Allowance for doubtful debts

Each debtor is assessed to determine recoverability of debt. Provision is made for all those debtors where evidence indicates that recoverability is doubtful. Accounts are written off when they are delinquent. Discount rates

Discount rates used to calculate discounted cash flows are based on prevailing market related interest rates. Fair value estimation

The fair value of financial instruments traded in active markets is based on quoted market prices at the reporting date. The fair value of non-traded instruments is determined by applying the prevailing market discount rate on the nominal value of the instrument. Asset lives and residual values

Plant and equipment are depreciated over its useful life taking into account residual values, where appropriate. The actual lives of the assets and residual values are assessed annually and may vary depending on a number of factors. In reassessing asset lives, factors such as technological innovation and maintenance programmes are taken into account. Residual value assessments consider issues such as future market conditions, the remaining life of the asset and projected disposal values. During the course of the year under review, a detailed assessment was done on the useful lives of the telecommunications network assets. Changes were made to certain of the asset classes to more appropriately reflect the current condition and use of the asset. The impact of these changes will be prospectively accounted for. The estimated useful life of the Powercom billing system was reassessed to be 2 years as a result of the future plans of the company. The change in estimate resulted in accelerated depreciation and was applied prospectively from 01 January 2013. Provision for post-retirement medical aid benefits

Post-retirement medical aid benefit provision is based on an actuarial valuation performed by independent actuaries. The discount rate used is based on the current long-term bond yield, gross of tax. All actuarial gains and losses are recognised in full. Estimated impairment of goodwill

The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy. The recoverable amounts of cash-generating units have been determined based on value-in-use calculations. These calculations require the use of estimates. There was no goodwill on the acquisition of 100% of the shares in Powercom (Proprietary) Limited. Goodwill in 2012 arose on the acquisition of 100% of the shares in Communitel Telecommunications (Proprietary) Limited (“Communitel”). Due to Neotel (Proprietary) Limited (“Neotel”) refinancing the entire shareholder loan accounts through the issuance of Class B preference shares the goodwill was written off. Recoverability of the investments in foreign ventures Investment in Communitel (“Ultimately in Neotel”)

Neotel holds the second telecom fixed line operator license in South Africa, and the company is still in a start-up phase. Telecom Namibia holds an effective interest in this company of 10.5% (2012: 10.5%) and has so far invested an amount of N$428 million (2012: N$428 million) in this venture as part of its capital contribution as an indirect shareholder. Accumulative interest earned and other costs incurred on the intergroup shareholders loans amounted to N$99 million (2012: N$99 million). During the course of the year there was no impairment charge raised (2012: N$13 million) against the cost of the ordinary share investment in the subsidiary due to Neotel refinancing and restructuring the group loans. Interest as a result has also been waived on the intergroup loans. Telecom Namibia maintains confidence in the strategic importance of the investment in Neotel, buoyed by the turnaround in EBIT during the current financial year, and retains a long- term view on the investment. Telecom management and the Board continue to monitor the performance of this significant investment and believe that the carrying value in the company of the investment is appropriate. At a group level, the accumulated share of losses of N$527 million (2012: N$527 million) has been equity accounted for, reducing the carrying value of the investment to Nil (2012: N$ Nil).


26

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 1. Summary of significant accounting policies (continued) Recoverability of the investments in foreign ventures (continued) Investment in Communitel (“Ultimately in Neotel”) (continued)

Should the company not continue to improve its performance as currently noted in support of the directors’ current assessment of recoverability, the future may turn out to be different resulting in material adjustments to the financial statements of Telecom Namibia Limited.

Assets held for sale

Telecom Namibia concluded a sale agreement of its 44% shareholding in Mundo Startel (‘MST’) Angola in September 2012. The implementation of the agreement of sale was completed in 2013. However due to the regulatory and administrative delays, the sale is only expected to be concluded in the 2014 financial year. During the current financial year, impairment charges of N$49.1 million (2012: N$50.5 million) and N$99.7 million (2012: Nil) were raised in the Group and company respectively against the carrying values of the preference shares of U$12 million due to the uncertainty regarding the recoverability of the preference shares. The investment in the preference shares has been fully impaired. As the investment is denominated in foreign currency, namely U$, it has been restated to the closing exchange rate. The Groups fair value is reflected after the share of accumulated losses of the associate of N$50 million (2012: N$50 million). The sale of MST Angola is still reflected as an asset held for sale as the factors and or circumstances preventing the sale from being completed are not within management’s and Telecom’s control. The investment is accounted for using the equity method as Telecom Namibia has representation on the board of MST Angola.



27

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 2. Segment information 2.1 Products and services from which reportable segments derive their revenues Information reported to the Managing Director for the purposes of resource allocation and assessment of segment performance focuses on types of goods and services delivered/provided. Operating segments are reported in a manner consistent with internal reporting. The Group’s reportable segments under IFRS 8 are as follows;

Voice

Post-paid services - Line rental

- Value added services

- Calls

- VSAT

- CDMA voice

- Telephone installations

- ISDN Pre-paid services - Fixed voice

Interconnection - Local - International Mobile

- CDMA voice (Post-paid & Pre-paid) - CDMA data (EVDO)

- GSM Data - Backhauling services: Mobile operators

- Digicon services: Mobile operators - Telematics - International/National express routes - Metro Ethernet - Foreign income: Data services

IP services - Internet access services

- Broadband access networks, fixed and mobile - IP/MPLS

Infrastructure and Others - Customer Premises Equipment

- Directories - Site sharing & Co-location - Structural cabling & in/outdoor extensions

IT services - iWay services

- Fax to e-mail service - E-mail to fax service


28

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 2. Segment information (continued) 2.2 Segment revenue and results The following is an analysis of the Group’s revenue and results from existing operations by reportable segments: Segment Revenue Segment Profit

2013 2012 2013 �2012

N$’000 N$’000 N$’000 N$’000

Voice 456 700 516 424 325 313 394 632

Mobile 65 846 44 627 64 604 41 808

Data 278 818 217 454 277 979 217 098

Infrastructure and others 142 147 108 840 79 459 77 637

IP services 359 094 324 232 255 908 264 963

IT services 9 072 11 399 8 044 10 785

Total 1 311 677 1 222 976 1 011 307 1 006 923

Other operating income 37 582 44 759

Administrative expenses (773 796) (702 549)

Impairment loss (49 148) --

Regulatory levies (22 204) --

Other operating expenses (343 915) (232 363)

Operating (loss)/profit (140 174) 116 770Finance income 746 18 439

Finance costs (53 529) (41 451)

Share of results of associate after tax -- (16 440)

(Loss)/profit before taxation (192 957) 77 318Taxation 25 348 (24 964)

(Loss)/profit for the year (167 609) 52 354

Segment revenue reported above represents revenue generated from external customers. There were no intersegment sales in the current year (2012: Nil). Total group revenues for the year current financial year are N$90.7 million (2012: Nil). The accounting policies of the reportable segments are the same as those of the Group. Segment profits represent the profit generated by each segment and exclude the allocation of central administration costs, directors’ salaries, share of profits of associate, investment income, finance costs and income tax expense. 2.3 Segment assets and liabilities The Group’s assets are utilised by all segments in generating the respective segments’ revenue streams. As such they are incapable of being allocated to any specific operating segments. Similarly, borrowings are utilised for the whole Group’s operations and cannot be definitively allocated to any operating segments. No segmentation is therefore provided for the Group’s assets and liabilities.



29

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 3. Property, plant and equipment Group

�Telecommunication installations and

equipment�Furniture and

fittings �Computer

equipment�Capital work-

in- progress �Motor vehicles

Leasehold improvements �Total

N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000

Year ended 30 September 2013

Cost

Opening balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135

Additions 116 797 4 768 3 293 320 505 -- -- 445 363

Acquisition of subsidiary (Note 27)

149 286 162 -- 4 260 -- 106 153 814

Capitalised borrowing costs -- -- -- 7 616 -- -- 7 616

Disposals (28 825) (2 052) (14 964) -- -- -- (45 841)

Scrappings (17 321) -- -- -- (876) -- (18 197)

Transfer to intangible assets -- -- -- (10 722) -- -- (10 722)

Transfers between asset classes 140 238 1 782 -- (142 020) -- -- --

Closing balance 3 139 602 48 588 5 011 439 108 753 106 3 633 168

Accumulated depreciation Opening balance 1 457 704 36 002 13 256 -- 1 629 -- 1 508 591

Depreciation charge 252 995 4 083 2 413 -- -- 106 259 597

Depreciation on disposals (12 703) (2 042) (14 943) -- -- -- (29 688)

Depreciation on scrappings (6 957) -- -- -- (876) -- (7 833)

Closing balance 1 691 039 38 043 726 -- 753 106 1 730 667

Closing book value 1 448 563 10 545 4 285 439 108 -- -- 1 902 501

Opening book value 1 321 723 7 926 3 426 259 469 -- -- 1 592 544

Group







N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


Cost

Opening balance 2 624 611 40 496 16 012 258 851 1 629 -- 2 941 599

Additions 174 513 3 558 2 124 54 921 -- -- 235 116


Disposals (26 292) (126) (1 454) -- -- -- (27 872)

Scrappings (51 382) -- -- -- -- -- (51 382)


Transfers between asset classes 57 977 -- -- (57 977) -- -- --

Closing balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135


Depreciation charge 172 256 2 287 2 407 -- -- -- 176 950

Depreciation on disposals (11 643) (108) (1 449) -- -- -- (13 200)

Depreciation on scrappings (45 684) -- -- -- -- -- (45 684)

Closing balance 1 457 704 36 002 13 256 -- 1 629 -- 1 508 591




30

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 3. Property, plant and equipment (continued) Company







N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


Cost

Opening balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135

Additions 116 790 4 768 3 293 320 505 -- -- 445 356


Disposals (28 825) (2 052) (14 964) -- -- -- (45 841)

Disposal to company in group (82 033) (82 033)

Scrappings (17 321) -- -- -- (876) -- (18 197)

Transfer to intangible asset -- -- -- (10 722) -- -- (10 722)


Closing balance 2 908 276 48 426 5 011 434 848 753 -- 3 397 314




Depreciation on disposal to company in group

(51 838) -- -- -- ----

(51 838)


Closing balance 1 570 270 37 989 726 -- 753 -- 1 609 738



The West Africa Coast Cable System (‘WACS’) was commissioned for use in May 2012 and was capitalised during the prior year.

Company







N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


Cost

Opening balance 2 624 611 40 496 16 012 258 851 1 629 -- 2 941 599

Additions 174 513 3 558 2 124 54 921 -- -- 235 116


Disposals (26 292) (126) (1 454) -- -- -- (27 872)

Scrappings (51 382) -- -- -- -- -- (51 382)



Closing balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135





Closing balance 1 457 704 36 002 13 256 -- 1 629 -- 1 508 591





29

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 3. Property, plant and equipment Group







N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


Cost

Opening balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135

Additions 116 797 4 768 3 293 320 505 -- -- 445 363

Acquisition of subsidiary (Note 27)

149 286 162 -- 4 260 -- 106 153 814


Disposals (28 825) (2 052) (14 964) -- -- -- (45 841)

Scrappings (17 321) -- -- -- (876) -- (18 197)



Closing balance 3 139 602 48 588 5 011 439 108 753 106 3 633 168


Depreciation charge 252 995 4 083 2 413 -- -- 106 259 597



Closing balance 1 691 039 38 043 726 -- 753 106 1 730 667



Group







N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


Cost

Opening balance 2 624 611 40 496 16 012 258 851 1 629 -- 2 941 599

Additions 174 513 3 558 2 124 54 921 -- -- 235 116


Disposals (26 292) (126) (1 454) -- -- -- (27 872)

Scrappings (51 382) -- -- -- -- -- (51 382)



Closing balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135





Closing balance 1 457 704 36 002 13 256 -- 1 629 -- 1 508 591




30

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 3. Property, plant and equipment (continued) Company







N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


Cost

Opening balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135

Additions 116 790 4 768 3 293 320 505 -- -- 445 356


Disposals (28 825) (2 052) (14 964) -- -- -- (45 841)

Disposal to company in group (82 033) (82 033)

Scrappings (17 321) -- -- -- (876) -- (18 197)

Transfer to intangible asset -- -- -- (10 722) -- -- (10 722)


Closing balance 2 908 276 48 426 5 011 434 848 753 -- 3 397 314




Depreciation on disposal to company in group

(51 838) -- -- -- ----

(51 838)


Closing balance 1 570 270 37 989 726 -- 753 -- 1 609 738



The West Africa Coast Cable System (‘WACS’) was commissioned for use in May 2012 and was capitalised during the prior year.

Company







N$’000 N$’000 N$’000 N$’000 N$’000 N$’000 N$’000


Cost

Opening balance 2 624 611 40 496 16 012 258 851 1 629 -- 2 941 599

Additions 174 513 3 558 2 124 54 921 -- -- 235 116


Disposals (26 292) (126) (1 454) -- -- -- (27 872)

Scrappings (51 382) -- -- -- -- -- (51 382)



Closing balance 2 779 427 43 928 16 682 259 469 1 629 -- 3 101 135





Closing balance 1 457 704 36 002 13 256 -- 1 629 -- 1 508 591





31

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued)

Group

2013�N$’000

Group 2012

�N$’000

Company 2013

�N$’000

Company 2012

�N$’000 4. Intangible assets Cost Software and licenses 211 300 179 605 192 224 179 605Frequency, spectrum and number 27 832 -- -- --

239 132 179 605 192 224 179 605

Accumulated amortisation Software and licenses 165 024 133 606 148 683 133 606Frequency, spectrum and number -- -- -- --

165 024 133 606 148 683 133 606

Closing book value Software and licenses 46 276 45 999 43 541 45 999Frequency, spectrum and number 27 832 -- -- --

74 108 45 999 43 541 45 999

Movement of intangible assets Opening book value 45 999 51 535 45 999 51 535Additions 5 387 918 5 387 918Acquisition of subsidiary (Note 27) 46 908 -- -- --Disposals (3 490) -- (3 490) --Transfer from plant and equipment 10 722 2 189 10 722 2 189Amortisation (31 418) (8 643) (15 077) (8 643)

Closing book value 74 108 45 999 43 541 45 999

There were no encumbrances on any of the Company’s and Group’s intangible assets. Software acquired from Powercom (Proprietary) Limited of N$19 million relates to the mobile billing system and related software. The estimated useful life was reassessed to be 2 years as a result of the future plans of the company. The change in estimate resulted in accelerated depreciation and was applied prospectively from 01 January 2013. On 28 November 2012, Telecom Namibia acquired the entire shareholding of Powercom (Proprietary) Limited for N$2. At the acquisition date, an intangible asset of N$27.8 million attributable to the ‘085’ number, frequencies and spectrum obtained from Powercom (Proprietary) Limited was raised on consolidation. The expected useful life was assessed to be 20 years commencing on the date when the new billing system is fully implemented in Telecom Namibia.

Group 2013

N$’000

Group 2012

N$’000

5. Goodwill Cost 16 990 16 990 Accumulated impairment losses (16 990) (16 990) -- -- Accumulated impairment losses Opening balance (16 990) -- Impairment losses recognised in the year -- (16 990) Closing balance (16 990) (16 990) There was no goodwill on the acquisition of 100% of the shares in Powercom (Proprietary) Limited.

Goodwill in the prior year arose on the acquisition of 100% of the shares in Communitel Telecommunications (Proprietary) Limited. Due to Neotel(Proprietary) Limited refinancing the entire shareholder loan accounts through the issuance of Class B preference shares, the goodwill was impaired.


32


Company

2013 N$’000

Company 2012

N$000 6. Investment in subsidiaries Summary of investments: Shares at cost - Ordinary shares 12 744 12 744- Preference shares 125 000 125 000Loans advanced 549 945 402 352Impairment (12 744) (12 744)

Net investment 674 945 527 352

Directors valuation of unlisted investment 674 945 527 352

Reflected as follows Long-term Investment in subsidiary 527 386 527 352Amounts owing by fellow subsidiaries 60 000 --

587 386 527 352

Short-term Amounts owing to fellow subsidiaries 87 559 --

Reconciliation of movements Opening balance 527 352 527 308Loans advanced 147 593 44

Closing balance 674 945 527 352

6.1 Investment in Communitel Telecommunications (Proprietary) Limited: Ordinary shares -- --

Opening balance 12 744 12 744Impairment charge (12 744) (12 744)

Preference shares 125 000 125 000

Loans 402 386 402 352

Opening balance Advanced during the year

402 352 34

402 30844

Balance at end of year 527 386 527 352

Telecom Namibia holds a 100% interest in Communitel Telecommunications (Proprietary) Limited, an investment holding company. The subsidiary is registered in the Republic of South Africa with an issued share capital of 40 ordinary shares of ZAR 1.00 each. The loans advanced are interest free and have no fixed terms of repayment. The preference shares are redeemable and attract a cumulative coupon rate equivalent to 75% of the prevailing Standard Bank South Africa Prime Lending rate.

Company 2013

N$’000

Company 2012

N$0006.2 Investment in Powercom (Proprietary) Limited: Disclosed as related party loans (Note 12) Loans advanced Non-current 60 000 --Current 87 559 -- 147 559 --

On 28 November 2012, Telecom Namibia acquired a 100% interest in Powercom (Proprietary) Limited, a mobile telecommunication services company for N$2. The subsidiary is registered in Namibia with an issued share capital of 1 400 ordinary shares of N$0.01 each. As a result of the acquisition, Telecom Namibia is expected to be the leading provider of fixed mobile converged products and improve its mobile business. Final numbers have been used to consolidate as the measurement period has passed (1 year from 28 November 2012). Refer to Note 27 for further information on the business acquisition. The fair value of trade and other receivables acquired was N$13 million and included trade receivables with a fair value of N$10 million. The gross contractual amount for trade receivables due is N$25 million of which N$15 million is expected to be uncollectable.



31


Group

2013�N$’000

Group 2012

�N$’000

Company 2013

�N$’000

Company 2012

�N$’000 4. Intangible assets Cost Software and licenses 211 300 179 605 192 224 179 605Frequency, spectrum and number 27 832 -- -- --

239 132 179 605 192 224 179 605

Accumulated amortisation Software and licenses 165 024 133 606 148 683 133 606Frequency, spectrum and number -- -- -- --

165 024 133 606 148 683 133 606

Closing book value Software and licenses 46 276 45 999 43 541 45 999Frequency, spectrum and number 27 832 -- -- --

74 108 45 999 43 541 45 999

Movement of intangible assets Opening book value 45 999 51 535 45 999 51 535Additions 5 387 918 5 387 918Acquisition of subsidiary (Note 27) 46 908 -- -- --Disposals (3 490) -- (3 490) --Transfer from plant and equipment 10 722 2 189 10 722 2 189Amortisation (31 418) (8 643) (15 077) (8 643)

Closing book value 74 108 45 999 43 541 45 999

There were no encumbrances on any of the Company’s and Group’s intangible assets. Software acquired from Powercom (Proprietary) Limited of N$19 million relates to the mobile billing system and related software. The estimated useful life was reassessed to be 2 years as a result of the future plans of the company. The change in estimate resulted in accelerated depreciation and was applied prospectively from 01 January 2013. On 28 November 2012, Telecom Namibia acquired the entire shareholding of Powercom (Proprietary) Limited for N$2. At the acquisition date, an intangible asset of N$27.8 million attributable to the ‘085’ number, frequencies and spectrum obtained from Powercom (Proprietary) Limited was raised on consolidation. The expected useful life was assessed to be 20 years commencing on the date when the new billing system is fully implemented in Telecom Namibia.

Group 2013

N$’000

Group 2012

N$’000

5. Goodwill Cost 16 990 16 990 Accumulated impairment losses (16 990) (16 990) -- -- Accumulated impairment losses Opening balance (16 990) -- Impairment losses recognised in the year -- (16 990) Closing balance (16 990) (16 990) There was no goodwill on the acquisition of 100% of the shares in Powercom (Proprietary) Limited.

Goodwill in the prior year arose on the acquisition of 100% of the shares in Communitel Telecommunications (Proprietary) Limited. Due to Neotel(Proprietary) Limited refinancing the entire shareholder loan accounts through the issuance of Class B preference shares, the goodwill was impaired.


32


Company

2013 N$’000

Company 2012

N$000 6. Investment in subsidiaries Summary of investments: Shares at cost - Ordinary shares 12 744 12 744- Preference shares 125 000 125 000Loans advanced 549 945 402 352Impairment (12 744) (12 744)

Net investment 674 945 527 352

Directors valuation of unlisted investment 674 945 527 352

Reflected as follows Long-term Investment in subsidiary 527 386 527 352Amounts owing by fellow subsidiaries 60 000 --

587 386 527 352

Short-term Amounts owing to fellow subsidiaries 87 559 --

Reconciliation of movements Opening balance 527 352 527 308Loans advanced 147 593 44

Closing balance 674 945 527 352

6.1 Investment in Communitel Telecommunications (Proprietary) Limited: Ordinary shares -- --

Opening balance 12 744 12 744Impairment charge (12 744) (12 744)

Preference shares 125 000 125 000

Loans 402 386 402 352

Opening balance Advanced during the year

402 352 34

402 30844

Balance at end of year 527 386 527 352

Telecom Namibia holds a 100% interest in Communitel Telecommunications (Proprietary) Limited, an investment holding company. The subsidiary is registered in the Republic of South Africa with an issued share capital of 40 ordinary shares of ZAR 1.00 each. The loans advanced are interest free and have no fixed terms of repayment. The preference shares are redeemable and attract a cumulative coupon rate equivalent to 75% of the prevailing Standard Bank South Africa Prime Lending rate.

Company 2013

N$’000

Company 2012

N$0006.2 Investment in Powercom (Proprietary) Limited: Disclosed as related party loans (Note 12) Loans advanced Non-current 60 000 --Current 87 559 -- 147 559 --

On 28 November 2012, Telecom Namibia acquired a 100% interest in Powercom (Proprietary) Limited, a mobile telecommunication services company for N$2. The subsidiary is registered in Namibia with an issued share capital of 1 400 ordinary shares of N$0.01 each. As a result of the acquisition, Telecom Namibia is expected to be the leading provider of fixed mobile converged products and improve its mobile business. Final numbers have been used to consolidate as the measurement period has passed (1 year from 28 November 2012). Refer to Note 27 for further information on the business acquisition. The fair value of trade and other receivables acquired was N$13 million and included trade receivables with a fair value of N$10 million. The gross contractual amount for trade receivables due is N$25 million of which N$15 million is expected to be uncollectable.



33


Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company 2012

N$’0007. Investment in associates Summary of investments: Shares at cost - Ordinary shares -- -- -- --- Preference shares 527 434 527 434 -- --Share of results (527 434) (527 434) -- --

Net investment -- -- -- --

Directors valuation of unlisted investment 527 434 527 434 -- --

Reconciliation of movements Opening balance -- -- -- --Loans advanced -- 16 440 -- --Loans repaid -- (420 194) -- --Share of losses -- (16 440) -- --Preference shares acquired -- 420 194 -- --

Closing balance -- -- -- --

7.1 Investment in Mundo Startel SARL: The company holds a 44% interest in an associate, Mundo Startel SARL. The company is registered in the Republic of Angola. Its principal business activities are the provision of telecommunication and information technology services to the public and private sectors in Angola. This investment was reclassified as an investment held for sale (see note: 14).��

7.2 Investment in Sepco Communications (Proprietary) Limited:

The subsidiary, Communitel Telecommunications (Proprietary) Limited holds a 20.6% (2012: 24.5%) interest in an associate, Sepco Communications (Proprietary) Limited which is registered in the Republic of South Africa. Sepco in turn holds 51% of the shares in Neotel (Proprietary) Limited (“Neotel”), a company that is licensed to provide information, communication and technology services in the Republic of South Africa. During 2012, the shareholders loans were repaid and Class B preference shares were subscribed to. The Group envisages recovering the full cost of the investment made in Neotel(Proprietary) Limited to date. The associate is accounted for using the equity method in these consolidated financial statements. Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company2012

N$’000 Comprising:

Ordinary shares at cost -- -- -- --

Preference shares at cost (527 435) 527 435 -- --Share of results (527 435) (527 435) -- --

-- -- -- --

Reconciliation of movements Opening balance -- -- -- --Loans repaid -- (403 754) -- --Preference shares acquired -- 420 194 -- --Share of losses -- (16 440) -- --



34


Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company 2012

N$’000

7. Investment in associates (continued)

7.2 Investment in Sepco Communications (Proprietary) Limited (continued)

Set out below is the summarised financial information of the associate, Neotel as at 30 September 2013:

Assets 5 539 000 5 203 000 -- --Liabilities (7 108 000) (6 592 000) -- --

Revenue 921 000 1 522 000 -- --

Loss after tax for the year 4 790 278 000 -- -- 8. Derivative financial instruments Comprises: Interest rate swaps Opening balance 4 331 7 016 4 331 7 016Recognised in profit or loss (1 715) (2 685) (1 715) (2 685)

Closing balance 2 616 4 331 2 616 4 331

Reflected as follows Short term assets 2 616 4 331 2 616 4 331

As at 30 September 2013, the Group had interest rate and foreign currency swap agreements in terms of which certain of the loans denominated in foreign currencies with fixed interest rates were converted to the South African Rand at floating rates ranging between 10,96% to 12,25% (2012 : 10,96% to 12,25%). Gains and losses recognised on interest rate swap contracts are recognised in profit or loss until the repayment of the bank borrowings. As the underlying loans are due for repayment during the next financial year, these derivatives are deemed short-term in nature. 9. Finance lease receivable Gross receivables from finance leases: Not later than 1 year 15 054 15 871 15 681 15 871Later than 1 year and not later than 5 years 25 832 5 986 19 780 5 986

40 886 21 857 35 461 21 857Unearned future finance income on finance leases (512) (471) (512) (471)

Net investment in finance leases 40 374 21 386 34 949 21 386

The net investment in finance leases may be analysed as follows: Not later than 1 year 15 012 15 753 15 639 15 753Later than 1 year and not later than 5 years 25 362 5 633 19 310 5 633

40 374 21 386 34 949 21 386


33


Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company 2012









2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company2012




-- -- -- --




33


Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company 2012









2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company2012




-- -- -- --





33


Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company 2012









2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company2012




-- -- -- --




34


Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company 2012

N$’000





Revenue 921 000 1 522 000 -- --


Closing balance 2 616 4 331 2 616 4 331






40 374 21 386 34 949 21 386


34


Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company 2012

N$’000





Revenue 921 000 1 522 000 -- --


Closing balance 2 616 4 331 2 616 4 331






40 374 21 386 34 949 21 386



35

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 9. Finance lease receivable (continued) The Group provides PABX’s for rental to customers on a finance lease basis for 5 year periods. Lease rentals are based on the prevailing Prime Lending Rate. The Group provides handset sales to customers on a finance lease basis for a period of 24 months. The disclosed information relates to these arrangements with customers which were assessed to be finance leases in terms of IAS17.

Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company2012

N$’00010. Inventories Materials for installations 46 595 39 364 50 561 39 364Goods for resale 1 654 12 620 -- 12 620Less: provision for impairment (2 545) (2 545) (2 545) (2 545)

45 704 49 439 48 016 49 439

11. Trade and other receivables Trade receivables 277 343 282 642 253 598 282 642Provision for impairment (55 320) (41 725) (46 569) (41 725)Prepayments 7 892 7 458 6 441 7 458VAT receivable 25 898 -- 23 703 --Other debtors 656 687 636 687

256 469 249 062 237 809 249 062

Provision for impairment of receivables Opening balance 41 725 37 602 41 725 37 602Acquisition of subsidiary 15 042 -- -- --Amount written off in the current year (18 930) (1 108) (7 405) (1 108)Provision for impairment charged to the income statement 17 483 5 231 12 249 5 231

Closing balance 55 320 41 725 46 569 41 725

The creation and release of the provision for impaired receivables has been included as part of the bad debts in the income statement. Amounts charged to the allowance are written off when there is no expectation of recovery of additional cash from the underlying debtors. Other classes of receivables within trade and other receivables do not contain any impaired assets. The maximum exposure to credit risk in respect of the receivables at reporting date is limited to the fair value of each class of the receivables at reporting date.

Group

2013 N$’000

Group2012

N$’000

Company 2013

N$’000

Company2012

N$’000An analysis of trade receivable amounts past due and not impaired are as follows:

1 month past due (+60 days) 12 301 6 610 6 466 6 610

2 months past due 8 377 3 017 2 252 3 017

3 months past due 13 305 1 861 13 304 1 861

33 983 11 488 22 022 11 488


36


Group

2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’00011. Trade and other receivables (continued) An analysis of trade receivable amounts past due and impaired are as follows:

The aging of impaired receivables is as follows:

1 month past due (+60 days) -- -- -- --

2 months past due 1 500 2 297 1 500 2 297

3 months past due 53 820 39 428 45 069 39 428

55 320 41 725 46 569 41 725

12. Related party transactions

The Group is controlled by Namibia Post and Telecom Holdings Limited (incorporated in Namibia) which owns 100% of the Group’s shares. The ultimate shareholder of the Group is the Government of the Republic of Namibia. Namibia Post and Telecom Holdings Limited is the Group’s holding company whilst Namibia Post Limited and Mobile Telecommunications Limited are fellow subsidiaries. Only significant transactions for State-Owned Enterprises were disclosed. Transactions for Local Authorities were not disclosed as the amounts were deemed to be immaterial. Details of the Company’s and Group’s transactions with the subsidiaries and associates are reflected in notes 6 and 7. Details of the Company’s and Group’s transactions with the Pension Fund are reflected in note 30.

Group

2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’000The following transactions were carried out with related parties: i) Sales of services

Namibia Post Limited 4 570 5 157 3 702 5 157Mobile Telecommunications Limited 93 073 103 406 91 264 103 406Namibia Post and Telecom Holdings Limited 480 480 480 480 Neotel (Proprietary) Limited 8 920 42 974 8 920 42 974Powercom (Proprietary) Limited -- -- 64 942 --

ii) Purchases of services

Namibia Post Limited 134 8 818 -- 8 818 Mobile Telecommunications Limited 50 782 41 236 38 109 41 236Namibia Post and Telecom Holdings Limited 91 141 93 456 91 141 93 456Neotel (Proprietary) Limited 32 350 42 974 32 350 42 974Powercom (Proprietary) Limited -- -- 20 631 --

Other related parties Nampower (Proprietary) Limited 3 913 3 999 3 532 3 999Namibia Airports Company Limited 88 -- -- --Namibia Broadcasting Corporation 2 527 2 021 2 527 2 021Transnamib Holdings Limited 678 441 678 441



37


Group

2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’00012. Related party transactions (continued) The following transactions were carried out with related parties:

iii) Outstanding balances arising from sales of goods/services

Current assets Namibia Post Limited 1 037 71 1 037 71 Mobile Telecommunications Limited 22 -- -- --Namibia Post and Telecom Holdings Limited 1 11 1 11Neotel (Proprietary) Limited 1 774 72 1 774 72Powercom (Proprietary) Limited (Note 6.2) -- -- 87 559 --

2 834 154 90 371 154

Cash and cash equivalents Namibia Post Limited 1 110 1 054 1 110 1 054

iv) Outstanding balances arising from purchases of goods/services Current liabilities � Mobile Telecommunications Limited 4 361 1 713 2 053 1 713Neotel (Proprietary) Limited 8 788 3 357 8 788 3 357 Namibia Post Limited 42 -- -- --

13 191 5 070 10 841 5 070

Other related parties (included in trade and other payables) Nampower (Proprietary) Limited 268 9 168 222 9 168Namibia Airports Company Limited 10 -- -- --Namibia Broadcasting Corporation 721 597 721 597Transnamib Holdings Limited 122 80 122 80

1 121 9 845 1 065 9 845

v) Outstanding balances arising from loans

Non-current assets Powercom (Proprietary) Limited (Note 6.2) -- -- 60 000 --

Telecom Namibia does not expect repayment of the loan within the next 12 months. The loan is unsecured and interest free.

Current liabilities Namibia Post and Telecom Holdings Limited -- 39 000 -- 39 000

This loan was interest free, unsecured and had no fixed terms of repayment. The loan was written off during the year in favour of the Government of the Republic of Namibia receiving future services from Telecom Namibia. Refer to Note 21 for further information.

vi) Suretyships

• The Company has extended a guarantee to Millennium Bank, in terms of the Mundo Startel shareholders agreement, in respect of a loan amounting to N$20 million (U$2.42 million) which was extended to its associate, Mundo Startel. Following Telecom Namibia’s decision to divest from Mundo Startel, Telecom Namibia, was relieved of its obligation under the suretyship agreement.

• The Government of the Republic of Namibia has availed a letter of comfort to Alcatel for an amount of US$75 million in respect of Telecom Namibia’s participation in the West Africa Coast Cable System (WACS) project. In terms of the WACS project, Telecom Namibia was Namibia’s Landing Point Lead Agent and was directly responsible for the payment of N$622 million (US$75 million) for the full capacity to be accessed through Swakopmund, Namibia. In the current year, WACS was completed and therefore the suretyship of the prior year is no longer required.


38

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 12. Related party transactions (continued) vi) Suretyships (continued)

• Fifty per cent of this capacity has been on sold by Telecom Namibia to Botswana Telecommunications Corporation and the latter has in turn provided a guarantee through the Government of the Republic of Botswana to the Government of the Republic of Namibia for the amount of Nil (2012: N$311 million (US$37.5 million)). Twenty five per cent of the capacity has also been sold to Mobile Telecommunications Limited and an agreement making MTC liable for commensurate payment has been signed between the two parties.

• A letter of guarantee covering the principal debt owed by the Company to European Investment Bank and interest thereon has been issued by the Government of Namibia. The balance outstanding on the loan at 30 September 2013 amounted to N$5.2 million (2012: N$12.2 million).

• The Group grants housing loan guarantees to all employees based on employee grade and level of remuneration. These guarantees are in turn secured against the respective employees’ pensions. Guarantees amounting to Nil (2012: N$160 000) were issued in respect of key management housing loans.

• Letter of support from the Government of the Republic of Namibia.

• A bank overdraft facility from Standard Bank Namibia Limited for N$10 million was signed on 12 June 2013 by Powercom (Proprietary) Limited. The facility is guaranteed by Telecom Namibia and is repayable upon demand. The balance outstanding on the overdraft facility at 30 September 2013 was N$5.1 million.

• Telecom Namibia provided limited guarantee for a total amount of N$120 million of which N$60 million is to Investec Bank Limited and N$60 million is to Nedbank Namibia Limited (Nedbank) in respect of borrowings of the newly acquired subsidiary Powercom (Proprietary) Limited. The outstanding balances of the loans at year-end were N$120 million.

• Telecom Namibia has agreed to support Powercom (Proprietary) Limited for the financial year ended 30 September 2014 so as to enable Powercom (Proprietary) Limited to settle its debts and obligations in the ordinary course of business.

vii) Key management compensation

Key management comprises of the Chiefs of the various operating divisions of the Group as set out on page 8. The remuneration of key management is determined by the Human Resources and Compensation Committee of the Board of Directors and is reviewed on an annual basis.

Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 Salaries and other short-term employee benefits 16 226 10 094 9 119 10 094Other long-term benefits 820 984 820 984

17 046 11 078 9 939 11 078

viii) Directors emoluments

Non-executive directors 383 475 383 475

- for services as directors 313 451 313 451- other directors expenses 70 24 70 24

Executive director - for managerial services 2 165 2 262 2 165 2 262

- salary and other short-term employee benefits 1 942 2 051 1 942 2 051- other long-term benefits 223 211 223 211

2 548 2 737 2 548 2 737

13. Cash and cash equivalents Bank balances 54 631 15 183 52 191 15 133 Cash on hand 6 279 2 588 6 279 2 588 Investment in money market instruments -- 4 467 -- 4 467

60 910 22 238 58 470 22 188



39

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) Group

2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 13. Cash and cash equivalents (continued) Cash and cash equivalents for the purposes of the statement of cash flows include the following:

Cash and cash equivalents 60 910 22 238 58 470 22 188 Bank overdrafts (Note 17) (338 803) -- (333 716) --

(277 893) 22 238 (275 246) 22 188

14. Non-current assets classified as held for sale Investment in associate Opening balance 65 757 57 141 116 266 107 650Unrealised foreign exchange gain 3 611 8 616 3 611 8 616Less: Impairment of assets held for sale (49 148) -- (99 657) --

20 220 65 757 20 220 116 266

The Group made a formal decision to dispose of its 44% shareholding in an associate, Mundo Startel in the 2011 financial year. The sale agreement was completed and is expected to be concluded in 2014. During the year, the investment for the issuance of the preference shares has been fully impaired due to the uncertainty regarding the recoverability of the investment. The disposal of Mundo Startel has been classified under IFRS 5 in the current year as the factors and circumstances preventing the sale from being completed are not within the control of Telecom Namibia. Management and directors remain committed to the disposal of the investment. The carrying amount at year-end approximates the fair value.

15. Share capital Authorised 200 000 000 ordinary shares of N$1 each 200 000 200 000 200 000 200 000

Issued 154 529 936 ordinary shares of N$1 each 154 530 154 530 154 530 154 530

The unissued ordinary shares are under the control of the directors until the next annual general meeting.

16. Post-retirement medical benefit obligations The Group provides post-employment benefits by way of a medical aid scheme to all employees who joined the Group prior to 1st of April 2007.

During the prior year, the Group extended an offer to employees to apply for buy-out of the amounts due to them in terms of the scheme. The scheme entailed employees receiving an amount equivalent to their respective liabilities in lieu of forfeiting the medical subsidies due to them and their dependents upon retirement from Telecom or death in service. Medical scheme:

The Group continues to pay two thirds of total contributions towards the medical scheme when certain qualifying employees become redundant, disabled or when an employee retires. The liability created in terms of IAS 19 amounts to N$45.572 million (2012: N$54.776 million). The effective date of valuation of the liability is 30 September 2013 and the next date of valuation is 30 September 2014. The short-term portion of Nil (2012: N$9.054 million) reflects the terminations paid out in 2013. The projected unit credit funding method has been used to determine the past-service liabilities at the valuation date and the projected annual expense in the year following the valuation date. The methods used in preparing the sensitivity analysis did not change compared to the previous period. The change in assumptions was accepted as reasonable.


40


Group2013

Group2012

Company2013

Company 2012

16. Post-retirement medical benefit obligations (continued) The principal actuarial assumptions used for accounting purposes were: - Real rate of return 1% 1% 1% 1%- Discount rate 7.92% 7.41% 7.92% 7.41%- Healthcare cost inflation 7.21% 6.41% 7.21% 6.41%- Expected average retirement age (yrs) 58 60 58 60- Normal retirement age (yrs) 60 60 60 60

N$’000 N$’000 N$’000 N$’000 Opening balance 54 776 90 251 54 776 90 251Current service cost 744 4 657 744 4 657Interest cost (Note 23) 3 392 7 761 3 392 7 761Subsidies paid (1 864) (1 883) (1 864) (1 883)Actuarial gain (2 472) (6 336) (2 472) (6 336)Buy out (9 004) (39 674) (9 004) (39 674)

Closing balance 45 572 54 776 45 572 54 776

Present value of unfunded liability: 45 572 54 776 45 572 54 776

Reflected as follows Short-term liability -- 9 054 -- 9 054Long-term liability 45 572 45 722 45 572 45 722

45 572 54 776 45 572 54 776

The amounts recognised in profit or loss is as follows: Current service cost 744 4 657 744 4 657Interest cost (Note 23) 3 392 7 761 3 392 7 761Subsidies paid (1 864) (1 883) (1 864) (1 883)

2 272 10 535 2 272 10 535

The amounts recognised in other comprehensive income are as follows: Actuarial gain (2 472) (6 336) (2 472) (6 336)

(2 472) (6 336) (2 472) (6 336)

Particulars in respect of the current employee members who belong to the medical aid for which the Group has a post-retirement medical aid liability as at the investigation date are as follows: Number of employees at 30 September 80 91 80 91Average age (years) 48 46 48 46 Details of the current pensioner members belonging to the medical aid are as follows: Number of pensioners 203 196 203 196Average age (years) 61 60 61 60 The effect of a 1% movement in the assumed medical cost inflation rate on the aggregate of the current service cost and interest cost would be as follows:

N$’000 N$’000 N$’000 N$’000

Increase 4 840 4 136 4 840 4 136Decrease 3 609 3 555 3 609 3 555

The effect of a 1% movement in the assumed medical cost inflation rate on the accumulated post-employment benefit obligation for medical costs would be as follows:

N$’000 N$’000 N$’000 N$’000




39


2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 13. Cash and cash equivalents (continued) Cash and cash equivalents for the purposes of the statement of cash flows include the following:

Cash and cash equivalents 60 910 22 238 58 470 22 188 Bank overdrafts (Note 17) (338 803) -- (333 716) --

(277 893) 22 238 (275 246) 22 188

14. Non-current assets classified as held for sale Investment in associate Opening balance 65 757 57 141 116 266 107 650Unrealised foreign exchange gain 3 611 8 616 3 611 8 616Less: Impairment of assets held for sale (49 148) -- (99 657) --

20 220 65 757 20 220 116 266

The Group made a formal decision to dispose of its 44% shareholding in an associate, Mundo Startel in the 2011 financial year. The sale agreement was completed and is expected to be concluded in 2014. During the year, the investment for the issuance of the preference shares has been fully impaired due to the uncertainty regarding the recoverability of the investment. The disposal of Mundo Startel has been classified under IFRS 5 in the current year as the factors and circumstances preventing the sale from being completed are not within the control of Telecom Namibia. Management and directors remain committed to the disposal of the investment. The carrying amount at year-end approximates the fair value.

15. Share capital Authorised 200 000 000 ordinary shares of N$1 each 200 000 200 000 200 000 200 000

Issued 154 529 936 ordinary shares of N$1 each 154 530 154 530 154 530 154 530

The unissued ordinary shares are under the control of the directors until the next annual general meeting.

16. Post-retirement medical benefit obligations The Group provides post-employment benefits by way of a medical aid scheme to all employees who joined the Group prior to 1st of April 2007.

During the prior year, the Group extended an offer to employees to apply for buy-out of the amounts due to them in terms of the scheme. The scheme entailed employees receiving an amount equivalent to their respective liabilities in lieu of forfeiting the medical subsidies due to them and their dependents upon retirement from Telecom or death in service. Medical scheme:

The Group continues to pay two thirds of total contributions towards the medical scheme when certain qualifying employees become redundant, disabled or when an employee retires. The liability created in terms of IAS 19 amounts to N$45.572 million (2012: N$54.776 million). The effective date of valuation of the liability is 30 September 2013 and the next date of valuation is 30 September 2014. The short-term portion of Nil (2012: N$9.054 million) reflects the terminations paid out in 2013. The projected unit credit funding method has been used to determine the past-service liabilities at the valuation date and the projected annual expense in the year following the valuation date. The methods used in preparing the sensitivity analysis did not change compared to the previous period. The change in assumptions was accepted as reasonable.


40


Group2013

Group2012

Company2013

Company 2012



Closing balance 45 572 54 776 45 572 54 776



45 572 54 776 45 572 54 776


2 272 10 535 2 272 10 535


(2 472) (6 336) (2 472) (6 336)


N$’000 N$’000 N$’000 N$’000



N$’000 N$’000 N$’000 N$’000



40


Group2013

Group2012

Company2013

Company 2012



Closing balance 45 572 54 776 45 572 54 776



45 572 54 776 45 572 54 776


2 272 10 535 2 272 10 535


(2 472) (6 336) (2 472) (6 336)


N$’000 N$’000 N$’000 N$’000



N$’000 N$’000 N$’000 N$’000




41


Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’00017. Long-term liabilities

Secured European Investment Bank 5 228 12 155 5 228 12 155Telecom Namibia obtained various loans from the European Investment Bank in December 1999 for tenures ranging from 10 to 14 years. The loans were originally denominated in Euros, British Pounds and United States Dollars and attracted fixed interest rates varying between 3% and 3.9% p.a. The Group then entered into currency and interest swap agreements that entitles it to pay interest at rates varying between 10.96% and 12.25% p.a. (2012: 10.96% and 12.25% p.a.) and to convert the foreign currency liabilities into Namibian Dollar. The capital amount is repayable in 3 (2012: 3) instalments with the final instalment due in 2013. A letter of guarantee covering the principal debt and interest has been issued by the Government of the Republic of Namibia. Nedbank Namibia Limited/Investec Bank Limited 120 000 -- -- -- Powercom (Proprietary) Limited obtained a loan amounting to N$120 000 000 during the current year. Interest on the loan is charged at 7.07% per annum and is accrued for on a monthly basis. Total interest for the period amounted to N$6 303 000. Fixed monthly installments of N$5 million are due as from 28 October 2013. Telecom Namibia provided limited guarantee for a total amount of N$120 000 000 of which N$60 000 000 is to Investec Bank Limited and N$60 000 000 is to Nedbank Namibia Limited.

Unsecured Development Bank of Namibia 115 000 120 000 115 000 120 000 Telecom Namibia received a loan amounting to N$120 000 000 from the Development Bank of Namibia in December 2009. The loan is for a period of 11 years and attracts interest at the prevailing First National Bank of Namibia Prime Lending Rate less 2.50% per annum (2012: First National Bank of Namibia Prime Lending Rate less 2.50% per annum). The loan is unsecured, has a two year grace period on capital repayment and is repayable in varying installment amounts.

Telecom Bonds Telecom Namibia registered loan stocks bearing interest at fixed and floating rates ranging between 8.09% and 10.70% p.a. (2012: 8.09 and 10.70%).Interest on the bonds is payable quarterly and semi-annually. The bonds are scheduled to mature in the period April to August 2015 and were issued as part of the Telecom Namibia’s Bond Programme approved by the Namibia Stock Exchange (NSX) for the raising of capital amounting to N$600 000 000 (2012: N$600 000 000).

347 000 347 000 347 000 347 000

Nedbank Namibia Limited 20 000 40 000 20 000 40 000 Telecom Namibia obtained a loan amounting to N$100 000 000 from Nedbank on the 30th of September 2009 for a five year tenure. The loan attracts interest at prevailing Nedbank Namibia Limited Prime Lending Rate less 2% (2012: Nedbank Namibia Prime Lending Rate less 2%). Repayment of the loan is in five annual installments of N$20 000 000 each commencing the 31st of January 2010. The loan is unsecured.

Total loans 607 228 519 155 487 228 519 155Less: Short-term portion transferred to current liabilities (90 228) (33 067) (30 228) (33 067)

517 000 486 088 457 000 486 088


42


Group

2013N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

�N$’00017. Long-term liabilities (continued) Maturity of non-current borrowings No later than 1 year 90 228 33 067 30 228 33 067Later than 1 year and not later than 5 years 442 000 396 088 382 000 396 088More than 5 years 75 000 90 000 75 000 90 000

607 228 519 155 487 228 519 155

Details of current portions Bank overdrafts 338 803 -- 333 716 --Current portion of interest bearing borrowings 90 228 33 067 30 228 33 067

429 031 33 067 363 944 33 067

Bank overdrafts are secured as disclosed below. Pre-hedging The interest rate exposure pre-hedging activities of borrowings is as follows: Interest free -- -- -- --At fixed rates 301 728 308 655 301 728 308 655At floating rates 305 500 210 500 185 500 210 500

607 228 519 155 487 228 519 155

Post-hedging The interest rate exposure post hedging activities of borrowings is as follows:

Interest free -- -- -- --At fixed rates 296 500 296 500 296 500 296 500At floating rates 310 728 222 655 190 728 222 655

607 228 519 155 487 228 519 155

Summary of borrowing arrangements Nedbank Namibia Limited

• Overdraft facility of N$205 million. Interest is charged at Prime less 2%.

• The facility is unsecured, expired on 31 January 2014 and is in the process of being renewed. First National Bank of Namibia Limited

• Direct short term facility of N$100 million. Interest is charged at Prime less 1%.

• Direct short term facility of N$100 million. Interest is charges at Prime less 2%.

• Direct first card facilities of N$122 000.

• Pre-settlement facility of N$25 million.

• Wesbank facilities of N$2.1 million.

• The above mentioned facilities will be reviewed on 31 July 2014.

• The facilities are secured by a letter from the Government of the Republic of Namibia. Standard Bank Namibia Limited


• FEC facility of N$199 million.

• Guarantee of N$800 000.

• Guarantee of N$15 779 to China Jiangsu.

• Guarantee of N$12 357 to Ministry of Agriculture, Water and Forestry.

• Guarantee of N$211 019 to Namibia Standards Institution.

• Spot of N$30 million.

• Letter of credit of N$3 million.

• EFT’s salaries of N$35 million.

• EFT’s debit orders of N$23 million.

• EFT’s debit Iway of N$2 million.

• Interest derivative of N$20 million.

• Negative pledge not to cede debtors or stock to any other lender, or to give any other security without prior consent from the bank.



41


Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’00017. Long-term liabilities

Secured European Investment Bank 5 228 12 155 5 228 12 155Telecom Namibia obtained various loans from the European Investment Bank in December 1999 for tenures ranging from 10 to 14 years. The loans were originally denominated in Euros, British Pounds and United States Dollars and attracted fixed interest rates varying between 3% and 3.9% p.a. The Group then entered into currency and interest swap agreements that entitles it to pay interest at rates varying between 10.96% and 12.25% p.a. (2012: 10.96% and 12.25% p.a.) and to convert the foreign currency liabilities into Namibian Dollar. The capital amount is repayable in 3 (2012: 3) instalments with the final instalment due in 2013. A letter of guarantee covering the principal debt and interest has been issued by the Government of the Republic of Namibia. Nedbank Namibia Limited/Investec Bank Limited 120 000 -- -- -- Powercom (Proprietary) Limited obtained a loan amounting to N$120 000 000 during the current year. Interest on the loan is charged at 7.07% per annum and is accrued for on a monthly basis. Total interest for the period amounted to N$6 303 000. Fixed monthly installments of N$5 million are due as from 28 October 2013. Telecom Namibia provided limited guarantee for a total amount of N$120 000 000 of which N$60 000 000 is to Investec Bank Limited and N$60 000 000 is to Nedbank Namibia Limited.

Unsecured Development Bank of Namibia 115 000 120 000 115 000 120 000 Telecom Namibia received a loan amounting to N$120 000 000 from the Development Bank of Namibia in December 2009. The loan is for a period of 11 years and attracts interest at the prevailing First National Bank of Namibia Prime Lending Rate less 2.50% per annum (2012: First National Bank of Namibia Prime Lending Rate less 2.50% per annum). The loan is unsecured, has a two year grace period on capital repayment and is repayable in varying installment amounts.

Telecom Bonds Telecom Namibia registered loan stocks bearing interest at fixed and floating rates ranging between 8.09% and 10.70% p.a. (2012: 8.09 and 10.70%).Interest on the bonds is payable quarterly and semi-annually. The bonds are scheduled to mature in the period April to August 2015 and were issued as part of the Telecom Namibia’s Bond Programme approved by the Namibia Stock Exchange (NSX) for the raising of capital amounting to N$600 000 000 (2012: N$600 000 000).

347 000 347 000 347 000 347 000

Nedbank Namibia Limited 20 000 40 000 20 000 40 000 Telecom Namibia obtained a loan amounting to N$100 000 000 from Nedbank on the 30th of September 2009 for a five year tenure. The loan attracts interest at prevailing Nedbank Namibia Limited Prime Lending Rate less 2% (2012: Nedbank Namibia Prime Lending Rate less 2%). Repayment of the loan is in five annual installments of N$20 000 000 each commencing the 31st of January 2010. The loan is unsecured.

Total loans 607 228 519 155 487 228 519 155Less: Short-term portion transferred to current liabilities (90 228) (33 067) (30 228) (33 067)

517 000 486 088 457 000 486 088


42


Group

2013N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

�N$’00017. Long-term liabilities (continued) Maturity of non-current borrowings No later than 1 year 90 228 33 067 30 228 33 067Later than 1 year and not later than 5 years 442 000 396 088 382 000 396 088More than 5 years 75 000 90 000 75 000 90 000

607 228 519 155 487 228 519 155

Details of current portions Bank overdrafts 338 803 -- 333 716 --Current portion of interest bearing borrowings 90 228 33 067 30 228 33 067

429 031 33 067 363 944 33 067

Bank overdrafts are secured as disclosed below. Pre-hedging The interest rate exposure pre-hedging activities of borrowings is as follows: Interest free -- -- -- --At fixed rates 301 728 308 655 301 728 308 655At floating rates 305 500 210 500 185 500 210 500

607 228 519 155 487 228 519 155

Post-hedging The interest rate exposure post hedging activities of borrowings is as follows:

Interest free -- -- -- --At fixed rates 296 500 296 500 296 500 296 500At floating rates 310 728 222 655 190 728 222 655

607 228 519 155 487 228 519 155

Summary of borrowing arrangements Nedbank Namibia Limited


• The facility is unsecured, expired on 31 January 2014 and is in the process of being renewed. First National Bank of Namibia Limited

• Direct short term facility of N$100 million. Interest is charged at Prime less 1%.

• Direct short term facility of N$100 million. Interest is charges at Prime less 2%.

• Direct first card facilities of N$122 000.

• Pre-settlement facility of N$25 million.

• Wesbank facilities of N$2.1 million.

• The above mentioned facilities will be reviewed on 31 July 2014.

• The facilities are secured by a letter from the Government of the Republic of Namibia. Standard Bank Namibia Limited


• FEC facility of N$199 million.

• Guarantee of N$800 000.

• Guarantee of N$15 779 to China Jiangsu.

• Guarantee of N$12 357 to Ministry of Agriculture, Water and Forestry.

• Guarantee of N$211 019 to Namibia Standards Institution.

• Spot of N$30 million.

• Letter of credit of N$3 million.

• EFT’s salaries of N$35 million.

• EFT’s debit orders of N$23 million.

• EFT’s debit Iway of N$2 million.

• Interest derivative of N$20 million.

• Negative pledge not to cede debtors or stock to any other lender, or to give any other security without prior consent from the bank.



43


2013N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 18. Deferred tax Deferred income taxes are calculated on all temporary differences under the comprehensive method using a principal tax rate of 33% (2012: 34%). The movement on the deferred tax account is as follows: Opening balance 421 865 421 501 421 865 421 501

(Credited)/charged to the income statement: (26 297) (1 790) (18 890) (1 790)

- current year movement timing differences (20 853) (1 908) (13 446) (1 908)- prior year 6 964 118 6 964 118- effect of change in tax rate (12 408) -- (12 408) --

Charged to other comprehensive income 840 2 154 840 2 154

Closing balance 396 408 421 865 403 815 421 865

Deferred tax liabilities may be analysed as follows: Capital allowances 462 820 479 815 470 227 479 815Prepayments 2 125 2 536 2 125 2 536Provisions (15 054) (21 276) (15 054) (21 276)Stock consumptions and packaging material (830) (840) (830) (840)Derivatives 1 509 (567) 1 509 (567)Advance income (55 085) (42 428) (55 085) (42 428)

Accrued income 923 4 625 923 4 625

396 408 421 865 403 815 421 865

The tax rate was adjusted to 33% from 34% for financial year ends beginning on or after 1 January 2013. This was enacted on 31 May 2013. 19. Trade and other payables Trade payables 253 064 168 106 227 935 168 106Performance bonus accrual -- 15 469 -- 15 469VAT payable -- 3 176 -- 3 176Leave pay accrual 55 779 42 007 55 779 42 007Levies payable to Communications Regulatory Authority of Namibia 20 114 -- 19 918 --Unpresented cheques 225 364 225 364

329 182 229 122 303 857 229 122

The average credit period for the Group is 60 days. The Group has financial risk management policies and procedures in place to make certain that all payables are paid off upon expiry of the credit timeframe agreed with the relevant suppliers. 20. Current tax Opening balance (2 854) (6 364) (2 854) (6 364)Charge for the year (949) (26 754) (949) (26 754)Taxation paid 5 599 30 264 5 599 30 264

Closing balance 1 796 (2 854) 1 796 (2 854)

21. Deferred revenue Department of Civil Aviation (DCA) 17 892 22 279 17 892 22 279Ministry of Home Affairs 8 938 8 734 8 938 8 734Mobile Telecommunications Limited 2 129 2 581 2 129 2 581Government of the Republic of Namibia 59 032 -- 59 032 --Advanced rental 67 917 65 569 67 917 65 569Unused airtime 8 819 5 250 5 174 5 250

164 727 104 413 161 082 104 413


44


Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 21. Deferred revenue (continued) Reflected as follows Long-term liabilities 87 991 33 593 87 991 33 593Short-term liabilities 76 736 70 820 73 091 70 820

164 727 104 413 161 082 104 413

Telecom Namibia received funds from the Department of Civil Aviation (DCA) and in terms of the underlying agreement, Telecom Namibia will apply the money received towards the construction of towers and optic fibre links for use by the DCA. Upon completion of the project, ownership of the assets will vest in Telecom Namibia which in turn, is expected to render services to the DCA in lieu of and to the extent of, the prepayment received and applied towards project costs. The prepayment received will be released to profit and loss as the services are rendered. Telecom Namibia received N$8.9 million from the Ministry of Home Affairs for the roll out of optic fibre links on behalf of the Ministry. This will be applied against future invoices to be billed by Telecom once the services are rendered to the Ministry. N$2.6 million was received from Mobile Telecommunications Limited during 2012 in respect of a prepayment towards the construction of an optic fibre network. An amount of N$452 thousand was released to profit and loss for services rendered during the period. Telecom Namibia receives rental from customers one month in advance of rendering the underlying goods and services. The Government of the Republic of Namibia transferred its exclusive capacity in WACS to Telecom Namibia for the amount of N$66 million in 2013. The amount included a loan restructuring of N$39 million with Namibia Post and Telecom Holdings Limited and N$27 million contribution to WACS from the Government of the Republic of Namibia in exchange for free or reduced cost services. Telecom Namibia will apply the money received towards services rendered to the Government of the Republic of Namibia. N$8 million will be used for the installation of equipment (a portion was released in the current year); the remaining N$58 million will be offset against internet usage and maintenance for a period of approximately 5 years.

Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 22. Operating (loss)/profit

Operating (loss)/profit is arrived at after the following items: Auditor’s remuneration

- Audit fees - current year 2 105 1 404 1 696 1 404

- Audit fees – other services 306 -- 90 --

Depreciation of plant and equipment 259 597 176 950 190 506 176 950

Amortisation of intangible assets 31 418 8 643 15 077 8 643

Profit on disposal of plant and equipment (22 871) (5 377) (22 581) (5 377)

Loss on scrapping of assets 10 364 5 698 10 364 5 698

Staff costs (Note 24) 506 419 441 075 475 035 441 075

Advertising and promotions 51 104 36 690 45 988 36 690

International settlements 133 328 88 178 124 993 88 178

Operating lease expenses

- Vehicles 19 870 18 637 19 870 18 637

- Office machines 2 043 1 676 2 043 1 676

- Tower rentals related party 16 135 5 513 5 500 5 513

Building rentals related party 50 082 46 835 50 082 46 835

Repairs and maintenance 53 357 49 381 52 434 49 381

Post-retirement benefits recognised in profit or loss 2 272 10 535 2 272 10 535

Fees for managerial, technical and other services 18 168 15 922 18 020 15 922

Net realised foreign exchange gain (130) (16 475) -- (16 475)

Net realised foreign exchange loss 2 086 -- 2 086 --

Net unrealised foreign exchange gain (5 696) (25) (5 566) (25)

Net unrealised foreign exchange loss 5 188 -- 5 188 --

Fair value adjustment on derivative 1 715 2 685 1 715 2 685



43


2013N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 18. Deferred tax Deferred income taxes are calculated on all temporary differences under the comprehensive method using a principal tax rate of 33% (2012: 34%). The movement on the deferred tax account is as follows: Opening balance 421 865 421 501 421 865 421 501

(Credited)/charged to the income statement: (26 297) (1 790) (18 890) (1 790)

- current year movement timing differences (20 853) (1 908) (13 446) (1 908)- prior year 6 964 118 6 964 118- effect of change in tax rate (12 408) -- (12 408) --

Charged to other comprehensive income 840 2 154 840 2 154

Closing balance 396 408 421 865 403 815 421 865

Deferred tax liabilities may be analysed as follows: Capital allowances 462 820 479 815 470 227 479 815Prepayments 2 125 2 536 2 125 2 536Provisions (15 054) (21 276) (15 054) (21 276)Stock consumptions and packaging material (830) (840) (830) (840)Derivatives 1 509 (567) 1 509 (567)

Advance income (55 085) (42 428) (55 085) (42 428)

Accrued income 923 4 625 923 4 625

396 408 421 865 403 815 421 865

The tax rate was adjusted to 33% from 34% for financial year ends beginning on or after 1 January 2013. This was enacted on 31 May 2013. 19. Trade and other payables Trade payables 253 064 168 106 227 935 168 106Performance bonus accrual -- 15 469 -- 15 469VAT payable -- 3 176 -- 3 176Leave pay accrual 55 779 42 007 55 779 42 007Levies payable to Communications Regulatory Authority of Namibia 20 114 -- 19 918 --Unpresented cheques 225 364 225 364

329 182 229 122 303 857 229 122

The average credit period for the Group is 60 days. The Group has financial risk management policies and procedures in place to make certain that all payables are paid off upon expiry of the credit timeframe agreed with the relevant suppliers. 20. Current tax Opening balance (2 854) (6 364) (2 854) (6 364)Charge for the year (949) (26 754) (949) (26 754)Taxation paid 5 599 30 264 5 599 30 264

Closing balance 1 796 (2 854) 1 796 (2 854)

21. Deferred revenue Department of Civil Aviation (DCA) 17 892 22 279 17 892 22 279Ministry of Home Affairs 8 938 8 734 8 938 8 734Mobile Telecommunications Limited 2 129 2 581 2 129 2 581Government of the Republic of Namibia 59 032 -- 59 032 --Advanced rental 67 917 65 569 67 917 65 569Unused airtime 8 819 5 250 5 174 5 250

164 727 104 413 161 082 104 413


44


Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 21. Deferred revenue (continued) Reflected as follows Long-term liabilities 87 991 33 593 87 991 33 593Short-term liabilities 76 736 70 820 73 091 70 820

164 727 104 413 161 082 104 413

Telecom Namibia received funds from the Department of Civil Aviation (DCA) and in terms of the underlying agreement, Telecom Namibia will apply the money received towards the construction of towers and optic fibre links for use by the DCA. Upon completion of the project, ownership of the assets will vest in Telecom Namibia which in turn, is expected to render services to the DCA in lieu of and to the extent of, the prepayment received and applied towards project costs. The prepayment received will be released to profit and loss as the services are rendered. Telecom Namibia received N$8.9 million from the Ministry of Home Affairs for the roll out of optic fibre links on behalf of the Ministry. This will be applied against future invoices to be billed by Telecom once the services are rendered to the Ministry. N$2.6 million was received from Mobile Telecommunications Limited during 2012 in respect of a prepayment towards the construction of an optic fibre network. An amount of N$452 thousand was released to profit and loss for services rendered during the period. Telecom Namibia receives rental from customers one month in advance of rendering the underlying goods and services. The Government of the Republic of Namibia transferred its exclusive capacity in WACS to Telecom Namibia for the amount of N$66 million in 2013. The amount included a loan restructuring of N$39 million with Namibia Post and Telecom Holdings Limited and N$27 million contribution to WACS from the Government of the Republic of Namibia in exchange for free or reduced cost services. Telecom Namibia will apply the money received towards services rendered to the Government of the Republic of Namibia. N$8 million will be used for the installation of equipment (a portion was released in the current year); the remaining N$58 million will be offset against internet usage and maintenance for a period of approximately 5 years.

Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company 2012

N$’000 22. Operating (loss)/profit

Operating (loss)/profit is arrived at after the following items: Auditor’s remuneration

- Audit fees - current year 2 105 1 404 1 696 1 404

- Audit fees – other services 306 -- 90 --

Depreciation of plant and equipment 259 597 176 950 190 506 176 950

Amortisation of intangible assets 31 418 8 643 15 077 8 643

Profit on disposal of plant and equipment (22 871) (5 377) (22 581) (5 377)

Loss on scrapping of assets 10 364 5 698 10 364 5 698

Staff costs (Note 24) 506 419 441 075 475 035 441 075

Advertising and promotions 51 104 36 690 45 988 36 690

International settlements 133 328 88 178 124 993 88 178

Operating lease expenses

- Vehicles 19 870 18 637 19 870 18 637

- Office machines 2 043 1 676 2 043 1 676

- Tower rentals related party 16 135 5 513 5 500 5 513

Building rentals related party 50 082 46 835 50 082 46 835

Repairs and maintenance 53 357 49 381 52 434 49 381

Post-retirement benefits recognised in profit or loss 2 272 10 535 2 272 10 535

Fees for managerial, technical and other services 18 168 15 922 18 020 15 922

Net realised foreign exchange gain (130) (16 475) -- (16 475)

Net realised foreign exchange loss 2 086 -- 2 086 --

Net unrealised foreign exchange gain (5 696) (25) (5 566) (25)

Net unrealised foreign exchange loss 5 188 -- 5 188 --

Fair value adjustment on derivative 1 715 2 685 1 715 2 685



45


Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’00023. Finance income and costs

Interest received Money market investments 205 556 205 556Loans -- 16 440 -- --Cash balance 541 937 541 937Interest on finance lease receivables -- 506 -- 506

746 18 439 746 1 999

Interest paid Telecom bonds 32 429 32 531 32 339 32 531Term loans 6 817 1 093 514 1 093Post-retirement benefit liability 3 392 7 761 3 392 7 761Short-term borrowing facilities 21 899 13 690 21 862 13 690

64 537 55 075 58 107 55 075Less non-cash interest cost of post retirement liability (Note 16) (3 392) (7 761) (3 392) (7 761)

Interest paid as per cash flow statement 61 145 47 314 54 715 47 314Less borrowing cost capitalised (Note 3) (7 616) (5 863) (7 616) (5 863)

53 529 41 451 47 099 41 451

24. Staff costs Salaries and other related costs 426 422 376 887 397 463 376 887Social security 1 279 792 980 792Medical aid 34 145 25 542 33 271 25 542Pension fund 44 573 37 854 43 321 37 854

506 419 441 075 475 035 441 075

25. Taxation Namibian normal income tax (949) (26 754) (949) (26 754)Deferred tax credit/(charge) - current year 33 261 1 908 25 854 1 908- prior period (6 964) (118) (6 964) (118)

Tax credit/(charge) for the year 25 348 (24 964) 17 941 (24 964)

Reconciliation of the taxation: (Loss)/profit before tax (192 957) 77 318 (105 400) 81 608

Tax calculated at a tax rate of 34% (2012: 34%) 65 605 (26 289) 35 836 (27 746)- Expenses not deductible for tax purposes (12 384) 7 032 (22 956) 2 900- Prior year adjustment (6 964) (118) (6 964) (118)- Tax losses� (32 934) -- -- --- Share of results of associates -- (5 589) -- --- Effect of change in tax rate 12 025 -- 12 025 --Tax credit/(charge) 25 348 (24 964) 17 941 (24 964)

Reconciliation of rate of taxation: % % % %Namibian normal taxation rate (34.0) (34.0) (34.0) (34.0)Reduction in rate of taxation due to: - Prior year 3.6 (0.1) 6.6 (0.1)- Effect of change in tax rate (6.2) -- (11.4) --- Expenses not deductible for tax purposes 6.4 9.1 21.8 3.5- Tax losses 17.1 -- -- --- Share of results of associates -- (7.3) -- --

(13.1) (32.3) (17.0) (30.6)

Included in other comprehensive income is deferred tax related to: N$’000 N$’000 N$’000 N$’000Remeasurement of defined benefit obligation 840 2 154 840 2 154


46


Group 2013

N$’000

Group 2012

N$’000

Company 2013

N$’000

Company 2012

N$’00025. Taxation (continued) Estimated tax losses in Powercom (Proprietary) Limited: Total tax losses 958 254 -- -- --Utilised to offset deferred tax liabilities (53 059) -- -- --Estimated tax losses not recognised, available to set-off against future taxable income

905 195 -- -- --

The Group has not raised any deferred tax asset as the criteria for raising a deferred tax asset was not met. 26. Cash flow movements 26.1 Working capital changes Increase/(Decrease) in working capital during the year: Decrease/(increase) in inventories 5 290 (1 417) 1 423 (1 417)Decrease/(increase)in trade and other receivables 9 950 (76 598) 11 253 (76 598)Increase in trade and other payables 57 100 66 528 74 735 66 528Decrease/(increase) in fellow subsidiary loans 5 431 955 (94 620) 955Increase in deferred revenue 20 024 2 763 17 669 2 763Decrease in amount owing by holding company 10 61 10 61

97 805 (7 708) 10 470 (7 708)

26.2 Non-cash movements Proceeds on disposal of towers to subsidiary -- -- 49 836 --Restructured loan to holding company (39 000) -- (39 000) --

(39 000) -- 10 836 --

27. Business combinations Acquisition of subsidiary Details of assets acquired and liabilities assumed Intangible assets (Note 4) 46 908 -- -- --Inventory 1 555 -- -- --Trade and other receivables 13 137 -- -- --Installment sale receivables 4 220 -- -- --Bank and cash 4 616 -- -- --Property, plant and equipment (Note 3) 153 814 -- -- --Interest-bearing borrowings (180 000) -- -- --Trade and other payables (42 960) -- -- --Deferred revenue (1 290) -- -- --

Total fair value of identifiable net assets -- -- -- --Consideration transferred -- -- -- --

Goodwill on acquisition (Note 5) -- -- -- --

There was no goodwill on acquisition of Powercom (Proprietary) Limited as all the proceeds were allocated to the fair value of the assets. Consideration paid Net cash inflow on acquisition of subsidiary Cash consideration paid -- -- -- --Bank balances and cash acquired 4 616 -- -- --

4 616 -- -- --



47

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 27. Business combinations (continued)

Business acquisition

On 30 November 2012, Telecom Namibia acquired 100% shareholding in Powercom (Proprietary) Limited trading as Leo. Telecom Namibia intends to migrate its voice service offering from the current CDMA technology used to GSM and this process is already underway and as part of this process incorporate the mobile service offering of Powercom (Proprietary) Limited into Telecom Namibia. The deal consisted of a cash payment of N$2 for the entire 100% ordinary share capital. Telecom Namibia facilitated the repayment of N$60 million of previous shareholders loans and guaranteed the repayment by Powercom (Proprietary) Limited of a further N$120 million. The revenue included in the consolidated statement of comprehensive income since acquisition contributed by Powercom (Proprietary) Limited was N$72.2 million. Although the company contributed a loss of N$96 million over the same period, future profits are expected. The fair value of trade and other receivables acquired was N$13 million and include trade receivables with a fair value of N$10 million. The gross contractual amount for trade receivables due is N$25 million of which N$15 million is expected to be uncollectable.

Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’00028. Capital expenditure commitments Commitments in respect of contracts placed 307 299 99 925 307 299 99 925

A total of N$441.8 million. (2012: N$357.3 million) was approved for capital expenditure for the year ended 30th of September 2013. Save for the aforelisted commitments in respect of contracts placed, the approved capital expenditure for the year ended 30th of September 2013 was spent. The Group finances capital expenditure from existing borrowing facilities and cash resources generated from operations.

29. Operating lease commitments The future minimum lease payments under operating lease contracts are as follows: No later than one year: 117 071 81 283 103 676 81 283

- Vehicles 34 971 30 999 34 971 30 999- Office machines 15 383 4 684 15 383 4 684- Tower rentals 13 395 -- -- --- Buildings - related party 53 322 45 600 53 322 45 600

Later than one year, but not later than 5 years: 343 200 232 194 313 339 232 194


More than 5 years - Tower rentals 5 156 -- -- -- The vehicles are leased from Avis Fleet Services for a period of 4 years. Transfer of vehicles during the tenure of the lease is prohibited in terms of the lease agreement. The office machines are leased from Nashua Namibia over varying lease periods. No contingent rent is payable on the machines. Transfer of the machines during the tenure of the lease is prohibited in terms of the lease agreement. The buildings are leased from Namibia Post and Telecom Holdings Limited over varying lease periods. No contingent rent is payable on the leased buildings. The towers are leased from Mobile Telecommunications Limited over an average period of 9.9 years. Contingent rent of N$290 604 is payable on the towers.


48

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 30. Pension Fund At the financial year-end, all the permanent employees of Telecom Namibia were members of the Napotel Pension Fund, a defined contribution fund, governed by the Namibian Pension Funds Act. Employees’ contributions amount to 7% of basic salary and the company’s contribution amounts to 16% of basic salary. An actuarial valuation was carried out for the year ended 30 September 2011, which indicated that the fund was in a sound financial position. As at the 30th of September 2013, a total of 1 236 (2012: 1 214) employees were members of the Napotel Pension Fund.

Powercom (Proprietary) Limited is a participating employer of Benchmark Retirement Fund administered by Retirement Fund Solutions, which is a defined contribution fund governed by the Namibian Pension Funds Act. Contributions to the fund are based on a percentage of salaries and are expensed in the year in which they are paid. As at the 30th of September 2013, a total of 127 employees were members of Benchmark Retirement Fund. The employees that moved to Telecom Namibia subsequent to year-end, joined the Napotel Pension Fund.

Group

2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’000 Contributions to the pension fund: 54 442 48 627 51 939 48 627

Company 44 575 37 853 43 321 37 853Employees 9 867 10 774 8 618 10 774

31. Guarantee(s) Powercom (Proprietary) Limited 120 000 -- 120 000 --Mundo Startel -- 20 330 -- 20 330

120 000 20 330 120 000 20 330

The Company issued a guarantee in 2012 in favour of the Millennium Bank in respect of a loan granted to its associate. In the current year the company was released of its obligation under the suretyship agreement following its decision to divest from Mundo Startel. Telecom Namibia provided limited guarantee for a total amount of N$120 million of which N$60 million is to Investec Bank Limited and N$60 million is to Nedbank Namibia Limited (Nedbank) in respect of borrowings of the newly acquired subsidiary Powercom (Proprietary) Limited. 32.1 Contingent assets Government of the Republic of Botswana -- 72 725 -- 72 725Mobile Telecommunications Limited -- 36 362 -- 36 362

-- 109 087 -- 109 087

The Government of the Republic of Botswana provided a guarantee for the participation of Botswana Telecommunications Corporation in WACS where Telecom Namibia was the lead agent for the Namibia Swakopmund Landing Point. Mobile Telecommunications Limited entered into an agreement with Telecom Namibia in terms of which it is responsible for25% of the WACS capacity landing in Namibia and shared the overall cost. The capital phase of the project has been completed therefore no contingencies were raised in the current year.

32.2 Contingent liabilities Alcatel-Lucent -- 145 450 -- 145 450

A contingent liability in the amount of Nil, (2012: N$145 449 658 (US$17 315 435)) arose as a result of Telecom Namibia’s participation in the WACS. In terms of this project, Telecom Namibia, as the lead agent for the Namibia landing point was directly responsible for the payments due for the landing point albeit recoverable prorata from Botswana Telecommunications Corporation and Mobile Telecommunications Limited. The capital phase of the project has been completed therefore no contingencies were raised in the current year.



47

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 27. Business combinations (continued)

Business acquisition

On 30 November 2012, Telecom Namibia acquired 100% shareholding in Powercom (Proprietary) Limited trading as Leo. Telecom Namibia intends to migrate its voice service offering from the current CDMA technology used to GSM and this process is already underway and as part of this process incorporate the mobile service offering of Powercom (Proprietary) Limited into Telecom Namibia. The deal consisted of a cash payment of N$2 for the entire 100% ordinary share capital. Telecom Namibia facilitated the repayment of N$60 million of previous shareholders loans and guaranteed the repayment by Powercom (Proprietary) Limited of a further N$120 million. The revenue included in the consolidated statement of comprehensive income since acquisition contributed by Powercom (Proprietary) Limited was N$72.2 million. Although the company contributed a loss of N$96 million over the same period, future profits are expected. The fair value of trade and other receivables acquired was N$13 million and include trade receivables with a fair value of N$10 million. The gross contractual amount for trade receivables due is N$25 million of which N$15 million is expected to be uncollectable.

Group2013

N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’00028. Capital expenditure commitments Commitments in respect of contracts placed 307 299 99 925 307 299 99 925

A total of N$441.8 million. (2012: N$357.3 million) was approved for capital expenditure for the year ended 30th of September 2013. Save for the aforelisted commitments in respect of contracts placed, the approved capital expenditure for the year ended 30th of September 2013 was spent. The Group finances capital expenditure from existing borrowing facilities and cash resources generated from operations.

29. Operating lease commitments The future minimum lease payments under operating lease contracts are as follows: No later than one year: 117 071 81 283 103 676 81 283


Later than one year, but not later than 5 years: 343 200 232 194 313 339 232 194


More than 5 years - Tower rentals 5 156 -- -- -- The vehicles are leased from Avis Fleet Services for a period of 4 years. Transfer of vehicles during the tenure of the lease is prohibited in terms of the lease agreement. The office machines are leased from Nashua Namibia over varying lease periods. No contingent rent is payable on the machines. Transfer of the machines during the tenure of the lease is prohibited in terms of the lease agreement. The buildings are leased from Namibia Post and Telecom Holdings Limited over varying lease periods. No contingent rent is payable on the leased buildings. The towers are leased from Mobile Telecommunications Limited over an average period of 9.9 years. Contingent rent of N$290 604 is payable on the towers.


48

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 30. Pension Fund At the financial year-end, all the permanent employees of Telecom Namibia were members of the Napotel Pension Fund, a defined contribution fund, governed by the Namibian Pension Funds Act. Employees’ contributions amount to 7% of basic salary and the company’s contribution amounts to 16% of basic salary. An actuarial valuation was carried out for the year ended 30 September 2011, which indicated that the fund was in a sound financial position. As at the 30th of September 2013, a total of 1 236 (2012: 1 214) employees were members of the Napotel Pension Fund.

Powercom (Proprietary) Limited is a participating employer of Benchmark Retirement Fund administered by Retirement Fund Solutions, which is a defined contribution fund governed by the Namibian Pension Funds Act. Contributions to the fund are based on a percentage of salaries and are expensed in the year in which they are paid. As at the 30th of September 2013, a total of 127 employees were members of Benchmark Retirement Fund. The employees that moved to Telecom Namibia subsequent to year-end, joined the Napotel Pension Fund.

Group

2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’000 Contributions to the pension fund: 54 442 48 627 51 939 48 627

Company 44 575 37 853 43 321 37 853Employees 9 867 10 774 8 618 10 774

31. Guarantee(s) Powercom (Proprietary) Limited 120 000 -- 120 000 --Mundo Startel -- 20 330 -- 20 330

120 000 20 330 120 000 20 330

The Company issued a guarantee in 2012 in favour of the Millennium Bank in respect of a loan granted to its associate. In the current year the company was released of its obligation under the suretyship agreement following its decision to divest from Mundo Startel. Telecom Namibia provided limited guarantee for a total amount of N$120 million of which N$60 million is to Investec Bank Limited and N$60 million is to Nedbank Namibia Limited (Nedbank) in respect of borrowings of the newly acquired subsidiary Powercom (Proprietary) Limited. 32.1 Contingent assets Government of the Republic of Botswana -- 72 725 -- 72 725Mobile Telecommunications Limited -- 36 362 -- 36 362

-- 109 087 -- 109 087

The Government of the Republic of Botswana provided a guarantee for the participation of Botswana Telecommunications Corporation in WACS where Telecom Namibia was the lead agent for the Namibia Swakopmund Landing Point. Mobile Telecommunications Limited entered into an agreement with Telecom Namibia in terms of which it is responsible for25% of the WACS capacity landing in Namibia and shared the overall cost. The capital phase of the project has been completed therefore no contingencies were raised in the current year.

32.2 Contingent liabilities Alcatel-Lucent -- 145 450 -- 145 450

A contingent liability in the amount of Nil, (2012: N$145 449 658 (US$17 315 435)) arose as a result of Telecom Namibia’s participation in the WACS. In terms of this project, Telecom Namibia, as the lead agent for the Namibia landing point was directly responsible for the payments due for the landing point albeit recoverable prorata from Botswana Telecommunications Corporation and Mobile Telecommunications Limited. The capital phase of the project has been completed therefore no contingencies were raised in the current year.



49

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management As a result of exposure to constantly changing market conditions, the Group’s management take cognisance of financial risks which are of relevance and significance to the Group. The Group’s risk management policies are monitored on an on-going basis by the Board of Directors’ Risk Management Committee. In the course of conducting its day to day operations, the Group holds or issues financial instruments. The Group’s operations are financed by internally generated cash flows, bonds and loan facilities obtained from financial institutions. On a selected transaction basis, the Group utilises derivative financial instruments to mitigate and manage its exposure to market risks from changes in interest and foreign exchange rates.

Group

2013 N$’000

Group2012

N$’000

Company2013

N$’000

Company2012

N$’000The following are the categories of financial instruments held as at the reporting date: Financial assets at fair value Bank 60 910 17 771 58 470 17 721Investments -- 4 467 -- 4 467Derivatives 2 616 4 331 2 616 4 331

63 526 26 569 61 086 26 519

Financial liabilities at fair value Bank overdraft 338 803 -- 333 716 --

Loans and receivables at amortised cost Interest in subsidiary -- -- 527 386 527 352Trade and other receivables 222 679 241 604 207 665 241 604Non-current assets classified as held for sale 20 220 65 757 20 220 116 266Amount by fellow subsidiaries 2 833 143 150 370 143Amounts owing by holding company 1 11 1 11Finance lease receivables 40 374 21 386 34 949 21 386

286 107 328 901 940 591 906 762

Financial liabilities at amortised cost Long-term liabilities 517 000 486 088 457 000 486 008Short-term portion of long-term liabilities 90 228 33 067 30 228 33 067Trade and other payables 273 403 168 470 248 078 168 470Amounts owing to fellow subsidiaries 13 191 5 070 10 841 5 070Amounts owing to holding company -- 39 000 -- 39 000

893 822 731 695 746 147 731 615

Fair value of financial instruments The carrying values of all financial instruments which are disclosed in the statements of financial position approximate their fair values except as reflected for the Telecom Bond. The estimated net fair values as at 30 September 2013 have been determined using available market information as at that date. These values are however not necessarily an entirely accurate reflection of the amounts that the Group could realise in the normal course of business. Derivatives are carried at fair value. The carrying value of receivables, bank balances, payables and accruals, approximate their fair value amounts due to the short-term maturities of these instruments. The fair value of the borrowings disclosed above are based on the expected future payments discounted at market interest rates. The fair value of financial assets and financial liabilities are determined in accordance with generally accepted pricing models based on discounted cash flow analysis using prices or rates prevailing on the market as inputs. Except as detailed below, the directors consider that the carrying amounts of financial assets and liabilities recorded in the Group and Company’s financial statements approximate their fair values: Group and Company 2013 2013 2012 2012 Carrying amount

N$’000Fair Value

N$’000Carrying Amount

N$’000Fair Value

N$’000Financial liabilities Long-term loans (Note 17) 296 500 189 434 296 500 209 633


50

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Interest rate risk management Interest rate risk arises from the price adjustments effected on the Group’s forward cover and floating rate debt as well as incremental funding or new borrowings and the refinancing of existing borrowings. At year end, various loans granted by European Investment Bank loans which were converted to floating rates through a swap agreement entered into with Standard Chartered Corporate Merchant Bank, were still outstanding. The table below summarises the interest rate swaps outstanding as at 30 September 2013 and at 30 September 2012.

Interest Rate Balance

Loan Number Currency Original Swap Maturity

Fixed Variable Date 30 Sept 2013 30 Sept 2012

A EURO 3.00% 13.66% 15-Nov-13 318 884 946 347

D EURO 3.90% 13.66% 15-Nov-13 63 881 189 579

Credit risk management Financial assets of the Group which are susceptible to credit risk comprise of bank and cash balances, financial assets held at fair value through profit or loss, loans and receivables and available-for-sale assets, (other than equity investments). This risk arises from the likelihood of default by counterparty with whom the Group has entrusted custody of its financial asset(s). Where this default happens, the Group’s loss would be limited to the fair value of the financial asset lost through such default. There is a concentration of credit risk in the loans availed to Communitel (Refer to note 6 for more details) and to Mundo Startel (Refer to note 14 for more details). The Group’s exposure to credit risk is influenced mainly by each type of customer’s credit worthiness. Management seeks to reduce the risk of irrecoverable debt through a comprehensive customer credit appraisal and independent credit checks at the time of application for post-paid services by all customers. The Group has introduced a variety of prepaid products to cater for those customers to whom credit cannot be extended on the basis of their adverse credit ratings. This ensures that products and services are still provided to these customers on a cash basis and hence reducing the concomitant credit risk arising from extension of credit to these customers. The Group provides for impairment of trade receivables which could arise as a result of non-payment by any of the customers once an adequate assessment has been undertaken of the likelihood of the customers failing to pay their accounts. This allowance is based on the duration over which accounts remain outstanding as well as assessment of individual customers’ capacity to pay amounts owed. Telecom Namibia guarantees a predetermined portion of employees’ housing loans obtained under the Group Housing Scheme. Such guarantees are extended on the basis of employees’ respective job grades and level of remuneration. In return, employees benefiting from such guarantees, undertake to cede an equivalent portion of their pensions which in turn can be applied by Telecom Namibia to settle any obligation arising from a default by the beneficiary employee under this arrangement. Given the underlying security against which any financial losses on such guarantees may be applied, the Group does not make any provision in respect of these contingencies. The Group had a significant exposure to credit risk as a result of it taking the role of Namibia’s Lead Agent for WACS. As the Lead Agent for Namibia, the Group committed to the project to the extent of seventy five million United States dollars (US$75 000 000), this represented the capacity which would be accessible on the cable upon completion of construction. This exposure is now nil as the WACS project has been commissioned. Telecom in turn entered into a joint venture with Botswana Telecommunications Corporation (BTC) and Mobile Telecommunications Limited (MTC) for joint ownership of the capacity to become available on completion of WACS. In terms the agreement, BTC will own fifty per cent (50%) of the capacity acquired by Telecom Namibia for a payment amounting to thirty seven million and five hundred thousand United States Dollars (US$37 500 000) with the rest of the capacity jointly owned by Telecom Namibia and MTC. Telecom Namibia obtained a letter of comfort from the Government of the Republic of Namibia in respect of its participation in the project whilst the Government of the Republic of Botswana availed a guarantee to the Government of the Republic Namibia in the amount thirty seven million and five hundred thousand United States Dollars (US$37 500 000) in support of BTC. Telecom Namibia was thus exposed to potential credit risk from any failure by BTC and MTC to meet their financial commitments under this project as, by virtue of being the Lead Agent, it remained solely and directly liable for the costs attributable to the Namibia’s prorata capacity within WACS and the Swakopmund Landing Station. The guarantee provided by the Government of the Republic of Botswana and the contract with MTC however mitigate the risk which would otherwise arise from the failure by BTC and MTC to meet their financial contributions towards this project. This exposure is now nil as the WACS project has been commissioned. Additionally, Telecom Namibia was exposed to potential credit risk through the upfront payments which were made during the tenure of the construction project to the WACS contractor, Alcatel, because transfer of risks and benefits of ownership would transfer upon completion of the project. Alcatel provided a performance guarantee to Telecom Namibia, alongside other participants in the project as assurance on the expected deliverables. The guarantee has now expired since WACS has been commissioned.



51

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Credit risk management (continued) The capital phase of the project was completed therefore no contingencies were raised in the current year and suretyship of the prior year is no longer required. The movement in the allowance for impairment in respect of trade receivables during the year is disclosed in note 11. Liquidity risk management Liquidity risk pertains to the likelihood of the Group failing to meet its obligations when they fall due. Liquidity risk is managed by Telecom Namibia’s Corporate Finance and Administration division in accordance with policies and guidelines formulated by Telecom’s Board of Directors. In terms of its borrowing requirements the Group ensures that sufficient facilities exist with reputable financial institutions to meet its immediate obligations. The Group has unused short term borrowing facilities with local financial institutions amounting to N$117 million (2012: N$173 million). The Company’s unused short term borrowing facilities with local financial institutions amounting N$112 million (2012: N$173 million). Telecom Namibia credit rating of triple B minus was reaffirmed by internationally renowned rating agency, Fitch, during the current financial year. The financial performance of Mundo Startel has been below expectation mainly because of cash flow constraints thus forcing Telecom Namibia to consider disposing of its shareholding in the business. The Board of Telecom Namibia has approved the disposal and the sale agreement has been signed and should be concluded in 2014 for take-over of Telecom Namibia’s shareholding in Mundo Startel. Refer to Note 14. There are currently no cash flow pay outs to either of the investments by Telecom Namibia, thus relieving the local operations of the financial burden which could otherwise arise from the payments. In line with strategic objectives, the Group aims to achieve an EBITDA margin of 30% plus by 2018. This will be achieved through increased sales, controlling operational expenditure and a procurement practices plan to manage the planned capital expenditure over the next five year period. Expansion and planned capital expenditure will be funded by the reissuance of bonds of N$250 million in 2015 as well as by the raising of new loans of N$500 million in 2014. The Group did not identify any significant changes in its exposure to liquidity risk and its objectives, policies and processes for managing and measuring the risk during the 2013 financial year. The table below details the contractual maturities for the Group and Company’s non-derivative financial liabilities. Year-end interest rates were used to determine the contractual amounts payable: Group

�<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002013 Trade and other payables 273 403 -- -- -- 273 403Bank overdraft 338 803 -- -- -- 338 803Loan to fellow subsidiaries 13 191 -- -- -- 13 191Long-term liabilities 93 338 514 664 89 823 (90 597) 607 228

718 735 514 664 89 823 (90 597) 1 232 625

2012 Trade and other payables 168 470 -- -- -- 168 470Loan due to holding company -- -- 39 000 -- 39 000Loan to fellow subsidiaries 5 070 -- -- -- 5 070Long-term liabilities 77 981 488 229 103 805 (150 860) 519 155

251 521 488 229 142 805 (150 860) 731 695

Company


624 483 447 372 89 825 (81 817) 1 079 863


52

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Liquidity risk management (continued) Company (continued)

�<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002012 Trade and other payables 168 470 -- -- -- 168 470Loan due to holding company -- -- 39 000 -- 39 000Loan to fellow subsidiaries 5 070 -- -- -- 5 070Long-term liabilities 77 981 488 229 103 805 (150 860) 519 155

251 521 488 229 142 805 (150 860) 731 695

The table below details the contractual maturities for the Group and Company’s non-derivative financial assets. Year-end interest rates were used to determine the contractual amounts receivable: Group

�<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002013 Trade and other receivables 222 679 -- -- -- 222 679Non-current assets classified as held for sale 20 220 -- -- -- 20 220Amounts owing by fellow subsidiaries 2 833 -- -- -- 2 833Amount owing by holding company 1 -- -- -- 1Finance lease receivables 13 529 27 357 -- (512) 40 374Cash and bank balances 60 910 -- -- -- 60 910

320 172 27 357 -- (512) 347 017

2012 Trade and other receivables 241 604 -- -- -- 241 604Non-current assets classified as held for sale 65 757 -- -- -- 65 757Amounts owing by fellow subsidiaries 143 -- -- -- 143Amount owing by holding company 11 -- -- -- 11Finance lease receivables 16 103 5 754 -- (471) 21 386Cash and bank balances 22 238 -- -- -- 22 238

345 856 5 754 -- (471) 351 139

Company

�<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002013 Trade and other receivables 207 665 -- -- -- 207 665Non-current assets classified as held for sale 20 220 -- -- -- 20 220Amounts owing by fellow subsidiaries 90 370 60 000 -- -- 150 370Interest in subsidiary -- -- 527 386 -- 527 386Amounts owing by holding company 1 -- -- -- 1Finance lease receivables 15 680 19 781 -- (512) 34 949Cash and bank balances 58 470 -- -- -- 58 470

392 406 79 781 527 386 (512) 999 061



51

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Credit risk management (continued) The capital phase of the project was completed therefore no contingencies were raised in the current year and suretyship of the prior year is no longer required. The movement in the allowance for impairment in respect of trade receivables during the year is disclosed in note 11. Liquidity risk management Liquidity risk pertains to the likelihood of the Group failing to meet its obligations when they fall due. Liquidity risk is managed by Telecom Namibia’s Corporate Finance and Administration division in accordance with policies and guidelines formulated by Telecom’s Board of Directors. In terms of its borrowing requirements the Group ensures that sufficient facilities exist with reputable financial institutions to meet its immediate obligations. The Group has unused short term borrowing facilities with local financial institutions amounting to N$117 million (2012: N$173 million). The Company’s unused short term borrowing facilities with local financial institutions amounting N$112 million (2012: N$173 million). Telecom Namibia credit rating of triple B minus was reaffirmed by internationally renowned rating agency, Fitch, during the current financial year. The financial performance of Mundo Startel has been below expectation mainly because of cash flow constraints thus forcing Telecom Namibia to consider disposing of its shareholding in the business. The Board of Telecom Namibia has approved the disposal and the sale agreement has been signed and should be concluded in 2014 for take-over of Telecom Namibia’s shareholding in Mundo Startel. Refer to Note 14. There are currently no cash flow pay outs to either of the investments by Telecom Namibia, thus relieving the local operations of the financial burden which could otherwise arise from the payments. In line with strategic objectives, the Group aims to achieve an EBITDA margin of 30% plus by 2018. This will be achieved through increased sales, controlling operational expenditure and a procurement practices plan to manage the planned capital expenditure over the next five year period. Expansion and planned capital expenditure will be funded by the reissuance of bonds of N$250 million in 2015 as well as by the raising of new loans of N$500 million in 2014. The Group did not identify any significant changes in its exposure to liquidity risk and its objectives, policies and processes for managing and measuring the risk during the 2013 financial year. The table below details the contractual maturities for the Group and Company’s non-derivative financial liabilities. Year-end interest rates were used to determine the contractual amounts payable: Group


718 735 514 664 89 823 (90 597) 1 232 625

2012 Trade and other payables 168 470 -- -- -- 168 470Loan due to holding company -- -- 39 000 -- 39 000Loan to fellow subsidiaries 5 070 -- -- -- 5 070Long-term liabilities 77 981 488 229 103 805 (150 860) 519 155

251 521 488 229 142 805 (150 860) 731 695

Company


624 483 447 372 89 825 (81 817) 1 079 863


52

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Liquidity risk management (continued) Company (continued)

�<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002012 Trade and other payables 168 470 -- -- -- 168 470Loan due to holding company -- -- 39 000 -- 39 000Loan to fellow subsidiaries 5 070 -- -- -- 5 070Long-term liabilities 77 981 488 229 103 805 (150 860) 519 155

251 521 488 229 142 805 (150 860) 731 695

The table below details the contractual maturities for the Group and Company’s non-derivative financial assets. Year-end interest rates were used to determine the contractual amounts receivable: Group

�<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002013 Trade and other receivables 222 679 -- -- -- 222 679Non-current assets classified as held for sale 20 220 -- -- -- 20 220Amounts owing by fellow subsidiaries 2 833 -- -- -- 2 833Amount owing by holding company 1 -- -- -- 1Finance lease receivables 13 529 27 357 -- (512) 40 374Cash and bank balances 60 910 -- -- -- 60 910

320 172 27 357 -- (512) 347 017

2012 Trade and other receivables 241 604 -- -- -- 241 604Non-current assets classified as held for sale 65 757 -- -- -- 65 757Amounts owing by fellow subsidiaries 143 -- -- -- 143Amount owing by holding company 11 -- -- -- 11Finance lease receivables 16 103 5 754 -- (471) 21 386Cash and bank balances 22 238 -- -- -- 22 238

345 856 5 754 -- (471) 351 139

Company

�<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002013 Trade and other receivables 207 665 -- -- -- 207 665Non-current assets classified as held for sale 20 220 -- -- -- 20 220Amounts owing by fellow subsidiaries 90 370 60 000 -- -- 150 370Interest in subsidiary -- -- 527 386 -- 527 386Amounts owing by holding company 1 -- -- -- 1Finance lease receivables 15 680 19 781 -- (512) 34 949Cash and bank balances 58 470 -- -- -- 58 470

392 406 79 781 527 386 (512) 999 061



53

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Liquidity risk management (continued) Company (continued) �<1 year �2-5 years �>5 years Interest Adjustment �Total N$’000 N$’000 N$’000 N$’000 N$’0002012 Trade and other receivables 241 604 -- -- -- 241 604Non-current assets classified as held for sale 116 266 -- -- -- 116 266Amounts owing by fellow subsidiaries 143 -- -- -- 143Amount owing by holding company 11 -- -- -- 11Interest in subsidiary - -- 527 352 -- 527 352Finance lease receivables 16 103 5 754 -- (471) 21 386Cash and bank balances 22 188 -- -- -- 22 188

396 315 5 754 527 352 (471) 928 950

Foreign currency risk

Foreign currency risk arises from the likelihood of incurring losses as a result of settling a foreign obligation or realising an asset denominated in foreign currency at an unfavourable exchange rate. The Group manages its foreign currency exchange rate risk by:

• Applying foreign currency proceeds from business conducted with foreign operators against foreign currency obligations; and

• Hedging material foreign currency exposures through certain financial instruments as approved by the Group’s policies and guidelines. Swap agreements converting foreign currency denominated borrowings and forward cover contracts cushioning against fluctuations in exchange rates, have been entered into to mitigate the risk arising from carrying the exposures in foreign currencies.

The following table illustrates the sensitivity to a reasonably possible change in the exchange rates, with all other variables held constant, to the Group’s loss before tax. A 10% sensitivity rate is applied for internal reporting purposes to key management personnel. This sensitivity analysis is based on the outstanding foreign currency transactions at the reporting date excluding those for which forward cover contracts have been taken out with counterparties.

Group 2013

N$’000

Group 2012

N$’000

Company2013

N$’000

Company2012

N$’000 For 10% increase in exchange rates Increase in (loss)/decrease in profit for year 8 500 299 8 600 299

For 10% decrease in exchange rates Decrease in (loss)/increase in profit for year 8 500 299 8 600 299

Amounts receivable and owing in foreign currencies which were not covered at reporting date are as follows:

Group 2013‘000

Group 2012‘000

Company2013 ‘000

Company2012‘000

Receivable: Euro 70 -- -- --USD 7 187 2 383 5 948 2 383

Contingent Asset: USD -- 8 658 -- 8 658 Payables: Euro 47 182 109 47 148 109USD 45 022 2 709 44 961 2 709

Contingent Liabilities: USD -- 17 315 -- 17 315


54

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Foreign currency risk (continued) The Group did not note any significant changes in its exposure to foreign currency risk and its objectives, policies and processes for managing and measuring the risk during the 2013 financial year. Interest rate risk The sensitivity analyses below have been determined based on the exposure to interest rates at the reporting date. For floating rate liabilities, the analysis is prepared on with the assumption that the amount of the liability outstanding at the reporting date was outstanding for the whole of the financial year. A 100 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

Interest rate risk management

If interest rates had been 100 basis points higher/lower and all other variables were held constant, the Group’s and Company’s effect on the income statement would be as follows:

Group 2013

N$’000

Group 2012

N$’000

Company2013

N$’000

Company2012

N$’000 For 100 basis points higher Increase in loss/decrease in profit for year 6 100 5 200 4 900 5 200

For 100 basis points lower Decrease in loss/increase in profit for year 6 100 5 200 4 900 5 200

The above effects on loss for the year would arise because of the Group’s exposure to variable rate receivables and borrowings. Capital management

The Group’s policy is to continue to maintain an adequate capital base to finance its business as outlined in the Group Strategic Plan and continue to carry out its mandate to the nation whilst simultaneously ensuring sufficient profitability and returns for the shareholder. The following indicates the Groups’ gearing position as at reporting date.

Group 2013

N$’000

Group 2012

N$’000

Company2013

N$’000

Company 2012

N$’000

The gearing ratio at the year-end was as follows: Long-term borrowings 607 228 519 155 487 228 519 155Bank overdraft 338 803 -- 333 716 --Cash and cash equivalents (60 910) (22 238) (58 470) (22 188)

Net Debt 885 121 496 917 762 474 496 967

Equity 508 678 674 655 1 166 639 1 252 466

Equity to debt ratio 0.57 1.36 1.53 2.52

Unutilised borrowing facilities 117 000 173 000 112 000 173 000

Long-term debt includes all debt which is repayable over a period beyond one year from the reporting date. On an annual basis, capital requirements are determined, prioritised and aligned with the available financial resources. Provision is then made for any deficits in capital availability mainly through term loan facilities with financial institutions. The Group maintains a good credit record with reputable financial institutions and this ensures continued availability of funding in the case of any deficits. All the issued shares are owned by the Government of the Republic of Namibia. There were no significant changes to the Group’s methodology of capital management in the year ended 30th of September 2013.



55

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Fair value hierarchy IFRS 13 requires that an entity discloses for each class of assets and liabilities measured at fair value the level in the fair value hierarchy into which the fair value measurements are categorised in their entirety. The fair value hierarchy reflects the significance of the inputs used in making the fair value measurements. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. The fair value hierarchy has the following levels: Level 1 - Inputs comprise unadjusted quoted prices in active markets for identical assets and liabilities that the entity can access at the measurement date; Level 2 - Inputs comprise other observable inputs for the asset or liability not included within Level 1 of the fair value hierarchy; and Level 3 - Inputs comprise unobservable inputs for the asset or liability (including the entity’s own data, which are adjusted, if necessary, to reflect the

assumptions market participants would use in the circumstance). Some of the Group’s financial assets and liabilities are measured at fair value at the end of each reporting period. Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate their fair values.

Valuation technique applied

Total instruments

at fair value Level 1 Level 2 Level 3 N$’000 N$’000 N$’000 N$’000Group Assets Derivative financial instruments 2 616 -- 2 616 --

Liabilities Loans from other entities 189 434 -- 189 434 --Bonds 347 000 -- 347 000 --

No significant unobservable inputs were used as level 3 outputs and thus there is no relationship established between unobservable inputs to fair value. There were no transfers between level 1 and level 2 for the year ended 30 September 2013. The fair values of financial liabilities included in Level 2 have been determined in accordance with generally accepted pricing models. 34. Comparative figures Certain comparative figures have been reclassified to improve disclosure of the financial statements. In the previous year impairment losses and copper sales were included in other operating expenses. Regulatory levies were classified under administration expenses. Impairment losses and regulatory levies are now separate items on the statements of comprehensive income while copper sales are included under other operating income. There was no impact on the statements of financial position. In the current year, the Group has applied IAS 19 ‘Employee Benefits’ (as revised in 2011) and the related consequential amendments for the first time. The amendment required the recognition of all actuarial gains and losses immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statements of financial position to reflect the full value of the plan deficit or surplus. These changes had an impact on the amounts recognised in profit or loss and other comprehensive income in prior year. 35. Subsequent events Telecom Namibia’s strategic plan to streamline the operations of the group was approved by the Board of Directors of the company in July 2013. As a result of implementing this plan, Powercom (Proprietary) Limited gave up its Telecommunications licence on 03 October 2013 and transferred all of its telecommunications services to Telecom Namibia. As a result of this transaction, assets of N$43 million and liabilities of N$1.9 million were sold to Telecom Namibia subsequent to year end. Telecom Namibia is migrating its voice service offering from the current CDMA technology used to GSM as part of the process to incorporated the mobile service offering of Powercom (Proprietary) Limited into Telecom Namibia.


56

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) Annexure A – Standards and Interpretations 1. Accounting standards effective in the current year and adopted

Standard Effective date Summary

Amendment to IFRS 1, ‘First time adoption’ on government loans

1 January 2013 This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. The adoption of this standard did not have any impact on the Group.

Amendment to IFRS 7 Financial Instruments: Disclosures – Asset and Liability offsetting

1 January 2013 The IASB has published an amendment to IFRS 7, ‘Financial instruments: Disclosures’, reflecting the joint requirements with the FASB to enhance current offsetting disclosures. These new disclosures are intended to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. The adoption of this standard did not have any impact on the Group.

IFRS 10 – Consolidated financial statements

1 January 2013 This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements. The standard provides additional guidance to assist in determining control where this is difficult to assess. This new standard might impact the entities that a group consolidates as its subsidiaries. The impact of the standard on the Group has been limited to disclosures of accounting policy notes only.

IFRS 11 – Joint arrangements 1 January 2013 This standard is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefor accounts for its interests in assets, liabilities, revenue and expenses. Joint ventures arise where a joint operator has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The adoption of the standard does not have any impact on the Group as the Group does not have any joint arrangements.

IFRS 12 – Disclosures of interests in other entities

1 January 2013 This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The adoption of this standard has resulted in additional disclosures being made to the Group annual financial statements.

IFRS 13 – Fair value measurement 1 January 2013 This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. The adoption of this standard has resulted in additional disclosures being made to the Group annual financial statements.

Amendments to IAS 1, ‘Presentation of Financial Statements’, on presentation of items of OCI

1 July 2012 The IASB has issued an amendment to IAS 1, ‘Presentation of financial statements’. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The adoption of this standard did not have any impact on the Group.

IAS 19 - Employee benefits 1 January 2013 The IASB has issued an amendment to IAS 19, ‘Employee benefits’, which makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. The impact of the adoption of the standard on the Group has been the requirement to present actuarial gains or losses in other comprehensive income as opposed to profit or loss. Current and prior year figures have been restated.

IAS 27 (revised 2011) – Separate financial statements

1 January 2013 This standard includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. The adoption of this standard did not have any impact on the Group.

IAS 28 (revised 2011) – Associates and joint ventures

1 January 2013 This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The impact of the standard on the Group has been limited to disclosures of accounting policy notes only.

IFRIC 20 – Stripping costs in the production phase of a surface mine

1 January 2013 This interpretation sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. This standard has no impact on the Group.



55

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) 33. Financial instruments and risk management (continued) Fair value hierarchy IFRS 13 requires that an entity discloses for each class of assets and liabilities measured at fair value the level in the fair value hierarchy into which the fair value measurements are categorised in their entirety. The fair value hierarchy reflects the significance of the inputs used in making the fair value measurements. The level in the fair value hierarchy within which the fair value measurement is categorised in its entirety shall be determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. The fair value hierarchy has the following levels: Level 1 - Inputs comprise unadjusted quoted prices in active markets for identical assets and liabilities that the entity can access at the measurement date; Level 2 - Inputs comprise other observable inputs for the asset or liability not included within Level 1 of the fair value hierarchy; and Level 3 - Inputs comprise unobservable inputs for the asset or liability (including the entity’s own data, which are adjusted, if necessary, to reflect the

assumptions market participants would use in the circumstance). Some of the Group’s financial assets and liabilities are measured at fair value at the end of each reporting period. Except as detailed in the following table, the directors consider that the carrying amounts of financial assets and financial liabilities recognised in the financial statements approximate their fair values.

Valuation technique applied

Total instruments

at fair value Level 1 Level 2 Level 3 N$’000 N$’000 N$’000 N$’000Group Assets Derivative financial instruments 2 616 -- 2 616 --

Liabilities Loans from other entities 189 434 -- 189 434 --Bonds 347 000 -- 347 000 --

No significant unobservable inputs were used as level 3 outputs and thus there is no relationship established between unobservable inputs to fair value. There were no transfers between level 1 and level 2 for the year ended 30 September 2013. The fair values of financial liabilities included in Level 2 have been determined in accordance with generally accepted pricing models. 34. Comparative figures Certain comparative figures have been reclassified to improve disclosure of the financial statements. In the previous year impairment losses and copper sales were included in other operating expenses. Regulatory levies were classified under administration expenses. Impairment losses and regulatory levies are now separate items on the statements of comprehensive income while copper sales are included under other operating income. There was no impact on the statements of financial position. In the current year, the Group has applied IAS 19 ‘Employee Benefits’ (as revised in 2011) and the related consequential amendments for the first time. The amendment required the recognition of all actuarial gains and losses immediately through other comprehensive income in order for the net pension asset or liability recognised in the consolidated statements of financial position to reflect the full value of the plan deficit or surplus. These changes had an impact on the amounts recognised in profit or loss and other comprehensive income in prior year. 35. Subsequent events Telecom Namibia’s strategic plan to streamline the operations of the group was approved by the Board of Directors of the company in July 2013. As a result of implementing this plan, Powercom (Proprietary) Limited gave up its Telecommunications licence on 03 October 2013 and transferred all of its telecommunications services to Telecom Namibia. As a result of this transaction, assets of N$43 million and liabilities of N$1.9 million were sold to Telecom Namibia subsequent to year end. Telecom Namibia is migrating its voice service offering from the current CDMA technology used to GSM as part of the process to incorporated the mobile service offering of Powercom (Proprietary) Limited into Telecom Namibia.


56

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) Annexure A – Standards and Interpretations 1. Accounting standards effective in the current year and adopted


Amendment to IFRS 1, ‘First time adoption’ on government loans

1 January 2013 This amendment addresses how a first-time adopter would account for a government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. The adoption of this standard did not have any impact on the Group.

Amendment to IFRS 7 Financial Instruments: Disclosures – Asset and Liability offsetting

1 January 2013 The IASB has published an amendment to IFRS 7, ‘Financial instruments: Disclosures’, reflecting the joint requirements with the FASB to enhance current offsetting disclosures. These new disclosures are intended to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. The adoption of this standard did not have any impact on the Group.

IFRS 10 – Consolidated financial statements

1 January 2013 This standard builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included within the consolidated financial statements. The standard provides additional guidance to assist in determining control where this is difficult to assess. This new standard might impact the entities that a group consolidates as its subsidiaries. The impact of the standard on the Group has been limited to disclosures of accounting policy notes only.

IFRS 11 – Joint arrangements 1 January 2013 This standard is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefor accounts for its interests in assets, liabilities, revenue and expenses. Joint ventures arise where a joint operator has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The adoption of the standard does not have any impact on the Group as the Group does not have any joint arrangements.

IFRS 12 – Disclosures of interests in other entities

1 January 2013 This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off balance sheet vehicles. The adoption of this standard has resulted in additional disclosures being made to the Group annual financial statements.

IFRS 13 – Fair value measurement 1 January 2013 This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. The adoption of this standard has resulted in additional disclosures being made to the Group annual financial statements.

Amendments to IAS 1, ‘Presentation of Financial Statements’, on presentation of items of OCI

1 July 2012 The IASB has issued an amendment to IAS 1, ‘Presentation of financial statements’. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). The amendments do not address which items are presented in OCI. The adoption of this standard did not have any impact on the Group.

IAS 19 - Employee benefits 1 January 2013 The IASB has issued an amendment to IAS 19, ‘Employee benefits’, which makes significant changes to the recognition and measurement of defined benefit pension expense and termination benefits, and to the disclosures for all employee benefits. The impact of the adoption of the standard on the Group has been the requirement to present actuarial gains or losses in other comprehensive income as opposed to profit or loss. Current and prior year figures have been restated.

IAS 27 (revised 2011) – Separate financial statements

1 January 2013 This standard includes the provisions on separate financial statements that are left after the control provisions of IAS 27 have been included in the new IFRS 10. The adoption of this standard did not have any impact on the Group.

IAS 28 (revised 2011) – Associates and joint ventures

1 January 2013 This standard includes the requirements for joint ventures, as well as associates, to be equity accounted following the issue of IFRS 11. The impact of the standard on the Group has been limited to disclosures of accounting policy notes only.

IFRIC 20 – Stripping costs in the production phase of a surface mine

1 January 2013 This interpretation sets out the accounting for overburden waste removal (stripping) costs in the production phase of a mine. This standard has no impact on the Group.



57

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) Annexure A – Standards and interpretations (continued) 1. Accounting standards effective in the current year and adopted (continued)


Annual improvements 2011 Unless otherwise specified the amendments are effective for annual periods beginning on or after 1 January 2013

This is a collection of amendments to IFRSs. These amendments are the result of conclusions the IASB reached on proposals made in its annual improvements project. It includes changes to:

• IFRS 1, Borrowing Costs – clarification of treatment of borrowing costs capitalised

• IAS 1, Presentation of Financial Statements – clarification of the requirements for comparative information

• IAS 16, Property, plant and equipment – classification of servicing equipment

• IAS 32, Financial instruments: Presentation – tax effect of distribution to holders of equity instruments

• IAS 34, Interim Financial Reporting – clarification of interim financial reporting and segment information for total assets and liabilities

These amendments did not have any impact on the Group.

2. Accounting standards and interpretations not yet effective


Amendment to IAS 32, ‘ Financial instruments: Presentation’, on asset and liability offsetting

1 January 2014 These amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position.

Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities

1 January 2014 These amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at fair value through profit or loss. The amendments give an exception to the entities that meet an “investment entity’ definition and which display particular characteristics. Changes have also been made to IFRS 12 to introduce disclosures that an investment entity needs to make.

Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures

1 January 2014 This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

Financial Instruments: Recognition and Measurement, Amendment to IAS 39 ‘ Novation of derivatives’

1 January 2014 This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counter party meets specified criteria.

IFRIC 21 - Levies 1 January 2014 This is an interpretation of IAS 37, ‘Provisions, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to a levy is the activity described in the relevant legislation that triggers the payment of the levy.

IFRS 9 – Financial Instruments 1 January 2015 IFRS 9 is the first standard issued as part of a wider project to replace IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply.

A reliable estimate of the impact on the adoption of these standards and interpretations on the Group has not yet been determined.



57

NOTES TO THE ANNUAL FINANCIAL STATEMENTS for the year ended 30 September 2013 (continued) Annexure A – Standards and interpretations (continued) 1. Accounting standards effective in the current year and adopted (continued)


Annual improvements 2011 Unless otherwise specified the amendments are effective for annual periods beginning on or after 1 January 2013

This is a collection of amendments to IFRSs. These amendments are the result of conclusions the IASB reached on proposals made in its annual improvements project. It includes changes to:

• IFRS 1, Borrowing Costs – clarification of treatment of borrowing costs capitalised

• IAS 1, Presentation of Financial Statements – clarification of the requirements for comparative information

• IAS 16, Property, plant and equipment – classification of servicing equipment

• IAS 32, Financial instruments: Presentation – tax effect of distribution to holders of equity instruments

• IAS 34, Interim Financial Reporting – clarification of interim financial reporting and segment information for total assets and liabilities

These amendments did not have any impact on the Group.

2. Accounting standards and interpretations not yet effective


Amendment to IAS 32, ‘ Financial instruments: Presentation’, on asset and liability offsetting

1 January 2014 These amendments are to the application guidance in IAS 32, ‘Financial instruments: Presentation’, and clarify some of the requirements for offsetting financial assets and financial liabilities on the statement of financial position.

Amendments to IFRS 10, 12 and IAS 27 on consolidation for investment entities

1 January 2014 These amendments mean that many funds and similar entities will be exempt from consolidating most of their subsidiaries. Instead, they will measure them at fair value through profit or loss. The amendments give an exception to the entities that meet an “investment entity’ definition and which display particular characteristics. Changes have also been made to IFRS 12 to introduce disclosures that an investment entity needs to make.

Amendment to IAS 36, ‘Impairment of assets’ on recoverable amount disclosures

1 January 2014 This amendment addresses the disclosure of information about the recoverable amount of impaired assets if that amount is based on fair value less costs of disposal.

Financial Instruments: Recognition and Measurement, Amendment to IAS 39 ‘ Novation of derivatives’

1 January 2014 This amendment provides relief from discontinuing hedge accounting when novation of a hedging instrument to a central counter party meets specified criteria.

IFRIC 21 - Levies 1 January 2014 This is an interpretation of IAS 37, ‘Provisions, contingent liabilities and contingent assets’. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (known as an obligating event). The interpretation clarifies that the obligating event that gives rise to a liability to a levy is the activity described in the relevant legislation that triggers the payment of the levy.

IFRS 9 – Financial Instruments 1 January 2015 IFRS 9 is the first standard issued as part of a wider project to replace IAS 39. IFRS 9 retains but simplifies the mixed measurement model and establishes two primary measurement categories for financial assets: amortised cost and fair value. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. The guidance in IAS 39 on impairment of financial assets and hedge accounting continues to apply.

A reliable estimate of the impact on the adoption of these standards and interpretations on the Group has not yet been determined.

Notes


Notes


Registration Number: 92/282

Auditors:

Deloitte & Touche

Bankers:

Standard Bank Namibia

Finance and Administration Division

Telecom Headquarters

Private Bag 13379, Windhoek

Tel: +264-61-201 2343

Fax: +264-61-23 9014

Commercial Division

Telecom Headquarters

PO Box 297, Windhoek, Namibia

Tel: +264-61-201 2474

Fax: +264-61-24 0933

About this Annual Report

Editor: Oiva Angula

Responsible Department: Corporate Communication and Public Relations

Published by: Telecom Namibia Ltd.

Photographs: Gerhard Botha Photography, Telecom Namibia Ltd & Online

Design and Layout: Ursula Snydewel

Printed by: Solitaire Press (Pty) Ltd.

The publisher thanks all who contributed in the production of this Annual Report. Comments and suggestions for

further improvement of this publication should be sent to: [email protected]

© Copyright Telecom Namibia Ltd. 2012/2013. All rights reserved. Whole sections or parts of sections may be

reproduced provided the source is always stated.

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