TRUE : Annual Report 2001

ContentsPage

n Highlights 2

n Message from the Chairman 3

n Message from the President 4

n Report of the Audit Committee 5

n Company Background and Major Development 6

n Nature of Business 7

n Revenues Breakdown by Business Group 17

n Corporate Information 18

n References 19

n Investment Structure 20

n Risk Factors 22

n Shareholders 25

n Management 26

n Managementûs Discussion and Analysis 45

n Connected Transactions 57

n Financial Statements 58

T e l e c o m A s i a C o r p o r a t i o n P u b l i c C o m p a n y L i m i t e d


A n n u a l R e p o r t 2 0 0 12

Selected Financial Results 2001 2000 % Change

Operating revenues M.Baht 20,636 19,388 6.4%

Revenues from telecommunication

and other services M.Baht 20,118 18,085 11.2%Revenues from product sales

(principally PCT handsets) M.Baht 518 1,302 (60.1%)Operating expense1 M.Baht 19,577 17,569 11.4%

EBITDA (normalized)2 M.Baht 10,421 9,343 11.5%

Margin % 51.8% 51.7%EBIT (normalized)2 M.Baht 2,431 1,635 48.7%

Margin % 12.1% 9.0%Net Profit (loss) M.Baht (3,425) (3,308) (3.5%)

EBITDA/Interest Coverage Times 1.9 1.7 14.3%

Debt/EBITDA Times 8.1 7.9 3.2%

Foreign long-term loans as a % of total % 50.1% 65.9% (23.9%)

Cash flow from operations M.Baht 4,479 3,228 38.8%

Selected Operating Results

Subscriber base

Fixed line telephone Lines 1,741,345 1,524,959 14.2%

Wireless (PCT) Subscribers 626,944 393,000 59.5%

Digital Data Network (bandwidth) ,000 Kbps 2,593 1,449 79.0%

Broadband (ADSL & Cable Modem) Subscribers 1,613 - 100.0%

Internet Subscribers 156,321 73,510 112.7%

Subscriber net additions

Fixed line telephone Lines 216,386 123,847 74.7%

Wireless (PCT) Subscribers 233,944 205,295 14.0%

Digital Data Network (bandwidth) ,000 Kbps 1,144 709 61.4%

Broadband (ADSL & Cable Modem) Subscribers 1,613 - 100.0%

Internet Subscribers 82,811 53,510 54.8%

Efficiency ratio

No. of employees Persons 5,539 5,305 4.4%

Lines per employee3 Lines 429 389 10.2%

Revenue per employee M.Baht 3.73 3.65 1.9%

HIGHLIGHTS

TelecomAsia Corporation Public Company Limited and Subsidiaries

1. Excluding out-of-period accounting adjustments of Bt157 million for 2001 and Bt685 million for 2000

2. Excluding TA Orange and product sales

3. Basing on total no. of employees for fixed line business of 4,062 for 2001 and 3,920 for 2000.

A n n u a l R e p o r t 2 0 0 1 3


MESSAGE FROM THE CHAIRMAN

TelecomAsia Corporation Plc. had reached itûs 10th Anniversary in the year of 2001. Throughout these years, TelecomAsia

has innovated and brought the spectacular advancement to the Thai society as we has evolved the traditional technology to the

sophisticated and user friendly technology which has totally competed with high efficiency and global standard. The 2.6 million

telephone numbers project is more than a successful milestone of a decade, it creates foundations of initiatives, working procedures,

self-competitions as well as impulse of adventures among various organisations concerned. It represents the significant center to

integrate among different divisions at every single officer, creditors and other state agencies, including the Telephone Organization of

Thailand, the Communication Authority of Thailand, the Royal Thai Police and many other public and private institutions. Above all

this is evident that supports of our loyal and respectful customers keep our business alive. Certainly, they are genuine basis of our

company. To all we definitely please wholeheartedly to sincerely express our appreciation.

In 2002, it is a great opportunity for TelecomAsia Corporation Plc. to move into another essential step ahead through this

second decade smoothly which is a time to blend new inventions of dynamic together with state-of-the-art technologies and

communicational services in order to perfectly adopt to the Thai lifeûs style. Also, these are involved with straight to core products and

extensive services of value added products emerging from the combination of voice, data and image technology on the network of

the 2.6 million telephone lines. We have enhanced our PCT to be more potentially useful to achieve effectively the customers' needs

as well. Most importantly, the progress of launching the mobile services with ùTA Orangeû would be the front liner for TelecomAsia

to become the one leader of aggressive players in wireless communication. Furthermore, the major issue that needs to be emphasis

on is the direction of concession conversion between TelecomAsia and the Telephone Organization of Thailand. This will provokes

our capability clearly to negotiate for fairness among all parties involved with.

Obviously, we realize and perceive all of these responsibilities carefully as we pay attention closely on the existing

telecommunicational competition. As a result, international standards and strict regulations are now becoming more importance to the

national level as well as the global scale, the real competition is now commencing and it also awakes everyone within TelecomAsia

to response and handle any obstructions wisely. At last but not lease, we, TelecomAsia, are proud to explore our features to all of

the world as we will hold self-consciousness constantly, look through the future carefully, read all problem explicitly, turn crisis to

opportunities and we accomplish the mission finally.

(Mr. Dhanin Chearavanont)

Chairman of the Board


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MESSAGE FROM THE PRESIDENT

Despite the global economic downturn and the repercussions from the September 11th tragedy, TelecomAsia finished the year

2001 in a better strategic position than we have ever been in since our founding ten years ago. As Thailandûs telecommunications

sector moves closer towards market liberalization, the outlook for TelecomAsia has never been more promising.

The year 2001 ushered in a new era for the Thai telecommunications industry. A new Telecom Act was promulgated. The

government set an aggressive timeframe for the privatization of the Telephone Organization of Thailand. The frameworks for

concession conversion were brought forth as a national agenda. These milestones are a testament to the importance of our sector

and its imminent liberalization as the fuel for Thailandûs future economic growth and competitiveness. It is not surprising that

competition in the industry has intensified among wireless, fixed line, and Internet players alike. Because the competitors know that

as the market opens up, the prizes to be won for those well positioned will be greater than ever before.

On the strategic front, TelecomAsia took decisive actions to strengthen our portfolio of businesses for the post-liberalization

environment. We successfully attained a 41% shareholding (through Bangkok Interteletec Co., Ltd.) in TA Orange Co., Ltd. (formerly

C.P. Orange Co., Ltd.) with an option and obtain to hold up to 51%. We strongly believe in the profitable growth prospects of the

mobile business in Thailand, and now we will be part and parcel of that growth. Furthermore, the knowledge transfer that we gain

from our new partner, Orange, one of the worldûs strongest brands, will go a long way towards strengthening TAûs own brand

management. In addition, there are significant synergies between our wireless, fixed line, Internet and cable TV (UBC) businesses,

on both the costs and revenue sides, which we have only just begun to reap the benefits of.

On the financial front, we reduced our financial risks by converting US$ 97 million of debt into Baht denomination as well as

refinanced US$ 110 million of debt into Baht. Preparations have been made for significantly more foreign exchange risk reduction and

balance sheet improvement in 2002.

On the operational front, we have improved our organization and management in three ways. First, we have set up a system

that allows us to measure and reward employees based on performance. Secondly, we have de-layered the organization, allowing

us to be more responsive to our customers and the changing competitive environment. Thirdly, we have reorganized our thinking and

people into value creation units, each with the responsibility for ultimately creating value for our shareholders.

The year 2002 will be an exciting year for TelecomAsia as it will be our first operational year as Thailandûs one and only

integrated operator. Not only will we be focusing on achieving the synergies we have identified thus far, but we will also be further

enhancing our position strategically, financially, and operationally to benefit from liberalization whichever way the story unfolds.

(Mr. Supachai Chearavanont)

President and Chief Executive Officer

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REPORT OF THE AUDIT COMMITTEE

By virtue of a resolution of the Board of Directors of TelecomAsia Corporation Public Company Limited (the çCompanyé)

passed at its meeting No.13/1999 held on 22nd December 1999, the Audit Committee was appointed to perform duties and discharge

responsibilities under the charter for the Audit Committee. During the year 2001 the Audit Committee carried out the following

work :

1. held committee meetings, totaling 10 times during the year 2001 in order to discharge its functions as assigned by the

Board of Directors;

2. considered and proposed the appointment and remuneration of PriceWaterhouseCoopers ABAS Limited as the Companyûs

external auditor for the year 2002;

3. presented the Corporate Policy Statement and Internal Auditing Charter to the Board of Directors for consideration and

approval, defining the process, scope and responsibility of the internal audit functions with a view to ensuring efficiency and

effectiveness, particularly in the areas of internal control and risk management;

4. reviewed the Companyûs and subsidiariesû financial reports, monthly, quarterly and annually, to ensure correctness,

reliability and adequate information reflecting good corporate governance;

5. consulted and discussed with PriceWaterhouseCoopers ABAS Limited to formulate an Internal Audit Operating Manual

incorporating all necessary issues to be used as practical guidance;

6. regularly reviewed the Companyûs and its subsidiariesû practices relating to connected transactions to ensure

compliance with the regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand;

7. continuously ensured that the Company improved its Internal Control System.

(Mr. Vitthya Vejjajiva)

Chairman of the Audit Committee


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COMPANY BACKGROUND AND MAJOR DEVELOPMENT

TelecomAsia Corporation Public Company Limited (the çCompanyé) was established on 13th November 1990 initially under thename of CP Telecommunications Company Limited to undertake the telecommunications business being awarded a Build TransferOperate (BTO) concession by the Telephone Organization of Thailand (çTOTé) to construct, install and jointly operate a 2.6 millionfixed telephone line expansion in the Bangkok Metropolitan Area (the çBMAé) (the BMA includes Bangkok, Nonthaburi, Samutprakarnand Pathumthani) for a period of 25 years. The Company must also provide maintenance of the system equipment of the 2.6 millionlines throughout the term of the agreement. In addition to the original fixed line concession with the TOT, the Company has beengranted the approval to expand various types of valued added services to its fixed line subscribers aiming to be a full-scaledtelecommunications service provider. This includes TA Connex, public phone service, Personal Communication Telephone service(çPCTé), data transmission services, internet and multimedia services.

The Company subsequently registered as a public company limited with registration no. Bor Mor Jor 82 on 11th February 1993having Nynex Network System (Thailand) Company Limited (çNYNEXé) as a strategic partner. NYNEX is an affiliate of VerizonCommunications, Inc. (çVerizoné), a leading telecommunications service provider in the U.S. As at 31st December 2001, NYNEX holdsapproximately 12.51% of fully paid-up capital of the Company while Charoen Pokphand Group Co., Ltd., a Thai major shareholderholds 16.40%.

Major Development in Business Operation and ManagementNovember 1990 Company Establishment with registered capital of Baht 1,000 millionAugust 1991 Entering into the BTO concession with the TOT to build, install, jointly operate and maintain a 2 million fixed

telephone lines in the BMA for the period of 25 yearsDecember 1991 Establishment of Telecom Holding Company Limited to invest in telecommunications projectsJuly 1992 Acquisition of 15% shareholding in the Company by Nynex Network System (Thailand) Company LimitedDecember 1993 Listing as a listed company on the Stock Exchange of Thailand with registered capital of Baht 22,230 millionJune 1994 Investment in FLAG Telecom Holdings Limited (çFLAGé), providing fiber optic link for telecommunications service

providersMarch 1995 Commencement of cable TV service of UTV Cable Network Company Limited (UTV), one of the Company's

affiliates.September 1995 Approval granted by TOT to the Company for additional 600,000 fixed line expansion in the BMA.May 1996 Approval granted by TOT to the Company to provide various value added services such as digital network

services and TA ConnexAugust 1996 Approval granted by TOT to the Company to provide PCT serviceJanuary 1997 Approval granted by TOT to the Company to provide public telephone service in the BMAMay 1998 Merger between UTV and International Broadcasting Corporation PLC (IBC) to become a leading cable TV

service provider under the name of United Broadcasting Corporation PLC (UBC)November 1999 Official commencement of PCT serviceMarch 2000 Debt restructuring successfully completed with a principle term that Kreditanstalt fur Wiederaufbau (KfW), major

foreign creditor, subscribes 702 million preference shares totaling USD 150 million equal to 24% of total sharesof the Company after capital increase

August 2000 Commencement of Click TA service, a new alternative of Internet servicesNovember 2000 Announcement of çTA 1234é service, an economical rate for long distance callsApril 2001 Commencement of prepaid PCT serviceJune 2001 Approval of shareholders in a shareholdersû meeting to swap 41% shares of Bangkok Inter Teletec Co., Ltd.

(çBITCOé), holding 99.81% of shares of CP Orange Company Limited (furtherly changed its name to TA OrangeCo., Ltd.) awarded a concession by the Communications Authority of Thailand (çCATé) to provide GSM 1800cellular phones services

October 2001 Entering into the share swap with BITCO and registration of paid-up capital increase with the Ministry ofCommerce on 6th November 2001

..

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NATURE OF BUSINESS

Products and Services under the Build Transfer Operate Concession with TOT and CAT

The Company is a leading telecommunications service provider of wire line and voice, video, data and web-based applica-

tions based on the integrated multi-platform network. As of 31st December 2001, the Company has achieved higher market share in

wire line business in the Bangkok Metropolitan Area (çBMAé), Thailandûs largest business center, than its competitor and is aiming to

provide its customers with a full range of telecommunications services, emphasizing both the best service from its well-trained

personnel and the best quality of products from its high technology-based network.

The Company's wire line network, as the core network, combines a fiber optic network and a high-speed digital network to

not only enable the Company to provide its customers with the best quality of wire line service, but also to help the Company develop

its new value added services which better serve its customers' various needs, e.g. Personal Cordless Telephone (PCT), multimedia

services, data transmission services and Internet and e-commerce services. Moreover, the Company has installed ATM (Asynchro-

nous Transfer Mode) and IP (Internet Protocol) networks on its core network to expand the capacity and speed of data transmission

and to offer new alternatives of services to its customers. The Company believes that its core network will become the key to

telecommunications services of today and to the next era of telecommunications business, emphasizing voice, video and data.

Apart from its high technology core network, the Company has procured a Network Management System which will enable

it to track errors and provide highly effective maintenance 24 hours a day including the advanced Computerized Customer Service

System or CCSS to help meet its customers' satisfaction in its services.

Products and Services of the Company and its subsidiaries and affiliates can be classified as follows:

1. Wire Line and its Value Added Services

2. Wireless Service (PCT)

3. Multimedia Services

4. Data Transmission Services

5. Internet and E-Commerce Services

(1) Wire Line and its Value Added Services

In 1991, the Company was formally awarded a Build Transfer Operate (BTO) concession by TOT to construct, install and

jointly operate a 2.6 million wire line telephone expansion in the BMA for a 25-year period. The Company shares its revenue with

TOT. TOT collects service charges from customers and then calculates the proportion of revenue sharing to the Company, based

upon the revenue amount before deduction of related expenses, pursuant to the concession, at the revenue sharing rate of 84% for

2 million lines and 79% for 600,000 lines. With regard to value added services, the Company has 82% revenue sharing from each

service and 76.5% of the public phone service. As of 31st December 2001, the Company has 1,741,345 telephone subscribers.

Telephone Subscription and Installation

Upon the request for telephone installation from the customer, the Company will quickly proceed and complete the installation

as scheduled. As part of providing excellent service and convenience to all customers, customers can subscribe for wire line

telephone at 21 branches of TA Outlet located throughout the BMA area or via Tele-ordering Center at the telephone number 0-2900-

9000. In case of having a network problem, the subscriber can dial 1177 Service Center for assistance 24 hours a day. The Company

will provide technical support through well-experienced technicians from its Network Maintenance Centers located throughout the BMA

area to solve problems immediately as needed. Moreover, the Company has established a Call Center to provide relevant information

and address customer concerns.


A n n u a l R e p o r t 2 0 0 18

Value Added Services

In addition to the wire line service, the Company offers various value added services to serve its customers' needs, e.g.

Public Phone Service, 1177 Service Center, TA Voice Mailbox, TA Connex, Direct Inward Dialing, TA Hunting Lines and Integrated

Service Digital Network.

- Public Phone Service : Since 1997, the Company has provided public phone service in the BMA area for 20,000 telephone

units, and is currently seeking approval for 6,000 additional telephone units to be installed in 2002.

- 1177 Service Center and Drop Wire Maintenance : Also since 1997, the Company has operated a service center for

receiving notifications of network problems and for drop wire maintenance.

- TA Voice Mailbox : This is an automatic telephone answering service which answers incoming calls when the line is engaged

or there is no answer. This service does not require any additional equipment, and allows customers to receive their voice

mails by just calling the Voice Mailbox Center.

- TA Connex : This service consists of following features: Call Waiting, Conference Calling, Call Forwarding, Hot Line,

Abbreviated Dialing, Automatic Call Repetition and Outgoing Call Barring.

Apart from the foregoing services, the Company also provides services for corporate customers that require a great amount

of telephone lines and anticipate various types of services through the direct sale staffs to visit the customers to introduce new

technology of valued added services compatible with the wire line telephone system as follows:

- Direct Inward Dialing (DID) : DID directs incoming calls to a party through a PABX, without an operatorûs intervention.

- TA Hunting Lines : This service bundles 2 or more telephone lines at one location into a single number (Pilot Number).

- Integrated Service Digital Network (ISDN) : ISDN enables a telephone network to handle the growing need for all forms

of voice, data and image communications to be used simultaneously on the same telephone line.

- Other Services : The Company will soon be launching new value added services such as Calling Card and Free Phone

1-800.

(2) Personal Communication Telephone (PCT)

Along with Asia Wireless Communication Company Limited (çAWCé), a TA subsidiary, the Company officially launched PCT

Service in November 1999. PCT is a service that brings convenience to its users through use of a single telephone number as the

wire line telephone with a cordless handset that can be used anywhere within the BMA.

PCT combines 2 leading technologies into the existing network: the Personal Handy Phone System (PHS) developed from

the Cordless Telephone System and the Public Switched Telephone Network (PSTN) and the advanced Intelligent Network with its

enhanced network capability that allows the PCT cordless number to use the same number as the wire line phone.

In 2001, the Company launched the PCT Prepaid Service under the Company's wire line network in order to satisfy

customers who want greater control over the cost of usage. PCT Buddy was also introduced during 2001 to serve apartment

residents who do not have their own fixed-line telephone numbers.

PCT is provided under the BTO concession with TOT. All revenue from PCT service is collected by TOT and the Company

is paid 82% of revenue, before deduction of related expenses, of which approximately 70% is paid to AWC as compensation for

operating the PCT service. PCT service is also available to TOT subscribers. Because the PCT network belongs to the Company,

TOT shares approximately 80% of revenue received from its subscribers to the Company as a PCT network rental fee with the

A n n u a l R e p o r t 2 0 0 1 9


Company (in the event that the forex rate is below Baht 38 per USD1) or approximately 82% of revenue (in the event that the forex

rate is Baht 38-45 per USD1).

(3) Multimedia Services

Multimedia service is provided through Asia Multimedia Company Limited (çAMé), the Company's subsidiary that owns

exclusively a large scale Hybrid Fiber-optic Coaxial (HFC) network. AM has been operating under TOT permission since 20th October

1997. AM currently jointly operates a cable TV business with United Broadcasting Corporation Public Company Limited (çUBCé), a

Company affiliate and Thailandûs leading cable TV service provider. AM has rented its HFC network of 35 analog channels to UBC

for broadcasting cable TV programs. In addition, AM is a drop wire distributor and provides UBC customers with drop wire installation

services, including the maintenance of the set-top Boxes.

AM is recognized as the first company in Thailand to launch broadband Internet services based upon cable modem

technology which allows computers to send and receive data via the HFC network at very high speed. Transmission speed through

AMûs cable modem service, introduced in 1999, is up to 100 times higher than other dial-upmodems currently used among internet

users. Because it is always connected to the Internet, cable modem service eliminates the delay of dial up procedures, saving users

time, and it does not require a separate telephone line.

(4) Data Transmission Services

The Company offers various alternatives in both speed and flexibility for data transmission to best fit its customers' needs.

After the installation of ATM/IP and Remote Access Server (RAS) in the middle of the year 2000, the capacity of data transmission

has increased in terms of both higher speeds and improved quality. Data transmission services available to customers are as follows:

- Digital Data Network (DDN) : DDN facilitates voice, data and image transmission between two different points over the

intelligent network of the Company. Users can use this special route to transmit data that is suitable for business institutions,

e.g. banks and financial institutions, which rely upon continuous transmission of accurate data or information, often in large

volumes.

- Asymmetric Digital Subscriber Line (ADSL) : ADSL allows high and stable speed data transmission service over the wire

line service, suitable for each userû s requirements for on-line data normal telephone line functionality, and is marketed under

the name of TA Express.

- IP Access Service (IPAS) : This service, offered under the name çTA Megaporté, is another alternative to Trunk Access that

provides RAS management services for customers who require external Access Port, e.g. Internet service providers, web

information providers, and business groups which require a Virtual Private Network Service (VPN), without having to incur any

additional expenses for equipment and management for the Access Port.

(5) Internet and E-Commerce Services

Since receiving approval from CAT in November 1996, the Company's subsidiary Asia Infonet Company Limited (çAIé) has

provided Internet and e-commerce services to its customers under the name of çAsianeté AI customers are offered various service

alternatives: for example, corporate customers can select leased line, ISDN and web hosting services, while private users can select

from monthly or hourly membership packages, or purchase and Internet kit ready for use or International Roaming services.

In addition to AIûs Internet service, the Company has created its own website: ClickTA.com, which is an economical Internet

service designed to serve its telephone subscribers exclusively. ClickTA.com is accessed through an on-line portal which provides its

customers with high speed data transmission through a special gateway to the Internet. Moreover, ClickTA.com contains a variety of

useful and entertaining information and has free e-mail service for its subscribers. Service charges collected by AI are shared with


A n n u a l R e p o r t 2 0 0 110

the Company. The revenue sharing ratios depend upon the number of ClickTA.com subscribers.

In addition to the foregoing, the Company also provides its corporate and institutional customers with e-commerce services

i.e. End-to-end Web Development Solutions, e.g. Web Design, Web Development Implementation, Hosting. Our services are capable

of serving even the most complicated interactive website with graphic and motion pictures or animation and multimedia components.

Marketing Strategy

The Company seeks to provide its customers with a complementary variety of bundled telecommunications services. The

Company also believes that the demand for the combination of the wire line, wireless, Internet and multimedia products and services

will be increasing significantly. As high technology products and services develop, the Company and its subsidiaries have jointly

determined their marketing strategy and targeted customers, together with distribution channels, as follows:

Marketing Strategy and Market Environment

The main objective of the Company is to best serve its customers via its advanced telephone network in order to facilitate

and better its customers' quality of life by considering the market demand and the quality of service. As a consequence, the market

strategy emphasizes public relations activities to improve the perception of and understanding towards the Company's products and

services, including the ongoing marketing campaign corresponding to the customers' needs.

Nature of Customers and Target Group

The Company recently reorganized its marketing organization into the Business Segmentation and Consumer Segmentation.

The Company has classified its Business Segmentation into 1) Small and Medium Enterprises, 2) Banking, Finance and Insurance,

3) Government and State Enterprises, and 4) Wholesale Services and Solutions in order to provide them with the most appropriate

service.

With regard to the Consumer Segmentation, the Company has categorized its customers by the market environment into

1) Teenager Group, 2) Housewife and Family Group, 3) Businessman and Professional Group, and 4) New Housing Resident Group

in order to offer best service and high technology products to such customers throughout the BMA.

Distribution Scheme and Distribution Channel

Distribution channels are divided into :

1. Business Channel is categorized into

- Small and Medium Enterprises : The distribution channel for this customer group is based upon the territory and area

approach. Each area is under the responsibility of a sales manager and sales executives in charge of a specific territory.

The marketing strategy is tailored and is adjustable to meet the requirements of the targeted customers. In addition, the

sale executives are trained to possess good skills in presentation, negotiation and creating marketing activities to

facilitate the sale, e.g. direct marketing.

- Banking, Finance and Insurance : The Company has an Account Executive (çAEé) who is responsible for certain

customers. Each AE surveys the total communication requirements of the customers and, correspondingly, offers them

a total solution package of voice, image, data and information transmission. Moreover, each AE acts as a single point

of contact for those customers in order to accommodate and provide customer care service appropriately.

- Government and State Enterprises : The Company established a specific sales department responsible for this

customer segment, in order to ensure compliance with relevant rules and regulations and to serve them with well-suited

services.

A n n u a l R e p o r t 2 0 0 1 11


- Wholesales Service and Solution : This customer group includes telecommunications business, Internet service

providers, e-commerce business, etc. which have huge demand for telephone usage with high technology functions. The

Company, therefore, has technical specialists available for giving technical advice and assistance to this customer group.

2. Consumer Channel is categorized into :

- Retail and Telesales Channel Management (RTM) : This involves the telesales to prospective customers through 21

outlets in order to accommodate them in subscribing to telephone line and other services from the Company.

- Direct Sales : This distribution channel is based upon the territory and area approach under the responsibility of a sales

manager and sales executives for each specific territory. Marketing strategy is tailored to be adjustable to provide the

most appropriate services such as mail drop, promotional campaign and activities, and mobile outlets to facilitate those

who are living in certain residential area.


A n n u a l R e p o r t 2 0 0 112

Industry and Competition

1. Fixed Line Business

Currently, there are 3 fixed line operators comprising 2 private concessionaires namely, the Company (offering services in

greater Bangkok and vicinities) and Thai Telephone and Telecommunication Plc.-TT&T (offering services in provincial areas). The TOT,

a state enterprise, also offers services with nationwide coverage. As of September 30, 2001, there were totally 3,190,667 fixed line

subscribers in Bangkok and vicinities. This represented a growth rate of 8.8 % year over year.

Table: Fixed Line Telephone - Lines in Service

As of September 30, 2001 As of September 30, 2000

Service Provider Bangkok Provinces Total Bangkok Provinces Total

Metropolitan Metropolitan

TOT* 1,474,421 1,653,689 3,128,110 1,439,382 1,437,212 2,876,594

TA** 1,716,246 1,716,246 1,493,646 1,493,646

TT&T* 1,184,126 1,184,126 1,183,393 1,183,393

Total 3,190,667 2,837,815 6,028,482 2,933,028 2,620,605 5,553,633

Source : * www.tot.or.th

** the Company's data

The penetration rate in Bangkok Metropolitan is still considerably low when compared with other developed Asian cities.

Therefore, there is still opportunity for growth. However the growth rate will depend on the pace of economic recovery and the

expansion in the Internet and data market, which will stimulate customer need for additional fixed telephone lines.

Table: Asian Citiesû Fixed Line Penetration Rates

Country Connected Lines per 100 Population

Hong Kong 52.1

Malaysia 20.2

Taiwan 54.1

Korea 48.6

Bangkok Metropolitan1 35.9

Source : CIA Fact Book 2000 and the Company

Competition is not intense at present. Under the current regulatory scheme, there are limited number of concessionaires

under the concession contracts between the concessionaires and the TOT. However, commencing the early 2001, the TOT has

adopted a more aggressive marketing scheme. This heated up the degree of competition. Since the Company has engaged in a more

aggressive marketing approach than the TOT and the TOT had a limited number available for sale, it managed to seize almost all

of the net additions market share and hence resulting in the Company's market share surpassing the TOTûs. As at September 30,

2001, the Company managed to posses 54% market share for Bangkok and vicinities while the TOT captured the balance of 46%.

The competitive strategy implemented by the Company included the continuous sales promotion for new application fee waiving,

bundling sales with other products, management by type of customers, emphasis on corporate client group including the concentration

on the service quality and customer satisfaction. The Company believes that its strength in fixed line services lies on its fixed line

1Bangkok Metropolitan includes Nontaburee, Patumthanee and Samut Prakarn

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network technology which is modern and highly flexible. It, therefore, enhances the Company to offer services with high efficiency and

low maintenance cost.

However, with the hyper growth in cellular subscribers that almost doubled within the year 2001 and with the intense sales

promotions from cellular operators, the tariff has effectively declined. This affected the Company's fixed line business. There was

some migration of subscribers from fixed line to cellular. The said impact will still continuously exist for the next few years when the

subscriber growth is expected to be increase rapidly. However, part of the said impact will be offset by higher call to mobile due to

a higher destination phone number to call to.

2. Personal Communication Telephone (PCT) Business

The Company has commenced the PCT official launch since November 1999 with its unique characteristic of çone numberé

concept as the first and the only operator in the world. It is, therefore, considered as value added service extending the service

coverage area of its fixed line. It enables subscriber to use their home phone numbers anywhere within service footprint. This has

positioned PCT uniquely as an extension to fixed line services and thus differentiated PCT from cellular service. Moreover, the

Company emphasizes the features of PCT with a slogan of çeasy to remember, convenient, safe, and economyé. Since PCT carries

the same number as of the fixed line, the number is easy to be remembered. As PCT handsets transmit 200 times less microwave

power than that of GSM 2 Watts (a cellular handset), they are relatively safer to use. However, PCT only cover the footprint of

Bangkok metropolitan. The tariff for PCT is about half of cellular. Calls made from fixed line telephones to PCTs are charged at Baht

3 per call, while, outgoing call from fixed line to PCT is charged at fixed rate of Bath 3 per call comparing with the time metering

rate for calls made from fixed line telephones to cellulars. Another unique characteristic of PCT is the higher data transmission speed

than that of the cellular. Moreover, enhancing the data transmission speed capability costs less than cellular due to additional

software upgrade requirement. In 2001, the Company has introduced a new sales promotion by reducing tariff for outgoing call from

PCT to fixed line or PCT within the same area to Baht 3 per call. Monthly fee was also reduced to Baht 200 per number rather than

per handset. The installation fee was also waived. Hence, PCT was positioned as virtual fixed line. By the end of the year, the

Company has further reduced the barrier to entry by lending PCT handsets to subscribers for 3 years without any conditions.

Moreover, the Company put emphasis on product acknowledgement in order to manage customer's expectations and maintaining the

customer service quality.

The target customers for PCT differ from those of the cellulars. They include housewives, civil servants, entry-level company

staff and school children, etc. The Company believes PCT is the value added service to the fixed line rather than being cellular and

suits the target customers who spend most of their time in Bangkok.

Despite the Company positioning the market segment for PCT to be differentiated from cellular, there are some consumer

groups still perceive PCT as a substitute to cellular. Therefore, the fierce competition of the cellular phone business has, in part,

inevitably affected the PCTûs operating results.

In 2001, cellular subscribers have doubled the number within the first 9 months to 6.4 million amid the more intense

competition. The cellular hyper growth has started to develop since the second half of 2000 due to handset and equipment price

reductions. Moreover, there were other sales promotions such as the all-inclusive charge that caused tariff reduction. This was done

in order to expand and build their subscriber base prior to the entrance of the new operators such as TA Orange Co., Ltd., ACT

Mobile, and Hutchison-Tawan Mobile.

Despite PCT facing a tougher competition from cellular and the service area being limited to Bangkok Metropolitan, the

Company still managed to add subscribers at the growth rate of 60% from 2000 to 626,944 as at December 30, 2001. This reflected

the success in its appropriate market positioning and the effective marketing activities. Moreover, it resulted from the wireless service


A n n u a l R e p o r t 2 0 0 114

as a whole still having high growth potential. Currently, Thailand still has a low penetration rate of 12% for wireless service comparing

to Hong Kong (53%), Singapore (36%), Korea (50%), Taiwan (45%), and Malaysia (13%). (Source: International Data Corporation,

2000 and CIA Fact Book)

3. Data Communications and Broadband Services

Data Communications Service

At present the market for data network business has expanded at the rate of 23%-30% due to much higher popularity of

on-line data transmission. There were higher number of foreign conglomerate participation in business including branch expansion of

Department Stores, super stores, and industries. The state also implemented the policy of implementing the IT system high-speed

data network for country development through different projects such as, GI-Net, SchoolNet, Information Superhighway or software

-park, etc. The private sector that has enhanced its efficiency towards the competitive advantage began to efficiently utilize the data

network for mass data communications. Moreover, the higher demand for Internet was attributable to the expansion in this business.

Since the economic crisis in 1997, several private companies and the government sector have accelerated the data network

installation in order to support the work expansion and to add leverage in the competition. Moreover, the higher popularity in Internet

usage was another factor affecting growth in this business sector.

Currently, there are 5 major DDN operators namely: TOT, UIH, TA, ADC and CAT. Competition in data network services is

very high, as there are many operators. The key success factors in this business are service quality and reliability, high service

coverage, and the ability to offer high-speed services demanded by customers. The Company now captures the market share of

approximately 30% in both numbers of circuits and Bandwidth aspect. It is considered to be at par with TOT who is another major

operator.

The Company does have significant competitive advantages over its competitors as results of its modern network technology

that yields higher service quality and reliability. In additions, the Company's data network was enhanced with the completion of

ATM/IP overlay network during the second half of 2000. This enables the Company to offer high-speed services suitable for growing

needs of subscribers. Moreover, the Company emphasizes on the service quality continuously. In 2001 the Company has opened the

new modern data center to cope with the expansion of data network demand. It has also set up a call center for data network

services to help customers who need high technical advice than normal fixed line. Moreover, the installation staff was integrated into

Services Area and Network Operation of the fixed line service in order to accelerate the process of installation and maintenance.

Broadband Service

The Company officially launched the broadband services in September 2001 with the complete broadband solution namely:

Cable Modem service, TA Express (ADSL) service and TA Megaport, which is the IP Access Service (IPAS).

The market for ADSL and Cable Modem in Thailand is still in the infant stage with the Company being the sole Cable Modem

operator owning the only cable TV network in the country. There are a limited number of ADSL operators namely: UBAHT and

LENSO. The broadband service competition is still mild due to the rapid expansion of the market. Total broadband market expansion

is expected to grow at the rate of 40%-50% p.a. for the next few years. Currently, the broadband services still limited to high-speed

Internet usage. Therefore, the growth for broadband services will depend on the expansion of Internet users including the develop-

ment of contents that can attract more users. There is, however, factor that hinders growth for this business namely: the service fee,

which is considerably higher than dial-up Internet. A typical modem costs around Baht 5,000-6,000 while average service fee is set

at approximately Baht 1,500-2,000 per month.

The Company enjoys the advantage of its ability to offer the service for both Cable Modem and ADSL with a higher coverage

area. The Cable Modem service, which is the cable TV network, covers 80,000 home pass in Bangkok Metropolitan. The ADSL

A n n u a l R e p o r t 2 0 0 1 15


service is offered through the fiber-rich core fixed line network with a very short last mile copper enabling the Company to offer high

quality services. Moreover the launch this year enables the Company to enjoy the first mover advantage.

4. Internet Service Business

The total number of Internet users in Thailand is estimated at around 3 millions, representing a 5% penetration rate. This is

relatively low comparing to developed countries such as: Korea (33.9%), Japan (20.6%), Hong Kong (32.7%), Taiwan (28.9%) and

Singapore (45.1%). (Source: International Telecommunication Union, 2000). Key factors that have limited the size of Thai Internet

usage are high cost of PCs and access charge, expensive international leased circuits, a shortage of local content, linguistic problems

and the slow development of business application for the domestic market. Furthermore, most of the ISPs currently have the CAT,

the regulator, holding a free stake of 35% of total share equity as a part of the ISP concession requirement, thereby discouraging

business expansion.

At present, the competition in the ISP business is severe due to the existence of many (18) operators. The Company offers

the service through its subsidiary namely, Asia Infonet Co., Ltd (AI) who is a major ISP. Other major ISPs comprise CS Communi-

cations, Internet Thailand, KSC Internet, Loxley Information and A-Net. The severe competition has caused an abrupt decline in

Internet service fee at the rate of 50% in the past few years. The dial-up service rate now cost around Baht 7-10 per hour. The

Company, (under AI), has put emphasis on being a leader in corporate market and is presently one of the major players in this

market segment. This year, it has concentrated in marketing the high-speed Internet via both ADSL and Cable Modem in order to

offer choices for customers. The Company's advantages over its competitors are that it operates via its own modern network ensuring

higher service quality and a lower cost structure. The Company can bundle its Internet products with other telecommunications

services offered by various companies amongst the TA group.

Regulatory Update

The telecommunications business in Thailand is in the preparation stage for liberalization. Under the commitment with WTO,

the foreign telecommunications firms will be allowed to enter the local market to join free competition by 2006. In order to prepare

the local operators to be ready for the global competition, the National Telecommunications Master Plan offers the local liberalization

as an initial stage. Under the National Telecommunications Master Plan, the National Telecommunications Commission (NTC) is to

be established to regulate and oversee the country's telecommunications business replacing the Telephone Organization of Thailand

(TOT) and the Communications Authority of Thailand (CAT). The selection process for 7 out of 14 proposed appropriate committee

members by the House of Senate is still pending for the reason that the selection process not being transparent enough.

The Enactment of Telecommunications Business Act (Telecom Act)

In March 2000, the Radio Frequency Allocation Act was enacted with an Article indicating the establishment of the National

Telecommunications Commission (NTC) to regulate and oversee the country's telecommunications business. In November 2001, the

Telecommunications Business Act was enacted. The said Telecom Act is the law that sets the framework for the to-be-established

NTC to regulate and oversee the telecommunications business. This is considered to be another vital step towards the country's

telecommunications liberalization.

However, there may be some controversial issues in this Act to practice which the government is expected to amend. The

25% foreign ownership limit in Article 8th may affect some existing operators with the shareholding structure already reach 49%. The

Article 57th prohibits the license holders from collecting deposits or other type of advanced payments. This has forced some operators

that collected deposits to return the said money to their subscribers. The Company has collected deposits on behalf of the TOT and

hence the TOT will return the money to the Company's subscribers. Moreover, the prepaid services offered by many operators are

unintentionally declared illegal by the Act. However, amendment is expected to be made in order not to affect the consumers at large.

The Article 77th indicated that concessionaires still have the same rights to operate telecommunications business as assigned under


A n n u a l R e p o r t 2 0 0 116

the principle of the Telecom Act and other conditions set by the NTC, and are entitled to be granted license after the concession

conversion process are completed

Concession Conversion

Currently, all the private telecommunications operators engage in their business under the Joint Operation and Joint

Investment for Expansion of Telecommunications Services Agreements with the government agencies. With the conditions of Build-

Transfer-Operate (BAHTO), private operators transferred their operating assets to the state agencies and will receive return from

investment in the form of revenue sharing from the counter party. The balance of revenue belongs to the agencies granting the

concessions namely: TOT and CAT, who have the role to regulate and oversee the national telecommunications business and, at the

same time, being operators that engaged in the business to compete with its own private concessionaires.

The previous governments have been trying to convert the said Joint Operation and Joint Investment for Expansion of

Telecommunications Services Agreements in order to lead to the level playing field which will be the core element leading to the

telecommunications liberalization. However, it is not yet successful due to several operation complexities. The current government has

set up the Concession Conversion Sub-Committee chaired by Minister Pongpol Adireksarn. The Sub-Committee has hired the

Chulalongkorn University Intellectual Property Institute to study the guideline for concession conversion in September 2001. Until now,

there are still different opinions from various parties that contradict to the Chulalongkorn University Intellectual Property Instituteûs

study result that was proposed to the said committee in the aspect of concessionaires to stop paying revenue sharing in the year

2006.

TOT and CAT Privatization

Under the plan to privatize state agencies, the government has the policy to accelerate and stipulate a plan for the

privatization of the TOT and the CAT to be completed by 2002. The TOT is set to privatize and be listed in the SET by the middle

of 2002. The CAT is also set to follow the suit. After that, acceleration was made to the TOT listing process to April 2002 due to the

success in listing of the Petroleum Authority of Thailand, one of the state enterprises. Currently, the said schedule may have to be

postponed again with the proposed time frame to be after the establishment of the NTC due to several disputed aspects of

regulations and overseeing the concession conversion under the TOT. This includes the unequivocal in different concession

conversion under the TOT.

A n n u a l R e p o r t 2 0 0 1 17


REVENUES BREAKDOWN BY BUSINESS GROUP

Business group/Operation by Percentage 2001 2000 1999

of Shares Baht % Baht % Baht %

Held by Million Million Million

the Company

1. Business in Telephone and Value Added Service1

TelecomAsia Corporation Public Company Limited

Revenues 15,618 75.7% 14,732 75.9% 12,497 83.6%

2. Business in Personal Communication Telephone


Asia Wireless Communication Co., Ltd. 99.99%

Wire & Wireless Co., Ltd. 87.50%

Revenues 3,072 14.9% 3,034 15.6% 843 5.6%

3. Business in Service Multimedia Network Provider

Asia Multimedia Co., Ltd. 90.45%

Revenues 894 4.3% 881 4.5% 905 6.1%

4. Business in Data Service


Revenues 503 2.4% 342 1.8% 195 1.3%

5 Business in Internet and E-Commerce

Asia Infonet Co., Ltd. 65.00%

Revenues 154 0.8% 95 0.5% 76 0.5%

6. Other Business

W7 Rental Services Co., Ltd. 99.99%

Nilubon Co., Ltd. 99.99%

Wire & Wireless Co., Ltd. 87.50%

Other Company

Revenues 395 1.9% 304 1.6% 427 2.9%

Total Revenues 20,636 100% 19,388 100% 14,943 100%

Source : The Company

1 Includes Fault Reporting and Dropwiring, Public Phone Audiotext


A n n u a l R e p o r t 2 0 0 118

CORPORATE INFORMATION

The Company was established on 13th November 1990 initially under the name of CP Telecommunication Co., Ltd. with aregistered capital of Baht 1,000 million to undertake Thailandûs major telecommunication infrastructures project and registered as apublic company limited with registration no. Bor Mor Jor 82 on 11th February 1993.

As at 31st December 2001, the Company's registered capital is Baht 33,906,499,780, consisting of 2,688,649,978 commonshares with a par value of Baht 10 per share and 702 million preference shares with a par value of Baht 10 per share, of which Baht32,324,999,780 is paid-up capital, comprising of 2,530,499,978 common shares with a par value of Baht 10 per share and 702 millionpreference shares with a par value of Baht 10 per share.

The Companyû s head office is located at : 18 Telecom TowerRatchadaphisek RoadHuai Khwang, Bangkok 10320Telephone : (662) 643-1111Fax : (662) 643-1651Website : www.telecomasia.co.th

The Company's subsidiaries, associated companies and other investments are as follows :

Company Name Address Type of Business Paid-upCapital

(THB Million)

Telecom Holding Co., Ltd. 18 Telecom Tower Ratchadaphisek Road Investment company both 12,000Huai Khwang, Bangkok 10320 locally and internationally

Nilubon Co., Ltd. 18 Telecom Tower Ratchadaphisek Road Real estate developer and 900Huai Khwang, Bangkok 10320 provider of office space

Telecom International 18 Telecom Tower Ratchadaphisek Road Investment in telecom projects 300Co., Ltd. Huai Khwang, Bangkok 10320 both locally and internationallyK.I.N. (Thailand) 18 Telecom Tower Ratchadaphisek Road Investment in international 75Co., Ltd. Huai Khwang, Bangkok 10320 telecommunication projects

including FLAG ProjectK.I.N. (Thailand) P.O. Box 957 Offshore Incorporations Investment in international USD 1Co., Ltd. (BVI) Road Town, Tortola British Virgin Islands telecommunication projects

and FLAG ProjectAsia Wireless 18 Telecom Tower Ratchadaphisek Road Investment in PCT Project and 3,900Communication Co., Ltd. Huai Khwang, Bangkok 10320 distributor of telecommunications(Formerly named Multimedia equipmentNetwork Co., Ltd.)Interactive Media Services 18 Telecom Tower Ratchadaphisek Road AUDIOTEX service provider 75Co., Ltd. Huai Khwang, Bangkok 10320W7 Rental Services 18 Telecom Tower Ratchadaphisek Road Car rental services 50Co., Ltd. Huai Khwang, Bangkok 10320Telecom Training and 18 Telecom Tower Ratchadaphisek Road professional training and seminar 50Development Co., Ltd. Huai Khwang, Bangkok 10320 organizerTele Engineering 719 KPN Tower, 9/F Rama 9 Road, Bangkapi Dropwire installation contractor 25and Services Co., Ltd. Huai Khwang, Bangkok and distributor of

telecommunications equipmentYai Kaew Co., Ltd. 18 Telecom Tower Ratchadaphisek Road Real estate investment and 10

Huai Khwang, Bangkok 10320 land acquisition for RCUU-Net Co., Ltd. 18 Telecom Tower Ratchadaphisek Road Supplier of cable TV accessories 5

Huai Khwang, Bangkok 10320 and telecommunicationsequipment

A n n u a l R e p o r t 2 0 0 1 19


TA Orient Telecom Hing Yip Commercial Centre, 3/F 272 Des Voeux Investment in telecommunication USD 15Investment Co., Ltd. Road C. Hong Kong projects in PR China MillionTelecom Asia (China) P.O. Box 71, Craigmuir Chambers Road Town, Investment in telecommunication USD 10Co., Ltd. Tortola British Virgin Islands projects in PR ChinaAsia Multimedia Co., Ltd. 18 Telecom Tower Ratchadaphisek Road Multimedia network service 6,127

Huai Khwang, Bangkok 10320 providerAsia DBS PLC 18 Telecom Tower Ratchadaphisek Road Concessionaire with MCOT 100

Huai Khwang, Bangkok 10320 to provide satellite broadcastingservices

Wire & Wireless Co., Ltd. 719 KPN Tower, 9/F Rama 9 Road, Bangkapi Dropwire and outside plant 100Huai Khwang, Bangkok installation contractor

Asia Infonet Co., Ltd. 1 Fortune Town Bldg., 17/F Ratchadaphisek Road Internet service provider 15Din-Dang, Bangkok

Telecom Equipment 111/2 Moo 2 Nikom Pattana Subdistrict Manufacturer of switching 24Manufacturing Co., Ltd. Nikom Pattana District Rayong Province equipment for 2.6 million

fixed line projectUnited Broadcasting 118/1 Tipco Building Rama 6 Road, Phayathai, Cable TV service provider 7,408Corporation PLC BangkokChongqing Communication 140 Daping Zhengjie Chongqing, PR China Distributor of telecommunications USD 35Equipment Co., Ltd. equipment MillionPublic Radio Network 900/9 SVOA Tower Building Rama 3 Road, Public radio network service 10Co., Ltd. Bangpongpang Yannawa, Bangkok providerNEC Communication 9/25 Moo 5 Phaholyothin Road Klong Luang Manufacturer of digital 343Systems (Thailand) Co., Ltd. District Pathumthani Province switching equipmentN.T.U. (Thailand) 518/5 Maneeya Center Building, 6th Floor, Telecommunication 12Limited Ploenchit Road, Lum Pinee, Pratumwan,

Bangkok

Company Name Address Type of Business Paid-up

Capital

(THB Million)

REFERENCES

The Registrar Thailand Securities Depository Co., Ltd.62 Stock Exchange of Thailand Building, 4, 6, 7/F Ratchadapisek Road,Khet Klong Toey Bangkok 10110Telephone : (662) 359-1200-1Fax : (662) 359-1259

Auditor Mr. Somchai Jinnovart (CPA Registration No.3271) orMr. Kajornkiet Aroonpirodkul (CPA Registration No.3445) orMr. Boonmee Ngotngamwong (CPA Registration No.3673) orMr. Soontorn Dentham (CPA Registration No.3340)

PricewaterhouseCoopers ABAS Ltd.15th Floor, Bangkok City Tower179/74-80 South Sathorn Road, Khet Sathorn Bangkok 10120Telephone : (662) 286-9999, (662) 344-1000Fax : (662) 286-5050


A n n u a l R e p o r t 2 0 0 120

INVESTMENT STRUCTURE

(As at 31 December 2001)TelecomAsia Corporation Public Company Limited

Personal Communication Telephone, Value Added Serviceand Digital Data Network

Telecom Holding Co., Ltd.

99.99%

Personal Communication Telephone Service Multimedia Network Provider Internet Service

Asia Wireless CommunicationCo., Ltd. Asia Multimedia Co., Ltd. Asia Infonet Co., Ltd.

99.99% 90.45% 65.00%

Subsidiary Company

Associated Company

Other Company

A n n u a l R e p o r t 2 0 0 1 21


10.91%

99.99%

38.21%

99.99%

99.99%

99.99%

41.00%

Other Business

Nilubon Co., Ltd.

K.I.N. (Thailand) Co., Ltd.

Interactive Media Services Co., Ltd.

W7 Rental Services Ltd.

Telecom Training and Development Co., Ltd.

Tele Engineering and Services Co., Ltd.

Yai Kaew Co., Ltd.

U-Net Co., Ltd.

Telecom International Co., Ltd.

Asia DBS Public Company Limited

Wire & Wireless Co., Ltd.

Telecom Equipment Manufacturing Co., Ltd.

United Broadcasting Corporation Public Company Limited

Public Radio Network Co., Ltd.

N.T.U. (Thailand) Limited

NEC Communication Systems (Thailand) Co., Ltd.

Percentage of holding not more than 10

Telecom Asia (China) Co., Ltd.

Telecom International China Co., Ltd.

TA Orient Telecom Investment Co., Ltd.

Chongqing Communication Equipment Co., Ltd.

K.I.N. (Thailand) Co., Ltd. (BVI)

FLAG Telecom Holdings Limited

99.99%

99.99%

99.99%

99.99%

99.99%

99.99%

99.99%

99.99%

99.99%

89.99%

87.50%

59.99%

40.96%

32.00%

16.67%

9.62%

Bangkok Inter Teletech Co., Ltd.

The Operator of GSM1800 Cellular Telephone Services

TA Orange Co., Ltd.

99.81%


A n n u a l R e p o r t 2 0 0 122

RISK FACTORS

1. Risk Related to Operations

1.1 The Companyûs concessions can be modified or cancelled.

The Telephone Organization of Thailand or çthe TOTé has granted the Company concessions to provide wireline and

related communications and data communications services on a build-transfer-operate basis. Build-transfer-operate conces-

sions require the concession holders to acquire all capital assets required for the operation of its business and to transfer

these assets to the grantor of the concession while retaining the exclusive right to use the assets during the term of the

concession. The TOT can cancel the Companyûs wireline concession if it willfully and continually breaches the concession

agreement in any material respect. The Company has in the past, and expects to continue to have in the future, differences

of opinion with the TOT about the terms and scope of the Companyûs concession agreement. Differences with the TOT, over

the interpretation of material terms of the Companyûs concessions could impair its ability to conduct business or result in the

TOT denying the Company rights that it believes have been granted under its concessions. If the Companyûs concessions

are cancelled, it would no longer be able to control a substantial portion of its businesses and its operations would be

significantly impacted. Because the counter-party to the Companyûs concession agreements are agency of the Government

of Thailand, it may not be able to enforce its rights or collect damages under the concession agreements, if the TOT

breaches its obligations. The TOT is required to compensate the Company at a price equal to the book value of its network

should the concession be cancelled.

1.2 The Companyûs principal revenue is controlled by a third party.

Pursuant to the Companyûs concession agreements, all of the revenues generated from its wireline and data services

operations are collected by the TOT. It retains a portion of such proceeds and pays to the Company the balance according

to a revenue sharing agreement. Because substantially all of the Companyûs revenues are directed to the TOT, it can

withhold or delay the forwarding of payments to the Company or offset obligations it believes the Company owes to it. This

means that the Company may not be able to receive all of its revenues and could be required to pay significant sums to the

TOT.

1.3 The Company competes with its regulator.

Maintaining a good relationship with the TOT is important to the successful operation of the Companyûs business. The

TOT acts both as regulator and as a direct competitor. At times its interests may be different to that of the Company. The

TOT can disrupt the Companyûs ability to offer services to its customers. The Company must receive the TOTûs approval

before it can change its tariffs, or charge its customers for new products or services. Before approving a charge for a new

service, the TOT considers whether it can offer a similar service and whether the service is covered under the Companyûs

revenue sharing plan. The TOT is not bound by any time limit in approving any request by the Company to offer a new

service. The Company believes that maintaining good relationship with the TOT can limit this type of risk, which the Company

has adopted as the major policy in operation under the concession agreement.

1.4 Market liberalization causes intensified competition.

The Thai telecommunications industry is moving towards liberalization. The government has a plan to liberalize the

telecommunications business locally before 2006. After that the market will be free to competition from international

operators. Therefore, it is most likely there will be new entrants to the market and competition in business will increase.

In order to prepare for the market liberalization, most of operators have strengthened their competitive advantages by

implementing various strategies, which have created a more competitive market environment before the market is actually

liberalized. The Companyûs PCT business is currently facing higher competition from cellular operators who aggressively

A n n u a l R e p o r t 2 0 0 1 23


promote their business whereas the Companyûs fixed line business is facing the competition from both fixed line and cellular

operators. Existing cellular operators have added their subscribers significantly during the year 2001. These subscribers may

make more calls from cellular phones, which could consequently affect the revenues from the fixed line service of the

Company.

1.5 Concession conversion may be on terms less favorable than its competitors.

The government policy is to liberalize the telecommunication business and the business of the Company and some

subsidiaries engaged in the concession contracts with the TOT and the CAT. The government therefore has the policy to

convert the concessions in order to create a level playing field for free market competition. The Concession Conversion

Sub-Committee was established in order to supervise the concession conversion process between the states and the private

sector. Private operators can decide whether or not to convert their concessions. The conditions in the concession conversion

will be agreed between the private operator and the TOT on a case by case basis. If other telecommunication operators

negotiate better terms than the Company for their concession conversions, the Company could be placed at a competitive

disadvantage, which could affect its operations.

1.6 Investment in new telecommunication services may not be successful.

The Company has its plan to expand into other types of telecommunication services such as high speed Internet

(ADSL & Cable Modem), E-Commerce and new services offered on the fixed line network such as Calling Card and Free

Phone 1-800 Service. Such services are new to the market and the Companyûs success depends upon many factors such

as market demand and the competition from other competitors. The result of the Companyûs inability to expand its

telecommunication business as planned will affect its operation plan as a whole and in return impact its operating results.

The Company has recently expanded into cellular business by acquiring a 41% ownership interest in TA Orange Co.,

Ltd. (TA Orange) has been granted a concession by the Communication Authority of Thailand to install and operate a GSM

1800 MHz mobile cellular telecommunication network in the Kingdom of Thailand. TA Orange will be the new entrant in the

Thai cellular market whereby two major operators have gained most of market share. While TA Orange has Orange SA, a

leading international cellular operator as its strategic partner, the success of investment in Thailandûs highly competitive

cellular business depend on various factors. The business performance of TA Orange will have a significant impact to the

Companyûs financial results.

2. Risk Related to Financial Situation

2.1 The Companyûs operations are restricted by various financial agreements.

The agreements covering long-term debt, and restructured debt, contain conditions and limitations on the Companyûs

operations. They place limitations on the Companyûs ability to issue equity or debt, sell or acquire assets and pay dividends,

as well as contain various covenants that could delay the implementation of its business strategies. These limitations may

force the Company to pursue less than optimal business strategies or forego business arrangements that could be financially

advantageous to it and to its shareholders.

2.2 Repayment of the Companyûs indebtedness could be accelerated without its control.

The Companyûs restructuring agreements permit its creditors to accelerate the repayment of its secured indebtedness if:

- TOT materially breaches its concession agreement with the Company;

- principal shareholders are unable to direct the Companyûs management; or

- The C.P. Group or Verizon Communications sells shares of the Company more than 10% of their holdings prior to March

31, 2003.


A n n u a l R e p o r t 2 0 0 124

These events could occur but are beyond the Companyûs control. If any of these events occur, the Companyûs creditors

could request immediate repayment of the indebtedness to them. If the indebtedness is accelerated, the Company may not

have sufficient funds to repay these amounts, which could affect its financial position.

2.3 Subject to exchange rate fluctuations between the Thai Baht and the U.S. Dollar.

All of the Companyûs revenues are denominated in Thai Baht, while approximately 50% of its total liabilities at

December 31, 2001 were denominated in foreign currencies, principally the U.S. Dollar. Further depreciation of the Thai Baht

would increase, in Baht terms, the outstanding foreign currency denominated debt, the related interest expense and the cost

of additional credit. A portion of capital expenditures is also denominated in foreign currencies, principally the U.S. Dollar.

Any further depreciation of the Thai Baht against those foreign currencies would increase the amount of Baht revenue

required to meet capital expenditure plans. In Baht terms the costs of capital expenditures would increase.

Therefore, any sudden and substantial increase in the U.S. dollar relative to the Thai Baht could affect results of

operations and the Companyûs ability to meet its future payment obligations on debt. The Company would, however, be a

beneficiary of any decrease in the value of the Dollar versus the Thai Baht.

A n n u a l R e p o r t 2 0 0 1 25


SHAREHOLDERS


List of Top 10 Major Shareholders1

(As of 22nd February 2002)

No. of Shares % of Total

NAME (Million Shares) Issued and

Paid-up Shares

1. CHAROEN POKPHAND GROUP CO., LTD. 530.00 16.40

2. NYNEX NETWORK SYSTEMS (THAILAND) COMPANY 404.35 12.51

3. THAI TRUST FUND2 358.02 11.07

4. KREDITANSTALT FUR WIEDERAUFBAU (çKfWé) 343.98 10.64

5. THANA HOLDING CO., LTD. 305.00 9.44

6. UNIQUE NETWORK COMPANY LIMITED 120.00 3.71

7. WIDE BROADCAST COMPANY LIMITED 80.00 2.47

8. CHAROEN POKPHAND FOODS PUBLIC COMPANY LIMITED 80.00 2.47

9. CLEARSTREAM NOMINEES LTD. 59.29 1.83

10. HSBC SECURITIES (SINGAPORE) PTE LIMITED 38.52 1.19

..

1Shares include ordinary shares and preference shares.2All shares in Thai Trust Fund are preference shares held by KfW, which shall not have right to vote.

. .


A n n u a l R e p o r t 2 0 0 126

MANAGEMENT

Management Structure of the Company consists of the Board of Directors, the Committees and the executive officers, details

of which are as follows :

Board of Directors

As of 31st December 2001, the Board of Directors Consisted of 24 directors who are (a) Executive Directors, those who were

involved with day-to-day operations of the Company, (b) Non-Executive Directors, those who were not involved with day-to-day

operations of the Company, which included Directors representing the secured creditors, and (c) Independent Directors. The members

of the Board of Directors of the Company is as follows :

1. Mr. Narong Srisa-an Independent Director

2. Mr. Vitthya Vejjajiva Independent Director and Chairman of the Audit Committee

3. Dr. Kosol Petchsuwan Independent Director and Member of the Audit Committee

4. Mr. Joti Bhokavanij Independent Director and Member of the Audit Committee

5. Mr. Dhanin Chearavanont Chairman

6. Mr. Sumet Jiaravanon Vice Chairman

7. Dr. Ajva Taulananda Vice Chairman

8. Mr. Chaleo Souvannakitti Vice Chairman

9. Mr. Athueck Asvanund Vice Chairman and Group General Counsel

10. Mr. Supachai Chearavanont Director, President and Chief Executive Officer

11. Mr. Soopakij Chearavanont Director

12. Mr. Chatchaval Jiaravanon Director

13. Mr. Vichaow Rakphongphairoj Managing Director

14. Mr. Umroong Sanphasitvong Director

15. Mr. Daniel C.Petri* Director

16. Mr. Stephen G. Parker* Director

17. Mr. Heinrich Heims** Director

18. Mr. Klaus Tuengeler** Director

19. Ms. Gabriele Gunia** Director

20. Mr. Claus Stadler** Director

21. Mr. Andreas Klocke** Director

22. Mr. Harald Link** Director

23. Mr. Ho Hon Cheong*** Director

24. Mr. John J.Lack* Director

* Verizon-nominated Director

** KfW-nominated Director

*** Secured Creditor-nominated DirectorRemark : Additional information related to the Company's Board of Directors is as follows :

a) History of Offence : noneb) Debt owned to the Company or its Subsidiaries : nonec) Material Connected Transactions : none

A n n u a l R e p o r t 2 0 0 1 27


Authority and responsibility of the Board of Directors

The Board of Directors is granted the authority and has the duty to manage the Company in compliance with the objects and

articles of association of the Company and the resolutions of the shareholders meeting. With regard to the management of the

Company, the Board of Directors has authority to make any decision related to the Company's regular operation except for matters

that require the approval of the shareholders meeting as specified by law. In addition, the Board of Directors may grant the authority

to one Director or more or to any other person to perform for any acts on its behalf, however, for any decision on major operational

matters such as investment and procurement of loans, the management team must propose said matters to the Board of Directors

for approval.

Authorized Directors

Mr. Supachai Chearavanont or Mr. Stephen G. Parker jointly sign with Mr. Athueck Asvanund or Mr. Soopakij Chearavanont

or Mr. Chatchaval Jiaravanon to, with the Company's seal affixed, execute any act, thing or legal action whatsoever on the

Company's behalf.

Appointment of Directors

The Company has established the Compensation and Nominating Committee as part of the good corporate governance

initiative of the Company. The Compensation and Nominating Committee will assist the Board of Directors in reviewing and

nominating Directors of the Company prior to proposing to the Company's shareholders meeting for final approval.

With regard to the right of shareholders to appoint Directors, each Director shall be appointed by a majority vote of the

shareholders. All Shareholders have the right to vote on the appointment of Directors. Each shareholder shall have one vote per one

share and shall exercise all the votes he has to appoint one or several person(s) to be director(s), provided that he can not divide

his votes to any person to any extent.

Independent Audit Committee

As of 31st December 2001, the Audit Committee of the Company consisted of 3 persons as follows :

1. Mr. Vitthya Vejjajiva Chairman of the Audit Committee

2. Dr. Kosol Petchsuwan Member of the Audit Committee

3. Mr. Joti Bhokavanij Member of the Audit Committee

The scope of duty and responsibility of the Audit Committee is as follows :

1. To review the Companyûs financial reports to ensure accuracy and adequate information for public disclosure;

2. To ensure the appropriateness and effectiveness of internal control system and internal auditing system of the Company;

3. To consider and propose the appointment and remuneration of an external auditor of the Company;

4. To regularly review the practice of the Company to ensure the compliance with the regulations of the Securities and Exchange

Commission and related law and regulations;

5. To review the disclosure of information of the Company to ensure the accuracy and adequacy of said information in case that

there is a connected transaction that may lead to a conflict of interest;

6. To prepare the Audit Committee Report on the Corporate Governance with the approval of the Chairman of the Audit Committee

appeared therein to be disclosed in the annual report of the Company; and

7. To perform any other act as required by law or as delegated by the Board of Directors.


A n n u a l R e p o r t 2 0 0 128

Independent Committee

The Independent Committee is responsible for reviewing and monitoring the entering into any connected transactions, which

may involve a conflict of interest with the Company. The Committee consists of the following members :

1. Mr. Narong Srisa-an Independent Director

2. Mr. Joti Bhokavanij Independent Director

3. Mr. Daniel C. Petri Verizon-nominated Director (alternates being

Mr. Stephen G. Parker or Mr. John J. Lack)

4. Mr. Klaus Tuengeler KfW-nominated Director (alternates being Mr. Andreas

Klocke or Mr. Claus Stadler)

5. Mr. Athueck Asvanund CP-nominated Director

6. Mr. Supachai Chearavanont CP-nominated Director

In the event that any major shareholder has a conflict of interest, Directors nominated by said shareholder will abstain from

the Independent Committee Meeting.

Compensation and Nominating Committee

The Compensation and Nominating Committee is responsible for determining the compensation and considering the nomina-

tion of the directors of the Company and is comprised of the following members :

1. Mr. Dhanin Chearavanont

2. Mr. Heinrich Heims

3. Mr. Daniel C. Petri

4. Mr. Soopakij Chearavanont

5. Mr. Umroong Sanphasitvong

Finance Committee

The Finance Committee assists the Company in reviewing and monitoring the financial management of the Company and

consists of the following members :

1. Dr. Ajva Taulananda

2. Mr. Chaleo Souvannakitti

3. Mr. Daniel C. Petri alternate being Mr. John J. Lack

4. Mr. Heinrich Heims alternate being Mr. Klaus Tuengeler

5. Mr. Umroong Sanphasitvong

A n n u a l R e p o r t 2 0 0 1 29


Executive Officers

As of 31st December 2001, the executive officers of the Company consisted of 13 persons as follows :

1. Mr. Supachai Chearavanont Director, President and Chief Executive Officer

2. Mr. Vichaow Rakphongphairoj Managing Director

3. Mr. Athueck Asvanund Vice Chairman and Group General Counsel

4. Mr. William E. Harris Chief Financial Officer

5. Mr. Polpan Uttapap Co-Executive Vice President - Service Area & Network Operation

6. Mr. Frank D. Mercer Co-Executive Vice President - Service Area & Network Operation

7. Dr. Jen Sriwattanathamma Executive Vice President - Information & Technology

8. Mr. Thada Savetsila Executive Vice President - Business & Enterprise

9. Mr. Boonserm Ungphakorn Special Advisor to Managing Director and Co-Executive Vice

President - Corporate Affairs and Human Resources

10. Mr. Chookiat Poapongsakorn Co-Executive Vice President - Corporate Affairs and Human

Resources, and Customer Services Management

11. Mr. Carl Goodier Co-Executive Vice President - Customer Services Management

12. Mr. Kashem Kornseri Executive Vice President - Consumer and Mass Marketing

13. Mr. Adhiruth Thothaveesansuk Executive Vice President - Business and Product

Remark : Additional information related to the Company's executive officers is as follows :a) History of Offence : noneb) Debt owned to the Company or its Subsidiaries : none

c) Material Connected Transactions : none

Authority and Responsibility of the President

The Company is currently in the process of reviewing the scope of authority and responsibility of the President. Therefore,

at the present time, any significant decision relating to the Company's operations such as new investment and procurement of loan

are proposed to the Board of Directors for approval.

Remuneration for the Company's Directors and Executive Officers

Remuneration of the Directors in the year 2001 is as follows :

No. of Directors Compensation Amount (Baht)

24 Salary -

Directorsû Remuneration 33,950,000.00

Other -

Total 33,950,000.00


A n n u a l R e p o r t 2 0 0 130

Remuneration of the Executive Officers in the 2001 is as follows :

No. of Executive Officers Compensation Amount (Baht)

13 Salary 102,958,000.00

Bonus 11,277,000.00

Other 35,063,000.00

Total 149,298,000.00

Other Compensation

Stock Option Plan 2000

The Ordinary General Meeting of the Shareholders of the Company No. 1/2000 held on April 27, 2000 approved the issuance

and the offer of non-transferable warrants in the total of 58,150,000 units (Stock Option Plan) to subscribe ordinary shares of the

Company to Directors and officers at or equivalent to the Executive Vice President level and upwards not exceeding 35 persons (the

çWarrant Holdersé), conditions of which are summarized as follows :

Number of Warrant 58,150,000 units (approximately 1.99% of the total issued and paid-up ordinary shares of the Company as

Offering : of March 31, 2000 of 2,925,000,000 shares) divided into 2 types :

(a) Warrant Type 1 in the amount of 39,600,000 units

(b) Warrant Type 2 in the amount of 18,550,000 units

Offering Method : Allotted to Directors and officers at or equivalent to the Executive Vice President level and upwards,

not exceeding 35 persons whose names are as follows :

Directors Warrant Type 1 Warrant Type 2

1. Dr. Ajva Taulananda 3,200,000 0

2. Dr. Veeravat Kanchanadul 2,800,000 0

3. Dr. Vallobh Vimolvanich 4,200,000 1,400,000

4. Mr. Supachai Chearavanont 6,800,000 3,500,000

5. Mr. Soopakij Chearavanont 4,400,000 2,100,000

6. Mr. Chatchaval Jiaravanon 4,400,000 2,100,000

7. Mr. Athueck Asvanund 5,600,000 2,800,000

8. Mr. John N. Doherty 1,000,000 1,400,000

Total 32,400,000 13,300,000

Officers at or equivalent to Warrant Type 1 Warrant Type 2

the Executive Vice President Level

and upwards :

1. Mr. Vichaow Rakphongphairoj 3,000,000 1,400,000

2. Dr. Chitti Vijakkhana 2,200,000 1,050,000

3. Mr. Kajorn Chiaravanont 600,000 700,000

4. Mr. Gary S. Butler 800,000 1,050.000

5. Mr. William E. Harris 600,000 1,050,000

Total 7,200,000 5,250,000

Grand Total 39,600,000 18,550,000

A n n u a l R e p o r t 2 0 0 1 31


Maturity : 10 years

Exercise Period : (a) Warrant Type 1 : Each Warrant Holder received 3 separate warrant certificates. Each certificate

represented 1/3 of the whole amount of warrants allotted and is exercisable for subscribing ordinary sharesstarting from June 30, 2000, 2001 and 2002, respectively.

(b) Warrant Type 2 : Each Warrant Holder received 3 separate warrant certificates. Each certificate

represented 1/3 of the whole amount of warrants allotted and is exercisable for subscribing ordinary shares

starting from December 31, 2000, 2001 and 2002, respectively.Exercise Ratio : One unit of warrant entitles its holder to purchase one ordinary share of the Company.

Exercise Price : 1. Warrant Type 1 (in the total of 39,600,000 units) =Baht 30.00 per one ordinary share

2. Warrant Type 2 (in the total of 18,550,000 units) =

Baht 51.55 per one ordinary share

Good Corporate Governance1. Board Composition

In 2001, the Board consisted of (a) Executive Directors, those who were involved with day-to-day operations of the Company,and (b) Non-Executive Directors, those who were not involved with day-to-day operations of the Company, which included Directors

representing the interests of secured creditors and (c) independent Directors.

2. Roles and Responsibilities of Directors

Throughout the year 2001 the Directors were in full compliance with items 2.1 through 2.8 of the Code of Best Practice forDirectors of Listed Companies of the Stock Exchange of Thailand.

3. Appointment to the Board

The major shareholders have agreed on a policy concerning appointment of Directors, and have used the legal requirements

as guidelines for selection of the Directors. The Board has appointed the following committees:

(a) Independent Audit Committee,(b) Finance Committee,

(c) Independent Committee, and(d) Compensation and Nominating Committee.

4. Holding of a Directorûs Position

Efforts continue to achieve compliance with item 4 of the Code of Best Practices for Directors of Listed Companies of the

Stock Exchange of Thailand.

5. Directorsû Remuneration

Remuneration of Directors are approved by the Shareholders Meeting. Remuneration for the performance of ExecutiveDirectors for their respective day-to-day responsibilities in the Company is fixed by the Chairman and the CEO. The Board has

approved formation of a five-member Compensation and Nominating Committee that will, commencing in 2002, determine remunera-

tion for Directors and the Chief Executive Officer.

6. Board & Shareholdersû Meetings

Board meetings are held at least five times annually. Commencing in 2001, the schedule of Board meetings for the entire

year is announced in advance. The meetings are scheduled, among other matters, to review the Company's 56-1 Report and

quarterly financial statements prior to submission of the same to the Stock Exchange of Thailand.


A n n u a l R e p o r t 2 0 0 132

7. Reports

The Company is in full compliance with item 7 of the Code of Best Practices for Directors of Listed Companies of the StockExchange of Thailand.

8. Corporate Governance Guidelines

Through a committee appointed by the Board in 2000, throughout the year 2001 the Board actively analyzed corporategovernance practices and policies of foreign countries and international organizations, such as the Organization for EconomicCo-operation and Development (OECD), for adaptation for use in the Company's Code of Corporate Conduct and Code of Ethics.

After working through several preliminary drafts, in November a draft proposal of Corporate Governance Guidelines waspresented to the general meeting of the full Board for review and consideration. The draft proposal includes a policy regardingtransactions with parties related to a Director, intended to avoid conflicts of interest and to maintain the Directorûs fiduciary obligationto the Company.

Throughout the past year and at the present time, the independent Directors review Connected Transactions that may berelated to the interests of a major shareholder. In 2001 these Directors issued a formal policy entitled Guideline for ReviewingConnected Transactions. For further detail of the connected transactions in the past year, please refer to the Connected Transactionssection.

9. Independent CommitteeIn order to ensure transparency and to avoid conflicting interests, in this particular case for purposes of review and decision-

making in connection with the Company's purchase of shares of Bangkok Inter-Teletec Company Limited from the CP Group, theBoard constituted a four member Independent Committee, comprised of Directors independent of the CP Group. The Directors whowere nominated to the Board by the CP Group voluntarily recused themselves from all Board decisions concerning the sharepurchase.

The Board approved making the Independent Committee a chartered committee of the Board as of 2002, and it will includeindependent Directors as well as Directors representing secured creditors and all major shareholders. Because this committee ischarged with ensuring transparency and avoiding conflicting interests in extraordinary transactions concerning the Company, anyDirector with a conflicting interest shall be recused from matters concerning the conflict.

Insider Trading PolicyThe Company is currently in compliance with applicable laws which monitor and prevent the personal use of confidential

information of the Company by its management, including the use of said information for the purpose of insider trading. Materialinformation which has not yet been disclosed will be kept confidential but will be disclosed only to the relevant senior managementof the Company. The relevant senior management of the Company who have access or receive said information are required toreport their trading of shares in the Company pursuant to the Regulations of the Stock Exchange of Thailand and the Securities andExchange Commission Regarding Rules, Conditions, and Procedures Governing the Preparation and Disclosure of Reports onSecurities Holdings, in order to prevent insider trading using internal information, and to ensure that the trading of shares by çinsiderséof the Company is transparent.

In addition, the Company has been carrying on the comparative study of the insider trading policies of various foreigninstitutions to be applied as a guideline to enhance transparency and boost the confidence in the Company amongst the analyst andinvestor community.

Internal ControlsThe Board of Directors acknowledged the opinion of the Independent Audit Committee, which concurred with the external

auditor, that the Company's internal controls are adequate and suitable, and are capable of protecting the assets of the Company

A n n u a l R e p o r t 2 0 0 1 33


from misuse or unauthorized use by the management. Thus, there has been no defect in the internal controls of the Company, which

could have a material and adverse effect on the opinion of the external auditor. The Board also emphasized the development of the

Company's a Corporate Governance in order to help improve the internal controls within the Company on a continuing basis.

Personnel

As of 31st December 2001, the total number of employees is as follows :

Work Group and Classification No. of Employee

Management 39

Service Area & Network Operation 2,025

Marketing & Sales 385

Information Technology 349

Customer Services 756

Finance & Accounting 239

Supporting 269

Total 4,062

Source : the Company

Remuneration for the Company's Employees

Remuneration

In 2001, the total remuneration for employees is Baht 1,672 million (salary, bonus, overtime compensation and commission)

Other Compensation & Benefits

- Health Plans and Employee Welfare

- In-house clinic

- Annual Medical Check-up

- New Employeeû Medical Check-up

- Group Health Insurance

- Group Accident Insurance

- Group life Insurance

In case of death : Baht 30,000. - /Person

- Social Security Fund

Each of the Company and employees shall contribute 3% of monthly salary (but not exceeding Baht 450/month). Said

employee will gain special benefits from the Fund to have medical treatment at designated hospitals.

- Paid Annual Leave

In case that the employee is unable to take annual leave due to having urgent assignment, annual leave can be accumulated

to the subsequent year subject to the approval of an authorized superior.

- Employee at the level of Vice President and upwards can take annual leave for 15 days and can accumulate remaining

annual leave to the subsequent year but can carry a balance of no more than 30 days. If the accumulated annual leave

balance exceeds 30 days, the Company will compensate for the excess.

- Employee at the level lower than Vice President can take annual leave for 10 days and can accumulate remaining annual


A n n u a l R e p o r t 2 0 0 134

leave to the subsequent year but can carry a balance of no more than 20 days. If the accumulated annual leave balance

exceeds 20 days, the company will compensate for the excess.

- Compensation

- Monthly Salary

- Annual Performance Pay : between 0-4 times of monthly salary subject to the Company's performance and financial status.

- Retirement : the employee must be at the age of 60 years. In case of early retirement, the employee must be at the age

of 55 years and severance pay will be paid depending on the number of service years.

Employeeûs Training and Development

Employeeûs Training and Development Policy

To encourage all employees to develop their knowledge, skills and attitude to be able to perform their jobs effectively and to

be more competent for career advancement, which assists the Company in achieving its corporate strategy and goals. At present,

the Company has provided the employees with various training and development programs such as Core Competency Program,

Functional Competency Program, TA Core Business Program etc.

A n n u a l R e p o r t 2 0 0 1 35


Directorsû Information (as of 31ST December 2001)

Name Position Age TA Share Ownership Experience

(31st December 2001)

Mr. Narong Independent 74 10,000 Present - Independent Director

Srisa-an Director TelecomAsia Corporation Plc.

Past - Vice Chairman, Thai Farmers Bank Plc.

Mr. Vitthya Vejjajiva Independent 65 - Present - Independent Director and Chairman of

Director and Audit Committee,

Chairman of TelecomAsia Corporation Plc.

Audit Committee - Chairman, K Line (Thailand) Ltd. and its

subsidiaries

1991-1992 - Permanent Secretary of the Ministry of

Foreign Affairs

Dr. Kosol Independent 63 - 1999- Present - Audit Committee, TelecomAsia

Petchsuwan Director Corporation Plc.

and Member of 1999- Present - President

Audit Committee The Telecommunications Association of

Thailand

1998-2000 - Independent Director and Member of

Audit Committee, PTTEP

1997- Present - Independent Director, TelecomAsia

Corporation Plc.

1997- Present - Director, The Press Council of Thailand

Mr. Joti Independent 59 - Present - Business Consultant

Bhokavanij Director and 2000-2001 - Executive Chairman

Member of TISCO Finance Public Company Limited

Audit Committee 1994-1997 - Executive Chairman, Thai Wah Group of

Companies

1992-1994 - Managing Director and Consult-General

of Denmark for Bangkok

The East Asiatic Company (Thailand)

Limited

Mr. Dhanin Chairman 62 - 1989-Present - Chairman, TelecomAsia Corporation Plc.

Chearavanont - Chairman and Chief Executive Officer,

Charoen Pokphand Group Co., Ltd. and

Chia Tai Group Co., Ltd.

- Chairman, Charoen Pokphand Foods Plc.

Mr. Sumet Vice Chairman 67 150,000 1993-Present - Vice Chairman,

Jiaravanon TelecomAsia Corporation Plc.

- Executive Chairman, Charoen Pokphand

Group Co., Ltd.


A n n u a l R e p o r t 2 0 0 136

Dr. Ajva Taulananda Vice Chairman 64 - Present - Vice Chairman,

TelecomAsia Corporation Plc.

- Vice Chairman

Charoen Pokphand Group Co., Ltd.

- Chairman

The Thai Chamber of Commerce and

Board of Trade of Thailand

- Director, Charoen Pokphand Foods Plc.

1993-1999 - Director and President


1991-1992 - Deputy Minister, Ministry of Agriculture

and Cooperatives

Mr. Chaleo Vice Chairman 73 3,486,900 1992-Present - Vice Chairman,

Souvannakitti TelecomAsia Corporation Plc.

- Director, Telecom Holding Co., Ltd.

Mr. Athueck* Vice Chairman 50 - 1997-Present - Director,

Asvanund and Group TelecomAsia Corporation Plc.

General Counsel - Director, Telecom Holding Co., Ltd.

- Group General Counsel,


- Director, United Broadcasting

Corporation Plc.

- Director, Asia Multimedia Co., Ltd.

1978-1997 - Baker & McKenzie

Mr. Supachai* Director, President 34 - 1999-Present - Director, President and Chief Executive

Chearavanont and Chief Officer, TelecomAsia Corporation Plc.

Executive Officer 1992-1999 - Director and Senior Executive Vice

President


Mr. Soopakij* Director 37 - Present - Director, TelecomAsia Corporation Plc.

Chearavanont 2000-Present - Executive Chairman,


1998-Present - Executive Chairman

United Broadcasting Corporation Plc.

1991-Present - Chairman, AT&T Network Technology

(Thailand) Co., Ltd.



*Authorized Signatory

A n n u a l R e p o r t 2 0 0 1 37


Mr. Chatchaval* Director 39 - Present - Director, TelecomAsia Corporation Plc.

Jiaravanon 2001-Present - Independent Director, Ticon Industrial

Connection Public Company Limited

2000-Present - President and C.E.O.,


- Independent Director, Cal-Comp

Electronics (Thailand) Plc.

1998-Present - Executive Chairman, Cambodia Mobile

Telephone Co., Ltd.

1997-Present - President and C.E.O.,

Asia Multimedia Co., Ltd.

- President,


- President, Asia Infonet Co., Ltd.

1987-Present - Director, Metro Machinery Plc.

- Vice Chairman,

Thai Co Poly Industry Co., Ltd.

- Independent Director,

SEAMICO Securities Plc.

Mr. Vichaow Managing Director 44 50,000 2000-Present - Managing Director,

Rakphongphairoj TelecomAsia Corporation Plc.

1998-2000 - E.V.P., Business & Enterprise,


1997-1998 - E.V.P., Central Operation & Information

Technology, TelecomAsia Corporation Plc.

1996-1997 - Region Director, Bangkok-Southeast

Region, TelecomAsia Corporation Plc.

1995-1996 - Region Director, Bangkok-West Region


Mr. Umroong Director 48 384,000 Present - Vice President - Finance and Accounting

Sanphasitvong Charoen Pokphand Group Co., Ltd.

- Director, C.P. Seven Eleven Plc.

- Director, Vinythai Plc.

Mr. Daniel C. Petri Director 53 - 2000-Present - President - International, Europe and

Asia, Verizon Communications

- Director, TelecomAsia Corporation Plc.

1998-2000 - President - International, Bell Atlantic

Corp.

1995-1998 - President - Global Systems Bell Atlantic/

NYNEX





A n n u a l R e p o r t 2 0 0 138

Mr. Stephen Director 55 - Present - Director, TelecomAsia Corporation. Plc.

G. Parker* 2000-2002 - Executive Director, Verizon

International - Asia

1995-2000 - Managing Director, NYNEX Network

Systems Siam Limited, Bangkok,

Thailand

1992-1995 - Executive Managing Director, NYNEX

Network Systems Company Hong Kong

Mr. Heinrich Heims Director 49 - 1998- Present - Senior Vice President - Export and

Project Finance, KfW

1978-1998 - Export Finance, KfW

Mr. Klaus Tuengeler Director 60 - Present - First Vice President-Export and Project

Finance Telecommunications, Natural

Resources, KfW

Ms. Gabriele Gunia Director 41 - Present - Vice President, Investor Relations, KfW

1997-2001 - Export and Project Finance

Telecommunications, KfW

1995-1996 - Delegation to the Ministry of Finance,

Bonn

1988-1995 - Position in the areas of Secretariat of

Domestic and European Credit Affairs,

Export and Project Finance, KfW

Mr. Claus Stadler Director 44 - Present - Senior Legal Counsel, KfW

Mr. Andreas Karl Director 45 - Present - Vice President - Export and Project

Klocke Finance, KfW (Frankfurt)

Delegate Director

in Charge of KfW Affairs in Thailand and

South-East Asia Region

Experience - German - Thai Chamber of Commerce,

Bangkok

Mr. Harald Link Director 47 - 1997- Present - Managing Partner, B. Grimm & Co. ROP

Mr. Ho Hon Cheong Director 47 - 1997- Present - Country Corporate Officer (CCO),

Citibank Thailand

Experience - Country Business Manager for Emerging

Markets, Citibank Thailand

- Corporate Bank Head for Emerging

Market Head, Citibank Thailand

- Head of Pan-Asia Corporate, Citibank

Singapore




A n n u a l R e p o r t 2 0 0 1 39




Mr. John J. Lack Director 45 - 2000-Present - Group Vice President Asia, the Verizon

Corporation

1998-2000 - Vice President Asia Pacific, Bell Atlantic

International Wireless

1995-1998 - Chief Operating Officer, Excelcomindo

Pratama, Indonesia


A n n u a l R e p o r t 2 0 0 140



Executive Officersû Information (as of 31ST December 2001)

Mr. Supachai Director, President 34 - 1999-Present - Director, President and Chief Executive

Chearavanont and Chief Officer, TelecomAsia Corporation Plc.

Executive Officer 1992-1999 - Director and Senior Executive Vice

President, TelecomAsia Corporation Plc.

Mr. Vichaow Managing Director 44 50,000 2000- Present - Managing Director, TelecomAsia

Rakphongphairoj Corporation Plc.

1998-2000 - E.V.P., Business & Enterprise,


1997-1998 - E.V.P., Central Operation & Information

Technology, TelecomAsia Corporation Plc.

1996-1997 - Region Director, Bangkok - Southeast

Region, TelecomAsia Corporation Plc.

1995-1996 - Region Director, Bangkok - West Region


Mr. Athueck Vice Chairman 50 - 1997-Present - Director, TelecomAsia Corporation Plc.

Asvanund and Group - Director, Telecom Holding Co., Ltd.

General Counsel - Group General Counsel,


- Director, United Broadcasting

Corporation Plc.

- Director, Asia Multimedia Co., Ltd.

1978-1997 - Baker & McKenzie

Mr. William Chief Financial 40 - Present - Chief Financial Officer

E. Harris Officer 1998-2000 - Executive Vice President - Corporate

Finance, TelecomAsia Corporation Plc.

1993-1998 - Director, Office of Credit Policy, Verizon,

Philadelphia

Mr. Frank D. Mercer Co-Executive Vice 52 - 1996-1999 - Assistant Vice President, GTE Network

President - Service Service

Area and Network 1994-1996 - General Manager, GTE Network

Operation Services, Florida Region

Mr. Polpan Uttapap Co-Executive Vice 49 26,000 1999-2000 - Senior Vice President, Bangkok Service

President-Service Area and Maintenance, TelecomAsia

Area and Network Corporation Plc.

Operation 1994-1999 - Senior Vice President, Bangkok - North

Region Service and Maintenance,


1991-1994 - Region Director, Operation Project

A n n u a l R e p o r t 2 0 0 1 41




Dr. Jen Executive Vice 50 - 1998-1999 - Senior Vice President-Information

Sriwattanathamma President - Technology

Information and TelecomAsia Corporation Plc.

Technology 1994-1998 - Vice President, Information Systems and

Support, TelecomAsia Corporation Plc.

Mr. Thada Executive Vice 45 - 2001 - Executive Vice President-Business and

Savetsila President- Enterprise, TelecomAsia Corporation Plc.

Business and 1999-2001 - Country Manager, Dell Computer

Enterprise (Thailand)

1998-1999 - Enterprise Computing Director,

Compaq Computer (Thailand)

Mr. Boonserm Special Advisor 63 10,000 1997-2001 - Co-Executive Vice President -

Ungphakorn to Managing Human Resources and Corporate Affairs

Director and TelecomAsia Corporation Plc.

Co-Executive 1995-1997 - Senior Vice President, Network Planning

Vice President- and Engineering

Corporate Affairs - Region Director, Bangkok - West Region

and Human TelecomAsia Corporation Plc.

Resources

Mr.Chookiat Co-Executive 50 - 2001-Present - Co-EVP Corporate Affairs and Human

Poapongsakorn Vice President- Resources

Corporate Affairs 1999-2001 - SVP-Customer and Public Services

and Human Center

Resources 1998-1999 - VP-Customer Services Center,

and Customer Acting VP-Public Services Center

Services 1997-1998 - VP-17 and Customer Services Center,

Management Acting VP-Public Services Center

1996-1997 - AIM Superintendent,

Bangkok - Southeast,

Acting VP-Public Services Center

1995-1996 - AIM Superintendent,

Bangkok - East and Southeast,

Acting VP-Public Services Center

Mr.Carl Goodier Co-Executive 37 20,000 1999-Present - Co-Executive Vice President - Customer

Vice President- Services Management,

Customer Services TelecomAsia Corporation Plc.

Management

Mr. Kashem Executive Vice 52 1,000 1997-2001 - Senior Vice President - Consumer and

Kornseri President- Mass Marketing

Consumer and TelecomAsia Corporation Plc.

Mass Marketing


A n n u a l R e p o r t 2 0 0 142

Mr. Adhiruth Executive Vice 40 - 2001-Present - Executive Vice President - Business andThothaveesansuk President- Product Development,

Business and TelecomAsia Corporation Plc.Product 1998-Present - President

Development Asia Wireless Communication Co., Ltd.1998-1998 - Managing Director

Wire and Wireless Co., Ltd.



A n n u a l R e p o r t 2 0 0 1 43


Director Company Change in 2001 Outstanding

Share(s)

Directorsû Shareholding in TAûs affiliates as of 31st December 2001

Mr. Dhanin Chearavanont Telecom Holding Co., Ltd. - 1

Mr. Chaleo Souvannakitti Telecom Holding Co., Ltd. - 1

Telecom International Co., Ltd. - 1

Telecom Equipment Manufacturing Co., Ltd. - 1

Mr. Vichaow Rakphongphairoj Telecom International Co., Ltd. 1 1

Telecom Equipment Manufacturing Co., Ltd. 1 1

U-Net Co., Ltd. 1 1

Interactive Media Services Co., Ltd. 1 1

Asia DBS Public Company Limited - 1

Asia Infonet Co., Ltd. 1 1

Asia Wireless Communication Co., Ltd. 1 1

Asia Multimedia Co., Ltd. 1 1

Dr. Ajva Taulananda Telecom International Co., Ltd. - 1

Telecom Training and Development Co., Ltd. - 1


U-Net Co., Ltd. - 1

Interactive Media Services Co., Ltd. - 1


Asia Infonet Co., Ltd. - 1

Asia Wireless Communication Co., Ltd. - 1

Asia Multimedia Co., Ltd. - 1

Mr. Chatchaval Jiaravanon Yai Kaew Co., Ltd. - 1



Wire & Wireless Co., Ltd. - 5

U-Net Co., Ltd. - 1






Mr. Soopakij Chearavanont Telecom International Co., Ltd. - 1


U-Net Co., Ltd. - 1







A n n u a l R e p o r t 2 0 0 144

Director Company Change in 2001 Outstanding

Share(s)

Mr. Supachai Chearavanont Telecom Holding Co., Ltd. 1 1


Telecom Training and Development Co., Ltd. - 1


Wire & Wireless Co., Ltd. - 5

U-Net Co., Ltd. - 1






A n n u a l R e p o r t 2 0 0 1 45


MANAGEMENTûS DISCUSSION AND ANALYSIS

Consolidated Results of Operations

In reviewing the Companyûs operating performance, the results of operations are discussed on a normalized basis as it clearly

demonstrates the trend of operating performance from period to period. In the fourth quarter 2001, the Company has invested in TA

Orange Co., Ltd. (TA Orange) at the proportion of 41%. Consolidated financial statements were prepared with proportionate

consolidation of TA Orange transactions, which yielded significant impact to the Companyûs financial statements. Therefore, in the

analysis, the Company discusses its results from operations for both pre and post TA Orange consolidation. In 2001, the Company

recognized a loss contribution from TA Orange of Baht 1,255 million or a loss of Baht 971 million after offsetting effect of Baht 284

million for amortization of negative goodwill.

Non-recurring items affecting the 2001 results consisted of Baht 955 million foreign exchange gain, Baht 47 million other

revenue and Baht 157 million accounting adjustment. The non-recurring items for 2000 comprised Baht 2,642 million foreign

exchange loss, Baht 2,472 million gain on sales of investment, Baht 175 million other expenses, Baht 1,378 million gain from debt

restructuring and Baht 685 million accounting adjustment. The accounting adjustments were recorded to adjust the underbooking or

the overbooking of accrued conduit and leased circuit rental for prior years due to the TOT's first approval of tariff in 2000 and upward

adjustment to the conduit rental tariff in 2001 with retroactive effect. The Company increased its accrued conduit rental expenses for

prior years of Baht 157 million in 2001 and decreased its accrued leased circuit and conduit rental of Baht 685 million in 2000.

Reported financial results for 2001 were a net loss of Baht 3,425 million, a higher loss compared with a Baht 3,308 million

loss in 2000 due mainly to those non-recurring items and the recognition of loss from TA Orange.

The results from ongoing operations without taking into account TA Orange for 2001 were Baht 2,455 million loss, an

improvement of Baht 1,456 million or 37.2% compared to 2000. Net loss without TA Orange should have been Baht 2,458 million in

2001 compared to a loss of Baht 3,308 million in 2000.

Consolidated Results of Operations - Adjusted Basis

(In million Baht, unless otherwise indicated)

Years Ended December 31, 2001 2000 % Change

Revenues

Revenues from telephone and other services 20,118 18,085 11.2

Revenues from product sales 518 1,302 (60.2)

Total revenues 20,636 19,387 6.4

Operating expenses

Cost of services1 14,084 13,373 5.3

Cost of sales 684 1,119 (38.9)

Selling and administrative expenses 4,763 3,031 57.1

Directorsû remuneration 46 46 -

Total operating expenses 19,577 17,569 11.4

EBITDA 9,063 9,526 (4.9)

Depreciation & amortization 8,004 7,708 3.8

Operating profit 1,059 1,818 ( 41.7)

Interest income 42 23 82.6

Interest expense (4,718) (5,676) (16.9)


A n n u a l R e p o r t 2 0 0 146

Tax (69) (76) (9.2)

Income (loss) from continuing operations2 (3,686) (3,911) (5.8)

Share of loss in associates (628) (1,128) 44.3

Non recurring items 845 1,718 (50.3)

Gain (loss) on foreign exchange 955 (2,642) 136.1

Other income (expenses) 47 (175) 126.9

Gain on sale of investments - 2,472 (100.0)

Accounting adjustment (157) 685 (122.9)

Gain from debt restructuring - 1,378 (100.0)

Net profit (loss) before minority interest (3,469) (3,321) (4.5)

Minority interest 44 13 238.5

NET PROFIT (LOSS) (3,425) (3,308) (3.5)

BASIC AND DILUTED LOSS PER SHARE (BAHT ) (1.81) (1.73) (4.6)

Balance Sheets

Current assets 16,884 13,601 24.1

Property, plant and equipment, net 64,033 64,263 (0.5)

Total assets 86,472 88,384 (2.2)

Current liabilities 10,594 6,101 73.6

Borrowings 61,944 63,820 (2.9)

Total liabilities 81,577 79,757 2.3

Shareholdersû equity 4,895 8,627 (43.3)

Cash Flows

Cash flows from operating sctivities 4,479 3,229 38.7

Cash flows from investing activities (1,400) (245) (47.1)

Cash flows from financing activities (1,450) (3,227) 55.1

Ending balance 2,684 1,055 154.4

Remarks

1. The reported cost of service were adjusted by the reversal of Baht 157 million out-of-period upward adjustment for 2001 and 685 million out-of-period

downward adjustment for 2000 to the accrued leased circuit and conduit rental in previous years. The accounting adjustments were to reflect the

approval and adjustment of tariff by the TOT.

2. The calculation for Income (Loss) from Ongoing Operations differed from that of 2000 Annual Report due to the exclusion of sharing in gain (loss)

from affiliates.

(In million Baht, unless otherwise indicated)

Years Ended December 31, 2001 2000 % Change

A n n u a l R e p o r t 2 0 0 1 47


The results from core operations (excluding product sales) without TA Orange were basically in line with the Company's

expectation, despite the economic downturn, the intense competitive environment and an impact from economy domestic long

distance çTA 1234é service. This was due to the Company's success in acquiring subscriber base and implementing strict cost

control. The Company has employed lowering barrier to entry and bundling strategies that has resulted in a remarkable growth in

subscriber base. Revenue from telephone and other services, the Company's core source of revenues, grew 11.2%. Core operating

expenses were capped at 2000ûs 32.2% of total revenues, thus generating an 11.5% growth in normalized EBITDA to Baht 10,421

million with a stable margin at 51.8%. In addition, the Company had lower interest burden due to loan prepayment and reduced

interest rates.

Normalized results from continuing operations including contributions from affiliates and TA Orange improved Baht 725 million

to a loss of Baht 4,314 million. This was derived mainly by increase in revenue from telephone and other services of Baht 2,033

million or 11.2% and lower interest burden of Baht 958 million together with improved contribution from affiliates of Baht 500 million,

including amortization of negative goodwill for investment in TA Orange.

However, operating expenses, excluding cost of product sales, increased Baht 2,443 million or 14.9 % over the year 2000

due partly to TA Orange expenses. In addition, there was a lower contribution from product sales, principally PCT handsets, of Baht

349 million due mainly to the lower selling prices of PCT handsets in order to reduce the remaining stock and to fulfill the marketing

purpose. The number of handsets sold was also declined due to the Company lending PCT handsets to customers for use over 3

years.

The revenue from core business continued to grow with growth in fixed line and various value added services. This was due

to the Company's emphasizing on expansion into different high growth value added services in order to offer variety of services to

customers. This also helps leverage the already invested assets and diversify its revenues. Evidence could be seen from the

revenues from various value added services including PCT increasing from 24.1% in 1999 to 32.8% in 2000 and to 36.1% in 2001

while the total revenues still growing.

In 2001, the Company generated total revenues of Baht 20,636 million, up Baht 1,249 million or 6.4% year-over-year, due

mainly to the higher revenue from telephone and other services, which grew 11.2% to Baht 20,118 million. The revenues from product

sales declined Baht 784 million to Baht 518 million due mainly to lower-price handsets and the sales promotion of lending handsets

for 3 years. The telephone and other service revenue growth were mainly from the value added services to the fixed line such as

public phone, ISDN, network rental, etc. which posted an increase of Baht 730 million, or 42.8%, to Baht 2,437 million. In addition,

the service revenue from PCT grew Baht 782 million, up 42.5%, while the revenues from DDN and Internet grew rapidly at 47.0%

and 61.4% respectively, despite contributing lower absolute amounts.

M. BahtFY 2000 FY 2001

20,636

19,387

6% G

Consolidated Operating Revenues


19,577

17,569

11 % G

Consolidated Operating Expenses


9,063

9,526

-5% G

EBITDA


10,421

9,343

12% G

EBITDA (without TA Orange & Product Sales)


A n n u a l R e p o r t 2 0 0 148

The revenue from fixed line services, excluding value added services grew 1.2% year-over-year to Baht 13,181 million,

representing a milder growth than 14.9% of 2001, due mainly to lower installation revenues. This was resulted from the free

installation promotion, which was in line with the policy to lower the barrier to entry of the customers and the impact from the slowing

economy. Moreover, the introduction of economy local long distance rate (TA 1234), and the competition from cellular services, which

reduced tariffs on special sales promotions (despite part of the impact being offset by higher revenues from more cellular numbers

to call to) also affected the revenues. Consequently, the average revenue per user (ARPU) declined by 7.8% year-over-year from

Baht 686 to Baht 633 this year. However, with the help from the strategy of adding subscribers rapidly by reducing the barrier to

entry, the Company managed to add 216,386 more subscribers, a 74.7% year-over-year growth, resulting in a 14.2% increase in the

total billable lines from the previous year balance to 1,741,345. And this led to continued growth in the total revenues from telephone

services.

The reported consolidated operating expenses were Baht 19,734 million in 2001. Excluding the non-recurring expense of Baht

157 million relating to an upward out-of-period accounting adjustment to the conduit rental as the TOT increased the previously

approved conduit rental fee, the adjusted operating expenses should have been Baht 19,577 million, up Baht 2,008 million or 11.4%

year-over-year from Baht 17,569 million in 2000. The 2000 operating expenses excluded the accounting adjustment of Baht 685

million to reduce the balance of conduit rental and long distance leased circuit fee in the previous years in accordance with the TOT's

former approval. The main cause of the increased expenses was from Baht 711 million higher cost of service, up 5.3%, to Baht

14,084 million due to higher revenue sharing (in line with higher revenue), higher depreciation (in line with additional assets).

Moreover, the selling & administrative expenses of Baht 4,763 million (which included expenses from TA Orange partly service

launch-related items) grew Baht 1,732 million, up 57.1% year-over-year due to higher selling & administrative expenses and employee

expenses while the cost of sales declined Baht 434 million, in line with the lower revenue.

Core operating expenses (all cash operating expenses except cost of sales and revenue sharing) was Baht 7,662 million,

increasing Baht 1,822 million or 31.2% year-over-year due mainly to inclusion of TA Orange expenses. Core operating expenses,

excluding TA Orange, grew 11.0% year-over-year, considered to be a declining rate comparing to a growth of 17.3% in 2000. A ratio

of the adjusted core operating expenses as a percentage of the consolidated revenues declined slightly from 32.3% in 2000 to 32.2%

2001. This was the result of the Company's disciplined cost control. Major cost control measure implemented in 2001 in order to help

sooth the impact from softer economic situation was 2 rounds of budget cut. The Company's management will continue to focus on

cost control further in 2002 in which budgeted operating expenses is set at zero growth while the budget for capital expenditure is

to be used from cash flows generated from operations only.

The earnings before interest, tax, depreciation and amortization (EBITDA) was reported for the year 2001 as Baht 9,063

million, declined 4.9% year-over-year. Excluding the contributions from product sales and TA Orange, the normalized EBITDA this

year would have been Baht 10,421 million, up 11.5% year-over-year, with a 51.8% margin, remained stable when compared to the

previous year. This reflected the success in the policy to add customers and control cost in order to sooth the impact from the slowing

economy and the higher competition.

FY 2000 FY 2001

51.7% 51.8%

EBITDA Margin

M. BahtFY

2000FY

2001

4,479

3,229

39% G

Cash Flow from Operations

A n n u a l R e p o r t 2 0 0 1 49


Moreover, the Company has an increased cash flow from operations resulting in a continually improved liquidity. This waspartly due to a lower interest expense burden from the declining interest rate and the prepayment of principal through the debtrestructuring process. With the better liquidity, the Company managed to prepay more than Baht 900 million of its loans in 2001. The

interest coverage ratio increased from 1.0 time in 1998 to 1.3, 1.7 and 1.9 times in 1999, 2000, and 2001 respectively.

Segment Results

Wireline-voice Business

The revenues from fixed line and value added services were reported for the year 2001 as Baht 15,618 million, up 6.0% year-

over-year. These were comprising Baht 13,181 million revenue from fixed line business and Baht 2,437 million from value added

services (public phone, fault reporting service, etc.), up 1.2% and 42.8% year-over-year respectively. The rapid increase in revenue

from value added services helped sooth the impact from the slowing growth of revenue from fixed line services, which was industry-

wide phenomenon.

(In Millions Baht )Turnover Segment Results*

2001 2000 % Change 2001 2000 % Change

Wireline - voice 15,618 14,732 6.0 5,023 4,318 16.3

Wireline - data (DDN) 503 342 47.1 238 151 57.6

Wireless çPCTé 3,072 3,034 1.3 441 318 38.7

Internet 154 95 62.1 75 40 87.5

Multimedia 894 881 1.5 82 104 (21.2)

Others 395 303 29.9 9 (36) 125

Group 20,636 19,387 6.4 5,868 4,895 19.9

Unallocated Costs & Depreciation (4,809) (3,077) 56.3

Net 20,636 19,387 6.4 1,059 1,818 (41.8)

* Excluding non-recurring items

The fixed line telephone service (excluding value added services) recorded a milder growth rate than 14.9% of 2000 due to

Baht 357 million less installation fee (from installation waive campaign). The service revenue of Baht 13,194 million grew at a milder

rate of 4.1% comparing to 15.6% of the previous year due to 7.8% decline in ARPU. However, the higher number of subscriber base

still causes the service revenue to grow. The decline in ARPU was resulted from the slowing economy and the reduction in local long

distance rate of TA 1234. Moreover, the higher competition from cellular services due to higher subscriber number and the lower

tariffs through various promotions may have caused higher outgoing calls from cellulars. However, the said impact was partly

compensated by higher revenues from calls to mobile due to more cellular numbers to call to.

Revenues from value added services were reported as Baht 2,437 million, up Baht 730 million or 42.8% year-over-year, most

of which were from public phone and other services e.g. ISDN, network rental, etc. In 2001, the Company recorded Baht 1,402 million

Total Revenue - Wireline

LinesFY 2000 FY 2001

216,386

123,847

75% G


15.618

14,731

6% G

Net Additions-Fixed Line Telephone


A n n u a l R e p o r t 2 0 0 150

revenues from public phone, up 21.1% year-over-year. With the higher efficiency management, the revenue per line grew 18.2% whilethe number in service was equal to the previous year of 20,000 sets. The Company has the plan to add another 6,000 sets in 2002after the approval from the TOT.

The Company managed to increase significant fixed line telephone subscribers in 2001 despite the slowing economy. Thiswas considered a success from the lowering of barrier to entry and bundling strategy. The billable lines grew 216,386, up 74.4% year-

over-year from 123,847 in 2000. Consequently, there were 1,741,345 cumulative billable lines as of December 31, 2001. The saidsuccess was mainly from the sales promotions of installation fee waive in conjunction with product and service bundling such as PCTservices. Discount or lending PCT handset strategy was implemented, including lowering PCT tariff for outgoing call to fixed line or

PCT in the same area to be the same as fixed line which was flat at Baht 3 per call. In addition, there were bundling sales withInternet service and other telecommunications equipment. At the end of the year, the deposit amounting to Baht 3,000 was also

waived in accordance with the new Telecommunications Business Act that was enacted in November 2001.

ARPU declined 7.8% year-over-year to Baht 633 in 2001 comparing to Baht 686 in 2000. The decline was partly due to therapid growth in new subscribers and the said reasons. However, when considering the ARPU for fixed lines plus PCT as being value

added service that carries the same number, the average yearly ARPU should have been Baht 737, which declined slightly at 3.9%year-over-year from Baht 766. This, again, reflects the success in the policy of leveraging the already invested assets.

TA 1234 is the economy domestic long distance service, which was commenced on November 16, 2000. The tariffs for TA1234 is approximately 33%-67% lower than the normal fixed line depending on distance and time of the day. Since October 2001,the Company has leased the IP network from the TOT for offering TA 1234 service at the rate of Baht 1 per minute in replacement

of the previously used fixed line network. The Company and the TOT are in the process of negotiation for the new tariff for the VOIPservice.

Wireless (Personal Communication Telephone-PCT)PCT revenue grew 1.3% to Baht 3,072 million, which was considered to be a decelerated growth from 2000 due to Baht 744

million less revenue from handset sales (from Baht 1,191 million in 2000 to Baht 447 million this year). This was due to lower sales

and special prices through several marketing promotion campaigns in order to clear the inventory and the bundling promotion withthe fixed line sales to add subscribers to both fixed line and PCT. However, the service revenue still grew at the high rate of 42.5%

from Baht 1,843 million in 2000 to Baht 2,625 million in 2001 due to subscriber additions.

Asia Wireless Communication Co., Ltd. (AWC), a subsidiary offering PCT service, has gained 60% net additions for 2001 to626,944 amid the more intense competition from cellular operators. This is considered to be a success from bundling sales promotion

with the fixed line. Fixed line subscriber can buy PCT handset at a discount price or borrow handset (1 fixed line per handset). Inaddition, AWC has adjusted its tariff downward by charging Baht 200 monthly fee per fixed line number instead of previously per PCT

handset (1 fixed line number can handle up to 9 PCT handsets) plus waiving installation fee. Part of the success is resulted fromoffering prepaid service under the name of PCT Buddy.

AWC commenced the PCT Buddy service since April 2001 in order to attract the subscribers who do not have fixed line

numbers or those who want to keep home phone numbers privately. The tariff for PCT Buddy is the same with normal PCT with onlydifferent in the monthly fee, which has been adjusted downward to Baht 22 per handset per month (equivalent to 1/9 of Baht 200)

from November 2001 until October 31, 2004. The balance of PCT Buddy users is 60,000 out of total subscribers of 626,944.

Since the end of 2000, the Company has proceeded with the plan to reposition PCT to be virtual fixed line with mobilitythrough different market promotions such as: adjustment of tariff downward to be close to fixed line as earlier discussed. Conse-

quently, PCT has possessed the economy tariff in addition to other values namely: same number as of home phone, low transmissionpower of 0.01 watt being safe for user. The repositioning helped differentiate the Company's PCT service from those traditional

cellular service and created its own market segment.

A n n u a l R e p o r t 2 0 0 1 51


The average ARPU for the Company's customers for the year 2001 was Baht 440, declined 6.4% year-over-year from Baht470. The decline in ARPU was primarily due to the tariff reduction corresponding to the strategy of market repositioning, the impactfrom economic situation and higher competitive environment.

AWC is preparing itself to offer ùOne Number Serviceû to all PCT users with the trial launch to the Company's staffs inJanuary 2001. One Number Service will enable subscriber to have the same number for fixed line, PCT and TA Orange cellularphone through the intelligent network of AWC. The One Number Service is another program that bundles different services amongthe group, which will differentiate from its peer and reduce the impact from cannibalization among fixed line, PCT and TA Orangecellular service.

This year, the Company has commenced the expansion of IN network in order to extend the service to 1,000,000 subscribersfrom currently 600,000. The expansion process is expected to be completed by early 2002 with total investment of Baht 600 million.Moreover, data communication speed of 32 Kbps capability was also applicable for all area. It is also planning to upgrade the datatransmission speed to 64 Kbps for some selected area by early next year with minimal investment due to only software investmentbeing required.

Data Network - DDN and BroadbandThis year the Company recorded Baht 503 million in revenue from DDN, up 47.0% year-over-year. The total number of billed

circuits was up 23% to 4,564. Additional bandwidth in service at year-end was 2,593,000 kbps up 79.0% year-over-year whereas therevenue per circuit grew 8% resulting from the Company's concentration on high bandwidth customers.

In 2001, the Company has improved its service quality of DDN. A new, more modern, network management center wasopened with a higher capability to serve the additional demand for DDN service. In addition, a call center for DDN was alsoestablished to serve the need of majority customers for technical advice. Additional staffs for the Installation and maintenance teamwere hired to ensure prompt service to customers. These are continual quality enhancement of DDN service from the previous yearin which ATM network was installed. Consequently, the Company can offer high-speed services and guarantee service qualityincluding offering variety of services that fit the customer needs.

The Company has officially launched the Complete Broadband Solution in July 2001 with success. At the end of 2001, therewere approximately 1,600 broadband customers separated into 700 TA Express (ADSL) and 900 cable modem users. The Companyexpected to have its market share of 40%-45%. The policy in offering the broadband service is to become partnership with different

Revenue from Service - PCT

As of31 Dec 00

As of31 Dec 01

626,944

393,000

60% G


2,625

1,843

42% G

Cumulative Subscribers-PCT

Revenue - DDN

FY 2000 FY 2001

1,144

709

61% G


503

342

47% G

Bandwidth Additions


A n n u a l R e p o r t 2 0 0 152

content providers including the promotion of different contents to stimulate more demand for broadband services.

Currently, the broadband services are still in the infant stage with most usage being for high speed Internet services. Growth

potential is therefore depending on the increased number of Internet users, content and application development, including the push

from the government to have more on-line communications as in other developed countries. It is expected that the broadband

services will grow at the rate of 40%-50% per year for the next few years. TA has the competitive advantages over its peer group

on its most modern and fiber-rich network with shortest local loop, thus ensuring higher quality of service and no need to qualify the

lines prior to the service. Moreover, its broadband service covers more than 80% of the business and 50% residential population.

Cable modem, on the other hand, covers approximately 2 million households or 800,000 home-pass.

Internet Service

This year the Company recorded proportionate revenue from Asia Infonet Co., Ltd. (AI), an Internet service provider, of Baht

154 million, up 61.4% year-over-year. This is considered to be a higher growth than 25.0% of the year 2000 most of which was from

ClickTA service and corporate customers.

The Internet subscriber number this year doubled the previous year with 112.7% growth to 156,321 comparing to 73,510 at

the end of previous year. Most of the growth was from KIT customers (sell by number of usage hours) and 45,000 monthly ClickTA

(up 20,000 subscribers from the year 2000). The corporate customers, who were the group that the Company paid most attention to,

grew at the rate of 11.1% to 700.

ClickTA is the Internet service developed by the company with the attractive fee. Customers can log-on for as long as they

wish with the cut off in every 2 hours. The Company has officially launched ClickTA in the year 2000 and re-launched again in April

2001 with service fee ranging from Baht 100 to Baht 500 per month depending on the customer usage.

Multimedia Service

Asia Multimedia Co., Ltd. (AM), the service provider for hybrid fiber-optic coaxial (HFC) network registered Baht 894 million

in revenue in 2001, up 1.5% year-over-year. Most of AMûs revenues were from leasing its network to UBC for cable TV service. In

the year 2001, AM has the opportunity to enhance its service revenue by leasing its transmission link in the provinces to TA Orange.

Proportionate Revenue - Internet

As of31 Dec 00

As of31 Dec 01

156,321

73,510

113% G


154

95

61% G

Cumulative Subscribers - Internet

Revenue - Multimedia


894

881

2% G

A n n u a l R e p o r t 2 0 0 1 53


Financial Conditions

Analysis of Consolidated Balance Sheets

Assets

Assets as at December 31, 2001 were Baht 86,472 million representing a decline of Baht 1,912 million from December 31,

2000 due mainly to the depreciation of property, plant & equipment and the decline in value of available-for-sale securities from the

sluggish market situation.

Current assets as of December 31, 2001 were Baht 16,884 million, up Baht 3,283 million from Baht 13,601 million of

December 31, 2000 attributable to the Baht 1,629 million increase in cash and the increase in other current assets of Baht 1,283

million which was mainly from TA Orange.

Trade accounts receivable, net, as of December 31, 2001 was reported as Baht 5,541 million reflecting a decline of Baht 292

million from Baht 5,833 million of December 31, 2000. This was due mainly to the decline in value added tax for the assets

transferred to the TOT and the accrued fault notification and dropwire maintenance service charge to the TOT while the average

collection period was 50 days, equivalent to the previous year.

The total investment in associates as of December 31, 2001 dropped Baht 885 million from the previous year to Baht 4,544

million due mainly to the loss from UBC.

Other current assets increased Baht 1,282 million to Baht 2,641 million, most of which was from the increase in advance

payment from contractor (partly from TA Orange).

Property, plant and equipment as of December 31, 2001 was Baht 64,033 million, dropped Baht 230 million from the end of

2000 due mainly to depreciation. The Company has invested additionally in property, plant and equipment in the year 2001 at the

amount of Baht 4,693 million, or Baht 7,576 million if including those from acquisition of joint venture. Most of the additional

investment was related to Baht 1,450 million investment in fixed line business, Baht 4,573 million in wireless business and Baht 545

million in DDN.

Other non-current assets increased Baht 895 million from the previous year to Baht 1,453 million due to the cost of PCT

handsets lent to subscribers for 3 years for sales promotion purpose. The Company will depreciate for the period of 3 years.

Liabilities

Total liabilities as of December 31, 2001 were Baht 81,577 million, up Baht 1,820 million from the year 2000 due mainly to

the increase in trade accounts payable and the accrued expenses most of which related to TA Orange. The Company repaid its long-

term loans of Baht 1,527 million in 2000, including the prepayment fee of Baht 904 million. The Company also refinanced US$ 113

million loan with new Baht loan facility of Baht 5 billion and has incurred an additional long term borrowing of Baht 1,009 million, most

of which were from financial lease. Long term trade payable arising from the supply and installation of PCT project declined by Baht

972 million. This amount included the Baht 783 million from the Baht appreciation against Japanese Yen and the repayment.

As of December 31, 2001, total foreign currency denominated long-term loans were reported as USD 561 million and JPY

22,897 million or equivalent to Baht 32,671 million or representing approximately 50.1% of total long-term loans.

Shareholdersû equity

Shareholdersû equity as of December 31, 2001 declined Baht 3,732 million from Baht 8,627 million as of end 2000 to Baht

4,895 million due to the loss in the year 2001. The Baht 2,706 million net increase in share capital relating to the new issuance of

307,499,978 shares for TA Orange share swap, was offset by the Baht 3,020 million decline in FLAG share price.


A n n u a l R e p o r t 2 0 0 154

Capital structure

The capital structure of the Company was still at the high level of debt. As of December 31, 2001, the debt to equity ratio

was standing at 15.01 times comparing to 8.68 times as of December 31, 2001 due partly to the decrease in shareholders equity

resulting from foreign exchange loss and the drop in FLAG share price. Currently, the Company has the policy not to incur additional

debt. All investment will be made from its internal cash flows. In case of surplus cash available from operation, the Company will

prepay debt and reduce foreign currency risk by reducing foreign currency borrowing.

Cash flow and source of fund

The main source of fund of the Company in 2001 was from operations, the equity increase of 307.5 million shares and the

additional borrowing, most of which through leasing. The major uses of fund were capital expenditure and loan repayment.

Cash flow from operating activities for full year 2001 increased Baht 1,250 million, or 38.7%, to Baht 4,479 million partly due

to increased EBITDA and decreased interest expenses. This enabled the Company to prepay more than Baht 900 million to creditors

this year.

Net cash flow from investing activity was a net use of Baht 1,399 million in 2001 after consolidating cash flow of Baht 2,782

million of TA Orange on the merging date. Most of the use of fund for investment was mainly capital expenditure amounting to Baht

3,930 million, most of which was investment in fixed line, wireless and DDN business.

Cash flow from financing activities was a net use of Baht 1,450 million, a result of the long-term debt repayment of Baht 1,715

million and the additional borrowing of Baht 265 million, not taking into account the refinancing facility of Baht 5 billion.

FX Exposure Reduction

The Company remains committed to reducing its risk from foreign currency fluctuation. In 2001, the Company was able to

reduce its foreign currency denominated loans by US$ 223 million or 28.4% of its total US Dollar loans. This was executed via various

activities.

In September 2001, the Company entered into a Payment and Indemnity Agreement with KfW which effectively swapped US$

96.65 million of loans into Thai Baht.

In December 2001, the Company borrowed Baht 5 billion from 4 major Thai banks to repay approximately US$113 million.

The Company has also prepaid its long-term borrowing of more than Baht 900 million including an amount of US$13 million to its

foreign creditors.

The Company is now implementing hedging activities to reduce foreign exchange risk via deployment of financial instruments

such as forward contract and cross currency swaps. In addition, the Company expects to issue Baht denominated debentures during

the course at 2002 and 2003 to fully repay its US Dollar denominated debt.

Investment in TA Orange

On October 31, 2001, the Company acquired a 41% shareholding interest in Bangkok Inter Teletech Co., Ltd., (BITCO), which

owns 99.81% of the total shareholding in TA Orange. TA Orange has been granted a concession by the Communications Authority

of Thailand (the CAT) to install and operate a GSM 1800 MHz mobile cellular telecommunication network in the kingdom of Thailand.

TA Orange has Orange SA as its strategic partner. Orange SA is currently operating cellular business under Orange brand, the

worldûs first wirefree brand, in 20 countries worldwide.

The acquisition was executed via a share swap transaction with CP Group and was negotiated on behalf of TA by a group

of non-CP directors. In the share swap, CP Group transferred to the Company 614,999,956 common shares of Baht 10 par value

A n n u a l R e p o r t 2 0 0 1 55


per share in BITCO. In return, CP Group received 307,499,978 newly issued common shares and 100 million equity

warrants the Company. Each warrant is exercisable into one fully paid-up ordinary share of the Company at Baht 32 per share in

cash within a period of no earlier than May 2002, and no later than October 2003. The Company has an option to buy the remaining

10% of ordinary shares in BITCO from CP Group at IPO price at the time of a future listing of BITCO. However, in the event the

Company chooses not to exercise this right, the Voting agreement jointly signed between the Company and CP Group shall be

terminated. Two important conditions indicated in the Voting Agreement are as follows: the Company and CP Group would vote in

the same direction as a combined block of approximately 51%; and lock-up provisions on all the Company's shares held by CP

Group exist until May 2002 (not applicable to sales, transfers or disposals of shares of the Company to Affiliates).

Valuation. The Company cost of investment was Baht 2,835 million, comprising Baht 2,706 million for common shares valued

at market price of Baht 8.8 per share (closing price on the completion date), Baht 52 million for warrant priced at Baht 0.52 per unit

and Baht 76 million for cash relating to payments for various fees. Fair value for the Company's interest in TA Orange is Baht 5,456

million. Therefore the Company acquired TA Orange at a Baht 2,621 million or 48% discount to its fair value. Details of the calculation

are provided in note no. 4 of TA's audited financial statements.

Accounting treatment. The discount is treated as a negative goodwill, which is presented as a separate item in the balance

sheet and amortized based on the expected losses of TA Orange at the time of the acquisition. The amortization of negative goodwill

was recorded under share of profit (loss) in subsidiaries and associates. In terms of the recognition of TA Orange's financial results,

the Company applies proportionate consolidation or joint venture accounting following the conditions set in the share swap

agreement. The results of TA Orange are included in results for wireless segment since the acquisition on October 31, 2001.

For fourth quarter and full year 2001 results, the amortization for negative goodwill was recorded at Baht 284.4 million. The

proportionate loss from TA Orange was booked at Baht 1,255 million, or Baht 971 million after the offsetting impact of the amortization

of goodwill. The remaining Baht 2,337 million of negative goodwill will be amortized in full in 2002.

The completion of the acquisition positions the Company as the only fully integrated network operator and service provider

for both wireline and wireless and is expected to yield significant synergies to both the Company and TA Orange. The restructure and

pricing of this transaction also demonstrate TA's commitment to strong corporate governance and confirm the strong support of the

CP Group.


A n n u a l R e p o r t 2 0 0 156

Selected Financial Ratios

TelecomAsia Corporation Public Company Limited and Subsidiaries

2001 2000

Liquidity Ratios

Current Ratio Times 1.59 2.23

Receivable Turnover Ratio Times 3.63 3.39

Average Collection Period * Days 49.91 50.24

*Excluding accounts receivable from the TOT which represents the amount thatwas already paid by customers but TA has not yet received its revenue sharing

from the TOT.

Profitability Ratios

EBITDA Margin % 43.92% 49.14%

EBITDA Margin (Excluding TA Orange) % 49.80% 49.10%

EBITDA Margin (Excluding TA Orange & Product Sales) % 51.80% 51.70%

EBIT Margin % 5.13% 9.38%

EBIT Margin (Excluding TA Orange) % 11.10% 10.40%

EBIT Margin (Excluding TA Orange & Product Sales) % 12.10% 9.00%

Return on Total Assets % (3.92%) (3.62%)

Return on Equity % (50.66%) (39.51%)

Efficiency Ratios

Assets Turnover Ratio Times 0.24 0.21

Leverage Ratios

EBITDA/Interest Coverage Ratio Times 1.92 1.68

Debt /EBITDA Times 8.11 7.86

Net Debt /Equity Ratio Times 15.01 8.68

Per Share Analysis

Book Value per Share Baht 1.51 2.95

Earnings (Loss) per Share (Basic and Diluted) Baht (1.81) (1.73)

Dividend per Share Baht 0.00 0.00

Stock Price at Year End Baht 10.20 18.00

A n n u a l R e p o r t 2 0 0 1 57


CONNECTED TRANSACTIONSDuring the year 2001, the Group were carried out the transactions with subsidiaries, associates, joint ventures and related

companies as disclosed in Note 4, Note 10, Note 13, Note 18 (under Currency Swap item) Note 23 and Note 32 to financial

statements for year ended 31 December 2001.

Measures and Procedures for Approving the Entering into of Connected Transactions

In addition to the Companyûs measures and procedures for approving the entering into the connected transactions in

compliance with the Rules and Regulations of the Securities and Exchange Commission (çSECé) and the Stock Exchange of Thailand

(çSETé), and the provisions of the Public Companies Act, the Company must comply with the terms and conditions of the Security

Agreement Amendment and Restatement Agreement (the çSAARAé) which is the principal debt restructuring agreement executed

between the Company and its Secured Creditors. The key terms and conditions in the SAARA with regard to connected transactions

specifies that the Company shall not enter into any contract, agreement, or arrangement with any affiliates other than on the

armsû length open market terms. In any event the Company wishes to enter into any contract which creates material payment with

the Companyûs affiliates, Telecom Holding Company Limited or any affiliate thereof, Charoen Pokphand Group Company Limited or

group of companies or affiliate thereof, Nynex Network Systems (Thailand) Company Limited or group of companies of affiliate

thereof, any individual not relating to the authorized business, any individual not relating to the PCT business and other relevant

businesses, the Company shall disclose said transaction in its annual budget. Nonetheless, the Secured Creditors of the Company

shall have right to make certain objection on the Companyûs annual budget. Apart from the obligations under the SAARA, the terms

and conditions of the Shareholders Agreement executed with Kreditanstalt fur Wiederaufbau dated 22nd December 1999 specifies that

the Company shall have to disclose the entering into any connected transactions of the major shareholders or its affiliates.

In addition to the foregoing obligations, in the event of a material connected transaction involving affiliates of major

shareholders of the Company, the Company shall propose to the Board of Directors to appoint the Committee comprising of the

independent directors and directors nominated by non-interested shareholders to consider and negotiate the terms of said transaction.

(The directors nominated by the interested major shareholders shall abstain from attending and voting at said meeting.) As part of

its consideration and negotiation process, the Committee is authorized to appoint an independent financial advisor, an independent

legal advisor and other advisors to assist, as it deems appropriate. The executive directors appointed by interested shareholders shall

also refrain from participating in said connected transaction. In the event the Committee approves said connected transaction, it will

then be proposed to the Board of Directorsû meeting (the directors nominated by interested major shareholders shall abstain from

voting.) After the approval of the Board of Directors, it will then be proposed to the shareholdersû meeting for approval with at least

three-fourths of the vote of the shareholders present and entitled to vote at such meeting provided that the interested shareholders

shall abstain in the vote on said connected transaction.

Policy for Future Connected Transactions

In addition to strictly compliance with the rules and regulations of the SEC and the SET, the Company has applied said rules

and regulations to implement an internal guideline for connected transactions by carrying on the comparative study of the connected

transactions guidelines from various foreign institutions to enhance transparency and create the parallel understanding with the

foreign analysts and investors. With regard to future connected transactions, the Company anticipates that there will be only the

connected transactions under the ordinary course of business of the Company with its affiliates and the Company shall proceed such

transactions in a transparent manner pursuant to the good corporate governance policy of the Company as well as all relevant

regulations.

..


A n n u a l R e p o r t 2 0 0 158

Financial Statements31 December 2001

A n n u a l R e p o r t 2 0 0 1 59


AUDITORûS REPORT

To the Shareholders of TelecomAsia Corporation Public Company Limited

I have audited the accompanying consolidated and Company balance sheets as at 31 December 2001 and 2000 of TelecomAsia

Corporation Public Company Limited and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively and

the related consolidated and Company statements of income (loss), changes in shareholdersû equity, deficit, and cash flows for the

years then ended. These financial statements are the responsibility of the Companyûs management. My responsibility is to express

an opinion on these financial statements based on my audits.

I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the

audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes

examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes

assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial

statement presentation. I believe that my audits provide a reasonable basis for my opinion.

In my opinion, the consolidated and Company financial statements referred to above present fairly, in all material respects, the

consolidated and Company financial position as at 31 December 2001 and 2000 of TelecomAsia Corporation Public Company Limited

and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively, and the consolidated and Company

results of operations and cash flows for the years then ended in accordance with generally accepted accounting principles.

SOMCHAI JINNOVART

Certified Public Accountant

(Thailand) No. 3271

PricewaterhouseCoopers ABAS Limited

Bangkok

22 February 2002

AUDITOR’S REPORT To the Shareholders of TelecomAsia Corporation Public Company Limited I have audited the accompanying consolidated and Company balance sheets as at 31 December 2001 and 2000 of TelecomAsia Corporation Public Company Limited and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively and the related consolidated and Company statements of income (loss), changes in shareholders’ equity, deficit, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the consolidated and Company financial statements referred to above present fairly, in all material respects, the consolidated and Company financial position as at 31 December 2001 and 2000 of TelecomAsia Corporation Public Company Limited and its subsidiaries, and of TelecomAsia Corporation Public Company Limited, respectively, and the consolidated and Company results of operations and cash flows for the years then ended in accordance with generally accepted accounting principles. SOMCHAI JINNOVART Certified Public Accountant (Thailand) No. 3271 PricewaterhouseCoopers ABAS Limited

Bangkok 22 February 2002

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2001 and 2000

31 December 31 December 31 December 31 December2001 2000 2001 2000

Notes Baht Baht Baht BahtAssetsCurrent assetsCash and cash equivalents 6 2,684,255,574 1,054,621,457 253,486,485 153,811,825Restricted cash 7 4,576,450,120 4,308,366,909 4,018,292,184 4,058,137,434Short-term investments 8 177,337,181 38,574,852 - -Trade accounts receivable, net 9 5,540,686,448 5,832,815,465 5,421,028,911 5,723,964,912Due from related parties 10 151,616,016 133,076,930 86,673,536 67,086,414Inventories, net 11 1,113,378,391 875,720,727 782,827,348 529,425,032Other current assets 12 2,640,554,733 1,358,001,816 1,854,723,783 1,063,164,943 Total current assets 16,884,278,463 13,601,178,156 12,417,032,247 11,595,590,560

Non-current assetsInvestments: - Available-for-sale securities 8 1,036,273,212 3,960,783,332 - - - Investments in subsidiaries, associates and others 13 4,544,451,457 5,430,041,857 11,155,634,650 10,879,509,891 - Investment property 14 54,293,898 57,972,973 - -Property, plant and equipment, net 15 64,032,659,405 64,262,597,055 46,733,374,436 50,627,073,770Other assets: - Intangible assets, net 16 804,299,872 512,919,260 206,622,576 - - Negative goodwill, net 4 (2,336,785,064) - (2,336,785,064) - - Other non-current assets 17 1,452,822,446 558,160,344 1,051,309,851 352,841,588 Total non-current assets 69,588,015,226 74,782,474,821 56,810,156,449 61,859,425,249

Total assets 86,472,293,689 88,383,652,977 69,227,188,696 73,455,015,809

CompanyConsolidated

The notes to the consolidated and Company financial statements on pages 9 to 58 form an integral part of these financial statements.

2

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2001 and 2000


Notes Baht Baht Baht BahtLiabilities and shareholders' equityCurrent liabilitiesBorrowings 18 3,214,292,423 1,782,478,411 1,170,657,842 -Trade accounts payable 2,584,804,955 1,695,819,407 953,699,929 672,606,758Accrued expenses 19 2,495,300,207 1,014,500,918 647,407,215 324,783,800Due to related parties 10 155,217,768 88,428,870 1,167,837,994 1,621,544,478Other current liabilities 20 2,143,970,461 1,519,547,125 1,594,979,819 1,353,706,242 Total current liabilities 10,593,585,814 6,100,774,731 5,534,582,799 3,972,641,278

Non-current liabilitiesBorrowings 18 61,944,182,485 63,819,640,430 58,737,800,080 60,777,882,313Long-term trade accounts payable 21 8,299,424,585 9,255,711,558 - -Other non-current liabilities 22 740,060,396 580,641,279 514,122,739 576,255,247 Total non-current liabilities 70,983,667,466 73,655,993,267 59,251,922,819 61,354,137,560

Total liabilities 81,577,253,280 79,756,767,998 64,786,505,618 65,326,778,838

Shareholders' equityShare capital Authorised share capital 3,390.65 million shares Preferred shares 702 million shares issued and fully paid 23 7,020,000,000 7,020,000,000 7,020,000,000 7,020,000,000 Common shares 2,530.50 million shares issued and fully paid 23 25,304,999,780 22,230,000,000 25,304,999,780 22,230,000,000Discount on preferred shares 23 (1,498,478,153) (1,498,478,153) (1,498,478,153) (1,498,478,153)Premium on common shares 23 11,115,406,488 11,432,046,462 11,115,406,488 11,432,046,462Cumulative translation adjustment 104,344,130 104,344,130 104,344,130 104,344,130Appropriated legal reserve 24 34,880,969 34,880,969 34,880,969 34,880,969Deficit (32,937,104,061) (29,511,977,179) (32,937,104,061) (29,511,977,179)Unrealised loss on available-for-sale securities (4,703,366,075) (1,682,579,258) (4,703,366,075) (1,682,579,258)Minority interest in subsidiaries 454,357,331 498,648,008 - -Total shareholders’ equity 4,895,040,409 8,626,884,979 4,440,683,078 8,128,236,971Total liabilities and shareholders' equity 86,472,293,689 88,383,652,977 69,227,188,696 73,455,015,809


Consolidated Company

3

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Income (Loss) For the years ended 31 December 2001 and 2000


Notes Baht Baht Baht BahtRevenues 10Revenues from telephone and other services 20,117,763,719 18,085,305,046 18,746,108,803 16,916,102,439Revenues from product sales 518,678,786 1,302,258,537 191,645,371 110,774,706Total revenues 20,636,442,505 19,387,563,583 18,937,754,174 17,026,877,145

Operating expenses 10Cost of services 26 14,241,481,957 12,688,408,350 13,572,242,369 11,784,686,612Cost of sales 684,642,471 1,119,159,026 309,325,616 141,243,863Selling and administrative expenses 4,762,782,736 3,030,574,658 2,840,498,324 2,251,210,937Directors’ remuneration 45,724,125 45,975,112 33,950,000 25,613,987Total operating expenses 19,734,631,289 16,884,117,146 16,756,016,309 14,202,755,399

Operating profit 27 901,811,216 2,503,446,437 2,181,737,865 2,824,121,746Gain on sale of investment - 2,472,154,845 - -Share of profit (loss) in subsidiaries and associates (628,472,598) (1,128,453,711) (1,874,652,529) 2,107,068,609Interest income 42,417,539 23,382,612 18,428,141 10,099,937Interest expense (4,718,426,956) (5,676,505,756) (3,718,396,991) (4,624,588,093)Foreign exchange gain (loss) 954,874,217 (2,642,423,012) 80,251,840 (4,747,039,313)Other non operating income (expenses) 47,312,187 (174,718,341) (112,495,208) (255,868,769)Loss before income tax (3,400,484,395) (4,623,116,926) (3,425,126,882) (4,686,205,883)Income tax (68,933,164) (76,444,287) - -Loss before extraordinary item (3,469,417,559) (4,699,561,213) (3,425,126,882) (4,686,205,883)Extraordinary item - Gain from debt restructuring 5 - 1,378,055,738 - 1,378,055,738Loss before minority interest (3,469,417,559) (3,321,505,475) (3,425,126,882) (3,308,150,145)Loss attributable to minority interest 44,290,677 13,355,330 - -

Net loss for the year (3,425,126,882) (3,308,150,145) (3,425,126,882) (3,308,150,145)

Basic and diluted loss per share 28Loss from ordinary activities (1.81) (2.35) (1.81) (2.35)Extraordinary item - Gain from debt restructuring 5 - 0.62 - 0.62Net loss for the year (1.81) (1.73) (1.81) (1.73)



4

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes in Shareholders’ Equity For the years ended 31 December 2001 and 2000


Notes Baht Baht Baht BahtPreferred shares 23 Beginning balance 7,020,000,000 - 7,020,000,000 - Increase during the year - 7,020,000,000 - 7,020,000,000 Decrease during the year - - - - Ending balance 7,020,000,000 7,020,000,000 7,020,000,000 7,020,000,000

Common shares 23 Beginning balance 22,230,000,000 22,230,000,000 22,230,000,000 22,230,000,000 Increase during the year 3,074,999,780 - 3,074,999,780 - Decrease during the year - - - - Ending balance 25,304,999,780 22,230,000,000 25,304,999,780 22,230,000,000Discount on preferred shares 23 Beginning balance (1,498,478,153) - (1,498,478,153) - Increase during the year - (1,498,478,153) - (1,498,478,153) Decrease during the year - - - - Ending balance (1,498,478,153) (1,498,478,153) (1,498,478,153) (1,498,478,153)Premium on common shares 23 Beginning balance 11,432,046,462 11,432,046,462 11,432,046,462 11,432,046,462 Increase during the year - - - - Decrease during the year (316,639,974) - (316,639,974) - Ending balance 11,115,406,488 11,432,046,462 11,115,406,488 11,432,046,462Cumulative translation adjustment Beginning balance 104,344,130 104,344,130 104,344,130 104,344,130 Increase during the year - - - - Decrease during the year - - - - Ending balance 104,344,130 104,344,130 104,344,130 104,344,130Appropriated legal reserve 24 Beginning balance 34,880,969 34,880,969 34,880,969 34,880,969 Increase during the year - - - - Decrease during the year - - - - Ending balance 34,880,969 34,880,969 34,880,969 34,880,969



5

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes in Shareholders’ Equity (Continued)For the years ended 31 December 2001 and 2000


Note Baht Baht Baht BahtDeficit Beginning balance (29,511,977,179) (26,203,827,034) (29,511,977,179) (26,203,827,034) Increase during the year - - - - Decrease during the year (3,425,126,882) (3,308,150,145) (3,425,126,882) (3,308,150,145) Ending balance (32,937,104,061) (29,511,977,179) (32,937,104,061) (29,511,977,179)

Unrealised gain (loss) on available-for-sale securities Beginning balance (1,682,579,258) 9,844,400 (1,682,579,258) 9,844,400 Increase during the year - - - - Decrease during the year 8 (3,020,786,817) (1,692,423,658) (3,020,786,817) (1,692,423,658) Ending balance (4,703,366,075) (1,682,579,258) (4,703,366,075) (1,682,579,258)

Minority interest in subsidiaries Beginning balance 498,648,008 512,003,338 - - Increase during the year - - - - Share of loss of subsidiaries (44,290,677) (13,355,330) - - Ending balance 454,357,331 498,648,008 - -

Total shareholders’ equity 4,895,040,409 8,626,884,979 4,440,683,078 8,128,236,971



6

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Deficit For the years ended 31 December 2001 and 2000


Note Baht Baht Baht Baht

Deficit Beginning balance (29,511,977,179) (26,203,827,034) (29,511,977,179) (26,203,827,034) Net loss for the year (3,425,126,882) (3,308,150,145) (3,425,126,882) (3,308,150,145) Ending balance (32,937,104,061) (29,511,977,179) (32,937,104,061) (29,511,977,179)

Appropriated legal reserve 24 34,880,969 34,880,969 34,880,969 34,880,969

Total deficit (32,902,223,092) (29,477,096,210) (32,902,223,092) (29,477,096,210)



7

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Cash Flows For the years ended 31 December 2001 and 2000


Notes Baht Baht Baht Baht

Cash flows from operating activities 29 4,479,031,257 3,228,635,110 3,281,925,149 3,699,827,743

Cash flows from investing activitiesDeposit in restricted cash (251,124,483) (1,586,445,319) 39,845,250 (1,740,283,962)Deposit in time deposit (82,810,932) (15,378,042) - -Payments on liquidated subsidiaries - (133,024) - -Acquisition of joint venture, net of cash acquired 4 2,782,125,446 - (76,419,234) -Acquisition of investment in other company (100,000) - - -Purchase of property, plant and equipment (3,930,955,821) (1,695,087,745) (2,207,308,673) (1,387,231,901)Purchase of intangible assets 16 (33,881,549) - (33,881,549) -Proceeds from sale of available-for-sale securities and other - 3,003,508,766 - -Proceeds from disposal of property, plant and equipment 117,267,777 48,905,523 232,643 806,219Net cash used in investing activities (1,399,479,562) (244,629,841) (2,277,531,563) (3,126,709,644)

Cash flows from financing activitiesIssue of preferred shares - 5,521,521,847 - 5,521,521,847Proceeds from borrowings 18 5,265,404,643 657,757,200 5,000,000,000 -Repayments on long-term trade accounts payable 21 (187,972,765) (531,831,359) - -Repayments on borrowings 18 (6,527,349,456) (8,874,703,476) (5,904,718,926) (6,006,432,873)Net cash used in financing activities (1,449,917,578) (3,227,255,788) (904,718,926) (484,911,026)

Increase (decrease) in cash and cash equivalents 1,629,634,117 (243,250,519) 99,674,660 88,207,073Beginning balance 1,054,621,457 1,297,871,976 153,811,825 65,604,752

Ending balance 2,684,255,574 1,054,621,457 253,486,485 153,811,825

Non cash transactionsThe principal non cash transactions for the year ended 31 December 2001 are as follows: 1. The acquisition of property, plant and equipment using finance leases and other payables amounting to Baht 666.88 million (Note 18) and Baht 67.20 million, respectively. 2. Currency swap of US Dollar loan amounting to US Dollars 96.65 million to Thai Baht 4,483.48 million (Note 18). 3. Acquisition of joint venture in exchange for issuance of shares (Note 4 and Note 23).



8

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2001 and 2000

9

1. General information

TelecomAsia Corporation Public Company Limited (“the Company”) is a public limited company and is incorporated and domiciled in Thailand. The registered office of the Company is located at 18 Telecom Tower, Ratchadaphisek Road, Huai Khwang, Bangkok, Thailand. The Company is listed on the Stock Exchange of Thailand. The Company and its subsidiaries, associates and other related companies (together the “TelecomAsia Group”, or “the Group”) are principally engaged in the telecommunications and diversified communications industries. The Group’s core business is providing telecommunications services and various value-added services, which include, among others, Digital Data Network (“DDN”), Public Telephone, Personal Communication Telephone (“PCT”) Service, Multimedia and Internet Service Provider (“ISP”), and cellular telephone service.

2. Concession agreements Telephone services In August 1991, the Company entered into the Joint Operation and Joint Investment for Expansion of Telephone Services Agreement (“the Concession”) with the Telephone Organization of Thailand (“TOT”). The Concession, a Build Transfer Operate (“BTO”) Concession, as amended and supplemented, granted the Company the right to construct and provide fixed line telephone services for up to 2.6 million new lines in the Bangkok Metropolitan Area. The Company was responsible for: 1) Procuring and constructing the expansion of the existing TOT network. 2) Upon completion of construction of the network expansion, transferring legal

ownership of certain network assets, land and buildings to TOT. 3) In consideration for the transferred assets receiving 25 years right to operate and

maintain the network and provide certain services including:

• Fixed line telephone • Personal Communication Telephone (PCT) • Public telephone (Build Operate Transfer) • Digital Data Network (DDN) • Acceptance of fault notification and drop wire maintenance • Customer service center

Under the provisions of the Concession, TOT and the Company share the gross revenues collected from operating the networks in the percentages stipulated. Additionally, as required by the Concession, the Company has placed letters of guarantee issued by certain local banks in favour of TOT totaling Baht 300 million to guarantee the Company’s compliance with the terms of the Concession. NON-POTS services


10

In August 1997, the Group has entered into a Joint Investment in the NON-POTS services through multimedia network agreement with the Telephone Organisation of Thailand (“TOT”). Under the terms of the agreement, the Group has certain commitments such as, among others, to acquire, install, manage and maintain the hardware and equipment for NON-POTS services. The Group is also committed to transfer to the TOT all hardware and equipment pertaining to such system when the installation is completed. This agreement is for a period of twenty years commencing from the agreement date, and the Group is unable to terminate it unless certain criteria specified in the agreement have been met. During the term of the agreement, the Group is entitled to collect the service fees, membership fees and other service fees from customers as stipulated in the agreement. The Group has placed letter of guarantee issued by certain local bank in favour of TOT amounting to Baht 5 million to guarantee the Group’s compliance with the terms of the agreement.


11

2. Concession agreements (Continued)

Internet services In October 1996, the Group entered into the Joint Investment in the Internet Services Agreement (the “Agreement”) with the Communication Authority of Thailand (“CAT”) to provide commercial internet services to users throughout Thailand for a 10 year term. Under the terms of the Agreement, the Group is required to provide its Internet service over facilities leased from CAT or authorities approved by CAT. Under the terms of the Agreement, the Group has certain commitments including acquiring, installing, managing and maintaining all equipment necessary to provide Internet services. The legal ownership of the system assets is transferred to CAT as installations are completed. In consideration for the transferred system assets, CAT granted the Group a ten year operating right to provide Internet services and collect customer deposits, membership and other service fees as stipulated in the Agreement. The Group has placed letters of guarantee issued by certain local banks in favour of CAT totaling Baht 0.5 million to guarantee the Group’s compliance with the terms of the Agreement. Cellular telephone service As set out in Note 4, on 31 October 2001, the Company acquired 41.00% of shares capital of Bangkok Inter Teletech Co., Ltd. (“BITCO”), the sole shareholders of CP Orange Co., Ltd. (“CPO”) (CPO had changed its company name as TA Orange Co., Ltd. in January 2002), formerly known as Wireless Communication Services Co., Ltd. CPO is an operator of the nationwide cellular network under a Build Transfer Operate concession granted by the CAT dated 20 June 1996 which was subsequently amended on 8 September 2000. Under the term of the concession agreement, CPO has certain commitments including acquiring, installing, managing and maintaining all equipment necessary to provide nationwide cellular telephone services. The legal ownership of the system assets is transferred to the CAT as installations are completed. In addition, CPO is required to pay annual fees to the CAT based on the percentage of service income or at the minimum fees as specified in the agreement whichever is higher. In consideration for the transferred system assets and committed fees, CAT granted CPO a seventeen year exclusive right to provide cellular telephone services and collect customer service fees as stipulated in the agreement.

The Group has placed letters of guarantee issued by certain foreign and local banks in favour of CAT totaling Baht 133.33 million to guarantee the Group’s compliance with the terms of the agreement.


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3. Accounting policies

The principal accounting policies adopted in the preparation of these consolidated and Company financial statements are set out below: a) Basis of preparation

The consolidated and Company financial statements have been prepared in accordance with Thai Generally Accepted Accounting Principles under the Accounting Act B.E. 2543 being those Thai Accounting Standards issued by the Institute of Certified Accountants and Auditors of Thailand and approved under law by the Board of Supervision of Auditing Practice appointed by the Minister of Commerce under the Auditor Act B.E. 2505, and the financial reporting requirements of the Securities and Exchange Commission. The consolidated and Company financial statements are prepared under the historical cost convention except as disclosed in the accounting policies below. For example, available-for-sale investment is shown at fair value.

b) Group accounting (1) Subsidiary undertakings

Subsidiary undertakings, which are those companies in which the Group, directly or indirectly, has an interest of more than one half of the voting rights or otherwise has power to exercise control over the operations are consolidated. Subsidiaries are consolidated from the date on which effective control is transferred to the Group and are no longer consolidated from the date that control ceases. All intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless cost cannot be recovered. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group.

(2) Associated undertakings

Investments in associated undertakings are accounted for by the equity method of accounting. These are undertakings over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associated undertaking are eliminated to the extent of the Group’s interest in the associated undertakings; unrealised losses are also eliminated unless the transactions provides evidence of an impairment of the asset transferred. Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the acquired associated undertaking at the date of acquisition. Goodwill on acquisitions of associated undertaking is included in the balance sheet as part of investment in associates, and is amortised using the straight-line method over its estimated useful life, 15 years.


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The Group’s investment in associated undertakings includes goodwill (net of accumulated amortisation) on acquisition. Equity accounting is discontinued when the carrying amount of the investment in an associated undertakings reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated undertakings.

(3) Joint venture

The Group’s interests in a jointly controlled entities are accounted for by proportionate consolidation. Under this method the Group includes its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows in the relevant components of the financial statements.


14

3. Accounting policies (Continued)

c) Foreign currency translation

Income statements of foreign entities are translated into the Group’s reporting currency at weighted average exchange rates for the year and balance sheets are translated at the exchange rates ruling on 31 December. Exchange differences arising from the translation of the net investment in foreign subsidiaries, have been recorded in the “Cumulative Translation Adjustment” in shareholders’ equity. On disposal of a foreign entity, accumulated differences are recognised in the income statement as part of the gain or loss on sale.

Income statements of the foreign operations that are integral to the operations of the

Group are translated into the Group’s reporting currency at average exchange rates for the year and the monetary items are translated at the exchange rates ruling on 31 December, while the non monetary items are translated at the date of the transactions. Exchange differences arising from the translation have been recorded as income or expense for the year.

Foreign currency transactions in Group companies are accounted for at the exchange rates prevailing at the date of the transactions. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement. Such balances are translated at year-end exchange rates unless hedged by forward foreign exchange contracts, in which case the rates specified in such forward contracts are used.

d) Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and cash equivalents comprise cash on hand, deposits held at call with banks, short-term deposits with banks and financial institution with original maturity of 3 months or less, other short-term highly liquid investments, and bank overdrafts. In balance sheet, bank overdrafts are included in borrowings in current liabilities.

e) Investments The Group classifies its investments into the following categories; trading, held-to-

maturity, available-for-sale and general investment. Investments that are acquired principally for the purpose of generating a profit from short-term fluctuations in price are classified as trading investments and included in current assets; during the period the Group did not hold any investments in this category. Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held-to-maturity and are included in non-current assets; during the period the Group did not hold any investments in this category. Investments intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, are classified as available-for-sale; these are


15

included in non-current assets unless management has the express intention of holding the investment for less than 12 months from the balance sheet date or unless they will need to be sold to raise operating capital, in which case they are included in current assets. Investments in equity securities that are not listed in the stock exchange are classified as general investment. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.

All purchases and sales of investments are recognised on the trade date, which is the

date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. Trading and available-for-sale investments are subsequently carried at fair value, whilst held-to-maturity investments are carried at amortised cost using the effective yield method. General investment is carried at original cost. Unrealised gains and losses arising from changes in the fair value of trading investments and available-for-sale investments are included in the income statement in the period in which they arise and in the shareholders’ equity, respectively. Realised gains and losses are determined on the weighted average method and are reflected in income statement.


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f) Trade accounts receivable

Trade accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables. The Group records an allowance for doubtful accounts which is equivalent to the estimated collection losses that may be incurred in the collection of all receivables. The estimated losses are based on historical collection experience combined with a review of all outstanding receivables at the balance sheet date. Bad debts are written-off when identified.

g) Inventories

Inventories are stated at the lower of cost or net realisable value. Cost is determined by the moving average cost method. Allowance is made against cost of supplies for network where, in the opinion of the management, there is diminution in value arising on obsolete, slow-moving and defective inventories, or, is otherwise required by changes in circumstances. Net realisable value is the estimated selling price in the ordinary course of business, less the cost of selling expenses.

h) Investment properties

Investment properties, principally comprising land, are carried at cost. Investment properties are not subject to depreciation. A review of impairment is periodically undertaken by the Group’s management.

On disposal of an investment property, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statement.

i) Property, plant and equipment

Property, plant and equipment are stated at historical cost less accumulated depreciation. Depreciation is calculated on a straight-line method to write-off the cost of each asset to its residual value over its estimated useful life of the respective assets, or if shorter, the lease term as follows:

Years Land Nil Land improvement 10 Buildings and improvements 5 – 20 Leasehold building improvements Lease period Furniture, fixtures, tools and office equipment 5 – 10 Power supply and computer 5 Multimedia network equipment 8 – 20 Vehicle 5


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Expenditures for additions, renewal and betterment, which result in a substantial increase in an asset’s current replacement value, are capitalised. Repair and maintenance costs are recognised as an expense when incurred. 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 disposals of property, plant and equipment are determined by comparing proceeds with carrying amounts and are recognised as other income (loss) in the statement of income.


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i) Property, plant and equipment (Continued)

Included in property, plant and equipment is property, plant and equipment under Concessions and Agreements as described in Note 2. Such property, plant and equipment is depreciated over the shorter of their useful lives or the remaining concession periods, as follows:

Years Land Nil Land improvement 10 Buildings 10 – 20 Telephone network equipment - Switching equipment 12 - Transmission 10 - Outside plant 10 – 25 - Mobile phone network equipment 10 Public phone 7 Power supply and computer 5 Network management systems 10

Borrowing costs to finance the construction of property, plant and equipment and assets under the Concessions and Agreements are capitalised as part of the cost of the asset during the period of time that is required to complete and prepare the property, plant and equipment for its intended use.

Costs of mobile phone network equipment under concession agreement represent costs of certain equipment and other assets which have been or have to be transferred to the CAT. The cost of mobile phone network equipment under concession agreement is depreciated on the straight-line method over its estimated useful life of 10 years not exceeding the remaining concession period.

j) Accounting for leases – where a group company is the lessee

Leases of equipment where the Group assumes substantially all risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased equipment or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowing. The interest element of the finance cost is charged to the income statement over the lease period. Equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset or the lease term.

Leases of assets where a significant portion of the risks and rewards of ownership are effectively retained by the lessor are classified as operating leases. Payments made


19

under operating leases are charged to the income statement 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.


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k) Intangible assets (1) Negative goodwill

Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition. Negative goodwill is presented separately as an item in the balance sheet. To the extent that negative goodwill relates to expectations of future losses and expenses that are identified in the Group’s plan for the acquisition and can be measured reliably, but which do not represent identifiable liabilities, that portion of negative goodwill is recognised in the income statement when the future losses and expenses are recognised.

(2) Computer software development costs

Generally, costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. However, costs that are directly associated with identifiable and unique software products controlled by the Group and have probable economic benefit exceeding the cost beyond one year, are recognised as intangible assets. Direct costs include staff costs of the software development team and an appropriate portion of relevant overheads.

Expenditure which enhances or extends the performance of computer software programmes beyond their original specifications is recognised as a capital improvement and added to the original cost of the software. Computer software development costs recognised as assets are amortised using the straight-line method over their useful lives, not exceeding a period of 5 years.

(3) Trademarks and licenses Expenditure on acquired trademarks and licenses by a joint venture is capitalised

and amortised using the straight-line method over its estimated useful life of 20 years. The trademark is not revalued. The carrying amount of the trademark is reviewed annually and adjusted for impairment where it is considered necessary.

(4) Other intangible assets

Other intangible assets represent fair value of subsidiaries’ shares issued in exchange for rights to operate NON-POTS and to hang dropwire. This intangible asset is amortised using the straight-line method over its estimated useful life, ranging from 20 – 25 years.

(5) Impairment of intangible assets

Where an indication of impairment exists, the carrying amount of intangible assets is assessed annually and written down immediately to its recoverable amount.

l) Borrowings

Borrowings are recognised initially at the proceeds received, net of transaction costs incurred. In subsequent periods, borrowings are stated at amortised cost using the effective yield method; any difference between proceeds (net of transaction costs) and


21

the redemption value is recognised in the income statement over the period of the borrowings.

m) Troubled debt restructuring - where the group company is the debtor When the Group transfers its assets or equities in settlement of its debts as part of the debt restructuring, the excess of the carrying amount of the payable settled (including accrued interest, unamortised premium or discount, finance charges, or issue costs) over the fair value of the assets or equities transferred to the lender is recognised as a gain on restructuring. Legal fees and other direct costs incurred in transferring equities are deducted from the amount recorded for that equity. All other direct costs affecting the debt restructuring are deducted in measuring the gain on restructuring or included in expense for the period if no gain on restructuring is recognised. Where the debt restructuring involves modification of terms of payables, the Group accounts for the effects of the restructuring prospectively from the time of restructuring and does not change the carrying amount of the payable at the time of the restructuring, unless the carrying amount exceeds the total undiscounted future cash payment specified by the new terms. If it does exceed this, the carrying amount of payable is reduced to the amount equal to the total undiscounted future cash payments specified by the new terms and a gain on restructuring is recognised in the statement of income if the amount is determinable.


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3. Accounting policies (Continued) n) Revenue recognition

Telephone usage revenues for local and domestic long distance calls are recognised based on completed call time at the tariffs set by TOT. Where a billing period does not coincide with a calendar month, the Company has estimated the local call usage based on historical usage. Telephone usage revenue earned but not billed is included in the balance sheets within accounts receivable.

Inbound and outbound international long distance calls are connected through the CAT network. CAT bills the Company’s customers directly for international calls. CAT pays each carrier Baht 6 per minute of inbound and outbound international traffic. The Company recognises international long distance call revenue based on customer usage reported to the Company by CAT.

Revenue from DDN service is recognised ratably over the service period. Annual revenues from DDN service billed but unearned are included in the balance sheets within other current liabilities.

Revenue derived from the installation of fixed lines and the activation of PCT services is recognised upon the completion of installation services and activation of services. Advance receipts but unearned are included in the balance sheets within other current liabilities.

Revenues from public telephones service are recognised based upon metered usage.

Revenues from Internet services are recognised based on actual time incurred by the customer.

Sales of telephone equipment and PCT handsets are recognised upon delivery of equipment and handsets and customer acceptance.

In accordance with the Concession described in Note 2, TOT is entitled to receive a share of certain revenues generated by the Company. The Company presents revenue gross of the TOT share in the statements of income, ranging from 16 % to 23.5% of revenues collected. The TOT share of revenue is included within cost of services.

All revenues have been presented net of value added tax, cash discounts and related cash-based promotions.

Other revenues earned by the Group are recognised on the following bases:

Royalty and rental income – on an accrual basis. Interest income – on an effective yield basis. Dividend income – when the Group’s right to receive payment is established.

o) Related parties


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Enterprises and individuals that directly, of indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the Company and close members of the family of these individuals and companies associated with these individuals also constitute related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.


24


p) Construction contacts When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that it is probable will be recoverable; and contract costs are recognised when incurred. When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are recognised over the period of the contract, respectively, as revenue and expenses. The Group uses the percentage of completion method to determine the appropriate amount of revenue and costs to recognised in a given period; the stage of completion is measured by reference to labour hours incurred to date as a percentage of total estimated labour hours for each contract and the proportion that contract costs incurred for work performed to date bear to the estimated total costs for the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as a expense immediately. In determining costs incurred up to the year end, any costs relating to future activity on a contract are excluded and shown as contract work in progress. The aggregate of the costs incurred and the profit/loss recognised on each contract is compared against the progress billings up to the year end. Where costs incurred and recognised profits (less recognised losses) exceed progress billings, the balance is shown as due from customers on construction contracts, under receivables and prepayments. Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is shown as due to customers on construction contract, under trade and other payables.

q) Financial instruments Financial instruments carried on the balance sheet include cash and bank balances, investments, receivables, trade creditors, leases and borrowings. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. The Group is also party to financial instruments that reduce exposure to fluctuations in foreign currency exchange. These instruments, which mainly comprise foreign currency forward contracts, are not recognised in the financial statement on inception. Foreign currency forward contracts protect the Group from movements in exchange rates by establishing the rate at which a foreign currency asset and liability will be settled. Any increase or decrease in the amount required to settle the asset or liability is off-set by a corresponding movement in the value of the forward exchange contract. The gains and losses are therefore off-set for financial reporting purposes and are not recognised in the financial statements. The fee incurred in establishing each agreement is amortised over the contract period, if any.

r) Share capital


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(1) Ordinary shares and non-redeemable preferred shares with discretionary dividends are

both classified as equity.

(2) External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction, net of tax, in equity from the proceeds. Share issue costs incurred directly in connection with a business combination are included in the cost of acquisition.

(3) Dividends on ordinary shares are recognised in equity in the period in which they are declared.

(4) The directors and executive management are entitled to participate in the Stock Option Plan under which non-transferable warrants are issued to the directors and executive management. If the warrants are granted at a discount on the market price no compensation cost is recognised in the income statement based on that discount. When options are exercised, the proceeds received net of any transaction costs are credited to share capital (par value) and share premium.

s) Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year.


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4. Acquisition On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company, the shareholders approved the acquisition by the Company of shares of Bangkok Inter Teletech Co., Ltd. ("BITCO") from Charoen Pokphan Group Co., Ltd.. (the "CP Group"). CP Group will transfer to the Company 614,999,956 common shares of Baht 10 par value per share in BITCO, representing approximately 41% of the total issued shares of BITCO. In consideration for the acquisition of the BITCO shares, the Company will issue common shares and equity warrants to the CP Group as follows: a. 307,499,978 new common shares of Baht 10 par value per share of the Company; and b. 100,000,000 equity warrants of the Company, each of which is exercisable into one

fully paid-up common share of the Company within a period of no earlier than 6 months, and no later than 2 years from the date of completion of the transaction at the exercise price of Baht 32 per share in cash.

No value has been attributed to the equity for the issued warrants. On exercise of the warrants proceeds received net of transaction costs will be credited to share capital (par value) and share premium. In order to effect the proposed acquisition together with the issue of securities by the Company (referred as the “Transaction”), the Company and CP Group entered into a Share Swap Agreement and a Voting Agreement dated 5 June 2001 (collectively, the “Transaction Documents”). Material clauses contained in the Voting Agreement include: a. Subject to the terms of the Voting Agreement, the Company and CP Group will vote in

the same direction as a combined block of approximately 51%; b. At the time of a future listing of BITCO on a stock exchange, the Company may

acquire from CP Group the remaining 10% of common shares in BITCO, at the IPO price. In the event the Company does not exercise this right, the Voting Agreement shall be terminated; and

c. Lock-up provisions on all the Company’s shares (newly issued or otherwise) held by

CP Group for the period of 6 months from the date on which the Company receives BITCO shares. The foregoing provision, however, does not apply to sales, transfers or disposals of shares of the Company to Affiliates.

The Company obtained consent from its creditors for this Transaction. On 31 October 2001, the Transaction was consummated, and BITCO was accounted for as a joint venture from that date. As a result the Company’s interests are accounted for by proportionate consolidation. Details of net assets acquired and negative goodwill are as follows: Baht Purchase consideration:


27

- Cash paid 76,419,234 - Fair value of share and warrant issued (Note 23) 2,758,359,80

6 Total purchase consideration 2,834,779,04

0 Fair value of net asset acquired (5,455,967,4

38) Negative goodwill (2,621,188,3

98)


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4. Acquisition (Continued) The proportional assets and liabilities arising from the acquisition are as follows:

Baht

Cash and cash equivalents 2,858,544,680

Short-term investments 82,000,000 Advances to contractors 305,912,302 Other accounts receivable 153,856,230 Other current assets 56,752,771 Property, plant and equipment, net - Network equipment 2,669,541,82

2 - Non - network equipment 213,946,536 Trademark, net 113,938,878 Other assets 21,369,103 Other accounts payable (509,512,403

) Amount due to related company (208,914,181

) Accrued expenses and other current liabilities (301,468,300

) Fair value of net assets acquired 5,455,967,43

8 Negative goodwill (2,621,188,3

98) Total purchase consideration 2,834,779,04

0 As a result, cash inflow from this acquisition is shown below: Baht Cash and cash equivalents 2,858,544,68

0 Less: cash paid for directly attributable acquisition costs (76,419,234) Net cash inflow on acquisition 2,782,125,44

6 Movement of negative goodwill is as follows: Baht Opening net book balance - Acquisition of joint venture (2,621,188,3

98) Amortisation 284,403,334 Closing net book balance (2,336,785,0

64)


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5. Debt restructuring

5.1 Debt restructuring of the Company

On 22 December 1999, the Company signed an Outline Term Sheet for Restructuring and the Company subsequently entered into debt restructuring agreements with its creditors, comprising both secured and unsecured creditors, which became effective on 31 March 2000. The principal provisions included, among others, the following: Secured creditors (a) on 31 March 2000, the Company issued 702,000,000 convertible preference

shares to a secured creditor for cash proceeds of U.S. Dollars 150 million. The cash proceeds from the offering were used to repay unsecured liabilities under the debt restructuring plan. The preference shares have Baht 10 par value with conversion rights to common shares in the second to eighth year from issue at a ratio of 1:1. The preference shares are entitled to a dividend for the first eight years, set at the rate of 10% per annum, cumulative plus dividend payable, if any, to the holders of common shares. With effect from the eighth anniversary of issue, the preference shares are entitled to a non-cumulative dividend at the rate of 0.1% per annum, plus dividend payable, if any, to the holders of common shares;


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5. Debt restructuring (Continued)

5.1 Debt restructuring of the Company (Continued) Secured creditors (Continued)

(b) the secured creditors have agreed to defer the repayment term of their long-term

loans. The repayment will be first due in the second quarter of the year 2002, and repaid through the year 2008. Interest rates were changed from fixed rates to rates based on the average MLR of the certain local banks plus 0.75% per annum for the Baht loans and on LIBOR plus agreed margins ranging from 1%-1.75% per annum for the U.S. Dollar loans, payable on a monthly basis;

(c) the secured creditors agreed to extend the repayment term of their overdraft credit

facilities to be due in December 2008. Interest rates are based on the average MOR of banks specified in the agreement; and

(d) the Company was granted permission to withdraw the loan facility under a

Standby Letter of Credit, which certain local banks issued to a subsidiary under the conditions of a joint-loan agreement entered into between the subsidiary and the said banks, of Baht 5,000 million to finance the Company’s operations under certain conditions.

Unsecured creditors

Two options of repayment were offered to unsecured creditors, the principal terms of which were as follows:

1 the Company offered to repay the unsecured creditors 50% of the principal

amount outstanding with the condition that the remaining balance of principal and the defaulted accrued interest were waived; and alternatively

2 the Company offered to repay the unsecured creditors 40% of the principal

amount outstanding. The remaining 60% would be repaid in eight semi-annual installments starting from January 2014, with compound interest of 2% per annum. The remaining amount owing to the unsecured creditors is subordinated to the repayments of debt payable to the secured creditors and the preference dividend referred to above.

The financial results of the debt restructuring of the Company are summarised as follows:

Secured creditors

Debt before

Restructuring Currency

Million

Debt after Restructuring

Currency Million

Loans in U.S. Dollars (U.S. Dollars) 770.49 770.49


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Loans in Baht (Baht) 18,833.68 18,833.68 Restructuring of the secured liabilities represented changes to the terms of loan repayments and changes in interest rates only. Therefore, there has been no change in the carrying value of liabilities. Unsecured creditors Debt before

Restructuring

Debt after Restructuri

ng

Gain on Restructuri

ng Baht

Million Baht

Million Baht

Million Creditors without gain from restructuring

8,869.49 9,737.26 -

Creditors with gain from restructuring 6,600.85 5,021.87 1,578.98 Gain from debt restructuring, net of related

expenses 1,378.06 Gain from debt restructuring, net of related

expenses per share (Baht) 0.62


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5. Debt restructuring (Continued)

5.1 Debt restructuring of the Company (Continued)

Debt before restructuring included principal amount and accrued interest. Debt after restructuring represents principal amount payable at restructuring or to be paid after restructuring, future interest until full settlement and withholding taxes absorbed by the Company.

5.2 Debt restructuring of subsidiary On 2 March 2000, a subsidiary of the Group entered into a debt restructuring agreement for the amount of Baht 4,033.2 million with certain local banks and financial institutions. The principal provisions included the following: − the group of creditors agreed to extend the repayment date to 31 December 2002,

and to allow the due date to be extended on a yearly basis. The said extended date will not be extended beyond 31 December 2009. The subsidiary must pay for an extension fee of 0.5% - 2% of the loan as stipulated in the agreement;

− the subsidiary agreed to pay interest at the rate of MLR + 2% (MLR being the

average MLR of four principal banks) at the month end; and − under the provision of the debt restructuring agreement, the subsidiary has pledged

the shares of its four subsidiaries as collateral.

6. Cash and cash equivalents Consolidated Company As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Cash on hand and at banks 57,611,146 35,175,501 22,244,088 13,694,676 Saving deposits 2,626,644,42

8 1,019,445,95

6 231,242,397 140,117,14

9 2,684,255,57

4 1,054,621,45

7 253,486,485 153,811,82

5 The average effective interest rates on cash at bank deposits were 0.26% and in the range of 0.75% - 2.0% in 2001 and 2000, respectively. These deposits have an average maturity of 74 days.

7. Restricted cash Consolidated Company As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Saving deposits 2,406,064,98 4,058,137,43 2,218,978,58 4,058,137,4


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3 4 9 34 Timed deposit 2,170,385,13

7 250,229,475 1,799,313,59

5 -

4,576,450,120

4,308,366,909

4,018,292,184

4,058,137,434

The average effective interest rates for time deposit accounts were 0.26% and in the range of 0.75% - 2.0% in 2001 and 2000, respectively. These deposits have an average maturity of 93 days.

Under the terms of loan and supplier agreements, the Company and certain subsidiaries have pledged the above bank accounts as collateral with the contracted parties.


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8. Investments Consolidated As at 31 December 2001 2000 Baht Baht Investments Current 177,337,181 38,574,852 Non-current 1,088,595,21

2 3,985,822,33

2 Total 1,265,932,39

3 4,024,397,18

4 Current: Available-for-sale securities 12,326,189 21,416,064 General investment - Time deposit 165,010,992 17,158,788

Total 177,337,181 38,574,852 Non-current: Available-for-sale securities 1,036,273,21

2 3,960,783,33

2 General investment – non-marketable equity securities(Note 13)

52,322,000 25,039,000

Total 1,088,595,212

3,985,822,332

General investment – Time deposit The average effective interest rates on short-term bank fixed deposits were 2.0% and in the range of 0.75% - 2.0% for 2001 and 2000, respectively. These deposits have an average maturity of 102 days. Available-for-sale securities Movement of available-for-sale-securities: Consolidated Year ended 31 December 2001 2000 Baht Baht Current: Opening net book amount 21,416,064 728,311,850 Reclassify - (20,166,557) Exchange differences 27,918 (6,308,383) Additions - 1,249,564 Disposals - (680,722,310) Revaluation deficit (9,117,793) (948,100) Closing net book amount 12,326,189 21,416,064 Non current: Opening net book amount 3,960,783,332 - Reclassify from investment in others - 2,871,637,943


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Exchange differences 87,158,904 2,780,620,947 Revaluation deficit (3,011,669,02

4) (1,691,475,55

8) Closing net book amount 1,036,273,212 3,960,783,332 Available-for-sale investments, comprising principally marketable securities, are fair valued annually at the close of business on 31 December. Fair value is determined by reference to Stock Exchange quoted bid prices. Available-for-sale investments are classified as non-current assets, unless they are expected to be realised within twelve months of the balance sheet date or unless they will need to be sold to raise operating capital. Non-current investments are shares in FLAG Telecom Holdings Limited ("FLAG") that have been pledged as collateral against borrowings (as mentioned in Note 31).


36

9. Trade accounts receivable, net

Consolidated Company As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Receivable from TOT 2,979,419,89

0 3,495,552,89

2 2,979,419,89

0 3,495,552,8

92 Billed customers 2,867,110,18

4 2,512,019,61

5 2,867,110,18

4 2,512,019,6

15 Other accounts receivable 166,268,260 176,410,002 - - 6,012,798,33

4 6,183,982,50

9 5,846,530,07

4 6,007,572,5

07 Less: Allowance for doubtful accounts

(472,111,886)

(351,167,044)

(425,501,163)

(283,607,595)

Trade accounts receivable, net 5,540,686,448

5,832,815,465

5,421,028,911

5,723,964,912

Outstanding trade accounts receivable as at 31 December can be analysed as follows: Consolidated Company As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Current 2,321,712,51

7 1,934,075,40

4 2,216,809,76

2 1,848,916,8

53 Less than 3 months 1,112,133,87

1 1,503,146,10

3 1,104,781,73

3 1,459,208,6

47 3 - 6 months 407,779,582 222,568,966 404,717,702 221,889,32

4 6 - 12 months 442,358,294 483,677,870 438,119,156 481,744,52

6 More than 12 months 1,728,814,07

0 2,040,514,16

6 1,682,101,72

1 1,995,813,1

57 6,012,798,33

4 6,183,982,50

9 5,846,530,07

4 6,007,572,5

07 Less: Allowance for doubtful account

(472,111,886)

(351,167,044)

(425,501,163)

(283,607,595)

Trade accounts receivable, net 5,540,686,448

5,832,815,465

5,421,028,911

5,723,964,912

In outstanding trade accounts receivable aged more than 6 months is a receivable of Baht 1,546.42 million (2000: Baht 2,156.84 million) relating to disputed revenue sharing on value added tax amounting to Baht 889.67 million (2000: Baht 889.67 million), which is expected to be settled by the rental of network facilities payable to TOT. The Management believes that the remaining of receivables more than 6 months consisted of value added tax of assets transferred to TOT by Baht 57.03 million (2000: Baht 398.43 million) and fault notification and dropwire maintenance services charged to TOT of Baht 599.72 million (2000: Baht 868.74 million) will be collectible. Hence, no allowance has been established against the outstanding amount.


37

Concentrations of credit risk with respect to trade accounts receivable are limited due to the Group's large number of customers, who are end users of telephone services, covering business and residential (other than TOT as mentioned above). The Group's historical experience in collection of accounts receivable falls within the recorded allowances. Due to these factors, management believes that no additional credit risk beyond amounts provided for collection losses is inherent in the Group's trade accounts receivable.


38

10. Related party transactions

The following transactions were carried out with related parties: i) Sales of goods and services

Consolidated Company For the years ended 31 December

2001 2000 2001 2000

Baht’000 Baht’000 Baht’000 Baht’000 Sales of goods: Subsidiaries:

Asia Wireless Communication Co., Ltd. - - 27.74 192.45 Wire & Wireless Co., Ltd. - - - 962.80 W7 Rental Services Ltd. - - - 42.10

Joint venture: Asia Infonet Co., Ltd. 394.77 12.16 - -

Associated: UBC Cable Network Public Co., Ltd. - 1,334.82 - -

Related company: CP Group of companies 36,489.89 4,549.03 - -

36,884.66 5,896.01 27.74 1,197.35 Sales of services: Subsidiaries:

Asia Wireless Communication Co., Ltd. - - 15,110.28 5.79 Wire & Wireless Co., Ltd. - - 2,144.70 284.49

Joint ventures: BITCO Group of companies 23,320.32 - 23.22 - Asia Infonet Co., Ltd. 7,638.96 602.64 988.80 142.50

Associated: UBC Cable Network Public Co., Ltd.

873,265.79

866,498.05 13.30 63.84

Related company: CP Group of companies 146,417.4

2 29,553.33 1,494.49 1,083.94 1,050,642.

49 896,654.0

2 19,774.79 1,580.56 Sales to the related companies, are carried out on commercial terms and conditions and at market prices. CP Group holds 26.20% of the Company’s equity interest.

ii) Purchases of goods and services Consolidated Company For the years ended 31 December

2001 2000 2001 2000

Baht’000 Baht’000 Baht’000 Baht’000 Purchases of goods:


39

Subsidiaries: Wire & Wireless Co., Ltd. - - 217,752.75 20,796.86 Asia Wireless Communication Co., Ltd. - - 31,028.00 - Nilubon Co., Ltd. - - 1,151.83 - Telecom Holding Co., Ltd. - - 61.00 - Asia Multimedia Co., Ltd. - - 13.72 16.37 Yai Kaew Co., Ltd. - - - 8,468.98

Joint venture: Asia infonet Co., Ltd. 26.44 148.92 0.93 337.52

Related company: NEC Communication Systems (Thailand) Co., Ltd. 70,343.84 17,363.44 70,343.84 17,363.44 CP Group of companies 70,481.50 58,200.71 62,608.59 52,005.81

140,851.78 75,713.07 382,960.66 98,988.98


40

10. Related party transactions (Continued)

ii) Purchases of goods and services (Continued) Consolidated Company For the years ended 31 December

2001 2000 2001 2000

Baht’000 Baht’000 Baht’000 Baht’000 Purchases of services: Subsidiaries:

Asia Wireless Communication Co., Ltd. - -

1,492,731.63

1,062,193.30

Nilubon Co., Ltd. - - 356,514.82 352,645.72 W7 Rental Services Ltd. - - 129,506.43 129,105.66 Wire & Wireless Co., Ltd. - - 78,037.30 18,419.31 Telecom Training and Development Co., Ltd. - - 18,000.00 18,000.00 Interactive Media Services Co., Ltd. - - 4,729.38 6,324.96 Telecom Holding Co., Ltd. - - 4.70 - Telecom Equipment Manufacturing Co., Ltd. - - - 54.56 Asia Multimedia Co., Ltd. - - - 9.67

Joint ventures: BITCO Group of companies 19,782.23 - 33,529.20 - Asia Infonet Co., Ltd. 1,850.80 6,353.00 2,641.76 16,957.42

Associated: UBC Cable Network Public Co.,Ltd. 1,800.45 1,520.65 61.43 44.98

Related companies: CP Group of companies 49,546.11 34,471.72 21,133.65 20,422.96 NEC Communication Systems (Thailand) Co., Ltd. 18,296.84 16,966.49 18,296.84 16,966.49 Verizon Group of companies 4,214.17 5,357.54 4,214.17 5,357.54

95,490.60 64,669.40

2,159,401.31

1,646,502.57

Purchases from related companies were carried out on commercial terms and conditions and at market prices. The Group holds 9.62% equity interest in NEC Communication Systems (Thailand) Co., Ltd. and Verizon Group of companies holds 12.51% of the Company’s equity interest.


41


iii) Outstanding balances arising from sales and purchases of goods and services.

Consolidated Company As at 31 December 2001 2000 2001 2000 Baht’000 Baht’000 Baht’000 Baht’000 Receivables from related parties: Subsidiaries:

Asia Wireless Communication Co., Ltd. - - 56,931.15 18,044.99 Nilubon Co., Ltd. - - 26,399.59 46,824.95 Wire & Wireless Co., Ltd. - - 1,378.93 1,314.68 Telecom Holding Co., Ltd. - - 734.39 695.93 W7 Rental Services Ltd. - - 45.05 45.05 Asia Multimedia Co., Ltd. - - 7.06 -

Joint ventures: BITCO Group of companies 14,286.65 - 419.79 - Asia Infonet Co., Ltd. 9,101.53 8,968.62 625.73 11.34

Associated: UBC Cable Network Public Co., Ltd. 82,758.73 96,173.09 - 56.92

Related companies: CP Group of companies 45,060.32 10,787.25 131.85 92.55 Others 408.78 17,147.97 - -

151,616.01 133,076.93 86,673.54 67,086.41

Payables to related parties: Subsidiaries:

Asia Wireless Communication Co., Ltd.

- - 661,565.59

1,168,665.89

Telecom Holding Co., Ltd. - - 232,288.48 231,460.37 Nilubon Co., Ltd. - - 48,817.70 51,008.23 Wire & Wireless Co., Ltd. - - 39,136.87 21,811.75 W7 Rental Services Ltd. - - 12,305.06 37,870.39 Telecom Training and Development Co., Ltd.

-

-

1,605.00 1,605.00 Interactive Media Services Co., Ltd.

- - 1,222.11 650.17

Tele Engineering and Services Co., Ltd. -

- 170.13 170.13

Yai Kaew Co., Ltd. - - - 15,449.95 Telecom Equipment Manufacturing Co., Ltd.

-

-

- 58.37 Joint ventures:

BITCO Group of companies 19,782.23 - 33,529.20 -


42

Asia Infonet Co., Ltd. 5,681.76 6,409.02 12,010.23 17,505.72 Associated:

UBC Cable Network Public Co., Ltd.

258.17 2,040.86 4.60 -

Related companies: NEC Communication System (Thailand) Co., Ltd.

58,964.05

82.67

58,964.05 82.67 Verizon Group of companies 42,080.70 49,072.13 42,080.70 49,072.13 CP Group of companies 19,514.76 12,934.48 16,568.95 11,341.62 Kreditanstalt fuer Wiederaufbau 7,569.33 14,792.09 7,569.33 14,792.09 Others 1,366.77 3,097.62 - -

155,217.7

7 88,428.87 1,167,838.0

0 1,621,544.4

8 Kreditanstalt fuer Wiederaufbau is the only preference shareholder of the Company and holds 21.72% interest in total voting right.


43


iv) Loans from a related party

Consolidated and Company As at 31 December 2001 2000 Baht Baht Loans from Kreditanstalt fuer Wiederaufbau 18,693,172,592 21,655,967,271

The secured loans from Kreditanstalt fuer Wiederaufbau (KfW), the Company’s preferred shareholder ranks pari passu with other secured lenders. The loans are denominated in United States Dollars and carry interest at rates of LIBOR +1% - 1.75% per annum. During 2001, the Company refinanced US Dollars 96.65 million into Thai Baht of approximately Baht 4,483.48 million (Note 18). The related interest expense were Baht 1,268.31 million and Baht 1,669.65 million for the years ended 31 December 2001 and 2000, respectively. These loans present in balance sheet as part of borrowings (Note 18). Maturity of loans from related party: Consolidated and Company As at 31 December 2001 2000 Baht Baht Between 1 and 2 years 1,623,916,425 414,002,892 Between 2 and 5 years 8,500,003,791 7,102,374,600 Over 5 years 8,569,252,376 14,139,589,779 18,693,172,592 21,655,967,271

v) Directors and key management’s remuneration

Directors and key management of the Company are listed in the Annual Report. In 2001 the total remuneration of the directors of the Company and the Group were Baht 33.95 million and Baht 45.72 million (2000: Baht 25.61 million and Baht 45.98 million), respectively. Besides directors fees as presented in the statements of income, the key management of the Company had salaries and other benefits paid in 2001 and 2000 of Baht 149.30 million and Baht 81.95 million, respectively.

vi) Stock option granted to directors and senior executives

No stock options were granted to directors and senior executives of the Company during 2001. (2000: 58.15 million shares). The outstanding number of stock options granted to directors and senior executives of the Company at 31 December was 42.25 million shares (2000: 42.25 million shares) (Note 23).

11. Inventories, net



44

As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Spareparts for networks (at cost) 802,985,568 712,743,52

5 550,798,1

52 433,197,2

74 Allowance for declining in value (202,204,91

6) (215,687,5

38) (57,685,70

9) (27,552,77

1) Spareparts for networks - net 600,780,652 497,055,98

7 493,112,4

43 405,644,5

03 Merchandise (at cost) 578,513,407 382,771,27

2 289,714,9

05 109,439,3

50 Allowance for declining in value (69,591,909

) (25,477,75

4) - -

Merchandise - net 508,921,498 357,293,518

289,714,905

109,439,350

Work in process (at cost) 2,712,846 14,376,672 - 14,341,179

Goods in transit (at cost) 963,395 6,994,550 - - Inventories, net 1,113,378,3

91 875,720,72

7 782,827,3

48 529,425,0

32 No inventories have been pledged as collateral for trust receipt at end of the year 2001 (2000: Baht 65.30 million).


45

12. Other current assets

Consolidated Company As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Advances to contractors 1,220,738,9

88 197,898,268

875,052,582 182,335,381 Income tax deducted at source 508,497,083 515,714,355 498,377,491 492,726,436 Claimable value added tax 352,957,567 255,943,208 36,232,548 39,449,059 Value added tax pending receipt of tax invoices 158,148,758 97,515,334 121,955,193 85,032,853 Interest receivable 132,235,348 127,271,361 123,433,039 123,220,875 Others 267,976,989 163,659,290 199,672,930 140,400,339 2,640,554,7

33 1,358,001,8

16 1,854,723,7

83 1,063,164,9

43

13. Investments in subsidiaries, associates and others Principal subsidiary undertakings

Name of subsidiaries Business Country incorporation

Asia DBS Public Company Limited (89.99%)

DBS system operator

Thailand

Asia Multimedia Co., Ltd.(90.45%)

NON-POTS and multimedia services

Thailand

Asia Wireless Communication Co., Ltd.

PCT operator

Thailand


Audio text services

Thailand

K.I.N. (Thailand) Co., Ltd.

Holding company

Thailand

K.I.N. (Thailand) Co., Ltd. (BVI)

Holding company

British Virgin Island

Nilubon Co., Ltd.

Rental services

Thailand

TA Orient Telecom Investment Co., Ltd.

Holding company


Tele Engineering and Services Co., Ltd.

Construction and distributor

Thailand

Telecom Asia (China) Co., Ltd.

Communication



46

Telecom Equipment Manufacturing Co., Ltd.(59.99%)

Telecom equipment manufacturer

Thailand


Holding company

Thailand

Telecom International Co., Ltd.

Holding company

Thailand

Telecom International China Co., Ltd.

Communication


Telecom Training and Development Co., Ltd.

Training service

Thailand

U-Net Co., Ltd.


Thailand

Wire & Wireless Co., Ltd. (87.50%)


Thailand

W 7 Rental Services Ltd.

Rental services

Thailand

Yai Kaew Co., Ltd.

Investment in property

Thailand

All subsidiaries, besides Telecom Holding Co., Ltd. which are 99.99% directly owned, are indirectly wholly owned by the Company unless otherwise stated. All holdings are in the ordinary share capital of the undertaking concerned and are unchanged from 2000.


47

13. Investments in subsidiaries, associates and others (Continued)

Investments in associates and others are as follows:

At 31 December 2001 Consolidated

Business

Relationship

Paid-up Capital

Baht’000

% Ownersh

ip interest

Investment-At Cost

Method Baht’00

0

Investment-At Equity Method Baht’00

0 Associates: United Broadcasting Corporation Public Company Limited

Pay Television

Shareholder 7,407,736 40.96

4,619,750

4,492,130


Telecommunication

Shareholder 10,000 32.00 3,200 -

Total investment in associates

4,622,950

4,492,130

General investments: Investments in non-marketable equity securities (net allowance for impairment of Baht 960,991) 52,322

Total investment in associates and others 4,544,45

2

At 31 December 2000 Consolidated

Business

Relationship

Paid-up Capital Bah’000

% Ownersh

ip interest

Investment-At Cost

Method Baht’00

0

Investment-At Equity Method Baht’00

0 Associates: United Broadcasting Corporation Public Company Limited

Pay Television

Shareholder 7,407,736 40.96

4,619,750

5,405,003


Telecommunication

Shareholder 10,000 32.00 3,200 -


48

Total investments in associates

4,622,950

5,405,003

General investments: Investments in non-marketable equity securities (net allowance for impairment of Baht 960,991) 25,039

Total investment in associates and others 5,430,04

2

At 31 December 2001 Company

Business

Relationship

Paid-up

Capital Baht’0

00

% Owners

hip interest

Investment-

At Cost Method Baht’0

00

Investment- At

Equity Method

Baht’000 Subsidiary Telecom Holding Co., Ltd.

Investment Holding

Shareholder

12,000,000 99.99

12,000,000 6,941,334

Joint venture Bangkok Inter Teletech Co., Ltd.

Cellular Operator

Shareholder

15,000,000 41.00

5,455,968 4,214,301

Total

17,455,968

11,155,635

At 31 December 2000 Company

Business

Relationship

Paid-up

Capital Baht’0

00

% Owners

hip interest

Investment-

At Cost Method Baht’0

00

Investment- At

Equity Method

Baht’000 Subsidiary Telecom Holding Co., Ltd.

Investment Holding

Shareholder

12,000,000 99.99

12,000,000

10,879,510

Total

12,000,000

10,879,510


49

13. Investments in subsidiaries, associates and others (Continued)

Movement of investments in associates is as follows:

Consolidated Company Year ended 31 December 2001 2000 2001 2000 Baht’000 Baht’000 Baht’000 Baht’000

At the beginning of year 5,405,003 6,533,457 10,879,510 10,464,865 Acquisition (Note 4) - - 5,455,968 - Share of results (912,873) (1,128,454) (2,159,056) 2,107,069 Unrealised loss on available-for-sale securities - - (3,020,787) (1,692,424) At end of year 4,492,130 5,405,003 11,155,635 10,879,510

The share of result includes Baht 332.84 million (2000: Baht 275.98 million) representing the amortisation charge of goodwill in respect of acquisition of associated undertakings. Investments in associated undertakings at 31 December 2001 include goodwill of Baht 4,655.75 million, net of accumulated amortisation of Baht 1,081.92 million (2000: Baht 4,988.59 million, net of accumulated amortisation of Baht 749.08 million).

Investment in associates at the carrying value of Baht 4.49 billion is secured against a subsidiary’s borrowings (Note 18). Share of results from subsidiaries and associates in the statements of income (loss) for the year ended 31 December 2001 are the net of the amortisation of negative goodwill amounting to Baht 284.40 million (Note 4).

14. Investment property

Consolidated Year ended 31 December 2001 2000 Baht Baht

Opening net book amount 57,972,973 63,898,148 Disposals - (7,400,000) Reclassify (3,679,075) 1,474,825 Closing net book amount 54,293,898 57,972,973

As at 31 December Cost 124,930,289 135,978,619 Allowance for decline in value (70,636,391) (78,005,646) Net book amount 54,293,898 57,972,973


50

15. Property, plant and equipment, net

Consolidated Company As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Network equipment Opening net book amount 61,816,021,9

27 68,143,550,1

27 49,979,486,6

50 55,214,725,5

15 Additions 3,483,560,23

2 1,104,455,20

5 1,873,125,51

2 858,747,320

Acquisition of joint venture(Note 4)

213,946,536 - - -

Disposals (7,593,892) (348,053,051)

(4,724,464) (344,313,143)

Adjustments/Reclassified 2,033,984,995

118,234,993 455,645,281 148,426,648

Impairment charge (179,604,891)

(11,709,306) (192,614,198)

-

Depreciation charge (7,354,977,729)

(7,190,456,041)

(5,989,290,835)

(5,898,099,690)

Closing net book amount 60,005,337,178

61,816,021,927

46,121,627,946

49,979,486,650

Non-network equipment Opening net book amount 2,446,575,12

8 2,109,377,20

5 647,587,120 313,989,127 Additions 1,210,439,29

7 815,291,973 334,183,162 528,484,582

Acquisition of joint venture(Note 4)

2,669,541,822

- - -

Disposals (10,604,733) (11,280,230) (3,127,180) (4,171,469) Adjustments/Reclassified (1,774,896,8

20) (30,875,992) (211,214,07

3) (39,943,769)

Impairment charge (31,382,317) - - - Depreciation charge (482,350,15

0) (435,937,82

8) (155,682,53

9) (150,771,35

1) Closing net book amount 4,027,322,22

7 2,446,575,12

8 611,746,490 647,587,120 Total 64,032,659,4

05 64,262,597,0

55 46,733,374,4

36 50,627,073,7

70 Network equipment Borrowing costs of Baht 14.11 million (2000: nil) were capitalised as cost of assets during the year. A capitalisation rate of 6.57% (2000: nil) was used, representing the borrowing cost of the loan used to finance the project.


51

Network equipment in the consolidated financial statements at net book value of Baht 48,761.53 million, net of accumulated depreciation and allowances of Baht 34,465.44 million (2000: Baht 55,078.62 million, net of accumulated depreciation of Baht 28,033.27 million), was transferred to TOT under the concession agreement (Note 2). According to the agreement, the Company has the right to operate and maintain these assets over the concession periods. Borrowings are secured by the right to operate network equipment of the Company and the Group (Note 31). Non – network equipment Additions include Baht 734.08 million (2000: Baht 217.43 million) assets leased under finance leases (where the Group is the lessee). Leased assets included in the table on page 33, where the Group is a lessee under a finance lease of vehicles as follows: Consolidated 2001

Baht 2000 Baht

Cost - capitalised finance leases 951,515,626 217,427,552 Accumulated depreciation (87,738,968) (23,782,622) Net book amount 863,776,658 193,644,930 Borrowings are secured by buildings of non-network at the net book value of Baht 943.76 million (2000: Baht 1,007.02 million) (Note 18 and Note 31).

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7,83

2 64

,315

,267

8,

052,

251

38,7

81,0

74

(510

,830

,26

2,03

3,98

4,99

5

TE

LE

CO

MA

SIA

CO

RPO

RA

TIO

N P

UB

LIC

CO

MPA

NY

LIM

ITE

D

Not

es to

the

Con

solid

ated

and

Com

pany

Fin

anci

al S

tate

men

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2001

and

200

0

53

6)

Impa

irmen

t cha

rge

- (4

33,3

74)

(68,

885,

492)

-

- (1

10,2

86,0

2 5)

- (1

79,6

04,8

91)

Dep

reci

atio

n ch

arge

-

(96,

907,

682 )

(6,2

02,6

16,9

91)

(144

,576

,3 55)

(554

,501

,04 8)

(356

,375

,65 3)

- (7

,354

,977

,729

)

Clo

sing

net

boo

k am

ount

1,

867,

928,

070

1,41

3,20

4,8 25

51,1

12,7

38,9

22

575,

738,

05 4 2,

678,

137,

2 34

1,25

8,68

0,2 39

1,09

8,90

9,8 34

60,0

05,3

37,1

78

A

t 31

Dec

embe

r 20

01

Cos

t 1,

867,

928,

070

1,94

0,32

0,5 98

83,4

84,7

43,9

73

1,04

3,33

2,16

1 5,

260,

635,

8 55

3,56

7,88

0,6 75

1,09

8,90

9,8 34

98,2

63,7

51,1

66

Acc

umul

ated

dep

reci

atio

n -

(526

,682

,39 9)

(32,

290,

110,

25 3)

(467

,594

,1 07)

(2,4

27,7

98,6 21)

(2,1

98,9

14,4 11)

- (3

7,91

0,79

9,79 1)

A

llow

ance

-

(433

,374

) (8

1,89

4,79

8)

- (1

54,7

00,0

0 0)

(110

,286

,02 5)

- (3

47,3

14,1

97)

Net

boo

k am

ount

1,

867,

928,

070

1,41

3,20

4,8 25

51,1

12,7

38,9

22

575,

738,

05 4 2,

678,

137,

2 34

1,25

8,68

0,2 39

1,09

8,90

9,8 34

60,0

05,3

37,1

78

TE

LE

CO

MA

SIA

CO

RPO

RA

TIO

N P

UB

LIC

CO

MPA

NY

LIM

ITE

D

Not

es to

the

Con

solid

ated

and

Com

pany

Fin

anci

al S

tate

men

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2001

and

200

0

54

15.

Prop

erty

, pla

nt a

nd e

quip

men

t (C

ontin

ued)

C

onso

lidat

ed

N

on -

netw

ork

equi

pmen

t

Lan

d an

d L

and

Im

prov

eme

nt

B

uild

ing

&

Impr

ovem

ent

Furn

iture

, Fi

xtur

es

and

Equ

ipm

ent

Pow

er

Supp

ly &

C

ompu

ter

V

ehic

les

W

ork

in

Prog

ress

T

otal

At 3

1 D

ecem

ber

2000

Cos

t 20

6,39

1,16

7 1,

625,

929,

999

1,35

3,60

6,7 17

1,

006,

248,

5 51

615,

367,

981

132,

939,

204

4,94

0,48

3,61

9

Acc

umul

ated

dep

reci

atio

n (1

3,51

7,63

7)

(570

,933

,133

) (8

86,3

91,7

9 8)

(663

,089

,01 1)

(341

,934

,67 3)

- (2

,475

,866

,252

) A

llow

ance

-

(4,5

05,3

81)

(12,

519,

175 )

- (1

,017

,683

) -

(18,

042,

239)

Net

boo

k am

ount

19

2,87

3,53

0 1,

050,

491,

485

454,

695,

74 4 34

3,15

9,54 0

272,

415,

625

132,

939,

204

2,44

6,57

5,12

8 Y

ear

ende

d 31

Dec

embe

r 20

01

Ope

ning

net

boo

k am

ount

19

2,87

3,53

0 1,

050,

491,

485

454,

695,

74 4 34

3,15

9,54 0

272,

415,

625

132,

939,

204

2,44

6,57

5,12

8

Add

ition

s -

3,55

8,55

3 15

2,57

6,64 5

236,

912,

46 2 73

7,59

3,09

1 79

,798

,546

1,

210,

439,

297

Acq

uisi

tion

of jo

int v

entu

re (N

ote

4)

46,3

53,4

52

135,

110,

260

56,4

30,1

48

84,5

68,2

19

9,45

9,96

2 2,

337,

619,

7 81

2,66

9,54

1,82

2

Dis

posa

ls

- (1

,229

,762

) (2

,933

,864

) (9

41,6

19)

(5,4

99,4

88)

- (1

0,60

4,73

3)

Adj

ustm

ents

/Rec

lass

ified

1,

568,

517

21,5

08,2

03

44,9

06,4

05

(71,

464,

521 )

- (1

,771

,415

,4 24)

(1,7

74,8

96,8

20)

Impa

irmen

t cha

rge

(3,7

00,0

00)

- -

- 1,

017,

683

(28,

700,

000 )

(31,

382,

317)

Dep

reci

atio

n ch

arge

(7

32,6

04)

(94,

635,

129)

(1

42,8

28,7

1(9

8,67

1,86

5(1

45,4

81,8

4-

(482

,350

,150

)

TE

LE

CO

MA

SIA

CO

RPO

RA

TIO

N P

UB

LIC

CO

MPA

NY

LIM

ITE

D

Not

es to

the

Con

solid

ated

and

Com

pany

Fin

anci

al S

tate

men

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2001

and

200

0

55

1)

) 1)

Clo

sing

net

boo

k am

ount

23

6,36

2,89

5 1,

114,

803,

610

562,

846,

36 7 49

3,56

2,21 6

869,

505,

032

750,

242,

107

4,02

7,32

2,22

7

At 3

1 D

ecem

ber

2001

Cos

t 24

5,21

1,58

1 1,

788,

089,

143

1,57

5,41

6,4 97

1,

007,

450,

0 18

1,15

4,22

7,7 34

778,

942,

107

6,54

9,33

7,08

0

Acc

umul

ated

dep

reci

atio

n (5

,148

,686

) (6

68,7

80,1

53)

(1,0

00,0

50,

955)

(5

13,8

87,8

0 2)

(284

,722

,70 2)

- (2

,472

,590

,298

)

Allo

wan

ce

(3,7

00,0

00)

(4,5

05,3

80)

(12,

519,

175 )

- -

(28,

700,

000 )

(49,

424,

555)

Net

boo

k am

ount

23

6,36

2,89

5 1,

114,

803,

610

562,

846,

36 7 49

3,56

2,21 6

869,

505,

032

750,

242,

107

4,02

7,32

2,22

7

TE

LE

CO

MA

SIA

CO

RPO

RA

TIO

N P

UB

LIC

CO

MPA

NY

LIM

ITE

D

Not

es to

the

Con

solid

ated

and

Com

pany

Fin

anci

al S

tate

men

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2001

and

200

0

56

15

. Pr

oper

ty, p

lant

and

equ

ipm

ent (

Con

tinue

d)

Com

pany

Net

wor

k eq

uipm

ent

L

and

&

Lan

d Im

prov

emen

t

B

uild

ing

&

Impr

ovem

ent

Tel

epho

ne

Net

wor

k

Equ

ipm

ent

Pu

blic

Ph

one

Pow

er

Supp

ly a

nd

Com

pute

r

W

ork

in

Prog

ress

T

otal

At 3

1 D

ecem

ber

2000

Cos

t 1,

867,

629,

31 6 1,

938,

640,

5 15

69,4

16,0

59,8 56

97

6,04

7,84

8 3,

528,

798,

1 89

238,

721,

79 8 77

,965

,897

,5 22

Acc

umul

ated

dep

reci

atio

n -

(429

,774

,7 17)

(25,

393,

176,

707

) (3

21,2

22,1

02)

(1,8

42,2

37,

346)

-

(27,

986,

410,

872

)

Net

boo

k am

ount

1,

867,

629,

31 6 1,

508,

865,

7 98

44,0

22,8

83,1 49

65

4,82

5,74

6 1,

686,

560,

8 43

238,

721,

79 8 49

,979

,486

,6 50

Yea

r en

ded

31 D

ecem

ber

2001

Ope

ning

net

boo

k am

ount

1,

867,

629,

31 6 1,

508,

865,

7 98

44,0

22,8

83,1 49

65

4,82

5,74

6 1,

686,

560,

8 43

238,

721,

79 8 49

,979

,486

,6 50

Add

ition

s -

- 49

7,06

5,50

9 5,

041,

700

- 1,

371,

018,

3 03

1,87

3,12

5,51 2

Dis

posa

ls

- -

(856

,159

) (3

,868

,305

) -

- (4

,724

,464

) A

djus

tmen

ts/R

ecla

ssifi

ed

298,

754

1,68

0,08

3 86

1,40

0,36

8 64

,315

,267

38

,781

,074

(5

10,8

30,2

6 5)

455,

645,

281

Impa

irmen

t cha

rge

- (4

33,3

74)

(81,

894,

798)

-

(110

,286

,02 6)

- (1

92,6

14,1

98)

Dep

reci

atio

n ch

arge

-

(96,

907,

68 2)

(5,3

91,4

31,1

4 6)

(144

,576

,355

) (3

56,3

75,6

5 2)

- (5

,989

,290

,83 5)

Clo

sing

net

boo

k am

ount

1,

867,

928,

071,

413,

204,

839

,907

,166

,957

5,73

8,05

3 1,

258,

680,

21,

098,

909,

846

,121

,627

,9

TE

LE

CO

MA

SIA

CO

RPO

RA

TIO

N P

UB

LIC

CO

MPA

NY

LIM

ITE

D

Not

es to

the

Con

solid

ated

and

Com

pany

Fin

anci

al S

tate

men

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2001

and

200

0

57

0 25

23

39

36

46

At 3

1 D

ecem

ber

2001

Cos

t 1,

867,

928,

07 0 1,

940,

320,

5 99

70,7

22,9

20,1 49

1,

043,

332,

16 1 3,

567,

880,

6 75

1,09

8,90

9,8 36

80,2

41,2

91,4 90

A

ccum

ulat

ed d

epre

ciat

ion

- (5

26,6

82,4 00)

(30,

733,

858,

428

) (4

67,5

94,1

08)

(2,1

98,9

14,

410)

-

(33,

927,

049,

346

) A

llow

ance

-

(433

,374

) (8

1,89

4,79

8)

- (1

10,2

86,0

2 6)

- (1

92,6

14,1

98)

Net

boo

k am

ount

1,

867,

928,

07 0 1,

413,

204,

8 25

39,9

07,1

66,9 23

57

5,73

8,05

3 1,

258,

680,

2 39

1,09

8,90

9,8 36

46,1

21,6

27,9 46

TE

LE

CO

MA

SIA

CO

RPO

RA

TIO

N P

UB

LIC

CO

MPA

NY

LIM

ITE

D

Not

es to

the

Con

solid

ated

and

Com

pany

Fin

anci

al S

tate

men

ts

For

the

year

s end

ed 3

1 D

ecem

ber

2001

and

200

0

58

15.

Prop

erty

, pla

nt a

nd e

quip

men

t (C

ontin

ued)

C

ompa

ny

Non

- ne

twor

k eq

uipm

ent

L

ease

hold

and

Im

prov

emen

t

Furn

iture

, Fi

xtur

es a

nd

Equ

ipm

ent

Pow

er

Supp

ly &

C

ompu

ter

W

ork

in

Prog

ress

T

otal

At 3

1 D

ecem

ber

2000

Cos

t 56

,524

,562

40

1,34

6,55

4 1,

006,

248,

551

132,

939,

204

1,59

7,05

8,87 1

Acc

umul

ated

dep

reci

atio

n (3

0,61

6,19

9)

(255

,766

,541

) (6

63,0

89,0

11)

- (9

49,4

71,7

51)

Net

boo

k am

ount

25

,908

,363

14

5,58

0,01

3 34

3,15

9,54

0 13

2,93

9,20

4 64

7,58

7,12

0 Y

ear

ende

d 31

Dec

embe

r 20

01

Ope

ning

net

boo

k am

ount

25

,908

,363

14

5,58

0,01

3 34

3,15

9,54

0 13

2,93

9,20

4 64

7,58

7,12

0 A

dditi

ons

229,

824

60,6

26,6

51

198,

335,

480

74,9

91,2

07

334,

183,

162

Dis

posa

ls

(6)

(2,1

85,5

55)

(941

,619

) -

(3,1

27,1

80)

Adj

ustm

ents

/Rec

lass

ified

15

,332

,357

12

,048

,907

(7

1,46

4,52

1)

(167

,130

,816

) (2

11,2

14,0

73)

Dep

reci

atio

n ch

arge

(1

3,67

0,82

0)

(47,

900,

247)

(9

4,11

1,47

2)

- (1

55,6

82,5

39)

Clo

sing

net

boo

k am

ount

27

,799

,718

16

8,16

9,76

9 37

4,97

7,40

8 40

,799

,595

61

1,74

6,49

0

At 3

1 D

ecem

ber

2001

Cos

t 69

,854

,668

45

1,94

9,71

5 87

3,66

1,88

5 40

,799

,595

1,

436,

265,

86 3 A

ccum

ulat

ed d

epre

ciat

ion

(42,

054,

950)

(2

83,7

79,9

46)

(498

,684

,477

) -

(824

,519

,373

)

Net

boo

k am

ount

27

,799

,718

16

8,16

9,76

9 37

4,97

7,40

8 40

,799

,595

61

1,74

6,49

0


60

16. Intangible assets

Consolidated

Trademar

k

Computer software

Right to operate NON-POTS

Right to hang

Dropwire

Total

Baht Baht Baht Baht Baht At 31 December 2000 Cost

- - 381,489,00

0 227,325,0

00 608,814,0

00 Accumulated amortisation

- - (61,038,24

0) (34,856,5

00) (95,894,7

40) Net book amount

- - 320,450,76

0 192,468,5

00 512,919,2

60 Year ended 31 December 2001 Opening net book amount

- - 320,450,76

0 192,468,5

00 512,919,2

60 Additions

- 33,881,54

9 - - 33,881,54

9 Acquisition of joint venture (Note 4)

113,938,878 - - -

113,938,878

Adjustment/Reclassified -

222,510,158 - -

222,510,158

Impairment charge -

(9,000,000) - -

(9,000,000)

Amortisation charge (1,013,392)

(40,769,131)

(19,074,450)

(9,093,000)

(69,949,973)

Closing net book amount 112,925,486

206,622,576

301,376,310

183,375,500

804,299,872

At 31 December 2001 Cost 121,159,3

77 503,790,0

47 381,489,00

0 227,325,0

00 1,233,763,

424 Accumulated amortisation (8,233,891

) (288,167,4

71) (80,112,69

0) (43,949,5

00) (420,463,

552) Allowance

- (9,000,000

) - - (9,000,00

0) Net book amount 112,925,4

86 206,622,5

76 301,376,31

0 183,375,5

00 804,299,8

72 The Company reclassified the net book value of computer software as at 31 December 2000 amounting to Baht 222,510,158 from property, plant and equipment to intangible assets in 2001 in accordance with International Accounting Standard No. 38, “Intangible Assets”.


61

Trademark represents the consideration paid by a joint venture to use another venturer's trademark in Thailand for the period from September 2000 to December 2020 or the expiration, termination or cancellation of the concession agreement which is earlier. The right to operate NON-POTS represents the fair value of TOT's interest in the nationwide NON-POTS concession for which Asia Multimedia Co., Ltd. (“AM”) issued 18.5 million ordinary shares in exchange for the concession. The right to hang dropwire represents the fair value of TOT's interest in the multimedia network which AM issued 40.0 million ordinary shares in exchange for this privilege. Company Computer

software Baht Year ended 31 December 2001 Opening net book amount - Additions 33,881,549 Adjustment/Reclassified 222,510,158 Impairment charge (9,000,000) Amortisation charge (40,769,131) Closing net book amount 206,622,576 At 31 December 2001 Cost 503,790,047 Accumulated amortisation (288,167,471) Allowance (9,000,000) Net book amount 206,622,576


62

17. Other non-current assets

Consolidated Company As at 31 December 2001

Baht 2000

Baht 2001

Baht 2000

Baht Subscribers acquisition cost, net 841,746,064 - 733,951,538 - Value added tax pending receipt of tax invoices related to debt restructuring 287,984,062 322,787,370 287,984,062 322,787,370 Prepaid withholding tax 237,305,437 188,683,035 - - Deposits 68,506,688 45,463,811 29,374,251 30,054,218 Others 17,280,195 1,226,128 - -

Total 1,452,822,446 558,160,344 1,051,309,8

51 352,841,588

Subscribers acquisition cost is the cost of PCT handsets distributed to subscribers free of charges under the 3-year usage contract campaign. Subscribers acquisition cost is amortised over the contract period. The amortisation for the year in the consolidation and the Company financial statements are Baht 58.01 million and Baht 54.94 million, respectively.

18. Borrowings

The borrowings are mainly denominated in Thai Baht, United States Dollars and Japanese Yen.

Consolidated Company As at 31 December 2001

Baht 2000

Baht 2001 Baht

2000 Baht

Current - Bank overdrafts - 152,525 - - - Bank and finance institution borrowings

2,982,358,693

1,735,017,300

1,170,657,842 -

- Finance leases 231,933,730 47,308,586 - - Total Current 3,214,292,42

3 1,782,478,411

1,170,657,842 -

Non-Current - Bank and finance institution borrowings

53,780,559,596

55,025,092,412

50,974,248,343

52,126,705,591

- Finance leases 400,071,152 143,371,296 - -

- Supplier Credit 7,763,551,73

7 8,651,176,72

2 7,763,551,73

7 8,651,176,72

2 Total Non-Current 61,944,182,4

85 63,819,640,430

58,737,800,080 60,777,882,3

13

Total Borrowings 65,158,474,908 65,602,118,8

41 59,908,457,9

22 60,777,882,313


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The movements in borrowings can be analysed as follows: Year ended 31 December 2001 Consolidated

Baht Company

Baht Opening amount, net 65,602,118,841 60,777,882,313 Additional borrowings

- principal 5,265,404,643 5,000,000,000 - non cash finance leases 666,887,097 - - interest 48,856,924 48,856,924

Acquisition of joint venture 28,955,635 - Repayment of borrowings (6,527,349,456) (5,904,718,926) Currency translation (31,794,115) (44,403,570) Reclassify 74,554,158 - Amortised debt issuance cost 30,841,181 30,841,181 Closing amount, net 65,158,474,908 59,908,457,922 The borrowing amounts are net of unamortised debt issuance costs, amounting to Baht 145.84 million.


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18. Borrowings (Continued)

Secured borrowings: The borrowings include secured liabilities (leases and bank and finance institution borrowings) in total amount of Baht 57.39 billion (2000: Baht 56.95 billion) and Baht 52.14 billion (2000: Baht 52.13 billion) for the consolidated and the Company financial statements, respectively. The bank borrowings are secured over certain available-for-sale securities, shares of subsidiaries and associates, network property and equipment, land and building of the Group (as mentioned in Note 31.6). Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. Bank and finance institution borrowings under current and non-current liabilities included the secured loans amounting to Baht 18.63 billion (2000: Baht 21.66 billion) from Kreditanstalt fuer Wiederaufbau (KfW) which as at March 2000 became a related party (Note 10). On 12 February 2001, K.I.N. (Thailand) Co., Ltd. (“K.I.N.”), registered under the laws of the British Virgin Island, a subsidiary of Telecom Holding Company Limited, entered into the Terms and Conditions for Private SAILS (Shared Appreciation Income Linked Securities) (“SAILS”) and SAILS Pledge Agreement with Credit Suisse First Boston International (“CSFBI”) for a second tranche of the SAILS transaction in relation to up to 1,000,000 common shares of FLAG. In actuality, only 685,000 common shares of FLAG were monetised in total in the second tranche. The principal provisions include, among others, the followings: 1. K.I.N. agreed to deposit in a Collateral Account with CSFBI up to 1,000,000 common

shares of FLAG, registered in the name of CSFBI, in exchange for the proceeds of 79% of the aggregate contract price, less 2% of the front end as stipulated in the contracts. The partial proceeds amount of US Dollars 1,000,000 was derived by K.I.N. on 20 February, 2001 and the remainder of the proceeds from the monetisation of the 685,000 common shares of FLAG was paid to K.I.N. on the closing date; and

2. K.I.N. agreed to assign and pledge up to 1,000,000 common shares of FLAG to CSFBI and grant to CSFBI all of its rights, title and interest to such common shares including income, proceeds and collection received or to be received on the date the shares were delivered to the Custodian or anytime thereafter.

On 26 March 2001, K.I.N. entered into two additional contracts for the second tranche of the SAILS program with CSFBI, namely the SAILS Mandatorily Exchangeable Securities Contract and the Amended and Restated Pledge Agreement. The principal provisions include, among others, the followings: 1. The Pledged Shares can be further pledged; 2. Unless K.I.N. has elected to exercise its Cash Settlement Option, K.I.N. shall on the

maturity date deliver to CSFBI 685,000 common shares in FLAG Telecom Holdings Limited. If K.I.N. fails to deliver the said shares, then delivery shall be effected by delivery of the pledged shares to CSFBI from the Collateral Account;


65

3. In the event K.I.N. exercises its Cash Settlement Opinion, it must deliver to CSFBI the Cash Settlement Amount in accordance with the provisions in the agreement on the maturity date. Therefore, the pledge over the said shares in favor of CSFBI would be released; and

4. K.I.N has the right, in 3 years time, to receive a percentage of the proceeds from any appreciation in the price of the FLAG shares. If at the end of the 3-year period the price of the FLAG shares appreciates up to 120% of the initial sale price, then K.I.N will receive 100% of this gain. If the price of the shares appreciates beyond 120%, then K.I.N will receive an additional 16.67% of the gain over 120%.


66


Refinancing: New Baht Agreement On 13 December 2001 the Company entered into the New Baht Agreement (“Agreement”) with four major local commercial banks providing a term loan facility of Baht 5.00 billion. The new facility will bear interest rate at MLR+0.75% per annum. The proceeds of the term loan will be used to prepay pro rata each Repayment Installment of the dollar-denominated Secured Indebtedness outstanding under the US Dollar Amendment Agreement. The repayment amounts to each repayment date are set forth in the Agreement starting from 30 June 2002 to 15 December 2008. On 27 December 2001 the total of Baht 5.00 billion under the Agreement was drawndown and used to prepay US dollar denominated debt in the amount of US dollar 112.87 million. Baht debentures On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company, the shareholders approved the Company to issue and offer to sell various types of debentures domestically to the public and/or institutional investors in whole or in part which could be single or multiple offering in order to repay existing debt. The debentures will be issued in Thai Baht, within the principal amount of not over Baht 36,000 million, or equivalent, in any other foreign currencies. The type of debentures issued will be amortisation or bullet payment, secured or unsecured debentures, which suit prevailing market conditions at interest rate, subject to the prevailing market conditions at the time of the issue and offering. The said debentures will not mature over in excess of 20 years. The completion of the above transaction is also subject to approval from relevant creditors of the Company, and the satisfaction of certain other conditions precedent. Presently, the Company is in the process of requesting consent from its Creditors. Currency Swap: On 7 September 2001, the Company entered into the Payment and Indemnity Agreement (the “Agreement”) with Kreditanstalt fuer Wiederaufbau (“KfW”), a secured lender, to reduce its exposure to currency exchange rate fluctuation. The principal provisions include, among others, the followings: 1. The Company will pay a fixed amount in Thai Baht to KfW on each relevant

repayment date from 30 June 2002 onwards as specified in the Schedule to the Agreement for the total amount of approximately Baht 4,483.48 million, equalling to US Dollars 96.65 million (out of total loans of Baht 18.63 billion). This arrangement will make the Company to satisfy the corresponding portion of its payment obligation in United States Dollars under the US Dollar Amendment Agreement.


67

2. The Company will reimburse and indemnify KfW for the costs, expenses and losses incurred by KfW in connection with the Agreement, the Swap Agreement between KfW and the counterparty and other relevant agreements as stipulated in the Agreement.

The Company recorded the said portion of loans in the balance sheet in Thai Baht as a result of the binding of the agreements. The expenses incurred in this arrangement were charged to statements of income. No further loss is anticipated. Reschedule of borrowings: Telecom Holding Company Limited (“Telecom Holding”), a subsidiary of the Company requested consent from its local commercial banks (“Creditors”) to extend the deadline for repayment of the remainder of the 60% of its total Outstanding Debts, amounting to Baht 1.17 billion pursuant to the Debt Restructuring Agreement, from 30 December 2000 to 30 December 2001. Subsequently, the Creditors consented to reschedule the amount due and payable by Telecom Holding to 30 December 2001.


68


In December 2001, Telecom Holding has commenced the process of negotiating with its Creditors to extend the deadline for repayment of the remaining amount of the rescheduled 60% (Baht 1.17 billion) plus the 5% (Baht 155.8 million) of the total Outstanding Debts from 30 December 2001 to 30 December 2002. At 31 December 2001 negotiations with the creditors were ongoing, and the debt of Baht 1.17 billion is included in current borrowings. On 12 December 2001, a subsidiary of Telecom Holding (“Assignee”) entered into the Assignment Agreement (“Agreement”) with a certain mutual fund, acting on behalf of certain finance and securities companies (“Assignor”) to purchase the debt of Telecom Holding at the Transfer Price as stipulated under the Agreement. The principal provisions include, among other, the following: 1. A Assignee shall pay the Transfer Price to the Assignor in six installments in the

respective amounts set forth in the Agreement starting 17 December 2001 to 15 may 2002.

2. The Assignor has agreed to transfer to the Assignee all the Assignor’s rights, title,

benefits, interest in and obligations to and under the Original Loan Agreement on and with effect from the Closing Date defined at the date on which the Assignee has satisfied its obligation to pay the installment payments.

On 17 December 2001, Assignee paid the first installment to Assignor amounting to Baht 216.81 million. The interest rate exposure of the borrowings of the Group is as follows: Consolidated Company 2001 2000 2001 2000 Total borrowings: Baht Baht Baht Baht

- at fixed rates 9,365,633,96

0 9,439,102,50

5 7,763,551,73

7 8,651,176,72

2

- at floating rates 55,792,840,9

48 56,163,016,3

36 52,144,906,1

85 52,126,705,5

91 65,158,474,9

08 65,602,118,8

41 59,908,457,9

22 60,777,882,3

13 Consolidated Company 2001 2000 2001 2000 Weighted average

effective interest rates: - bank overdrafts 8.59% 9.05% 8.59% 9.05% - bank and finance institution

borrowings 5.94%

8.31% 5.70% 8.24% - lease liabilities 9.10% 10.78% - - - supplier credit 1.00% 1.00% 1.00% 1.00%


69

The carrying amounts and fair values of certain non-current borrowings (excluding finance lease liabilities) of the Group are as follows: Carrying amounts Fair values 2001 2000 2001 2000 Baht Baht Baht Baht

Non-current bank borrowings

35,087,387,0

04

33,369,125,1

41 35,705,654,2

15 34,100,466,6

89

Loan from a related company (Note 10)

18,693,172,5

92

21,655,967,2

71 18,895,679,4

76 21,521,554,5

62

Supplier credit 7,763,551,73

7 8,651,176,72

2 7,102,289,55

0 7,950,739,96

2 The fair values are based on discounted cash flows using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at the balance sheet date. The carrying amounts of current borrowings and lease obligations approximate to their fair value.


70


Maturity of non-current borrowings (excluding finance lease liabilities): Consolidated Company 2001 2000 2001 2000 Baht Baht Baht Baht

Between 1 and 2 years 3,915,836,85

2 1,483,026,11

0 3,320,282,39

4 973,990,880

Between 2 and 5 years 25,414,166,8

30 18,464,007,0

42 23,586,010,0

35 17,103,208,2

96

Over 5 years 32,214,107,6

51 43,729,235,9

82 31,831,507,6

51 42,700,683,1

37

61,544,111,3

33 63,676,269,1

34 58,737,800,0

80 60,777,882,3

13 Finance lease liabilities-minimum lease payments Consolidated 2001 2000 Baht Baht Not later than 1 year 265,177,858 66,017,154 Later than 1 year and not later than 5 years 361,795,037 157,730,502 626,972,895 223,747,656 Future finance charges on finance leases 5,031,983 (33,067,774) Present value of finance lease liabilities 632,004,878 190,679,882 Representing lease liabilities: - current 231,933,726 47,308,586 - non-current 400,071,152 143,371,296 632,004,878 190,679,882 The present value of finance lease liabilities is as follows: Consolidated 2001 2000 Baht Baht Not later than 1 year 231,933,726 47,308,586 Later than 1 year and not later than 5 years 400,071,152 143,371,296 632,004,878 190,679,882

Facilities: The Group has the following undrawn committed borrowing facilities: Consolidated Company 2001 2000 2001 2000 Baht Baht Baht Baht Floating rate


71

- expiring within one year - - - -

- expiring beyond one year 120,000,000 5,120,000,0

00 120,000,000 5,120,000,00

0 Fixed rate - expiring within one year - - - - - expiring beyond one year - - - -

120,000,000 5,120,000,0

00 120,000,000 5,120,000,00

0


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19. Accrued expenses Included in accrued expenses at 31 December 2001 is an amount of Baht 446.48 million (2000: 227.96 million) related to long distance circuit and conduit rental as described below. Previously, the Company has been in dispute with TOT on the tariff basis and methodology for computing rental charges for leased circuit and conduits. The Company claimed that the rental as charged by TOT was not in compliance with a condition under the joint agreement with TOT, which allows TOT to charge the Company a reasonable and fair rental, considering that the Company is a joint partner with TOT.

In November 2000, the Board of TOT approved tariffs for leased circuit and conduit rentals for the Company with such tariffs becoming effective as of the date of network utilisation by the Company. As a result, the amount booked for the leased circuit and conduit rentals by the Company since 1992 was reduced by Baht 685.21 million, with the reduction recognised in the 2000 financial statements as a change in accounting estimation in accordance with TAS 39, Net Profit, or Loss for the Period, Fundamental Errors and Accounting Changes. The details of the amount of leased circuits and conduit rentals correctly recorded by the Company up to year ended 2000 and the amount of adjustment up to 31 December 1999 resulting from such tariff changes was as follows: Financial information for the year ended 31 December 2000

Amount recorded after adjustment

Amount Over

recorded 1992-1999 2000 1992-1999 Baht million Baht million Baht

million Leased circuit – direct route 501.49 145.92 337.88 Leased circuit – mixed traffic 412.61 66.95 138.52 Conduit rental 1,249.66 208.79 208.81 Total 2,163.76 421.66 685.21

During 2001, the Board of TOT reconsidered and reapproved an increase in the tariffs of conduit rental from the previous approval given in November 2000. As a result, the amount recognised for conduit rental by the Company for the period 1992 - 2000 increased by Baht 156.88 million with the increase recognised in the 2001 financial statements as a change in accounting estimation in accordance with TAS 39, Net Profit, and Loss for the Period, Fundamental Errors and Accounting Changes. The details of amount adjusted up to 31 December 2001 are as follows:


73

Amount recorded

Amount recorded

after adjustment

Amount under

recorded

1992-2000 1992-2000 1992-2000 Baht million Baht million Baht million Conduit rental 1,458.45 1,615.33 156.88


74

20. Other current liabilities Consolidated Company As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Other payable 1,383,910,5

61 956,689,056 1,093,943,91

3 904,400,260 Output VAT pending tax invoice 231,377,049 246,276,731 176,577,602 177,693,375 Unearned income 227,978,608 204,097,289 166,339,153 186,157,643 Others 300,704,243 112,484,049 158,119,151 85,454,964 Total 2,143,970,4

61 1,519,547,1

25 1,594,979,81

9 1,353,706,24

2 21. Long-term trade accounts payable

This account represents trade accounts payable pertaining to the supply and installation of PCT project. On 5 November 1999, three subsidiaries (consisting of Telecom Holding Co., Ltd. (TH), Tele Engineering and Services Co., Ltd. (TE), and Asia Wireless Communication Co., Ltd. (AWC), operator of the Personal Communication Telephone System and obligor under debt restructuring agreements) entered into debt restructuring agreements with certain local and foreign creditors. As a result of this debt restructuring, there were no changes in the carrying amount of the debt payable at the time of the restructuring, since the total future cash payments exceed the carrying amount. The outstanding restructured trade accounts payable and terms of payment are as follows:

Consolidated

2001

2000

Foreign Currency

Baht

Foreign Currency

Baht

Interest rate Million Million Million Million Current (included in trade accounts payable)

Average MLR USD 0.63 28.10 USD 0.63 27.52 JLTPR + 0.5% & 2.0% JPY 407.45 138.15 JPY 407.45 154.85 Average MLR Baht 10.48 10.48 Baht 10.48 10.48 176.73 192.85 Non-Current Average MLR USD 23.92 1,060.90 USD 24.55 1,066.41 JLTPR + 0.5% & 2.0% JPY

19,167.82 6,499.22 JPY

19,575.27 7,439.51


75

Average MLR Baht 739.31 739.31 Baht 749.79 749.79 8,299.43 9,255.71 Total 8,476.16 9,448.56

Under the provisions of the debt restructuring the subsidiaries have commitments in respect of payment of the above principal and interest at the amounts per payment, interest rates and terms stipulated in the related agreements, covering the periods starting from November 1999 to August 2014. Moreover, the subsidiaries have to pledge certain assets (Note 31.6) as specified in the agreements to the related contracted creditors as collateral. Furthermore, the debt restructuring agreements set forth certain conditions and restrictions with which these subsidiaries, as contracted parties, are required to comply. Movement of long-term trade accounts payable can be analysed as follows: Year ended 31 December 2001 Consolidate

d Baht

Million Opening amount 9,448.56 Repayment (189.58) Currency translation (782.82) Closing amount 8,476.16


76

21. Long-term trade accounts payable (Continued) The interest rate exposure and fair values of debt under restructuring agreements as at 31 December are as follows: 2001 2000 Baht Million Baht Million Total debt under restructuring exposure

from interest rate – borrowing at floating rates

8,860.75 9,893.17 Weighted average effective interest rates - Denominated in Japan Yen 3.16% 3.24% - Denominated in U.S. Dollars 7.08% 7.85% - Denominated in Thai Baht 7.08% 7.85% Fair values of non-current restructuring debts - Denominated in Japan Yen 7,033.37 7,729.24 - Denominated in U.S. Dollars 1,042.98 1,100.35 - Denominated in Thai Baht 717.28 764.88 8,793.63 9,594.47 The fair values of restructuring debts are based on discounted cash flows using a discount rate based upon the borrowing rate which the directors expect would be available to the Group at the balance sheet date.

22. Other non-current liabilities


As at 31 December 2001 2000 2001 2000 Baht Baht Baht Baht Valued added tax pending receipt of tax invoices related to debt restructuring 287,984,062 322,787,370 287,984,062 322,787,370 Withholding tax related to debt restructuring 226,138,677 253,467,877 226,138,677 253,467,877 Other payable 220,503,235 - - - Deposit received from customers 5,434,422 4,386,032 - - Total 740,060,396 580,641,279 514,122,739 576,255,247

23. Share capital, premium and discount on share capital


77

Number

of Shares

Common Shares Baht

Preferred

Shares Baht

Share Premium (Discount)

Total

Million Million Million Baht Million

Baht Million

At 31 December 2000 2,925 22,230 7,020 9,934 39,184 - Issue of shares - acquisition

(Note 4) 308 3,075 - (317) 2,758 At 31 December 2001 3,233 25,305 7,020 9,617 41,942 The total authorised number of shares is 3,390.65 million shares (2000: 2,983.15 million shares) with a par value of Baht 10 per share (2000: Baht 10 per share). All issued shares are fully paid. The unissued shares totaling of 158 million will be issued as follows: - To directors and senior executives under Stock Option Plan of year 2000 58 million shares - To concerned parties in consideration of additional interest in joint venture (Note 4)


78

23. Share capital, premium and discount on share capital (Continued)

Preferred shares The preferred shares of the Company shall confer the following rights on the holders thereof: Dividends : Dividends for the first eight years are set at the rate of 10% p.a.,

cumulative plus the dividend payable to the holders of common shares, if any, and thereafter at the rate of 0.1% p.a. non-cumulative plus the dividend payable to the holders of common shares, if any. As at 31 December 2001, the undeclared cumulative dividends was Baht 1,231.38 million (2000 : Baht 529.38 million).

Liquidation : Upon liquidation or dissolution of the Company, any amount remaining

after payment of preference shares, all amounts payable in respect of indebtedness and other obligations of the Company shall be divided among the holders of the preferred shares pro rata to the number of the preferred shares held by each holder and paid in equal amount per share to such holders of the preferred shares in priority to the holders of the common shares.

Redemption : The preferred shares shall not be redeemable by the Company. Conversion : The preferred shares have a conversion right to common shares at ratio of

1:1 during any period from the 2nd to the 8th anniversary of the issuance of the preferred shares. To the extent that the preferred shareholders have not exercised, their conversion right will expire.

Voting rights : Each preferred share shall carry the right to one vote at any

meeting of the shareholders of the Company.

On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company, the shareholders approved an increase of authorised share capital from 2,281,150,000 common shares with a par value of Baht 10 per share and 702,000,000 preferred shares with a par value of Baht 10 per share to 2,688,649,978 common shares with a par value of Baht 10 per share and 702,000,000 preferred shares with a par value of Baht 10 per share, in consideration for Bangkok Inter Teletech Co., Ltd. (“BITCO”) shares acquired by the Company. The allotment of additional 407,499,978 authorised shares capital are as follows: a. of the 307,499,978 ordinary shares to be issued to Charoen Pokphand Group Co., Ltd.

and N.T.K. Technology Co., Ltd. (previously known as Chanloe Co., Ltd.) (“CP Group”); and

b. of the 100,000,000 ordinary shares to be reserved as the allocation for the exercise of

the equity warrants to be issued.


79

The ordinary shares issued in exchange of ordinary shares of BITCO were issued at a discount amounting to Baht 316,639,974 (Note 4). The Company registered the increase of the 3,390,649,978 authorised and the 3,232,499,978 paid-up share capital with the Ministry of Commerce on 17 September 2001 and 6 November 2001, respectively. Stock options a. The Company’s Stock Option Plan of year 2000 (the “Plan”) is open to senior

executives and directors of the Company. Under the terms of the Plan, non-transferable warrants of 58,150,000 shares will be issued to these senior executives and directors within the three year periods commencing 27 April 2000, divided into two types of option: amounting to 39.60 million units with an exercise price of Baht 30.00 (“Type 1”) and amounting to 18.55 million units with an exercise price of Baht 51.55 (“Type 2”).

Stock option rights issued for both Type 1 and Type 2 will be expired on 9 June 2010. Stock options which have not been exercised are subject to cancellation upon expiration or termination of employment. None of the eligible stock options have been exercised as at 31 December 2001.

b. On 28 June 2001, at the Extraordinary Shareholders’ Meeting 1/2001 of the Company,

the shareholders approved the issuance of 100,000,000 equity warrants to CP Group as a portion of consideration for the BITCO shares acquired by the Company. Each equity warrant is exercisable into one fully paid-up ordinary share of the Company within a period of no earlier than 6 months, and no later than 2 years from the date of completion of the Transaction at the exercise price of Baht 32 per share.

Equity warrants issued to CP Group will be expired on 31 October 2003.


80

23. Share capital, premium and discount on share capital (Continued)

Movements in the number of stock options outstanding are as follows: 2001

In thousand 2000

In thousand At beginning of year 58,150 - Granted 100,000 58,150 Exercised - - Lapsed - - At end of year 158,150 58,150 A compensation cost is not recognised in these financial statements for the fair value or the intrinsic value of share options granted.

Stock options outstanding at the end of the year have the following terms: Expiry date

Exercise price Baht

2001 In thousand

2000 In

thousand 31 October 2003 32.00 100,000 - 30 June 2010 30.00 39,600 39,600 31 December 2010 51.55 18,550 18,550 158,150 58,150

24. Legal reserve

The legal reserve of the Company was established in accordance with the provisions of the Public Company Limited Act B.E. 2535, which requires the appropriation as legal reserve of at least 5% of net income for the year until the reserve reaches 10% of the authorised share capital. This reserve is not available for dividend distribution.


81

25. Segment information Primary reporting format - business segments

Baht : Million

For the year ended 31 December 2001 Wirelin

e DDN Wireles

s Multimed

ia Interne

t Other Group

Revenues 15,618 503 3,072 894 154 395 20,636 Segment result 4,866 238 441 82 75 9 5,711 Unallocated costs (4,809) Operating profit 902 Finance cost (3,721) Share of associates (601) Other income and other non operating expenses

20

Loss before tax (3,400) Income tax (69) Loss before minority interests

(3,469)

Minority interests 44 Net loss for the year (3,425) Segment assets 48,291 1,245 18,982 4,069 68 3,059 75,714 Associates 5,581 Unallocated asset 5,177 Consolidated total assets 86,472 Segment liabilities 62,335 75 11,634 571 41 1,625 76,281 Unallocated liabilities 5,296 Consolidated total liabilities

81,577

Capital expenditure 1,450 545 4,573 158 6 748 7,480 Unallocated capital expenditure

246

Consolidated total capital expenditure

7,726

Depreciation and amortisation

(5,498) (120) (1,318) (595) (4) (288) (7,823)

Unallocated depreciation and amortisation

(181)

Consolidated total depreciation and amortisation

(8,004)


82


83

25. Consolidated business segment (Continued) Primary reporting format - business segments

Baht : Million

For the year ended 31 December 2000 Wirelin

e DDN Wireles

s Multimed

ia Internet Other Group

Revenues 14,732 342 3,034 881 95 304 19,388 Segment result 5,003 151 318 104 40 (36) 5,580 Unallocated costs (3,077) Operating profit 2,503 Finance cost (5,823) Share of associates (1,129) Other income and other non operating expenses

(174)

Loss before tax (4,623) Income tax (76) Loss from ordinary activities

(4,699)

Extraordinary item 1,378 Loss before minority interest

(3,321)

Minority interest 13 Net loss for the year (3,308) Segment assets 51,371 773 14,655 4,317 47 2,433 73,596 Associates 9,391 Unallocated asset 5,397 Consolidated total assets 88,384 Segment liabilities 62,870 43 10,110 663 41 1,253 74,980 Unallocated liabilities 4,777 Consolidated total liabilities

79,757

Capital expenditure 858 1 178 61 9 256 1,363 Unallocated capital expenditure

676

Consolidated total capital expenditure

2,039

Depreciation and amortisation

(5,458)

(67) (1,180) (575) (3) (245) (7,528)


84

Unallocated depreciation and amortisation

(180)

Consolidated total depreciation

and amortisation (7,708)


85

25. Consolidated business segment (Continued) The Group is organised into five main business segments: • Wireline - to install and provide services of 2.6 million fixed lines including public

telephone and related value added service;

• DDN - to provide a lease line connecting between two places in the form of voice, data and image;

• Wireless - to provide Personal Communication Telephone (PCT) and cellular

telephone services, sales of handsets and related accessories; • Multimedia - to provide multimedia services, NON-POTS and cable modem; and • Internet - to provide internet services, online-portal in name of Click TA.com and

corporate network and technology services. On 31 October 2001, the Group had acquired a joint venture, an operator of cellular telephone services (Note 4) and reports its operations under wireless segment. Other operations of the Group mainly comprise holding of investment and providing of vehicle and building rental services, neither of which are of a sufficient size to be reported separately. The sales transactions between business segments were eliminated. Unallocated costs represent corporate expenses. Segment assets consist of property, plant and equipment, intangible assets, inventories, receivables and operating cash, and excluding investments. Segment liabilities comprise operating liabilities and borrowings. Capital expenditure comprises additions to property, plant and equipment (Note 15) and intangible assets (Note 16), including additions resulting from acquisition through business combination (Note 15, Note 16 and Note 4). The Group is operating only in Thailand. Therefore, no geographical segments to report as secondary reporting format.

26. Cost of services Cost of services includes major operating and administrative expenses directly related to the provision of telephone and other services. Consolidated Company 31

December 31

December 31

December 31

December 2001 2000 2001 2000


86

Baht Million

Baht Million

Baht Million

Baht Million

Cost of services: Depreciation andamortisation

7,784.28 7,535.50 6,109.87 5,959.14

Revenue sharing 3,227.36 2,901.82 4,719.78 3,963.96 Network operating expenses 3,229.84 2,251.08 2,742.59 1,861.57

Total

14,241.48

12,688.40

13,572.24

11,784.67


87

27. Operating profit The following items have been included in arriving at operating profit: Consolidated Company For the year ended 31

December 2001 2000 2001 2000 Baht Baht Baht Baht Depreciation on property, plant

and equipment (Note 15) - owned assets 7,691,373,5

62 7,539,360,2

54 6,144,973,37

4 6,048,871,0

41 - owned assets (vehicles)

leased out under operating leases 81,997,971 63,250,993 - -

- leased assets under finance lease 63,956,346 23,782,622 - -

Impairment charge (Reverse) - Property, plant and equipment (Note 15) 210,987,208

(10,667,338) 192,614,198 -

- Intangible assets (Note 16) 9,000,000 - 9,000,000 - (Profit)/loss on disposal of

property, plant and equipment

(101,751,164) 307,845,209 7,619,003 347,711,160

Repairs and maintenance

expenditure on property, plant and equipment 877,910,200 995,596,534 801,275,628 932,705,197

Amortisation of intangible

assets (included in “selling and administration expenses and cost of services) (Note 16) 69,949,973 28,167,450 40,769,131 -

Operating lease rentals - building 98,294,563 151,426,184 388,041,577 378,404,280 - vehicle 40,419,464 14,634,686 152,357,093 129,708,688

Inventories - cost of inventories recognised

as expense (included in cost of sales) 684,642,472

1,119,159,026 309,325,616 141,243,863

- obsolescence 30,631,533 17,232,885 30,132,937 -


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Trade receivables - doubtful debts 166,698,861 132,742,049 130,625,657 106,328,637

Staff cost - Wages and salaries 2,083,134,6

71 1,866,802,1

02 1,452,214,19

5 1,313,560,2

03 - Social security cost 30,161,691 28,644,960 21,923,418 21,076,830 - Other benefits 100,608,171 75,815,650 93,620,794 63,928,235 The number of persons employed by the Group at the end of year are as follows: Consolidated Company 2001 2000 2001 2000

Full time 7,438 5,305 4,062 3,920 Part time 1,174 921 696 500 8,612 6,226 4,758 4,420


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28. Loss per share

Basic loss per share is calculated by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding during the years (2,274 and 2,223 million shares for the years ended 31 December 2001 and 2000, respectively). 2001

Baht Million 2000

Baht Million Net loss attributable to shareholder (3,425.13) (3,308.15) Cumulative dividend of preferred shares (702.00) (529.38) Net loss used to determine basic loss per share (4,127.13) (3,837.53) Weighted average number of ordinary shares in issue (million shares)

2,274 2,223

Basic loss per share (Baht per share) (1.81) (1.73) Diluted earnings (loss) per share for the year ended 31 December 2001 include the effect of 702,000,000 shares (2000: 702,000,000 shares) of convertible preferred share and 158,150,000 (2000: 58,150,000) stock options on an as-if-converted method, the results of their inclusion is antidilutive. Therefore, the basic loss per share and diluted loss per share are presented in the same amount. Supplementary earnings per share data excluding the extraordinary item (for this purpose the weighted average shares number is not changed). 2001

Baht Million 2000

Baht Million Net loss attributable to shareholder (3,425.13) (3,308.15) Cumulative dividend of preferred shares (702.00) (529.38) Extraordinary item (Note 5) - (1,378.05) Net loss used to determine basic loss per share (4,127.13) (5,215.58) Weighted average number of ordinary shares in issue (million shares)

2,274 2,223

Basic loss per share excluding extraordinary item (Baht per share)

(1.81) (2.35)


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29. Cash flows from operating activities

Reconciliation of loss before minority interest to cash flows from operating activities:

Consolidated Company 2001 2000 2001 2000 Baht Baht Baht Baht Loss before minority interest (3,469,417,5

59) (3,321,505,47

5) (3,425,126,88

2) (3,308,150,14

5) Add : Interest expense 4,718,426,95

6 5,676,505,756 3,718,396,991 4,624,588,093 Income tax 68,933,164 76,444,287 - - Profit before interest and tax 1,317,942,56

1 2,431,444,568 293,270,109 1,316,437,948 Adjustments for: Depreciation and amortisation 8,004,148,66

6 7,707,915,267 6,271,532,549 6,079,796,706 (Gain) loss on disposal of property, plant and equipment (101,751,164

) 307,845,209 7,619,003 347,711,160 Doubtful accounts 166,698,861 132,742,049 130,625,657 106,328,637 Loss (reverse) on impairment (Note 27) 192,804,209 (10,667,338) 201,614,198 - Loss on of inventories obsolescence 30,631,533 17,232,885 30,132,937 - Other operating assets and liabilities write-off (13,995,918) (6,098,908) - - Gain from sales of available-for-sale securities -

(2,472,154,845) - -

Loss from liquidation of other investments - 1,522,252 - - Unrealised (gain) loss on foreign exchange (944,939,754

) 2,526,566,189 (71,454,366) 4,779,238,526 Gain from debt restructuring (Note 5) -

(1,378,055,738) -

(1,378,055,738)

Gain from forgivingness (348,058) (26,528,236) (348,058) (26,528,236) Reverse accrued rental of

conduit and lease circuit (Note 19) - (685,203,383) - (685,203,383)

Share of loss (profit) in subsidiaries and associates

628,472,598 1,128,453,711 1,874,652,529 (2,107,068,60

9)


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Changes in operating assets and liabilities (excluding the effects of acquisition of joint venture) - Trade accounts receivable 140,066,853 (359,964,565) 130,858,609 (597,264,846) - Due from related parties (78,367,877) 82,488,741 (19,587,121) (1,727,710) - Inventories (1,499,311,2

82) (189,655,230) (1,399,950,62

3) (224,044,338) - Other current assets (590,371,410

) 571,893,605 (648,480,715) 190,386,954 - Other non-current assets (20,031,494) 35,117,471 (1,573,687) 6,754,965 - Trade accounts payable 405,073,571 (218,664,229) 281,712,483 297,987,750 - Due to related parties 119,290,315 16,656,252 (401,205,066) 612,269,083 - Accrued expenses and other current liabilities

1,535,614,647

(1,244,870,877) 369,035,051 (761,758,501)

- Other non-current liabilities (195,111) (10,867,212) - - Cash generated from operating activities 9,291,431,7

46 8,357,147,63

8 7,048,453,48

9 7,955,260,36

8 Less : Interest paid (4,481,730,

402) (4,840,729,7

21) (3,610,557,2

07) (4,121,555,4

98) Income tax paid (330,670,08

7) (287,782,807

) (155,971,13

3) (133,877,12

7) Net cash from operating

activities 4,479,031,2

57 3,228,635,11

0 3,281,925,14

9 3,699,827,74

3


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30. Financial instruments

i) Objective and significant terms and conditions

In order to manage the risks arising from fluctuations in currency exchange rates, the Company and its subsidiaries adopt the following foreign currency risk management practices: • Entering into forward foreign exchange contracts • Negotiating payment terms for foreign currency settlements on an individual transaction basis • Negotiating with foreign suppliers to share the foreign exchange exposure Transactions risk is calculated in each foreign currency and is projected six months forward. Exchange rates are monitored and forecasting information supplied by recognised research and financial analysis is used to estimate the future exchange rates. These are compared against premiums on forward exchange contracts, and after making adjustments for the related risk, a decision is taken on whether to cover foreign currency transactions.

Transactions, if hedged with forward exchange contracts, are not hedged on a net basis, but rather on a transaction by transaction basis.

At 31 December 2001 and 2000, the Company and its subsidiaries had outstanding foreign currency assets and liabilities as follows:

Consolidated Company 2001 2000 2001 2000 Currency

Million Currency Million

Currency Million

Currency Million

Assets US dollars 23.87 91.44 - - GBP 0.08 - - - Liabilities US dollars 601.37 814.11 547.73 770.49 Japanese Yen 43,230.84 43,619.05 22,896.67 22,763.50 GBP 2.75 - - - EUR 0.17 - - -

Foreign currencies assets represents investment in available-for-sale securities whilst the above foreign currencies liabilities represent trade accounts payable, long-term trade accounts payable, borrowings and other payables.

Forward foreign exchange contracts Forward foreign exchange contracts are entered into to manage exposure to fluctuations in foreign currency exchange rates on specific transactions. A subsidiary and a joint


93

venture’s policy is to enter into forward foreign exchange contracts for 100% of short-term loans anticipated in each month over the following six months. At 31 December 2001, the settlement dates on open forward contracts is in January 2002. The Baht amounts to be received and contractual exchange rates of the Company's outstanding contracts were:

Consolidated 2001 2000 Baht Baht

United States dollars 14.39 million (2000: USD 1.48 million)

at rates averaging USD Baht 43.99/USD (2000: Baht 41.49 - 43.49/USD)

632,888,397

61,289,847


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30. Financial instruments (Continued)

i) Objective and significant terms and conditions (continued)

Net fair values

The net fair values of the Company's derivative financial instruments at the balance sheet date were:

Consolidated 2001 2000 Million

Baht Million

Baht

Favorable (unfavorable) forward foreign exchange contracts

3.96 (2.4)

The fair values of forward foreign exchange contracts have been calculated based on rates quoted by the Company's lending bankers at balance sheet date, as if these agreements had been terminated.

ii) Other interest rate exposures

Refer to borrowings Note 18 for details on the average interest rates and maturities of these balances.

iii) Credit risk

The Company and the Group have no significant concentrations of credit risk (other than TOT which represents 34.51% (2000: 43.48%) of receivables overdue, as discussed in Note 9). Derivative instruments are entered into with, and cash is placed with substantial financial institutions. The credit exposure of derivatives are represented by the net fair values of the contracts, as disclosed above.

iv) Other fair values

Certain financial assets and liabilities which are accounted for at historical cost are carried at values which may differ materially from the fair value. The carrying amounts of cash, trade receivables, trade payables, other payables, short-term borrowings, floating rate long-term borrowings, preference shares and dividends payable approximate to their fair values. Information on the fair values of borrowings, and foreign currency forward exchange contracts is included in Note 18 and in section (i) of this note, respectively.


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31. Contracts and commitments

31.1 The Company entered into the agreement for Joint-Operation and Investments for

Expansion of 2.6 million lines Telephone Services with TOT and other supplements to the Agreement for the following services:

- Wireline Services - Value Added Services - Personal Communication Telephone Services - Public Telephone Services - Receiving telephone service orders, and receiving payment for installation charges,

deposits and monthly usage - Fault notification and dropwire maintenance - TOT lease of fibre optic network from a subsidiary in order to sublease to the

Company - Personal Communication Telephone Service for TOT subscribers

Under the provisions of the “Agreement”, the “Amendment” and the Supplementary Agreements, TOT and the Company will share the gross revenues collected from operating the telephone network in accordance with the percentages stipulated in the agreements. Among the Company’s responsibilities are the acquisition, installation, project management, operation and maintenance of the system as set forth in the agreements. In addition, the Company is required to transfer to TOT certain equipment pertaining to such system together with the land and buildings acquired by the Company related to the project. In compliance with the terms of the agreements, the Company has placed letters of guarantee issued by certain local banks in favor of TOT totaling Baht 300 million.

31.2 Agreement for PCT operation

According to the Concession Agreement and the PCT Supplemental Agreement (“the Concession Agreement”) between the Company and TOT to jointly operate and invest in the expansion of basic telephone services, including a personal communication telephone system in the telephone areas of Bangkok using the same long-distance telephone area code (the “Territory”), the Company shall be responsible to operate and comply with the Concession Agreement. Asia Wireless Communication Co., Ltd. (“AWC”), a subsidiary of the Company is awarded to operate and share revenues with the Company in accordance with the PCT Contract (the “Contract”). In July 2001, the Company entered into the Contract with AWC, which became effective on 25 July 2001. The principal terms and conditions include, among others, the following: a. AWC shall be responsible, at its own cost and expense, to procure, purchase,

install, operate and maintain a personal communication telephone system in the Territory, all of which shall be performed in accordance with the requirements of the Concession Agreement; and


96

b. In consideration of the foregoing, AWC shall be entitled to receive a portion of

the revenue generated by the PCT services in accordance with the calculation methodology set forth in the Contract.


97

31. Contracts and commitments (Continued)

31.3 Two subsidiaries and two joint ventures have agreements with state enterprises, namely the Communication Authority of Thailand (CAT) and the Telephone Organization of Thailand (TOT) to provide internet service, nationwide cellular telephone service and the lease of long distance circuits, respectively. Under the terms of the agreements, the subsidiaries and joint ventures have certain commitments to acquire, install, manage and maintain all equipment. The subsidiaries and joint ventures are also committed to transfer to TOT and CAT all equipment pertaining to such systems as the installations are completed. During the term of the agreements, the subsidiaries and joint ventures are entitled to collect the deposits, membership fees and other service fees from customers as stipulated in the agreements. In addition, the subsidiaries and joint ventures were contingently liable to certain foreign and local banks for letters of guarantee totaling Baht 60.17 million issued by said banks in favor of TOT and CAT. The letters of guarantee covered the guarantee for the subsidiaries and joint ventures in compliance with the provisions of the agreements referred to above.

31.4 The Company, subsidiaries and joint ventures were contingently liable to certain

foreign and local banks for letters of guarantee in favor of certain government agencies, certain state enterprises and companies amounting to Baht 42.32 million for the Company and Baht 324.68 million and US Dollars 2.80 million for the subsidiaries and joint ventures.

31.5 The Company had issued a letter to a finance company to support the business of one

of its wholly owned subsidiaries and to confirm to that finance company that the Company holds 99.99% of the total shares in said subsidiary. The Company has also committed that the Company and/or its affiliates will maintain their holding percentage in the subsidiary at no less than 51% of the total shares until all obligations of the subsidiary liable to the said finance company are settled. As at 31 December 2001, the subsidiary has an outstanding loan with the finance company amounting to Baht 205.26 million.

31.6 Under the terms of various agreements, the Company’s and certain subsidiaries’

assets have been pledged and/or mortgaged as collateral with contracted parties, details of which are as follows: Carrying Value at 31 December Consolidated Company

Mortgaged Value

2001 Baht

Million

2000 Baht

Million

2001 Baht

Million

2000 Baht

Million

2001 Baht

Million

2000 Baht

Million


98

Fixed and savings deposits 4,505.97

4,308.37

- - 4,018.29 4,058.14

Investment in available-for-sale securities

1,036.27

3,960.78 - - - -

Investment in shares of subsidiaries and associates (excluding investment in shares of certain subsidiaries pledged as collateral, which have been eliminated in the consolidated financial statements)

4,488.91

5,430.05 - - -

10,879.51

Land, building and machinery

943.76 1,007.02

1,000.00

1,000.00

- -

In addition, the Group and the Company’s right to operate network assets under concession are secured against borrowings (Note 18).

31.7 The Company has entered into contracts with various contractors to supply and install

additional network and expansion of network equipment capability. Total commitments as at 31 December 2001 is approximately Baht 1,426.00 million. In addition the Company has commitments with TOT to construct and transfer building and network equipment amounting to approximately Baht 222.50 million.


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32. Interest in joint venture

The Group has a 65% interest in a joint venture, Asia Infonet Co., Ltd.,(“AI”) which operates as an Internet provider and 41% in Bangkok Inter Teletech Co., Ltd.,(“BITCO”) that holds 99.99% in C.P. Orange Co., Ltd. an operator of 1800 MHz cellular telephone system. The following amounts represent the Group’s share of the assets and liabilities and revenue and expenses of the joint venture included in the consolidated balance sheet and income statement: 2001 2000 BITCO AI AI Baht Baht Baht Current assets 2,313,086,217 40,601,122 25,935,220 Non-current assets 22,733,750 9,077,456 4,384,285 Property, plant and equipment 3,936,674,781 18,604,846 16,411,756 Intangible asset, net 323,882,163 - - Total assets

6,596,376,911

68,283,424

46,731,261

Current liabilities (2,163,355,083) (39,828,008) (40,573,371) Non-current liabilities (232,468,305) (920,057) (558,720) Total liabilities (2,395,823,388) (40,748,065) (41,132,091) Net assets

4,200,553,523

27,535,359

5,599,170

Sales

-

153,837,901

95,274,938

Profit (loss) before tax

(1,255,084,559)

19,437,672

10,331,796

Income tax - - - Profit (loss) after tax

(1,255,084,559)

19,437,672

10,331,796

Proportionate interest in joint venture capital commitments

8.68 billion

nil

nil

Proportionate interest in joint venture contingent liabilities

218.59 million

0.90 million

0.90 million

The number of employees in the joint venture in 2001 was 2,131 (2000: 96).

33. Concession conversion


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In November 1997, the Thai government adopted the Telecommunications Master Plan that calls for several liberalisation initiatives; amongst those were the privatisation of TOT and CAT and conversion of the concessions under their operations.

The process of concession conversion involved comprehensive proposals and negotiations with the TOT commencing in November 2000. After extensive discussions, none of the concessions qualified for conversion were successfully concluded prior to the change of government in early 2001. Following the change of government, the new government decided to completely revise the Concession Conversion Framework set forth by the former government and it is expected to consider a more pragmatic approach in order to improve opportunity for successful conversion of most concessions.


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34. Post balance sheet events

On 22 February 2002, at the Board of Directors’ Meeting 1/2002 of the Company, the Board of Directors approved the followings: 1. The issuance and offering of the warrants to purchase the Company’s common shares to

directors and employees at executive level of the Company and its subsidiaries in the total number of not exceeding 35 persons (“ESOP”). The total number of warrants to be offered is not exceeding 37,131,597 units at the exercise price of Baht 10.60. The warrant will be exercisable within a period of not exceeding 5 years from the issuance and offering date.

2. The increase of registered capital from Baht 33,906,499,780 to Baht 34,277,815,750 by

issuing 37,131,597 new common shares at a par value of Baht 10 per share for the exercise of the rights to purchase the common shares of the Company under the warrants to be issued and offered under the ESOP.

All above matters shall be proposed to the Annual General Shareholders Meeting for further consideration and approval.

3. The Company’s Board of Directors authorised these financial statements for issue.

TelecomAsia Corporation Public Company Limited Financial Statements 31 December 2001

TRUE : Annual Report 2001

Documents

Transcript of TRUE : Annual Report 2001