TRUE : Annual Report 2002

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CorporateGovernanceComplianceReportThe Board and management of the Company

believe good governance can create value for all stakeholders.Transparency, performance and accountability are essentialelements of good corporate governance. This year marks thefourth consecutive year that the Company has publisheda special section in its Annual Report which discloses to allstakeholders and interested persons its good corporategovernance commitment and efforts.

The following Corporate Governance ComplianceReport is the realization of an initiative by the Company, asbroadened and defined by directives of the SET and theCompany’s Board of Directors.

1. POLICY ON CORPORATE GOVERNANCE[PRINCIPLE 1]

Several years ago the Company expressly committeditself to making good corporate governance an essentialcomponent of its corporate culture. The Corporate GovernanceGuidelines (the “Guidelines”), originally prepared by aworking group comprised of directors, both independent andnon-independent, management and outside legal advisors, wasa focal point of the Board’s final meeting of 2001. Fully meantto be a “living document,” adaptable to the evolution ofthe Company and to the interests of its stakeholders, theGuidelines have been implemented throughout 2002. TheGuidelines will be reviewed annually so as to underscorethose governance principles that will bring lasting benefits tothe Company and its stakeholders.

The matters covered by the Guidelines are:

• DUTIES AND RESPONSIBILITIES OF THE BOARD OFDIRECTORS

• COMPOSITION AND SELECTION OF THE BOARD OFDIRECTORS

• BOARD STRUCTURE AND PROCEDURES

• BOARD LEADERSHIP

• BOARD RELATIONSHIP TO MANAGEMENT

• MEETING PROCEDURES

• COMMITTEES OF THE BOARD OF DIRECTORS

• GENERAL COMMITTEE MATTERS

• POLICY REGARDING RELATED PARTYTRANSACTIONS AND CODE OF CONDUCT

2. RIGHTS AND EQUITABLE TREATMENTOF SHAREHOLDERS AND OF VARIOUSGROUPS OF STAKEHOLDERS[PRINCIPLES 2, 3, 4, 7, 11 AND 15]

Although the ten largest common shareholders hold amajority of the common stock, these shareholders are listedelsewhere in this Annual Report, the Board and the Company

recognize that, being a publicly listed company, the shareholderbase is numerous and diverse. In order to ensure equitabletreatment to its broad-based shareholder population, measures,such as the following, have been implemented:

• allocating not less than four (4) Board seats toindependent persons;

• holding all shareholder meetings, there having beenone general and one extraordinary in 2002, withinBangkok;

• providing written proxy materials to shareholderssufficiently prior to each meeting to enable carefulconsideration of the agenda matters;

• allowing shareholders or their proxy an opportunityto speak and ask questions of Directors andmanagement at shareholder meetings;

• scheduling all Board of Directors meetings at thefinal Board meeting of the prior year and providingwritten notice of every meeting in accordance withall applicable rules and regulations;

• posting material financial, management andoperational information, including informationrequired by law, on the Company’s publiclyaccessible web site;

• offering to anyone a subscription to emailedinformation releases from the Company’s InvestorRelations Department;

• chartering the Independent Committee to add anadditional tier of scrutiny to matters that may giverise to conflicts of interest or favor any particularinterest group; and

• utilizing independent advisors to give opinions andprovide expertise on matters of material concern.

The Company recognizes the valuable contribution ofvarious stakeholder groups, groups that are similarly diverse asare the shareholders. In addition to the implementation of themeasures listed above, during the second half of 2002, the Boardapproved and the Company implemented a Code of Conduct.The Code of Conduct seeks to instill appropriate regard for theinterests of employees, customers, suppliers and other vendors,creditors and competitors of the Company, as well as of thegovernment and the local community. The Code of Conduct isthe moral guideline, encompassing both business and personalethics within the workplace, for the Company’s employees.

The Company’s commitment to the interests ofstakeholders reaches far beyond only stakeholders holding afinancial interest in the Company. Contributions to society,through many different projects in order to encompass the broadspectrum of the Thai community, is spread well beyond theCompany’s Bangkok Metropolitan service area. Informationabout community projects including the following can be foundat the Social Contribution page of the Company’s web site:

• introducing TelecomAsia and Its Role in Societypackage to the public;

• organizing TelecomAsia’s Nature Classroom for youth;

• teaching children about their cultural heritagethrough TelecomAsia’s Arts and Culture Classroom;

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• encouraging the study of science throughTelecomAsia’s Science Classroom to children invarious schools;

• encouraging youth to become environmentally-aware through a number of conservation andcommunication programs.

3. LEADERSHIP AND VISION [PRINCIPLES5, 8, 9 AND 10]

The Board of Directors convened five meetings during2002. Non-executive directors constitute majority of the Board,placing the balance of power with non-executive directors andensuring credible oversight of management. The Chairman ofthe Board is a non-executive director. The size and diversity ofthe Board reflects the Company’s objective to accommodatethe diversity of shareholders and stakeholders. Themembership strives to ensure that there is an appropriatenumber of directors to fairly represent each interest group,whether the group is significant or minority shareholders,creditors or employees.

In addition to selection based upon providingrepresentation to diverse constituencies, directors areelected on the basis of experience, wisdom, integrity and anunderstanding of telecommunications technologies and theindustry as a whole.

Compensation of top executives and the Board arerecommended by the Compensation and NominatingCommittee (which retains independent advisor to performthis function) and approved by the entire Board. The presentremuneration paid to Board members was set at and approvedby the Company’s shareholders. Besides their salaries, keymembers of executive management have been provided, withapproval of the Company’s shareholders given at 2000‘s and2002‘s Annual General Shareholders Meetings, stock optionsas a key component of their compensation in order to link theircompensation to the performance of the Company and to be along term incentive plan.

In the fourth quarter of 2002 the Compensation andNominating Committee engages of Hewitt Associates, aconsulting firm specializing in human capital management, toprovide assessment of the Company’s remuneration principlesand policies on executive compensation, particularly withinThailand’s telecommunications industry.

4. RISK MANAGEMENT AND OVERSIGHT[PRINCIPLES 12, 13, 14 AND 15]

Risk is managed at both the Board and themanagement levels, in several complementary ways. TheCompany in consultation with Marsh UK Ltd. (insurance advisorof the Company’s secured creditors) develops and evaluatesinsurance package on annual basis. Likewise, risk andthe Company’s efforts to manage such risk are disclosed viadifferent media.

At the Board level, risk management and oversight aresupported by four very active standing committees: (a) theIndependent Audit Committee; (b) the Finance Committee;(c) the Independent Committee; and (d) the Compensationand Nominating Committee. Over the course of 2002 theIndependent Audit Committee engaged the services ofPricewaterhouseCoopers Risk Assessment Services Limited toprovide consulting services in enhancing the effectiveness of theinternal audit function of the Company, which will result in

improved internal controls throughout the Company. Each com-mittee is authorized to (and has) retain(ed) assistances of outsideexperts in carrying out their respective mandates.

Each committee is obligated further to provideperiodic detailed reports on its activities to the entire Board, andto follow a formal charter which specifies its role andresponsibilities.

Management bears the day-to-day task of evaluating riskand providing oversight, and it does so primarily through theactivities of the Group Management Committee, which isconvened weekly and consists of the Company’s most seniorexecutive management, of the Office of the Chief FinancialOfficer, of the Internal Audit Department, and of the Office ofthe Group General Counsel. Such activities of management arekept transparent through regular reports by the Presidentgiven at each Board meeting and through the Management’sDiscussion and Analysis included in the latter part of thisAnnual Report. At all times, Board members have direct accessto members of executive management to discuss any businessmatter.

In the past several years the Company has made greatprogress in providing investors and potential investors withaccess to important information on a timely basis. TheCompany, primarily through its Investor Relations department,utilizes the Internet (www.telecomasia.co.th) to communicatewith the public efficiently and effectively. Copies of allregulatory filings and press releases are posted within a matterof days, and often on the day of release, analyst conferencesare available via webcast, past and current annual reports canbe read, and financial results are all available at any time.

5. CONFLICTS OF INTERESTS [PRINCIPLES 1,6 AND 7]

The Board, management and employees are regularlyreminded of each person’s obligation to avoid situationswhere a conflict of interest may be involved. In addition togovernment regulations, the Guidelines and the Code ofConduct define and establish a resolution and/or disclosuresolution for conflict of interest situations.

With the encouragement of the Board and management,beginning in 2002 vendors entering into material contracts withthe Company are required to attest to the absence of a“connected transaction”, as such transactions are defined bythe Stock Exchange of Thailand. In addition, the in-housepublication distributed to all employees, Yai Kaew, has publishedreminders to, and from time-to-time will continue to remind,employees of their obligation to report and avoid conflicts ofinterest situations.

The aforementioned Independent Committee plays a keyrole in any Board matter involving a related party transactionor a corporate opportunity, as well as all matters which arecovered by the Stock Exchange of Thailand’s Rules andProcedures and Disclosure of Connected Transactions of ListedCompanies. Furthermore, a Policy Regarding Related PartyTransactions comprises the final section of the Guidelines.Additional circumstances which could cause conflicts ofinterest, such as trading on insider information and having apersonal relationship in matters involving the Company, arediscussed in detail with alternative ways to resolve the matter inthe Code of Conduct.

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CompanyBackgroundand MajorDevelopment

TelecomAsia Corporation Public Company Limited (the“Company”) was established on 13 November 1990,initially under the name of CP TelecommunicationsCompany Limited to undertake the Build Transfer Operate(BTO) concession from the Telephone Organization ofThailand (now TOT Corporation PLC or “TOT”). This was toconstruct, install and jointly operate a 2.6 million fixed telephonelines expansion in the Bangkok Metropolitan Area (the “BMA”)(the BMA includes Bangkok, Nonthaburi, Samutprakarn andPathumthani) for a period of 25 years. The Company must alsoprovide maintenance of the network of 2.6 million linesthroughout the term of the agreement. In addition to theoriginal fixed line concession with the TOT, the Company hasbeen granted approval to expand a range of valued-addedservices for its fixed line subscribers. These include TA Connex,a public phone service, Personal Communication Telephoneservice (“PCT”), data network service, internet and multimediaservices. The Company has also invested in cable TV and mobilephone business.

The Company subsequently registered as a publiccompany limited with registration no. Bor Mor Jor 82 on 11February 1993 with Nynex Network System (Thailand) CompanyLimited (“NYNEX”) as a strategic partner. NYNEX is anaffiliate of Verizon Communications Inc (“Verizon”), a leadingtelecommunications service provider in the USA. As at 31December 2002, NYNEX holds approximately 10.94% of fullypaid-up capital of the Company while CP Group and itsaffiliates hold 42.75%.

Major Development in BusinessOperation and Management

November 1990 Company established with registeredcapital of Baht 1,000 million.

August 1991 Entered into the BTO concession with theTOT to build, install, jointly operate andmaintain a 2 million fixed telephone linesin the Bangkok Metropolitan Area (BMA)for a period of 25 years.

December 1991 Telecom Holding Company Limitedestablished to invest in telecommunicationsprojects.

July 1992 Fifteen percent shareholding in theCompany acquired by Nynex NetworkSystem (Thailand) Company Limited.

December 1993 Company listed on the Stock Exchange ofThailand with registered capital of Baht22,230 million.

March 1995 Start of cable TV service of UTV CableNetwork Company Limited (UTV), one ofthe Company’s affiliates.

September 1995 Company received approval for additional600,000 fixed lines expansion in the BMA.

May 1996 Company gained approval to providevalue-added services, such as digitalnetwork services and TA Connex.

August 1996 The Company gained approval toprovide PCT service.

January 1997 The Company received approval toprovide a public telephone service in theBMA.

May 1998 UTV and International BroadcastingCorporation PLC (IBC) merged to becomea leading cable TV service providerunder the name of United BroadcastingCorporation PLC (UBC).

November 1999 Official start of PCT service.

March 2000 Debt restructuring successfully completedwith a principle term that Kreditanstaltfür Wiederaufbau (KfW), a major foreigncreditor, subscribes 702 million preferenceshares totaling USD 150 million, equal to24% of total shares of the Company afterthe capital increase.

August 2000 Start of Click TA service, an alternativeInternet service that allows customers tolog on for up to 2 hours.

November 2000 “TA 1234” service, an economical rate forlong distance calls Launched.

February 2001 Prepayment of loans of Baht 532 millionfrom cash surplus.

April 2001 Start of prepaid PCT service under thename “PCT Buddy”.

July 2001 High-speed data transmission services,including ADSL, Cable Modem and TAMegaport services launched.

Additional prepayment of loan of Baht 368million from cash surplus.

September 2001 Entered into a cross-currency swapagreement with KfW for repayment ofloans of $US97 million in Baht to reduceforeign exchange risk.

October 2001 Invested 41% in shares of BangkokInter Teletech Co., Ltd. (“BITCO”), whichholds 99.81% of shares in TA OrangeCompany Limited (formerly known as CPOrange Company Limited) via a share swaptransaction. TA Orange is a GSM 1800cellular operator under a concessiongranted by the Communication Authorityof Thailand (“CAT”).

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December 2001 Entered into a new Baht loan agreementof Baht 5 billion to repay the US dollar-denominated debt to reduce the foreignexchange risk.

March 2002 TA Orange, a 41% joint venture ofTelecomAsia Corporation Public CompanyLimited launched its cellular service underthe “Orange” brand name.

Additional prepayment of loan of Baht 948million from the Company’s cash surplus.

April 2002 The Company gained approval to installand operate an additional 6,000 publicphone sets, increasing the Company’scapability to provide public phone serviceto 26,000 sets.

July 2002 Telecom Holding Company Limited and itssubsidiaries entering into a RestructuringAgreement with its creditors.

Further prepayment of loans of Baht 345million from the Company’s cash surplus.

August 2002 The Company signed a Memorandum ofUnderstanding with Thailand’s 10 leadingproviders of information, entertainment,healthcare, financial services and on-linegames in order to jointly promote anddevelop fully integrated services forThailand’s first Broadband Community.

September 2002 Approval granted by the ExtraordinaryGeneral Shareholders Meeting No. 1/2545to increase the registered capital of theCompany from Baht 34,278 million to Baht44,461 million by issuing 1,018 million newshares at a par value of Baht 10 each. Theproceeds were used for investment in TAOrange and repayment of debts.

Launch of a new business broadbandsolution called “TA Metronet” which isbased on Fibre-to-Building technology. Thistechnology provides transmission rates of512 Kbps to 1 Gbps for each customer.

October 2002 Successfully placed Baht 18,465 million innew debentures, the largest offering of

corporate debentures rated by TRIS and thesecond largest offering in Thai history. Thedebentures were offered in two tranches,both of which were oversubscribed byinvestors.

Prepayment of the Company’s indebtednessin the amount of US Dollar 452 millionor Baht 19,590 million, funded by theproceeds from Thai Baht Debentures ofBaht 18,465 million and Baht loan fromIFC of Baht 1,125 million.

Offered new ordinary shares to theexisting shareholders (whose namesappeared in the Share Register Book as of26 September 2002) by the resolution ofthe Extraordinary General ShareholdersMeeting No. 1/2545 during 14 -18October 2002. The number of total sharessubscribed was 461,997,236 shares or85.757 % of the total shares offered tothe existing shareholders. The Companyregistered the change in the Company’spaid up capital from Baht 32,325 millionto Baht 36,945 million. The proceedsfrom this rights offering of Baht 3,003million, which came from the CP Groupand other existing shareholders, was usedfor additional investment in TA Orangethrough Bangkok Inter Teletech CompanyLimited. The Company’s holding stake inTA Orange increased from 41% to 44%after the transaction.

December 2002 Bought back Yen-denominated, long-termtrade accounts worth Baht 3.6 billion (Yen10.1 billion) at a 81.3% discount to theirbook value, representing a gain from thebuy-back of Yen-denominated notes ofapproximately Baht 3.1 billion in theCompany’s fourth quater 2002 results.

Signed an MOU with additional 13providers of information, entertainment,hospital and on-line games forthe development of the BroadbandCommunity.

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Nature ofBusiness

Products and Services Under the BuildTransfer Operate Concession withTOT and CAT

The Company is a leading telecommunications service

provider of wireline and voice, video, data and web-based

applications, based on the integrated multi-platform network.

At December 31, 2002, the Company’s wireline business had

the highest market share in the Bangkok Metropolitan Area

(“BMA”).

The Company’s core wireline network combines a fibre

optic network and a high-speed digital network. This enables

the Company to provide customers with the best quality of

wireline service and supports the development of new

value-added services that better serve customers’ needs. The

Company has also installed ATM (Asynchronous Transfer Mode)

and IP (Internet Protocol) networks on its core network to

expand the capacity and speed of data transmission and to

offer new alternative services to customers.

The Company has a Network Management System, which

enables it to track errors and to provide highly effective

maintenance 24 hours a day, including the advanced

Computerized Customer Service System (CCSS).

The Company, its subsidiaries and affiliatesprovide :

1. Wireline and Value-Added Services

2. Wireless Service (PCT) and Mobile Phone (Orange)

3. Multimedia Services

4. Data Transmission Services

5. Internet and E-Commerce Services

1. Wireline and Value-Added Services

In 1991, the Company was formally awarded a Build

Transfer Operate (BTO) 25-year concession by TOT to construct,

install and jointly operate a 2.6 million wireline telephone

expansion in the BMA. The Company shares its revenue with

TOT. TOT collects service charges from customers and then

calculates the proportion of revenue sharing to the Company.

Under the concession, this is based on gross revenue before the

deduction of related expenses, at the rate of 84 percent for 2

million lines and 79 percent for 600,000 lines. The Company

has 82 percent revenue sharing from each value-added service

and 76.5 percent of the public phone service. At December 31,

2002, the Company had 1,955,945 telephone subscribers.

Telephone Subscription and Installation

Customers can subscribe for wireline telephone services

at 23 TelecomAsia branches throughout the BMA area or

through the Tele-ordering Center at 0-2900-9000. Network

and customer support is provided through a 24-hour a day

Service Center. Technical support is provided by its Network

Maintenance Centers throughout the BMA area. A customer

Call Center provides customer information and addresses

customer concerns.

Value-Added Services

In addition to the wireline service, the Company offers a

range of value-added services to meet customers’ needs, such

as the public phone service, 1177 Service Center, TA Voice

Mailbox, TA Connex, Direct Inward Dialing, TA Hunting Lines

and Integrated Service Digital Network.

• The Company has provided a public phone service in

the BMA area since 1997 with 20,000 telephone

units. In April 2002, the Company gained approval

to install an additional 6,000 telephone units, bring-

ing the total number of units to 26,000.

• The Company operates 1177 Service and Drop Wire

Maintenance Centres to handle network problems

and maintenance.

• TA Voice Mailbox is an automatic telephone

answering service that 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 voicemails by

just calling the Voice Mailbox Center.

• TA Connex provides Call Waiting, Conference

Calling, Call Forwarding, Hot Line, Abbreviated

Dialing, Automatic Call Repetition and Outgoing Call

Barring.

The Company also provides services for corporate

customers requiring a large number of telephone lines and

provides a range of valued-added services including:

• Direct Inward Dialing (DID automatically directs

incoming calls to a party.

• The TA Hunting Lines service bundles two or more

telephone lines at one location into a single number.

• The Integrated Service Digital Network (ISDN) enables

a telephone network to handle all forms of voice,

data and image communications simultaneously on

the same telephone line.

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• New, value-added services such as Call Card and Free

Phone 1-800, were launched in 2002.

2 Personal Communication Telephone(PCT) and Mobile Phone Business(Orange)

The PCT business is operated by Asia Wireless

Communication Company Limited (“AWC”), a TA subsidiary.

The mobile phone business (Orange), operated by TA Orange

Company Limited. TelecomAsia has an almost 44 percent

shareholding, held by Bangkok Inter Teletech Company Limited.

Details will be said as follow :

2.1 Personal Communication Telephone (PCT)

Together with Asia Wireless Communication Company

Limited (“AWC”), a TelecomAsia subsidiary, the Company

officially launched its PCT Service in November 1999. PCT links

a single, wireline telephone number with a cordless handset

that can be used anywhere within the BMA.

PCT combines two leading technologies - the Personal

Handy Phone System (PHS), developed from the cordless

telephone system, and the Public Switched Telephone Network

(PSTN) within the existing advanced Intelligent Network.

PCT is provided under the BTO concession with TOT.

All revenue from the PCT service is collected by TOT and the

Company is paid 82 percent of this, before deduction of related

expenses, of which about 70 percent is paid to AWC as

compensation for operating the PCT service. The PCT service is

also available to TOT subscribers. Because the PCT network

belongs to the Company, TOT shares approximately 80 percent

of revenue received from its subscribers to the Company as a

PCT network rental fee with the Company (in the event that the

forex rate is below Baht 38 per USD1) or approximately 82

percent of revenue (in the event that the forex rate is Baht

38-45 per USD1).

2.2 Mobile Phone Business (Orange)

In October 2001, the Company invested in a 41 percent

shareholding in Bangkok Inter Teletech Company Limited

(“BITCO”), which holds 99.81 percent of the shares in TA

Orange Company Limited (formerly known as CP Orange

Company Limited), to operate a GSM 1,800 MHz cellular

business under a concession granted by the Communication

Authority of Thailand (“CAT”) until 2013.

In March 2002, TA Orange Company Limited formally

launched its business in both post-paid and pre-paid mobile

phone services.

In October 2002, the Company used the proceeds from

a Baht 3 billion Capital Increase to increase its investment in

TA Orange Company Limited through Bangkok Inter Teletech

Company Limited. The Company’s holding stake in TA Orange

increased from 41 percent to 44 percent after this transaction.

3. Multimedia Services

Multimedia service is provided through Asia Multimedia

Company Limited (“AM”), the Company’s subsidiary that owns

exclusively a large-scale, hybrid fibre-optic coaxial (HFC) network.

Asia Multimedia has been operating since October 20, 1997.

AM currently jointly operates a cable TV business with United

Broadcasting Corporation Public Company Limited (“UBC”), a

Company affiliate and Thailand’s 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 the first company in Thailand to launch

broadband internet services, based on cable modem

technology which allows computers to send and receive data

via the HFC network at very high speed. The transmission speed

through AM’s cable modem service, introduced in 1999, is up

to 100 times higher than other dial-up modems currently used

by internet users. Because it is always connected to the internet,

the cable modem service eliminates the delay of dialling-up,

saving users’ time, and 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 meet customers’

needs. After the installation of ATM/IP and Remote Access Server

(RAS) in mid- 2000, the capacity of data transmission has

increased in speed and quality. Data transmission services

include :

• Digital Data Network (DDN)

DDN facilitates voice, data and image transmission

between two different points of the Company’s

Intelligent Network. 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) allows for

normal telephone usage at the same time as high

and stable speed wireline data transmission. It is

marketed under the name of “TA Express”.

• IP Access Service (IPAS)

This service, offered under the name “TA Megaport,”

provides RAS management services for customers

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who require an external access port, for example,

internet service providers, web information

providers, and business groups which require a

Virtual Private Network Service (VPN), without the

additional cost for equipment and management of

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 (“AI”)

has provided internet and e-commerce services under the

name of “Asianet” AI customers are offered various service

alternatives. Corporate customers can, for example, select leased

line, ISDN and web-hosting services, while private users can

select from monthly or hourly membership packages, or

purchase an internet kit or international roaming services.

In addition to AI’s 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

that provides customers with high-speed, data transmission

through a special gateway to the internet. Service charges

collected by AI are shared with the Company, the ratio

dependent on the number of ClickTA.com subscribers.

In addition, the Company also provides corporate and

institutional customers with e-commerce services, including

end-to-end web development solutions.

Marketing Strategy

The Company seeks to provide customers with a

complementary variety of bundled telecommunications services.

It considers that the demand for the combination of wireline,

wireless, internet and multimedia products and services will

increase significantly in future. As high technology products

and services develop, the Company and its subsidiaries have

jointly determined their marketing strategy. The focus is to

better understand customers’ needs and distribution channels,

and to improve customers’ perception and understanding of

products and services that meet their requirements.

Nature of Customers and Target Group

The Company recently separated its customers into

business and consumer segments to provide them with the best

service and most appropriate high technology products and

services. The business segment comprises: Small and Medium

Enterprises; Banking, Finance and Insurance; Government and

State Enterprises, and Wholesale Services and Solutions.

The consumer segment comprises : Teenagers; Housewives

and Families; Businessmen and Professionals and New Housing

Residents.

Distribution Scheme and DistributionChannels

Distribution channels are divided into:

1) Business Channel

• 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 can be

adjusted to meet the requirements of customers.

Sales executives are trained in presentation,

negotiation and marketing.

• Banking, Finance and Insurance

Account Executives (“AE”) are responsible for

particular customers, providing a single point of

contact to meet customers’ total communication

requirements provide quality customer care services.

• Government and State Enterprises

The Company has established a team specifically

responsible for these customers, to ensure

compliance with regulatory requirements and to

provide appropriate services.

• Wholesale Services and Solutions

This group includes other telecommunications and

e-commerce businesses and internet service

providers with large demands for high technology

ICT services. The Company has technical specialists

available to give advice and assistance to this

customer group.

2) Consumer Channel

• Retail and Telesales Channel Management (RTM)

Customers can subscribe to telephone wireline

services through 23 telesales outlets.

• Direct Sales

Direct sales are by area under the responsibility of a

sales manager and sales executives for each territory.

Marketing activities are tailored and include mail

drops, promotional campaigns and activities, and

mobile outlets to facilitate those who are living in

certain residential areas.

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1Includes Fault Reporting and Dropwiring, Public Phone and Audiotext

Revenues Breakdown byBusiness Group

Percentage 2002 2001 2000of Shares

Business Group / Operation by Held bythe Baht % Baht % Baht %

Company Million Million Million

1. Business in Telephone and Value Added Service1

TelecomAsia Corporation Public Company Limited

Revenues 16,125 62.5% 15,618 75.7% 14,732 75.9%

2. Business in Personal Communication Telephone (PCT) and Mobile Phone (Orange)


Asia Wireless Communication Co., Ltd. 99.99%

Wire & Wireless Co., Ltd. 87.50%

Bangkok Inter Teletech Co., Ltd. 43.86%

Revenues 6,096 23.6% 3,072 14.9% 3,034 15.6%

3. Business in Service Multimedia Network Provider

Asia Multimedia Co., Ltd. 90.45%

Revenues 954 3.7% 894 4.3% 881 4.5%

4. Business in Data Service


Revenues 1,199 4.7% 503 2.4% 342 1.8%

5. Business in Internet and E-Commerce

Asia Infonet Co., Ltd. 65.00%

Revenues 198 0.8% 154 0.8% 95 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 1,203 4.7% 395 1.9% 304 1.6%

Total Revenues 25,775 100% 20,636 100% 19,388 100%

Source: The Company

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CorporateInformationThe Company was established on 13th November 1990 initially under the name of CP Telecommunication Co., Ltd. with a

registered capital of Baht 1,000 million to undertake Thailand’s 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 2002, the Company’s registered capital is Baht 44,461,181,920, consisting of 3,746,364,662 commonshares with a par value of Baht 10 per share and 699,753,530 preference shares with a par value of Baht 10 per share, of which Baht36,944,972,140 is paid-up capital, comprising of 2,994,743,684 common shares with a par value of Baht 10 per share and 699,753,530preference shares with a par value of Baht 10 per share.

The Company’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-up Capital

Telecom Holding Co., Ltd. 18 Telecom Tower Investment company both THB 13,339 millionRatchadaphisek Road locally and internationallyHuai Khwang, Bangkok 10320

Nilubon Co., Ltd. 18 Telecom Tower Real estate developer and THB 900 millionHuai Khwang, Bangkok 10320 provider of office spaceRatchadaphisek Road

Nilubon Co., Ltd. (BVI) P.O. Box 71, Craigmuir Incorporate an international USD 50,000Chambers, Road Town, businessTortola, British Virgin Islands

Telecom International 18 Telecom Tower Investment in telecom THB 300 millionCo., Ltd. Ratchadaphisek Road projects both locally and

Huai Khwang, Bangkok 10320 internationally

K.I.N. (Thailand) Co., Ltd. 18 Telecom Tower Investment in international THB 75 millionRatchadaphisek Road telecommunication projectsHuai Khwang, Bangkok 10320

K.I.N. (Thailand) Co., Ltd. P.O. Box 957 Investment in international USD 1(BVI) Offshore Incorporations telecommunication projects

Road Town, Tortola,British Virgin Islands

Asia Wireless Communication 18 Telecom Tower Investment in PCT Project THB 5,287 millionCo., Ltd. (Formerly named Ratchadaphisek Road and distributor ofMultimedia Network Co., Ltd.) Huai Khwang, Bangkok 10320 telecommunications equipment

Asianet Corporation Co., Ltd. 18 Telecom Tower AUDIO TEXT service provider THB 75 million(Formerly named Interactive Ratchadaphisek RoadMedia Services Co., Ltd.) Huai Khwang, Bangkok 10320

W7 Rental Services Co., Ltd. 18 Telecom Tower Car rental services THB 50 millionRatchadaphisek RoadHuai Khwang, Bangkok 10320

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Telecom Training and 18 Telecom Tower Professional training and THB 50 millionDevelopment Co., Ltd. Ratchadaphisek Road seminar organizer

Huai Khwang, Bangkok 10320

Tele Engineering and 719 KPN Tower, 9/F Dropwire installation THB 25 millionServices Co., Ltd. Rama 9 Road, Bangkapi contractor and distributor

Huai Khwang, Bangkok of telecommunicationsequipment

Yai Kaew Co., Ltd. 18 Telecom Tower Real estate investment THB 10 millionRatchadaphisek Road and land acquisition for RCUHuai Khwang, Bangkok 10320

U-Net Co., Ltd. 18 Telecom Tower Supplier of cable TV THB 5 millionRatchadaphisek Road accessories andHuai Khwang, Bangkok 10320 telecommunications equipment

TA Orient Telecom 3/F, Hing Yip Commercial Centre, Investment in HK$ 117 millionInvestment Co., Ltd. 272 Des Voeux Road C., telecommunication projects

Hong Kong in PR China

Telecom International China P.O. Box 71, Craigmuir Investment in HK$ 78Co., Ltd. Chambers, Road Town, telecommunication projects

Tortola, British Virgin Islands in PR China

Telecom Asia (China) Co., Ltd. P.O. Box 71, Craigmuir Investment in HK$ 78Chambers, Road Town, telecommunication projectsTortola, British Virgin Islands in PR China

Asia Multimedia Co., Ltd. 18 Telecom Tower Multimedia network service THB 6,127 millionRatchadaphisek Road providerHuai Khwang, Bangkok 10320

Asia DBS PLC. 18 Telecom Tower DBS system operator THB 100 millionRatchadaphisek RoadHuai Khwang, Bangkok 10320

Wire & Wireless Co., Ltd. 719 KPN Tower, 9/F Dropwire and outside plant THB 100 millionRama 9 Road, Bangkapi installation contractorHuai Khwang, Bangkok

Asia Infonet Co., Ltd. 1 Fortune Town Bldg., Internet service provider THB 15 million17/F Ratchadaphisek RoadDin-Dang, Bangkok

Telecom Equipment 111/2 Moo 2 Telecom equipment THB 24 millionManufacturing Co., Ltd. Nikom Pattana Subdistrict manufacturer

Nikom Pattana DistrictRayong Province

United Broadcasting 118/1 Tipco Building Cable TV service provider THB 7,424 millionCorporation PLC. Rama 6 Road, Phayathai,

Bangkok

Chongqing Communication 140 Daping Zhengjie Distributor of RMB 292 millionEquipment Co., Ltd. Chongqing, PR China telecommunications equipment

Public Radio Network 900/9 SVOA Tower Building Public radio network THB 10 millionCo., Ltd. Rama 3 Road, Bangpongpang service provider

Yannawa, Bangkok

NEC Communication Systems 9/25 Moo 5 Phaholyothin Road, Manufacturer of digital THB 343 million(Thailand) Co., Ltd. Klong Luang District switching equipment


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Pathumthani Province

N.T.U. (Thailand) Limited 518/5 Maneeya Center Building, Telecommunication THB 7.5 million6th Floor, Ploenchit Road,Lum Pinee, Pratumwan,Bangkok

Bangkok Inter Teletech 986 U Chu Liang Building, Telecommunication THB 21,000 millionCo., Ltd. 14th Floor, Unit D 1,

Rama IV Road, Silom,Bangrak, Bangkok

TA Orange Co., Ltd. 986 U Chu Liang Building, Mobile - Phone Service THB 22,100 million4th - 5th Floors, 11-15th Floors,Rama IV Road,Silom, Bangrak, Bangkok

Thai Smart Card Co., Ltd. 283 Silom Road, Bangrak, Central Service Bureau for THB 395 millionBangkok clearing electronic payment

transactions

Asia Remanufacturing 102,15th Floor, Modification, repair and THB 5.6 millionIndustries Co., Ltd. Na Ranong Road, maintenance services of

Klongtoey, Bangkok equipment for governmentaloffices and private enterprises


ReferencesRegistrar :

Thailand Securities Depository Co., Ltd.62 Stock Exchange of Thailand Building, 4, 6, 7/FRatchadaphisek Road, Khet KlongtoeyBangkok 10110Telephone : (662) 229-2800, (662) 654-5599Fax : (662) 359-1262-63

Auditor :Mr. Somchai Jinnovart(CPA Registration No. 3271) and/orMr. Kajornkiet Aroonpirodkul(CPA Registration No. 3445) and/orMrs. Nattaporn Phan-Udom(CPA Registration No. 3430)PricewaterhouseCoopers ABAS Ltd.15th Floor, Bangkok City Tower179/74-80 South Sathorn Road, Khet SathornBangkok 10120Telephone : (662) 286-9999, (662) 344-1000Fax : (662) 286-5050

Debenture Registrar/ :Debentureholders’Representative

DBS Thai Danu Bank Public Company Limited393 Silom Road, Bangrak, Bangkok 10500Telephone : (662) 233-9160-79 (662) 230-5000Fax : (662) 236-7939

Legal Counsel :of the Issuer

Minter Ellison (Thailand) Ltd.17th Floor Tonson Tower Building900 Ploenchit Road, Lumpini, PatumwanBangkok 10330 (Thailand)Telephone : (662) 689-3333Fax : (662) 689-3300

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Investment Structure

99.99% K.I.N. (Thailand) Co., Ltd.

99.99% Asianet Corporation Limited

99.99% Telecom Training and Development Co., Ltd.

99.99% Tele Engineering andServices Co., Ltd.

99.99% Yai Kaew Co., Ltd.

99.99% U-Net Co., Ltd.

99.99% Telecom International Co., Ltd.

99.99% Telecom International China Co., Ltd.

99.99% Telecom Asia (China) Co., Ltd.

99.99% TA Orient Telecom Investment Co., Ltd.

38.21% Chongqing CommunicationEquipment Co., Ltd.

100% K.I.N. (Thailand) Co., Ltd. (BVI)

89.99% Asia DBS Public Company Limited

87.50% Wire & Wireless Co., Ltd.

20.00% Asia Remanufacturing IndustriesCompany Limited

59.99% Telecom EquipmentManufacturing Co., Ltd.

40.96% United Broadcasting CorporationPublic Company Limited

32.00% Public Radio Network Co., Ltd.

16.67% N.T.U. (Thailand) Limited

9.62% NEC Communication System(Thailand) Co., Ltd.

Other (Percentage of holding not more than 10)

99.99% W7 Rental Services

Limited

99.99% Nilubon Co., Ltd.

INVESTMENT STRUCTURE(As at 31 December 2002)

TelecomAsia Corporation Public Company LimitedPersonal Communication Telephone, Value Added Service

and Digital Data Network

99.99%

Telecom Holding Co., Ltd.

10.76%

Thai Smart Card Company Limited

43.86%

Bangkok Inter Teletech Co., Ltd.

The Operator of 1800 MHz

Cellular Telephone Services

Service Multimedia Network

Provider

Personal Communication

Telephone

65.00%

Asia Infonet Co., Ltd.

99.81%

TA Orange Co., Ltd.

90.45%

Asia multimedia Co., Ltd.

99.99%

Asia Wireless Communication

Co., Ltd.

Internet Service Other Business

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Risk

FactorsRisk Related to Operations

Relationship with the TOT and the CATcreates a number of business risks that areoutside of the Company’s ability to control.

The Company operates a number of telecommunications-related businesses under concessions granted by the TOTCorporation Public Company Limited (“TOT”) and theCommunications Authority of Thailand (“CAT”). The TOT andCAT, also oversee the Company’s compliance with the terms ofeach concession agreement. Differences of interpretation withthe TOT and the CAT over the material terms of a concessionagreement could impair the Company’s ability to conduct thebusiness or otherwise deny the Company its rights.

The Company currently depends on the operation of aconcession-based, wireline telephone network for a significantportion of the Company’s operating revenues. The concessionexpires in 2017. In certain circumstances if the Concession wascancelled, the Company would no longer be able to conduct asubstantial portion of its business.

Under the revenue-sharing provisions of the Concession,TOT collects and retains a portion of the Company’s revenuesand can withhold or delay the forwarding of these payments tothe Company or offset obligations it believes the Company owesto it.

As a provider of wireline services in the BangkokMetropolitan Area (“BMA”), the TOT is simultaneously theCompany’s regulator and a direct competitor. At times, the TOT’sinterests may be different from the Company’s. As a result, theTOT is able to affect the Company’s ability to provide services tocustomers.

Regulatory changes in the Thaitelecommunications industry maysignificantly affect the Company’s operatingenvironment.

The Thai telecommunications industry is heavilyregulated and supervised by the Government. However, tofulfil its commitment to the World Trade Organization, the ThaiGovernment has announced plans to liberalize the industrybefore 2006. Liberalisation could materially affect theCompany’s operations.

Increased competition in Thailand has hadand may continue to have an adverse effecton the Company’s results of operations andfinancial conditions.

The telecommunications sector in Thailand is rapidlyevolving. The Company faces increasing competition fromcellular operators and the TOT. The Company expects highcompetition to be remained in the future.

The telecommunications industry is subject torapid technological change.

Emerging and future technological changes mayadversely affect the viability or competitiveness of the Company’s businesses. Furthermore, changing market demand mayrequire the Company to adopt new technologies that couldrender many of the technologies it is currently implementingless competitive or obsolete. Substantial capital expenditure andaccess to related or enabling technologies may be required tointegrate new and existing technology into the existing networkinfrastructure.

Risk Related to Financial Situation

The Company’s operations are restricted byvarious financial agreements.

Agreements covering long-term debt and restructureddebt contain conditions and limitations on the Company’soperations. These may force the Company to pursue less thanoptimal business strategies or forego business arrangementsthat could be financially advantageous to Company andshareholders.

Repayment of the Company’s indebtednesscould be accelerated without its control.

The Company’s restructuring agreements permit itscreditors to accelerate the repayment of its securedindebtedness if :

TOT materially breaches its concession agreement withthe Company;

Principal shareholders are unable to direct theCompany’s management; or

In any of these events, the Company’s creditors couldrequest immediate repayment of the indebtedness to them.

Subject to exchange rate fluctuations

Any further depreciation of the Thai Baht againstforeign currencies, principally the Japanese Yen, would increasethe Company’s outstanding foreign debt and related interestexpenses, as well as the amount of Baht revenue required tomeet capital expenditure plans.

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ShareholdersTelecomAsia Corporation Public Company Limited

List of Major Shareholders1

(as of 24th February 2003)

NAME No. of Shares % of Total(Million Shares) Issued Shares

1. CP Group2 1,579.57 42.75

2. NYNEX NETWORK SYSTEMS (THAILAND) COMPANY 404.35 10.94

3. THAI TRUST FUND3 357.99 9.69

4. KREDITANSTALT FüR WIEDERAUFBAU (“KfW”) 341.75 9.25

5. CLEARSTREAM NOMINEES LTD 69.70 1.89

6. HSBC SECURITIES (SINGAPORE) PTE LIMITED 38.79 1.05

7. THANA HOLDING CO., LTD. 34.00 0.92

8. STATE STREET BANK AND TRUST COMPANY 28.45 0.77

9. GOVERNMENT PENSION FUND 20.18 0.55

10. THAI NVDR CO., LTD. 19.14 0.52

1 Including common shares and preferred shares.2 There are Charoen Pokphand Group Co., Ltd. and its related persons, namely, Bangkok Telecom Holding Company Limited, Charoen Pokphand Foods Public Company Limited, Bangkok ProduceMerchandising Public Company Limited, Bangkok Agro-Industrial Products Public Company Limited, Charoen Pokphand Northeastern Public Company Limited, Kasetphand Industry Company Limited,Charoen Pokphand Enterprise Company Limited, Unique Network Company Limited, Wide Broad Cast Company Limited, C.P. Interfood (Thailand) Company Limited, Star Marketing Company Limitedand Advance Pharma Company Limited3 Shares, in Thai Trust Fund, are preferred shares of KfW, which have no right to vote.

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ManagementManagement 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 2002, the Board of Directors comprises of 23 directors who are (a) Executive Directors (b) Non-ExecutiveDirectors including directors representing the creditors, and (c) Independent Directors. The Board of Directors of the Company is asfollows :

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 and Executive 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. John J. Lack Director

Remark : 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

Authority and responsibility of the Board of Directors

The Board of Directors is granted the authority and duty to manage the Company in compliance with the objectives andarticles of association of the Company and the resolutions of the shareholders meetings. With regard to the management of theCompany, the Board of Directors has authority to make any decision related to the Company’s regular operation except for the matterrequired the approval of the shareholders meeting as specified by law. In addition, the Board of Directors may grant the authorizationto one director or more or any other person to perform any acts on its behalf, however, any decision on major operations such asmajor investment and major procurement of loan, the management team shall propose the said transactions to the Board of Directorsfor approval.

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Authorized Directors

Mr.Supachai Chearavanont or Mr. Stephen G. Parker or Mr. Vichaow Rakphongphairoj 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 Compensation and Nominating Committee will assist the Board of Directors in reviewing and proposing the

compensation 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 shareholder shall appoint the directors by a majority vote.

All Shareholders have the rights to appoint directors. Each shareholder shall have one right to vote per one share and shall appoint

one director or more, provided that he cannot divide his votes to any person to any extent.

Audit Committee

As of 31st December 2002, the Audit Committee of the Company consists 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 Company’s 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

Act, Rules and Regulations of the Stock Exchange of Thailand 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 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.

Independent Committee

The Independent Committee will be 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 (with the alternate of

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

4. Mr. Klaus Tuengeler KfW-nominated Director (with the alternate of

Mr. Andreas Klocke or Mr. Claus Stadler)

5. Mr. Supachai Chearavanont CP-nominated Director

6. Mr. Athueck Asvanund CP-nominated Director

In case any major shareholder having a conflict of interest, Directors nominated by the said shareholder will abstain from the

Independent Committee Meeting.

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Compensation and Nominating Committee

The Compensation and Nominating Committee will be responsible for determining the compensation and considering the

nomination of the directors of the Company comprising 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 will assist the Company in reviewing and monitoring the financial management of the Company

consisting 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 or Mr. Andreas Klocke

5. Mr. Umroong Sanphasitvong

Corporate Governance Committee

Corporate Governance Committee will be responsible for setting policy on Corporate Governance of the Company. The

Committee consists of the following members :

1. Dr. Ajva Taulanada

2. Mr. Vitthya Vejjajiva

3. Mr. Claus Stadler

4. Mr. Stephen G. Parker

5. Mr. Athueck Asvanund

6. Mr. Supachai Chearavanont

7. Mr. William E. Harris

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Executive Officers

As of 31st December 2002, the executive officers of the Company are as follows :

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

2. Mr. Vichaow Rakphongphairoj Managing Director

3. Mr. Chatchaval Jiaravanon Director and Executive Director

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

5. Mr. William E. Harris Chief Financial Officer

Remark : 1. Executive Officers mean Directors, President or persons with managerial authority who are among the top four ranking

individuals in the Company, after the President, and all other persons who occupy a position equivalent to such a top

four ranking individual.

2. Additional information related to the Company’s Executive Officers is as follows:

a) History of Offence : none

b) Debt owned to the Company or its Subsidiaries : none

c) Material Connected Transactions : none

Authority and Responsibility of the President

The President has the authority to supervise and carry on the Company’s day-to-day business, and in case any matter/transaction is important, the President will submit said matter/ transaction to the independent directors and/or the relevantCommittee (such as the Finance Committee, the Compensation and Nominating Committee or the Independent Committee) and/orthe Board of Directors, as the case may be, to approve said matter/ transaction. In addition, the President has no authority to approveany matter/ transaction that he or the person who may have a conflict of interest or any other form of conflict, which the Companyor the Company’s subsidiaries have or propose to enter into, with the Company or the Company’s subsidiaries. In such case, suchmatter/ transaction shall have to be approved by the independent directors and/or the relevant Committee and/or the Board ofDirectors, as the case may be.

Remuneration for the Company’s Directors and the Executive Officers

Remuneration of the Directors in the year 2002 is as follows :

No. of Directors Compensation Amount (Baht)

23 Salary -

Directors’ Remuneration 41,611,000.00

Other -

Total 41,611,000.00

Remuneration of the Executive Officers in the 2002 is as follows :

No. of Executive Officers Compensation Amount (Baht)

5 Salary 70,230,377.00Bonus 7,306,760.00Other 24,324,240.77

Total 101,861,377.77

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Other Compensation

1. Employee Stock Option Plan 2002

The Annual General Shareholders Meeting of the Company for the year 2002 held on April 12, 2002 has approved theissuance and the offer of non-transferable warrants to purchase the Company’s ordinary shares to certain Directors and employees atexecutive level totaling not exceeding 35 persons. Summary details are as follows:

Total Outstanding : 37,131,597 unitsNumber of WarrantsissuedMaturity : 5 years from the issuance date

Exercise Period : Each Warrant Holder received 3 separate warrant certificates. Each certificate represented 1/3 of thewhole amount of warrants allotted and shall be exercisable for subscribing ordinary shares as follow:The 1st Certificate: Warrant Holders shall be starting exercising from 14th June 2003 until its expiration.The 2nd Certificate: Warrant Holders shall be starting exercising from 14th June 2004 until its expiration.

The 3rd Certificate: Warrant Holders shall be starting exercising from 14th June 2005 until its expiration.Exercise Ratio : One unit of warrants entitles to purchase one ordinary share at Baht 10.60

2. Employee Stock Option Plan 2000

The Annual General Shareholders Meeting of the Company for the year 2000 held on April 27, 2000 has approved theissuance and offer of non-transferable warrants to purchase the Company’s ordinary shares to certain Directors and employees at

executive level totaling not exceeding 35 persons. Summary details are as follows:

Total Outstanding : 36,995,000 unitsNumber of WarrantsissuedMaturity : 10 years from the issuance date

Exercise Period : (a) Warrant Type 1 : Each Warrant Holder received 3 separate warrant certificates. Eachcertificate represented 1/3 of the whole amount of warrants allotted and is exercisable forsubscribing ordinary shares starting from June 30, 2000, 2001 and 2002 respectively.

(b) Warrant Type 2 : Each Warrant Holder received 3 separate warrant certificates. Eachcertificate 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 warrants entitles to purchase one ordinary share at Baht 10.60

Insider Trading Policy

The Company is currently in compliance with applicable laws to monitor and prevent the personal use of confidentialinformation 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 shall access or receive said information are required to reporttheir trading of shares in the Company pursuant to the Regulations of the Stock Exchange of Thailand and the Office of Securitiesand Exchange Commission Regarding Rules, Conditions, and Procedures Governing the Preparation and Disclosure of Reportson Securities Holdings, in order to prevent insider trading using internal information, and to ensure that the trading of shares by“insiders” of 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 Controls

After an assessment of the Company’s internal controls with the Audit Committee, the Board of Directors has an opinion thatthe Company’s internal controls are adequate and suitable. Moreover, the external auditor has an opinion that they do not encounterany matter involving internal controls and its operation which are considered to be material weaknesses that could have a materialeffect on the financial statements. The Board also emphasized the development of the Company’s Corporate Governance in order tohelp improve the internal controls within the Company on a continuing basis.

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Personnel

As of 31st December 2002, the total number of employees is as follows :

Work Group and Classification No. of Employee

Management 58Service Area & Network Operation 1,965Marketing & Sales 370Information Technology 349Customer Services 772Finance & Accounting 216Supporting 281

Total 4,011

Source : the Company

Remuneration for the Company’s Employees

Remuneration

In 2002, the total remuneration for employees is approximately Baht 1,820 million which consists of wages, salaries, bonus,overtime, compensation, commission, provident fund and others. (please see details in the note 26 to the financial statements)

Other Compensation & Benefits

- Health Plans and Employee Welfare

• In-house clinic• Annual Medical Check-up• New Employees’ 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 contributes 3% of monthly salary (If any employee’s salary is more than Baht15,000 a month, it was calculated only Baht 15,000 as the basic of funding). Said employee will gain special benefitsfrom the Fund to have medical treatment at designated hospitals.

- Paid Annual Leave

In the case that the employee is unable to take annual leave, annual leave can be accumulated to the subsequent yearsubject to the approval of an authorized superior.

• Employees at the level of Vice President and upwards can take annual leave for 15 days and can accumulate remainingannual leave to the subsequent year, but can carry a balance of no more than 30 days. If the accumulated annual leavebalance exceeds 30 days, the Company will compensate for the excess.

• Employees at the level lower than Vice President can take annual leave for 10 days and can accumulate remainingannual leave to the subsequent year, but can carry a balance of no more than 20 days. If the accumulated annual leavebalance 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 or early retirement by agreement of company and employee,

severance pay will be paid accordingly the labor law.

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Employee Training and Development

Employee Training and Development Policy

To encourage all employees to develop their knowledge, skills and attitude to be able to perform their jobs effectively and tobe more competent for career advancement, which assists the Company in achieving its corporate strategy and goals. At present, theCompany provides employees with various training and development programs, such as Core Competency Program, FunctionalCompetency Program, TA Core Business Program, etc.

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Name Position Age TA Share Ownership Experience

(year) (31st December 2002)

DIRECTORS’ INFORMATION (AS OF 31ST DECEMBER 2002)

Mr. Narong Independent 75 10,000 shares 1998-Present - Independent Director

Srisa-an Director TelecomAsia Corporation Plc.Present - Chairman

Eastern Seaboard Industrial

Estate (Rayong) Co., Ltd.- Chairman

Advanced Agro Plc.- Chairman of the Executive Board

Beer Thai (1991) Co., Ltd.

- Vice Chairman and Chairman ofthe Executive Board

Siam Food Products Plc.- Vice Chairman

General Tobacco Co., Ltd.

- Vice ChairmanBerli Jucker Plc.

- Executive Director

Com-link Co., Ltd.

Mr. Vitthya Independent Director 66 - 1998-Present - Independent Director and

Vejjajiva and Chairman of Audit Committee,Chairman of TelecomAsia Corporation Plc.

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

and its subsidiaries1991-1992 - Permanent Secretary of the

Ministry of Foreign Affairs1988 - Ambassador Extraordinary and

Plenipotentiary of the

United States of America1984 - Ambassador Extraordinary and

Plenipotentiary of Belgiumand the European Community

1981 - Ambassador Extraordinary and

Plenipotentiary of Canada1979 - Director - General of

Department of Economic Affairs

Dr. Kosol Independent Director 64 - 1999- Present - Member of Audit Committee,Petchsuwan and Member of TelecomAsia Corporation Plc.

Audit Committee 1999- Present - PresidentThe Telecommunications

Association of Thailand

1997- Present - Independent Director,TelecomAsia Corporation Plc.

2000-2001 - Chairman, The AeronauticalRadio of Thailand Limited

1997-2001 - Director,

The Press Council of Thailand1998-2000 - Independent Director and

Member of Audit Committee,PTT Exploration and Production

Plc.

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Mr. Joti Independent Director 60 - 1999-Present - Independent Director and

Bhokavanij and member of the

Member of Audit Committee

Audit Committee TelecomAsia Corporation Plc.

Company Limited

2000-2001 - Executive Chairman

TISCO Finance Plc.

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 63 - 1989-Present - Chairman

Chearavanont TelecomAsia Corporation Plc.

- 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 68 150,000 shares 1993- Present - Vice Chairman,

Jiaravanon TelecomAsia Corporation Plc.

- Executive Chairman,


Co., Ltd.

Dr. Ajva Vice Chairman 65 - Present - Vice Chairman,

Taulananda TelecomAsia Corporation Plc.

- Vice Chairman


Co., Ltd.

- Chairman

The Thai Chamber of Commerce

and Board of Trade of Thailand

1993-1999 - Director and President

TelecomAsia Corporation Plc.

1991-1992 - Deputy Minister, Ministry of

Agriculture and Cooperatives

Mr. Chaleo Vice Chairman 74 3,486,900 shares 1992- Present - Vice Chairman,

Souvannakitti TelecomAsia Corporation Plc.

- Director


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*Authorized Signatory

Mr. Athueck Vice Chairman 51 - 1997-Present - DirectorAsvanund* and TelecomAsia Corporation Plc.

Group General Counsel - Group General Counsel,TelecomAsia Corporation Plc.

- Director,Telecom Holding Co., Ltd.

- Director, Asia Multimedia Co., Ltd.- Director, CP Seven Eleven

Corporation Plc.- Director, United Broadcasting

Corporation Plc.1978-1997 - Baker & McKenzie

Mr. Supachai Director, President 35 1,240,000 shares 1999-Present - Director, President andChearavanont* and Chief Executive Officer

Chief Executive Officer TelecomAsia Corporation Plc.1992- 1999 - Director and Senior Executive

Vice PresidentTelecomAsia Corporation Plc.

Mr. Soopakij Director 38 - Present - Director,Chearavanont* TelecomAsia Corporation Plc.

2000-Present - Executive Chairman,Telecom Holding Co., Ltd.

1998-Present - ChairmanUnited BroadcastingCorporation Plc.

1991-Present - ChairmanAT&T Network Technology(Thailand) Co., Ltd.

Mr. Chatchaval Director 40 - Present - Director,Jiaravanon* and TelecomAsia Corporation Plc.

Executive Director 2001-Present - Director and Director ofAudit CommitteeTicon Industrial ConnectionPublic Company Limited

2000-Present - President and C.E.O.,Telecom Holding Co., Ltd.

- Independent Director,Cal-Comp Electronics (Thailand)Plc.

1998-Present - Executive Chairman,Cambodia Mobile TelephoneCo., Ltd.

1997-Present - President and C.E.O.,Asia Multimedia Co., Ltd.

- President,Asianet Corporation Co., Ltd.

- President, Asia Infonet Co., Ltd.1990-Present - Director, Metro Machinery Plc.

- Director, Thai Kodama Co., Ltd.

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* Authorized Signatory

Mr. Vichaow Director 45 150,000 shares 2000-Present - Managing Director

Rakphongphairoj* and TelecomAsia Corporation Plc.

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


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

Information Technology


1996-1997 - Region Director,

Bangkok-Southeast Region



Bangkok-West Region


Mr. Umroong Director 49 384,000 shares Present - Deputy Group CFO

Sanphasitvong Charoen Pokphand Group

Co., Ltd.

- Director, C.P. Seven Eleven Plc.

- Director, Vinythai Plc.

Mr. Daniel C.Petri Director 54 - 2002-Present - Group President - International

2000-2002 - President - International,

Europe and Asia,

Verizon Communications

- Director,


1998-2000 - President - International,

Bell Atlantic Corp.

1995-1998 - President - Global Systems

Bell Atlantic/NYNEX

Mr. Stephen G. Director 56 - Present - Director,

Parker* TelecomAsia Corporation. Plc.

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 Director 49 - 1998- Present - Senior Vice President

Heims Export and Project Finance, KfW

1978-1998 - Export Finance, KfW

Mr. Klaus Director 61 - Present - First Vice President

Tuengeler Export and Project Finance

Telecommunications,

Natural Resources, KfW

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Ms. Gabriele Director 42 - Present - Vice President,

Gunia Asset Securitisation, KfW

2001-2002 - Vice President,

Investor Relations, KfW

1996-2001 - Export and Project Finance

Telecommunications, KfW

1994-1995 - Delegation to the Ministry of

Finance, Bonn

1988-1994 - Position in the areas of

Secretariat of Domestic

and European Credit Affairs,

Export and Project Finance, KfW

Mr. Claus Director 45 - Present - Deputy General Counsel

Stadler Head of the Legal Department

(Frankfurt), KfW

Mr. Andreas Director 46 - Present - Head of KfW’s Southeast Asia

Klocke Regional office in Bangkok

in Charge of KfW Affairs in

Thailand and Southeast

Asia Region

Mr. Harald Link Director 47 50,000 shares 1997- Present - Managing Partner,

B. Grimm & Co. R.O.P.

Mr. John J. Lack Director 46 - 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

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EXECUTIVE OFFICERS’ INFORMATION (AS OF 31ST DECEMBER 2002)

Mr. Supachai Director, President 35 1,240,000 shares 1999-Present - Director, President and

Chearavanont and Chief Executive Officer

Chief Executive Officer TelecomAsia Corporation Plc.

1992- 1999 - Director and Senior Executive

Vice President


Mr. Vichaow Director 45 150,000 shares 2000- Present - Managing Director

Rakphongphairoj and TelecomAsia Corporation Plc.

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


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

Information Technology


1996-1997 - Region Director

Bangkok-Southeast Region



Bangkok-West Region


Mr. Chatchaval Director 40 - Present - Director

Jiaravanon and TelecomAsia Corporation Plc.

Executive Director 2001- Present - Director and Director of

Audit Committee

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,

Asianet Corporation Co., Ltd.

- President, Asia Infonet Co., Ltd.

1990-Present - Director, Metro Machinery Plc.

- Director, Thai Kodama Co., Ltd.

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Mr. Athueck Vice Chairman 51 - 1997-Present - Director,Asvanund and TelecomAsia Corporation Plc.

Group General Counsel - Group General Counsel,TelecomAsia Corporation Plc.

- Director,Telecom Holding Co., Ltd.

- Director, Asia Multimedia Co., Ltd.- Director, CP Seven Eleven

Corporation Plc.- Director, United Broadcasting

Corporation Plc.

1978-1997 - Baker & McKenzie

Mr. William E. Chief Financial Officer 41 100,000 shares Present - Chief Financial OfficerHarris 1998-2000 - Executive Vice President -

Corporate FinanceTelecomAsia Corporation Plc.

1993-1998 - Director, Credit Policy,Verizon Communications,Philadelphia

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The Company Directors’ Shareholding in TA’s affiliates as of 31st December 2002 are as follows :

Director Company Change in 2002 Outstanding

Share(s)

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

Chearavanont Bangkok Inter Teletech Co., Ltd. - 1

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

Souvannakitti Telecom International Co., Ltd. - 1

Telecom Equipment Manufacturing Co., Ltd. - 1

Mr. Vichoaw Telecom International Co., Ltd. 1 1

Rakphongphairoj Telecom Equipment Manufacturing Co., Ltd. - 1

U-Net Co., Ltd. - 1

Asianet Corporation Co., Ltd. - 1

(Formerly named Interactive Media Services Co., Ltd.)

Asia DBS Public Company Limited - 1

Asia Infonet Co., Ltd. - 1

Asia Wireless Communication Co., Ltd. - 1

Asia Multimedia Co., Ltd. - 1

K.I.N. (Thailand) Co., Ltd. - 1

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

Telecom Training and Development Co., Ltd. - 1


U-Net Co., Ltd. - 1







Yai Kaew Co., Ltd. 1 1

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

Jiaravanon Telecom International Co., Ltd. - 1


Wire & Wireless Co., Ltd. - 5

U-Net Co., Ltd. - 1







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

Chearavanont Telecom Equipment Manufacturing Co., Ltd. - 1

U-Net Co., Ltd. - 1







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

Chearavanont Telecom International Co., Ltd. - 1

Telecom Training and Development Co., Ltd. - 1


Wire & Wireless Co., Ltd. - 5

U-Net Co., Ltd. - 1







Director Company Change in 2002 Outstanding

Share (s)

The Company Directors’ Shareholding in TA’s affiliates as of 31st December 2002 are as follows :

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Connected TransactionsDuring the year 2002, the Group were carried out the transactions with subsidiaries, associates, joint ventures and related

companies as disclosed in Note 4 Note 9 Note 12 Note 17 Note 22 and Note 31 to financial statements for year ended 31 December2002.

Measures and Procedures for Approving the Entering into of Connected Transactions

In addition to the Company’s measures and procedures for approving the entering into the connected transactions incompliance with the Rules and Regulations of the office of Securities and Exchange Commission (“SEC”) and the Stock Exchange ofThailand (“SET”), and the provisions of the Public Companies Act, the Company must comply with the terms and conditions of theSecurity Agreement Amendment and Restatement Agreement (the “SAARA”) which is the principal debt restructuring agreementexecuted between the Company and its Secured Creditors, and related agreements. The key terms and conditions in the SAARA andrelated agreements with regard to connected transactions specifies that the Company shall not enter into any contract, agreement, orarrangement with any affiliates other than on the arms’length open market terms. In any event the Company wishes to enter into anycontract which creates material payment with the Company’s affiliates, Telecom Holding Company Limited or any affiliate thereof, TAOrange Company Limited, Charoen Pokphand Group Company Limited or group of companies or affiliate thereof, Nynex NetworkSystems (Thailand) Company Limited or group of companies or affiliate thereof, any individual not relating to the authorized business,any individual relating to the PCT business and other relevant businesses, the Company shall disclose said transaction in its annualbudget. Nonetheless, the Secured Creditors of the Company shall have right to make certain objection on the Company’s annualbudget. Apart from the obligations under the SAARA, the terms and conditions of the Shareholders Agreement executed withKreditanstalt für Wiederaufbau dated 22nd December 1999 specifies that the Company shall have to disclose the entering into anyconnected 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 majorshareholders of the Company, the Company shall propose to the Board of Directors to appoint the Committee comprising of theindependent 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 itsconsideration and negotiation process, the Committee is authorized to appoint an independent financial advisor, an independent legaladvisor and other advisors to assist, as it deems appropriate. The executive directors appointed by interested shareholders shall alsorefrain from participating in said connected transaction. In the event the Committee approves said connected transaction, it will thenbe proposed to the Board of Directors’ meeting (the directors nominated by interested major shareholders shall abstain from voting.)After the approval of the Board of Directors, if said transaction also required shareholders’ approval, it will then be proposed to theshareholders’ meeting for approval with at least three-fourths of the vote of the shareholders present and entitled to vote at suchmeeting 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 andregulations to implement an internal guideline for connected transactions by carrying on the comparative study of the connectedtransactions guidelines from various foreign institutions to enhance transparency and create the parallel understanding with theforeign analysts and investors. With regard to future connected transactions, the Company anticipates that there will be theconnected transactions under the ordinary course of business of the Company with its affiliates and the Company shall proceed suchtransactions in a transparent manner pursuant to the good corporate governance policy of the Company as well as all relevantregulations.

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Report of The AuditCommittee

By virtue of a resolution of the Board of Directors of TelecomAsia Corporation Public Company Limited(the ‘Company’) passed at its meeting No.13/1999 held on 22nd December, 1999 the Audit Committee was appointed to performduties and discharge responsibilities under the charter for the Audit Committee. During the year 2002 the Audit Committee carriedout the following work:

1. held committee meetings, totalling 10 times during the year 2002 in order to discharge its functions as assigned by theBoard of Directors. Management was invited to participate in some of the meetings to provide extra information in certainagendas. The Audit Committee reported its activities to the Board of Directors on a quarterly basis;

2. considered and proposed the appointment and remuneration of PricewaterhouseCoopers ABAS Limited as theCompany’s external auditor for the year 2002;

3. reviewed quarterly and annually financial reports of the Company and its subsidiaries to ensure correctness, reliability andadequacy of information disclosed, reflecting good corporate governance;

4. acknowledged the Audit Plan and external auditor’s findings and provided recommendations;

5. regularly reviewed the Company’s and its subsidiaries’ practices relating to connected transactions to ensure compliancewith the regulations of the Securities and Exchange Commission and the Stock Exchange of Thailand;

6. considered the Internal Audit Plan, acknowledged the findings, and submitted suggestions on actions to be taken by themanagement;

7. closely monitored the work progress of Internal Auditing Department in order to enhance effectiveness of the internalaudit function and continuously ensured that the Company improved its internal controls system to enhance efficiencyand effectiveness;

Towards this end, the Management upon the recommendation of the Audit Committee engagedPricewaterhouseCoopers Risk Assessment Services Limited to provide consulting services in enhancing the effectiveness ofthe internal audit function of the Company, which will result in improved internal controls throughout the Company. Inthis regard, the Audit Committee has been closely monitoring the progress of the consulting services provided by theConsulting Company, especially in risk assessment on which the Internal Audit Plan will be based.

(Mr. Vitthya Vejjajiva)

Chairman of the Audit Committee

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Management’s

Discussion and AnalysisOverview

2002 saw a number of improvements in TelecomAsia’s financial and operational results. Revenue, EBITDA (Earnings BeforeInterest,Tax, Depreciation and Amortisation) and net income from ongoing operations posted accelerated growth compared to 2001.Revenue grew by a record 24.9 percent compared with 6.4 percent the previous year. The major contributor to growth was TAOrange, which started to generate revenues from the first quarter of 2002. In addition, there was significant growth in revenue fromthe Digital Data Network (DDN) and other business. Revenues from core businesses, excluding TA Orange, grew by 11.6 percentcompared with growth of 6.5 percent in 2001.

Consolidated EBITDA rose by 8.4 percent in 2002, compared with a decline of 5.4 percent in 2001. Net loss from ongoingoperations, excluding TA Orange, decreased 65.5 percent to Baht 1.2 billion in the year under review from Baht 3.4 billion theprevious year.

Revenue growth pushed up the year-end consolidated EBITDA margin (excluding TA Orange) from 49.5 in 2001 to51.0 percent, reflecting continued successful cost control in core operations. When TA Orange is included, the EBITDA margindecreased from 43.7 percent in 2001 to 37.9 percent due to a higher negative EBITDA contribution from TA Orange as the Companystarted to consolidate TA Orange’s results for a full year in 2002.

Core wireline and data businesses approached the break-even point with steady growth in revenue and improved marginswhile providing strong cash flows - the springboard for TelecomAsia to reduce debt and to provide for future growth. Net loss fromongoing operations continued to decrease to Baht 107 million in 2002, compared with a loss of Baht 1.4 billion in 2001. Afterfunding capital expenditure, free cash flows almost tripled to Baht 4.3 billion, enabling the Company to prepay its debts by Baht 1.1billion.

The Company’s balance sheet improved significantly with a successful bond offering, the settlement of yen-denominatedobligation and other measures. The successful placement of Baht 18.5 billion in new debentures, the second largest offering ofcorporate debentures in Thai history, and new borrowing of Baht 1.1 billion from International Finance Corporation (IFC) reduced USdollar denominated debt by $US 453 million to $US 78 million.

The successful settlement of Yen-denominated Deferred Payment Notes, amounting to Baht 3.8 billion resulted in a one-offgain of Baht 3.1 billion in the fourth quarter of 2002. As a result of the successful balance sheet improvement program, theproportion of foreign denominated debt decreased from 55 percent in 2001 to 22 percent. The net debt/EBITDA ratio, excluding TAOrange, was lowered to 5.2 times in 2002 from 6.6 times in 2001.

It was another strong year for the core fixed line business. TelecomAsia gained 273,676 net additions, 78percent share of market growth in the Bangkok metropolitan area in 2002. This increased total billable subscribers to more than 2.0million and secured the Company’s number one position in the BMA with 56 percent market share.

TA Orange successfully launched its cellular service to the market in March 2002, gaining 1.3 million subscribers in its first ninemonths of operation and exceeding its original target. TA Orange contributed higher revenues and less negative EBITDA to theCompany’s consolidated results for three consecutive quarters following its launch.

The Personal Communication Telephone (PCT) subscriber base declined by four percent as a result of intense competitionwithin the wireless business. The Company, therefore, has developed a four-part plan to revitalize the PCT business by reducingfinancial and regulatory constraints, improving the network signal quality and range, and marketing products and services to attractand retain medium and high value customers.

The Company successfully grew its DDN business, with 138 percent growth in revenue and 56 percent growth in circuits.About half of the revenue growth was generated from wholesale activity with carriers other than TA Orange - putting this business ona sustainable footing for future growth.

Internet and Broadband business grew strongly with 121 percent and 140 percent growth respectively in subscribers. TelecomAsialaunched its broadband service a year and a half ago and, to date, has captured approximately 50 percent market share. Broadbandservices offered by the Company include ADSL, Cable Modem, Internet Protocal Access Service (IPAS) and TA Metronet, the firstfiber- to-the- building Service in Thailand. The Company also successfully established a broadband community that brings together 21leading providers of information, entertainment and on-line games to jointly develop broadband content. With high ARPU, comparedto core fixed line telephone services, and rapid growth in subscriber numbers, broadband will position TelecomAsia for future growth.

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Consolidated Results of Operations

The results of operations are discussed on a normalized basis without taking into account non-recurring items. We believe thisenables a better overview of the Company’s operating results and trends from period to period. All non-recurring items are disclosedin consolidated profit and loss statement based on adjusted basis. The Company began to consolidate results from TA Orange for afull year in 2002, creating a different basis for consolidated results for 2001 and 2002. The results, presented below, therefore,exclude TA Orange where appropriate, so that trends for core operations are clear.

• Consolidated revenues grew by a record 24.9 percent (Baht 5.1 billion) to Baht 25.8 billion, compared with 6.4 percentin 2001. The major contributors to growth in 2002 were TA Orange ( Baht 2.9 billion) and DDN (Digital Data Network)revenue, which grew by 138.4 percent to Baht 1.2 billion. Excluding TA Orange, total revenues grew by 11.6 percent toBaht 23 billion, compared with 6.5 percent growth in 2001. More connections and increased revenue from value-addedservices, especially public phones, increased core wireline revenue by 3.2 percent to Baht 16.1 billion.

• Consolidated operating expenses for 2002 were Baht 25.6 billion. If one-off items are stripped out, adjusted operat-ing expenses in 2002 totalled Baht 25.2 billion, an increase of 28.8 percent compared with 2001. The increase resultedmainly from depreciation of Baht 1.3 billion, selling, general and administrative expenses of Baht 1.3 billion and revenuesharing of Baht 1.1 billion.

The increase in depreciation was mainly due to TA Orange (Baht 665 million), promotional lending of PCT handsets tocustomers (Baht 296 million) and newly installed public phones (Baht 75 million).

One-off transactions included the out-of-period booking of leased circuit and conduit rentals of Baht 286 million in 2002and Baht 114 million in 2001, following TOT reviews. In addition, there was a Baht 33 million one-off compensation in2002.

• Consolidated EBITDA grew Baht 756 million (8.4 percent) to Baht 9.8 billion. This was a strong improvement on 2001when consolidated EBITDA declined by 5.4 percent.

The consolidated EBITDA margin decreased from 43.7 percent to 37.9 percent due mainly to a higher negative contribu-tion from TA Orange as TelecomAsia started to consolidate TA Orange’s full year results in 2002.

• Consolidated share of profit (loss) in associated companies for 2002 was a profit of Baht 1.8 billion and consisted ofa loss contribution from UBC of Baht 483 million and net gain from amortization of goodwill from TelecomAsia’s invest-ment in TA Orange of Baht 2.3 billion. For 2001, the consolidated share of loss in associated companies totalled Baht 629million, consisting of a loss contribution from UBC of Baht 913 million and gain from negative goodwill write-back of Baht284 million.

The loss contribution from UBC decreased by Baht 434 million as its operations improved strongly. The share in operatingresults of UBC, excluding amortization of goodwill, was a loss of Baht 103 million in 2002, compared with a loss of Baht580 million the previous year. The improvement was derived mainly from an increase in the customer base from 406,589in 2001 to 437,845 in 2002. In addition, there was the full effect of an 18 percent price increase, implemented in August,2001. UBC’s operating expenses in 2002 were stable compared to 2001.

• Consolidated interest expenses in 2002 totalled Baht 3.9 billion, a decrease of Baht 818 million compared with 2001.This resulted mainly from a decline in interest rates, especially London Interbank Offer Rate. However, starting in thefourth quarter of 2002, the Company’s cost of debt increased as a result of the issuance of high-interest-rate Baht bondsto refinance US dollar-denominated loans .

• Reported net loss was Baht 5.4 billion, compared with a loss of Baht 3.4 billion in 2001. This included a number of non-recurring items. All non-recurring items are disclosed in the normalized profit and loss statement.

• Excluding non-recurring items, the consolidated net loss from ongoing operations was Baht 1.7 billion, including shareof loss in affiliated companies, a decrease of Baht 2.7 billion compared with 2001, resulting mainly from increased EBITDAand decreased interest expenses.

When TA Orange is excluded, consolidated net loss from ongoing operations, including share of gain (loss) in affiliates,was reduced by 65.5 percent to Baht 1.2 billion.

• Contribution from TA Orange for 2002 was a Baht 335 million loss, compared with a loss contribution of Bt 971 in2001. The 2002 loss contribution comprised an operational loss of Baht 2.6 billion and a goodwill write-back of Baht 2.3billion. TA Orange’s loss contribution to EBITDA increased to Baht 1.8 billion in 2002, compared with Baht 1.2 billion theprevious year as TelcomAsia started to consolidate TA Orange’s results for a full year in 2002. However, the loss contribu-tion declined for three consecutive quarters from Baht 728 million in the second quarter to Baht 204 million by year-enddue to an increase in revenues.

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% ChangeFY 2002 FY 2001 FY 2002/

(Baht in millions unless otherwise indicated) FY 2001

RevenuesRevenues from telephone and other services 24,207 20,118 20.3Revenues from product sales 1,568 519 202.2

Total revenues 25,775 20,636 24.9

Operating expensesCost of services 17,366 14,127 22.9

Depreciation and amortization 8,772 7,784 12.7Revenue sharing 4,290 3,227 32.9Network operating expenses 4,303 3,116 38.1

Cost of sales 1,758 685 156.8Selling and administrative expenses 6,160 4,816 27.9

Total operating expenses 25,284 19,628 28.8

EBITDA 9,768 9,012 8.4Depreciation & Amortization 9,277 8,004 15.9

Operating profit 492 1,008 (51.2)Interest income 54 42 28.0Interest expense (3,900) (4,718) (17.3)Tax (144) (69) 108.4

Net income (loss) from continuing operations (3,498) (3,737) 6.4Share of profit (loss) in subsidiaries and associates 1,844 (628) 393.5

Net income from continuing operationsincluding share of profit (loss) in subsidiaries (1,653) (4,365) 62.1

Non recurring items (3,743) 896 (517.8)Gain ( loss ) on Foreign Exchange (403) 955 (142.3)Accounting adjustment-leased circuit & conduit rental (286) (114) (150.7)Adjustment-personnel compensation (33) - -Other (expense) income 137 55 149.3Gain from settlement of DPN obligation 3,088 - -Loss on impairment of investment (5,722) - -Loss on impairment of IN (1,562) - -Gain on sale of investment 943 - -Gain from debt restructuring 95 - -

Net Profit (Loss) before minority interest (5,396) (3,469) (55.5)(Income) loss attributable to minority interest 1 44 (97.4)

Net Profit (Loss) for the period (5,395) (3,425) (57.5)

Balance SheetsCurrent assets 18,899 16,884 11.9Property, plant and equipment, net 66,871 64,033 4.4Total assets 93,247 86,472 7.8Current liabilities 14,396 10,594 35.9Borrowing 59,330 61,944 (4.2)Total liabilities 86,049 81,577 5.5Shareholder’s equity 7,198 4,895 47.1

Cash FlowCash flows from operating activities 4,455 4,479 (0.5)Cash flows from investment activities (9,120) (1,400) (551.9)Cash flows from financing activities 5,116 (1,450) 452.8Ending cash balance 3,136 2,684 16.8

NOTE :

1/ Normalized operating expenses excluding one-off transactions, which consisted of:

- out-of-period booking of leased circuit and conduit rental of Baht 286 million for 2002 and Baht 114 million for 2001 according to reviews with the TOT.

- one-time compensation in 2002 of Baht 33 million.

Consolidated Results of Operations - Adjusted Basis

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Segment results

Wireline

• Revenue from the core wireline business grew steadily at 3.2 percent to Baht 16.1 billion, reflecting an increased contribu-tion from value-added services.

• An additional 6,000 public phones were installed during 2002, resulting in revenue growth of 26.6 percent to Baht 1.8billion from this high growth, high value-added service.

• TelecomAsia outperformed the market with 273,676 new wireline subscribers, an increase of 15.7 percent to 2.02 mil-lion, compared with market growth of 10 percent in the Bangkok metropolitan area.

• The Company secured its position as the dominant player in the BMA wireline market acquiring 78 percent share inmarket net additions, giving it an overall market share of 56.0 percent.

• Wireline value-added services were launched to create new revenue streams, including 1800 caller free phone number forbusinesses and televoting.

Wireless

Personal Communication Telephone (PCT)

• While PCT revenue fell by Baht 123 million (4.0 percent) to Baht 2.9 billion, due to a decline in handset sales, revenue fromusage grew by Baht 229 million (8.7 percent) to Baht 2.8 billion.

• Subscribers declined by 3.6 percent to 604,340 because of intense competition from cellular services.

• A four-part plan to revitalize the PCT business was developed to boost marketing activity, reduce financial and regulatoryconstraints, and to improve the network signal quality and range.

Cellular Service (TA Orange)

• TA Orange contributed Baht 2.9 billion to overall consolidated revenue growth of 24.9 percent.

• TA Orange gained 1.3 millions subscribers within its first nine months of operation.

• TA Orange contributed Baht 335 million to net loss. This consisted of a loss from its operations of Baht 2.7 billion and agoodwill write-back of Baht 2.3 billion.

• TA Orange’s negative EBITDA contribution declined for three consecutive quarters as a result of increases in revenue.

DDN (Digital Data Network)

• DDN experienced strong improvement with revenue growing by 138.4 percent to Baht 1.2 billion.

• Wholesale activity resulted in growth of 55.7 percent in DDN circuits to 7,104 circuits, almost double that in 2001.

• 48.7 percent growth in revenue to Baht 629 million was from business customers other than TA Orange.

• The Service Level Agreement (SLA), launched in 2002, provides guaranteed quality of service to customers, further en-hancing the DDN business.

Internet

• Revenue grew by Baht 44 million (28.7 percent) from a strong increase in subscribers.

• Internet subscriber numbers grew by 121.2 percent and the growth in proportionate revenue was mainly derived by thehigh-speed subscribers.

• A wireless internet service was launched at the end of the year and will generate revenues in 2003.

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Multimedia / Broadband

• Revenues from multimedia and broadband increased by Baht 60 million, mainly from the broadband business.

• Broadband subscribers grew 140.2 percent to 3,708, representing market share of more than 50 percent.

• To further expand the broadband market, TelecomAsia signed memorandums of understanding with 21 leading providersof information, entertainment, healthcare and other applications to develop fully integrated broadband services.

Results by Segment

Turnover Segment Results

(Baht In millions ) 2002 2001 % Change 2002 2001 % Change

Wireline - voice 16,125 15,618 3.2 5,093 4,980 2.3Basic (POTS) 13,687 13,277 3.1Value-added services 2,438 2,341 4.1

Digital Data Network (DDN) 1,199 503 138.4 738 238 209.9

Wireless 6,096 3,072 98.4 (2,397) (1,195) (100.6)PCT 2,949 3,072 (4.0)TA Orange 3,147 - NA

Internet 198 154 28.6 25 19 32.8

Multimedia/Broadband 954 894 6.7 35 (106) 132.7

Others 1,203 396 203.8 200 9 2,090.6

Group 25,776 20,636 24.9 3,694 3,945 (6.4)

Unallocated Costs (3,173) (2,882) 10.1

Notes :

1/ Segment results excluding non-recurring items.

2/ Segment results of wireline and DDN represent gross profit while those for wireless, multimedia and Internet represent operating profit.

3/ Results of wireless, multimedia and internet segments for 2001 were restated from previous release to include allocated selling, administrative and general expenses.

Financial Position

Assets

• The Company’s total assets increased by Baht 6.8 billion to Baht 93.2 billion due mainly to an increase in property, plantand equipment (net) of Baht 2.8 billion and all of the remaining negative goodwill for TA Orange of Baht 2.3 billion beingamortized.

Liabilities

• Total liabilities in 2002 increased Baht 4.5 billion to Baht 86.0 billion due mainly to an increase in other non-currentliabilities, principally the unbilled construction cost for the TA Orange network (Baht 3.7 billion). Interest-bearing debtsdecreased slightly by Baht 255 million to Baht 73.4 billion as the increase in debt of Baht 7.5 billion, contributed by TAOrange, was offset by the settlement of DPN and repayment by the Company and other subsidiaries totalling Baht 4.3billion. This included prepayment of Baht1.6 billion.

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Shareholders’ Equity

• Shareholders’ Equity increased by Baht 2.3 billion from a capital increase of Baht 3.0 billion via a rights offering and a netloss of Baht 0.7 billion, excluding unrealized loss on available for sale securities of Baht 4.7 billion, already recorded as adeduction to shareholders’ equity in the year 2001.

Cash Flow

• Net cash flow from operations decreased by Baht 24 milllion, due mainly to TA Orange. The core fixed line and databusiness generated strong cash flows of Baht 6.5 billion, almost doubled that in 2001. This was due mainly to growth inEBITDA of Baht 965 million, decreased interest expenses of Baht 806 million and a decrease in the working capitalrequirement of Baht 1.2 billion. As a result, free cash flow after funding capital expenditure almost tripled to Baht 4.3billion.

• Net cash used in investing activities was Baht 9.1 billion, an increase of Baht 7.7 billion, compared to 2001, due mainly toan increased investment in TA Orange’s cellular network.

• Net cash provided by financing activities was Baht 5.1 billion, which was mainly related to borrowing by TA Orange fornetwork investment.

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Report of the Board ofDirectors’ Responsibilities forFinancial StatementsThe Board of Directors is responsible for the financial statements of the Company and its subsidiaries. The aforementioned

financial statements have been prepared in accordance with Generally Accepted Accounting Principles, using appropriate accounting

policy consistently employed by the Company as well as applying careful judgment and best estimation. Important information is

adequately disclosed in the notes to financial statements.

The Board of directors has provided and maintained an efficient internal control system to ensure that accounting records are

accurate, complete and adequate to protect its assets.

To accomplish this task, the Board of Directors has appointed an Audit Committee, which consists of Independent Directors

responsible for the quality of financial statements and internal control system, whose comments on these issues are readily included

in the Audit Committee Report in this annual report.

The Board of Directors is of the opinion that the Company’s overall internal control system is adequate and suitable and has

rendered credibility and reliability to the financial statements of the Company and its subsidiaries for the year ended 31st December

2002.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED

Balance Sheets

As at 31 December 2002 and 2001

31 December 31 December 31 December 31 December

2002 2001 2002 2001

Notes Baht Baht Baht Baht

Assets

Current assets

Cash and cash equivalents 5 3,135,696,393 2,684,255,574 372,900,545 253,486,485

Restricted cash 6 4,482,279,607 4,576,450,120 3,626,163,288 4,018,292,184

Short-term investments 7 21,209,967 177,337,181 - -

Trade accounts receivable, net 8 7,152,405,277 5,689,657,001 6,100,929,805 5,507,702,447

Short-term loans to related parties 9 780,710 2,645,463 - -

Inventories, net 10 1,184,274,566 1,113,378,391 665,305,452 782,827,348

Other current assets 11 2,922,213,734 2,640,554,733 1,592,027,473 1,854,723,783

Total current assets 18,898,860,254 16,884,278,463 12,357,326,563 12,417,032,247

Non-current assetsInvestments: - Available-for-sale securities 7 - 1,036,273,212 - -

- Investments in subsidiaries,

joint venture and associates 12 4,009,108,477 4,492,129,457 10,639,534,769 11,155,634,650

- Other long-term investments 7 75,571,404 52,322,000 21,250,000 -

- Investment property 13 53,873,898 54,293,898 - -

Property, plant and equipment, net 14 66,870,643,233 64,032,659,405 40,873,095,696 46,733,374,436Other assets: - Intangible assets, net 15 1,771,042,202 804,299,872 1,176,959,004 206,622,576

- Negative goodwill, net 4 - (2,336,785,064) - (2,336,785,064)

- Other non-current assets 16 1,567,934,309 1,452,822,446 962,915,960 1,051,309,851

Total non-current assets 74,348,173,523 69,588,015,226 53,673,755,429 56,810,156,449

Total assets 93,247,033,777 86,472,293,689 66,031,081,992 69,227,188,696

CompanyConsolidated

The notes to the consolidated and Company financial statements on pages 9 to 57 are an integral part of these financialstatements.

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Balance Sheets

As at 31 December 2002 and 2001

31 December 31 December 31 December 31 December2002 2001 2002 2001

Notes Baht Baht Baht BahtLiabilities and shareholders' equityCurrent liabilitiesTrade accounts payable 2,244,583,101 2,740,022,723 1,615,483,584 2,121,537,923Current portion of long-term borrowings 17 5,854,179,102 3,214,292,423 3,246,084,064 1,170,657,842Accrued expenses 18 3,260,267,951 2,495,300,207 1,374,189,048 647,407,215Other current liabilities 19 3,036,961,915 2,143,970,461 2,234,098,139 1,594,979,819 Total current liabilities 14,395,992,069 10,593,585,814 8,469,854,835 5,534,582,799

Non-current liabilitiesLong-term borrowings 17 59,329,884,748 61,944,182,485 50,461,425,305 58,737,800,080Long-term trade accounts payable 20 8,012,582,879 8,299,424,585 - -Other non-current liabilities 21 4,310,326,080 740,060,396 354,778,672 514,122,739 Total non-current liabilities 71,652,793,707 70,983,667,466 50,816,203,977 59,251,922,819

Total liabilities 86,048,785,776 81,577,253,280 59,286,058,812 64,786,505,618

Shareholders' equityShare capital Authorised share capital Preferred shares 6,997,535,300 7,020,000,000 6,997,535,300 7,020,000,000 Common shares 37,463,646,620 25,304,999,780 37,463,646,620 25,304,999,780 Issued and fully paid-up share capital 22 Preferred shares 6,997,535,300 7,020,000,000 6,997,535,300 7,020,000,000 Common shares 29,947,436,840 25,304,999,780 29,947,436,840 25,304,999,780Premium on share capital 22 Common shares 11,432,046,462 11,432,046,462 11,432,046,462 11,432,046,462Discount on share capital 22 Preferred shares (1,493,683,023) (1,498,478,153) (1,493,683,023) (1,498,478,153) Common shares (1,943,271,209) (316,639,974) (1,943,271,209) (316,639,974)Foreign currency translation adjustment 104,344,130 104,344,130 104,344,130 104,344,130Unrealised loss on available-for-sale securities (2,712,750) (4,703,366,075) (2,712,750) (4,703,366,075)Retained earnings (deficit) Appropriated legal reserve 23 34,880,969 34,880,969 34,880,969 34,880,969 Deficit (38,331,553,539) (32,937,104,061) (38,331,553,539) (32,937,104,061)Total Parent's shareholders' equity 6,745,023,180 4,440,683,078 6,745,023,180 4,440,683,078Minority interest in subsidiaries 453,224,821 454,357,331 - -Total shareholders’ equity 7,198,248,001 4,895,040,409 6,745,023,180 4,440,683,078Total liabilities and shareholders' equity 93,247,033,777 86,472,293,689 66,031,081,992 69,227,188,696

Consolidated Company


63


Statements of Income

For the years ended 31 December 2002 and 2001


Notes Baht Baht Baht BahtRevenues 9Revenues from telephone and other services 24,206,831,133 20,117,763,719 20,277,308,944 18,746,108,803Revenues from product sales 1,568,461,523 518,678,786 34,498,894 191,645,371Total revenues 25,775,292,656 20,636,442,505 20,311,807,838 18,937,754,174

Operating expenses 9

Cost of services 25 17,651,532,612 14,241,481,957 14,641,473,445 13,572,242,369

Cost of sales 1,758,073,422 684,642,471 41,288,830 309,325,616

Total costs 19,409,606,034 14,926,124,428 14,682,762,275 13,881,567,985

Gross profit 6,365,686,622 5,710,318,077 5,629,045,563 5,056,186,189

Selling and administrative expenses 6,193,016,285 4,816,155,568 3,163,152,299 2,874,448,324

Profit from sales and services 172,670,337 894,162,509 2,465,893,264 2,181,737,865Other revenues 253,313,675 280,133,421 97,930,764 119,251,927Other expenses 14 (1,786,178,721) (225,172,527) (1,676,410,595) (231,747,135)

Operating results 26 (1,360,194,709) 949,123,403 887,413,433 2,069,242,657Share of profit (loss) in subsidiaries, joint venture and associates 1,844,460,287 (628,472,598) (6,529,318,873) (1,874,652,529)Loss on impairment of investment 7 (5,721,988,062) - - -Gain on sale of investment 17 943,248,540 - - -Other non-operating income 17 3,196,228,940 - 3,087,826,418 -

Profit (loss) before interest and tax (1,098,245,004) 320,650,805 (2,554,079,022) 194,590,128

Interest income 54,299,134 42,417,539 26,447,874 18,428,141

Interest expense (3,899,940,673) (4,718,426,956) (2,912,208,760) (3,718,396,991)

Foreign exchange gain (loss) (403,465,884) 954,874,217 45,390,430 80,251,840

Loss before income tax (5,347,352,427) (3,400,484,395) (5,394,449,478) (3,425,126,882)

Income tax (143,683,537) (68,933,164) - -

Loss before extraordinary item (5,491,035,964) (3,469,417,559) (5,394,449,478) (3,425,126,882)

Extraordinary item

Gain from debt restructuring 17 95,453,976 - - -

Loss before minority interest (5,395,581,988) (3,469,417,559) (5,394,449,478) (3,425,126,882)

Loss attributable to minority interest 1,132,510 44,290,677 - -

Net loss for the year (5,394,449,478) (3,425,126,882) (5,394,449,478) (3,425,126,882)

Basic and diluted loss per share 27Loss from ordinary activities (2.37) (1.81) (2.37) (1.81)Extraordinary itemGain from debt restructuring 0.03 - 0.03 -Net loss for the year (2.34) (1.81) (2.34) (1.81)



64


Statements of Changes in Shareholders’ Equity


Unrealised

Foreign currency loss on Minority

Preferred Common Premium Discount translation available-for- Legal interest in

shares shares on shares on shares adjustment sale securities reserve Deficit subsidiaries Total

Notes Baht Baht Baht Baht Baht Baht Baht Baht Baht Baht

Beginning balance 2002 7,020,000,000 25,304,999,780 11,432,046,462 (1,815,118,127) 104,344,130 (4,703,366,075) 34,880,969 (32,937,104,061) 454,357,331 4,895,040,409

Issue of common shares 22 - 4,619,972,360 - (1,621,836,105) - - - - - 2,998,136,255

Conversion of shares 22 (22,464,700) 22,464,700 - - - - - - - -

Unrealised loss on available-for-

sale securities 7 - - - - - (785,727,182) - - - (785,727,182)

Net loss for the year - - - - - - - (5,394,449,478) - (5,394,449,478)

Reversal of unrealised loss on

available-for-sale securities 7 - - - - - 5,486,380,507 - - - 5,486,380,507

Share of loss in subsidiaries - - - - - - - - (1,132,510) (1,132,510)

Ending balance 2002 6,997,535,300 29,947,436,840 11,432,046,462 (3,436,954,232) 104,344,130 (2,712,750) 34,880,969 (38,331,553,539) 453,224,821 7,198,248,001

Unrealised

Foreign currency loss on Minority

Preferred Common Premium Discount translation available-for- Legal interest in

shares shares on shares on shares adjustment sale securities reserve Deficit subsidiaries Total

Notes Baht Baht Baht Baht Baht Baht Baht Baht Baht Baht

Beginning balance 2001 7,020,000,000 22,230,000,000 11,432,046,462 (1,498,478,153) 104,344,130 (1,682,579,258) 34,880,969 (29,511,977,179) 498,648,008 8,626,884,979

Issue of common shares 22 - 3,074,999,780 - (316,639,974) - - - - - 2,758,359,806


sale securities 7 - - - - - (3,020,786,817) - - - (3,020,786,817)

Net loss for the year - - - - - - - (3,425,126,882) - (3,425,126,882)

Share of loss in subsidiaries - - - - - - - - (44,290,677) (44,290,677)

Ending balance 2001 7,020,000,000 25,304,999,780 11,432,046,462 (1,815,118,127) 104,344,130 (4,703,366,075) 34,880,969 (32,937,104,061) 454,357,331 4,895,040,409

The notes to the consolidated and Company financial statements on pages 9 to 57 are an integral part of these financial statements.

Consolidated

Consolidated

Issued and fully paid-up


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Statements of Changes in Shareholders’ Equity (Continued)


Unrealised

Foreign currency loss on

Preferred Common Premium Discount translation available-for- Legal

shares shares on shares on shares adjustment sale securities reserve Deficit Total

Notes Baht Baht Baht Baht Baht Baht Baht Baht Baht

Beginning balance 2002 7,020,000,000 25,304,999,780 11,432,046,462 (1,815,118,127) 104,344,130 (4,703,366,075) 34,880,969 (32,937,104,061) 4,440,683,078

Issue of common shares 22 - 4,619,972,360 - (1,621,836,105) - - - - 2,998,136,255

Conversion of shares 22 (22,464,700) 22,464,700 - - - - - - -


sale securities 7 - - - - - (785,727,182) - - (785,727,182)

Net loss for the year - - - - - - - (5,394,449,478) (5,394,449,478)

Reversal of unrealised loss on

available-for-sale securities 7 - - - - - 5,486,380,507 - - 5,486,380,507

Ending balance 2002 6,997,535,300 29,947,436,840 11,432,046,462 (3,436,954,232) 104,344,130 (2,712,750) 34,880,969 (38,331,553,539) 6,745,023,180

Unrealised

Foreign currency loss on

Preferred Common Premium Discount translation available-for- Legal

shares shares on shares on shares adjustment sale securities reserve Deficit Total

Notes Baht Baht Baht Baht Baht Baht Baht Baht Baht

Beginning balance 2001 7,020,000,000 22,230,000,000 11,432,046,462 (1,498,478,153) 104,344,130 (1,682,579,258) 34,880,969 (29,511,977,179) 8,128,236,971

Issue of common shares 22 - 3,074,999,780 - (316,639,974) - - - - 2,758,359,806


sale securities 7 - - - - - (3,020,786,817) - - (3,020,786,817)

Net loss for the year - - - - - - - (3,425,126,882) (3,425,126,882)

Ending balance 2001 7,020,000,000 25,304,999,780 11,432,046,462 (1,815,118,127) 104,344,130 (4,703,366,075) 34,880,969 (32,937,104,061) 4,440,683,078

The notes to the consolidated and Company financial statements on pages 9 to 57 are an integral part of these financial statements.



Company

Company

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Statements of Retained Earnings


31 December 31 December 31 December 31 December

2002 2001 2002 2001

Note Baht Baht Baht Baht

Deficit

Beginning balance (32,937,104,061) (29,511,977,179) (32,937,104,061) (29,511,977,179)

Net loss for the year (5,394,449,478) (3,425,126,882) (5,394,449,478) (3,425,126,882)

Ending balance (38,331,553,539) (32,937,104,061) (38,331,553,539) (32,937,104,061)

Appropriated retained earnings

Legal reserve 23 34,880,969 34,880,969 34,880,969 34,880,969

Total deficit (38,296,672,570) (32,902,223,092) (38,296,672,570) (32,902,223,092)

CompanyConsolidated


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Statements of Cash Flows



Notes Baht Baht Baht Baht

Cash flows from operating activities 28 4,455,445,629 4,479,031,257 6,540,616,800 3,281,925,149

Cash flows from investing activitiesWithdrawal (deposit) in restricted cash 94,170,513 (251,124,483) 392,128,896 39,845,250Withdrawal (deposit) in time deposit 161,264,302 (82,810,932) - -Acquisition of subsidiary 12 - - (859,143,560) -Acquisition of joint venture, net of cash acquired 4 (402,161,904) 2,782,125,446 (3,060,000,000) (76,419,234)Acquisition of long-term investment in other companies (23,250,000) (100,000) (21,250,000) -Purchases of property, plant and equipment (8,753,437,834) (3,930,955,821) (2,260,867,073) (2,207,308,673)Purchases of intangible assets 15 (279,921,803) (33,881,549) (256,626,962) (33,881,549)Disposal of property, plant and equipment 83,262,342 117,267,777 1,729,974 232,643Net cash used in investing activities (9,120,074,384) (1,399,479,562) (6,064,028,725) (2,277,531,563)

Cash flows from financing activitiesIssue of common shares 22 2,998,136,255 - 2,998,136,255 -Proceeds from debentures 17 18,065,057,803 - 18,065,057,803 -Proceeds from borrowings 17 8,443,672,784 5,265,404,643 1,125,000,000 5,000,000,000Repayments on long-term trade accounts payable 20 (677,546,400) (187,972,765) - -Repayments on borrowings 17 (23,713,250,868) (6,527,349,456) (22,545,368,073) (5,904,718,926)Net cash received from (used in) financing activities 5,116,069,574 (1,449,917,578) (357,174,015) (904,718,926)

Net increase in cash and cash equivalents 451,440,819 1,629,634,117 119,414,060 99,674,660Beginning balance 2,684,255,574 1,054,621,457 253,486,485 153,811,825

Ending balance 3,135,696,393 2,684,255,574 372,900,545 253,486,485

Non cash transactions

The principal non cash transactions for the year ended 31 December 2002 are as follows:

- The acquisition of property, plant and equipment using finance leases amounting to Baht 719.38 million (Note 17),

- Capitalisation of interest expense as part of the cost of assets amounting to Baht 101.95 million, and

(Note 17).



- Repayments on borrowings amounting to Baht 4,119.16 million through debt restructuring and settlement agreements

68

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITEDNotes to the Consolidated and Company Financial StatementsFor the years ended 31 December 2002 and 2001

69

1. General information

TelecomAsia Corporation Public Company Limited (“the Company”) is a public limited company, incorporated and resident in Thailand. The address of its registered office is 18 Telecom Tower, Ratchadaphisek Road, Huai Khwang, Bangkok, Thailand. The Company is listed on the Stock Exchange of Thailand.

The Company and its subsidiaries, joint venture, 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, Internet Service Provider (“ISP”), and Cellular Telephone Service.

2. Concession agreements

Telephone servicesIn August 1991, the Company entered into the Joint Operation and Joint Investment for Expansion of Telephone Services Agreement (“the Concession”) with the Telephone Organisation 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 lines in the Bangkok Metropolitan Area. The Company was responsible for:

1) procuring and constructing the expansion of the existing TOT network.2) on completion of construction of the network expansion, transferring legal ownership of certain network

assets, land and buildings to TOT.3) in consideration of the transferred assets receiving a right to operate, maintain the network and provide

certain services for 25 years including:

• fixed line telephone• Personal Communication Telephone• public telephone (Build Operate Transfer)• Digital Data Network• acceptance of fault notification and drop wire maintenance• customer service centre

Under the provisions of the Concession, TOT and the Company share the gross revenues collected from operating the networks according to stipulated percentage.

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 servicesIn August 1997, the Group entered into a Joint Investment in the NON-POTS services through multimedia network agreement with 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 TOT all hardware and equipment pertaining to such system when the installations are 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.


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2 Concession agreements (Continued)

Internet servicesIn 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. As 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 set out 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 servicesThe Company invested in share capital of Bangkok Inter Teletech Co., Ltd. (“BITCO”) (Note 4), the sole shareholder of TA Orange Co., Ltd. (“TA Orange”), formerly known as CP Orange Co., Ltd. TA Orange is an operator of the nationwide cellular network under a Build Transfer Operate concession granted by CAT dated 20 June 1996 which was subsequently amended on 8 September 2001.

Under the terms of the Concession agreement, TA Orange 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 CAT as installations are completed. In addition, TA Orange is required to pay annual fees to CAT based on the percentage of service income or a minimum fee as specified in the agreement whichever is higher. As consideration for the transferred system assets and committed fees, CAT granted TA Orange 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 local banks in favour of CAT totaling Baht 65.00 million to guarantee the Group’s compliance with the terms of the agreement.

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 the 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 accounting principles applied may differ from generally accepted accounting principles adopted in other countries and jurisdictions. The accompanying consolidated and Company financial statements are therefore not intended to present the financial position and results of operations and cash flows in accordance with jurisdictions other than Thailand. Consequently, these consolidated and Company financial statements are prepared based on the assumption that the users of the financial statements have an understanding of Thai generally accepted accounting principles and practices.


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3. Accounting policies (Continued)

a) Basis of preparation (Continued)

The consolidated and Company financial statements have been prepared under the historical cost convention except as disclosed in the accounting policies below.

For the convenience of the user, an English translation of the consolidated and Company financial statements has been prepared from the statutory financial statements that are issued in the Thai language.

b) Use of estimates

The preparation of financial statements in conformity with Thai generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses in the reported periods. Actual results may differ from those estimates.

c) 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. Separate disclosure is made for minority interests in the consolidated balance sheet and statement of income.

Subsidiary undertakings are reported by using the equity method of accounting in the Company’s separate financial statements.

A list of the Group’s principal subsidiary undertakings is set out in Note 12.

(2) Associated undertakings

Investments in associated undertakings are accounted for by the equity method of accounting. These are undertakings in 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 undertakings 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 undertakings is included in the balance sheet as part of investment in associate and is amortised using the straight-line method over its estimated useful life of 15 years.

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.

Associated undertakings are reported by using the equity method of accounting in the Company’s separate financial statements.

Details of the Group’s principal associated undertakings is set out in Note 12.


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(3) Joint venture

The Group’s interests in 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. In the Company financial statements the equity method is applied for interests in joint venture.

Details of the Group’s principal joint ventures are set out in Note 31.

d) Foreign currency translation

Statements of income 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 “Foreign currency translation adjustment” in shareholders’ equity. On disposal of a foreign entity, accumulated differences are recognised in the statement of income as part of the gain or loss on sale.

Statements of income of 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 the Group 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 statements of income. 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.

e) 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 on call at banks, short-term deposits with banks and financial institutions 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.

f) 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 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 investments. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.


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f) Investments (Continued)

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 statement of income 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 the statement of income.

A test of impairment is carried out when there is a factor indicating that an investment might be impaired. If the carrying value of the investment is higher than its recoverable amount, impairment loss is charged to the statement of income.

On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the statement of income.

When disposing of part of the Group’s holding of a particular investment in debt or equity securities, the carrying amount of the disposed part is determined from the weighted carrying amount of the total holding of the investment.

g) 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.

h) 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 costs of selling.

i) Investment properties

Investment properties, principally comprising land, are carried at cost. Investment properties are not subject to depreciation. A review for 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 statement of income.


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j) 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:

YearsLand NilLand improvement 10Buildings and improvements 5 – 20Leasehold building improvements Lease periodFurniture, fixtures, tools and office equipment 5 – 10Power supply and computer 5Multimedia network equipment 8 – 20Vehicle 5

Expenditure for additions, renewal and betterment, which results in a substantial increase in an asset’s current replacement value, is 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 in the statements of income.

Included in property, plant and equipment in network equipment is property, plant and equipment held under Concessions and Agreements as described in Note 2. These property, plant and equipment are depreciated over the shorter of their useful lives or the remaining concession periods, as follows:

YearsLand NilLand improvement 10Buildings 10 – 20Telephone network equipment- Switching equipment 12- Transmission 10- Outside plant 10 – 25- Mobile phone network equipment 10PCT network equipment- Outside plant and buildings 20- Cable and drop wire 15- Inside plant 5 - 12Public phone 7Power supply and computer 5Network 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 CAT. The costs of mobile phone network equipment under Concession agreement are depreciated on the straight-line method over their estimated useful lives of 10 years not exceeding the remaining concession period.


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k) 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 statement of income 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 under operating leases are charged to the statement of income 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.

Accounting for leases - where a group company is the leassor

Operating leases

Assets leased out under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with other similar property, plant and equipment owned by the Group. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.

l) Intangible assets

(1) Goodwill and negative goodwill

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 joint venture at the date of acquisition. Goodwill on acquisition is reported in the consolidated and Company balance sheets as an intangible asset and is amortised using the straight-line method over its estimated useful life of 5 years.

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 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 statement of income when the future losses and expenses are recognised.

(2) Computer software development costsGenerally, costs associated with developing or maintaining computer software programs are recognised as expenses 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.


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l) Intangible assets (Continued)

(3) Trademarks and licencesExpenditure on trademarks and licences acquired by a joint venture is capitalised and amortised using the straight-line method over their estimated useful lives of 20 years. Trademarks and licences are not revalued. The carrying amount of such trademarks and licences are reviewed annually and adjusted for impairment where it is considered necessary.

(4) Other intangible assetsOther 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 assetsWhere an indication of impairment exists, the carrying amount of intangible assets is assessed annually and written down immediately to its recoverable amount.

m) Subscribers acquisition cost

Subscribers acquisition cost is the cost of PCT handsets distributed to subscribers free of charge under the 3-year usage contract campaign. Subscribers acquisition cost is amortised over the contract period.

n) 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 the redemption value is recognised in the statement of income over the period of the borrowings.

o) 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.

p) Deferred income taxes

The Group does not recognise income taxes payable or receivable in future periods in respect of temporary differences arising from differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. The principal temporary differences arise from depreciation on property, plant and equipment and tax losses carried forward and, in relation to acquisitions, on the difference between the fair values of the net assets acquired and their tax base.

q) Employee benefits

Provident fund

The Group operates a provident fund, being a defined contribution plan, the assets of which are held in a separate trustee-administered fund. The provident fund is funded by payments from employees and by the relevant Group companies. The Group’s contributions to provident fund are charged to the statement of income in the period to which the contributions relate.


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r) 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 in 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 for 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 in other current liabilities.

Revenue derived from the installation of fixed lines and the activation of PCT services is recognised on completion of installation services and activation of services. Unearned advance receipts are included in the balance sheets in other current liabilities.

Revenues from public telephone services are recognised according to metered usage.

Revenues from internet services are recognised according to actual time used by the customer.

Sales of telephone equipment and PCT handsets are recognised on delivery of equipment and handsetsor customer acceptance.

In accordance with the Concession described in Note 2, TOT is entitled to receive a share of some of the revenue generated by the Company. The Company presents revenue gross, that is including the TOT share, in the statement of income. The TOT share, ranging from 16%-23.5% of collected revenue, is included in cost of services.

All revenues have been presented net of 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.

s) Related parties

Enterprises and individuals that directly, or 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.

t) Construction contracts

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. Contract costs are recognised when incurred.


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t) Construction contracts (Continued)

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 recognise 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 contracts under trade and other payables.

u) Financial instruments

Financial instruments carried in 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 statements 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 offset by a corresponding movement in the value of the forward exchange contract. The gains and losses are therefore offset 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.

v) Share capital

(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 statement of income 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.

(5) In the acquisition of BITCO, the Company issued 100,000,000 equity warrant to CP Group. If the warrants are granted at a discount on the market price no compensation cost is recognised in the statement of income 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.

w) 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 31 October 2001 the Company acquired 614,999,956 common shares at Baht 10 par value per share, representing approximately 41%, of Bangkok Inter Teletech Co., Ltd. (“BITCO”) from Chareon Pokphan Group Co., Ltd. (“CP Group”). In consideration for the acquisition of the BITCO shares, the Company issued 307.5 million common shares and 100 million units of equity warrants to CP Group. Consequently, BITCO became a joint venture of the Company and is accounted for by proportionate consolidation.

On 31 October 2002, the Company acquired an additional 2.85714% interest in BITCO resulting in the Company’s equity interest in BITCO increasing to 43.85714%.

Details of net assets acquired, goodwill and negative goodwill are as follows:

31 October 31 October2002 2001Baht Baht

Purchase consideration: - Cash paid 3,060,000,000 76,419,234 - Fair value of shares and warrants issued - 2,758,359,806Total purchase consideration 3,060,000,000 2,834,779,040Fair value of net assets acquired (2,780,903,968) (5,455,967,438)Goodwill (negative goodwill) 279,096,032 (2,621,188,398)

The proportional assets and liabilities arising from the additional acquisition are as follows:

31 October 31 October2002 2001Baht Baht

Cash and cash equivalents 2,657,838,096 2,858,544,680Short-term investments 7,659,551 82,000,000Accounts receivable 24,235,695 -Inventories 10,626,617 -Advance to contractors 1,749,804 305,912,302Other accounts receivable 51,086,609 153,856,230Other current assets 13,350,447 56,752,771Property and equipment, net - Network equipment 414,820,590 213,946,536 - Non-network equipment 145,026,562 2,669,541,822Trademark, net 7,510,488 113,938,878Other assets 2,417,169 21,369,103Borrowings (393,467,598) -Other accounts payable (43,126,093) (509,512,403)Amount due to related company (20,132,726) (208,914,181)Accrued expenses (59,713,760) (285,015,183)Other current liabilities (38,977,483) (16,453,117)Fair value of net assets acquired 2,780,903,968 5,455,967,438

Cash (outflow) inflow from this acquisition is shown below:

Baht BahtCash and cash equivalents 2,657,838,096 2,858,544,680Less: cash paid for directly attributable acquisition costs (3,060,000,000) (76,419,234)Net cash (outflow) inflow on acquisition (402,161,904) 2,782,125,446


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4. Acquisition (Continued)

Movement of goodwill is as follows:Negative

Goodwill goodwillBaht Baht

Opening net book value - (2,336,785,064)Acquisition of joint venture 279,096,032 -Amortisation (Note 12) (9,303,202) 2,336,785,064Closing net book value (Note 15) 269,792,830 -

5. Cash and cash equivalents

Consolidated CompanyAs at 31 December 2002 2001 2002 2001

Baht Baht Baht BahtCash on hand and at banks 92,239,788 57,611,146 30,316,275 22,244,088Saving deposits 3,043,456,605 2,626,644,428 342,584,270 231,242,397

3,135,696,393 2,684,255,574 372,900,545 253,486,485

The average effective interest rate on cash at banks was 0.26% in 2002 and 2001. These deposits have an average maturity of 22 days.

6. Restricted cashConsolidated Company

As at 31 December 2002 2001 2002 2001Baht Baht Baht Baht

Saving deposits 2,082,191,985 2,406,064,983 1,316,400,292 2,218,978,589Fixed deposits 2,400,087,622 2,170,385,137 2,309,762,996 1,799,313,595

4,482,279,607 4,576,450,120 3,626,163,288 4,018,292,184

The average effective interest rates for fixed deposit accounts were 0.77% and 0.26% in 2002 and 2001, respectively. These deposits have an average maturity of 132 days.

Under the terms of loan and supplier agreements the Company and certain subsidiaries have pledged theabove bank accounts as collateral with the contracted parties.

7. Investments


InvestmentsBaht Baht Baht Baht

Current 21,209,967 177,337,181 - - Non-current 75,571,404 1,088,595,212 21,250,000 - Total 96,781,371 1,265,932,393 21,250,000 -

Current:

Available-for-sale securities 9,803,725 12,326,189 - - General investment - Fixed deposits 11,406,242 165,010,992 - - Total 21,209,967 177,337,181 - -

Non-current:

Available-for-sale securities - 1,036,273,212 - - General investment - Non-marketable equity securities 75,571,404 52,322,000 21,250,000 -

Total 75,571,404 1,088,595,212 21,250,000 -


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7. Investments (Continued)

General investment - Fixed deposits

The average effective interest rates on short-term bank fixed deposits were 1.0% and 2.0% in 2002 and 2001,respectively. These deposits have an average maturity of 132 days.

General investment - Non-marketable equity securities

In 2002, the Company invested in 10.76% of the common shares of an unlisted company amounting to Baht 21.25 million.

Available-for-sale securities

Movement of available-for-sale-securities:Consolidated

Year ended 31 December 2002 2001Baht Baht

Current:Opening net book value 12,326,189 21,416,064Currency translation (31,207) 27,918Revaluation deficit (2,491,257) (9,117,793)Closing net book value 9,803,725 12,326,189

Non-current:Opening net book value 1,036,273,212 3,960,783,332Currency translation (17,429,732) 87,158,904Impairment of investment (5,721,988,062) -Revaluation deficit (783,235,925) (3,011,669,024)Reversal of unrealised loss on available-for-sale securities 5,486,380,507 -Closing net book value - 1,036,273,212

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 ascollateral against borrowings (Note 30).

On 12 April 2002, FLAG, which is an indirect investment of the Company (through K.I.N. (Thailand) Co., Ltd.) in the proportion of 9.28% shareholding, filed a voluntary petition (the “Petition”) under Chapter 11 of the United States Bankruptcy Code. As a result of the Petition, the Group recorded an impairment charge in the value of the investment by Baht 5,721.99 million on FLAG in accordance with Thai Accounting Standard No. 36 “Impairment of Assets”.

On 26 September 2002, FLAG announced confirmation of Plan of Reorganisation (the “Plan”) by the UnitedStates Bankruptcy Court. Accordingly, FLAG’s ongoing business operations will be no longer subject to therestrictions imposed by the Chapter 11 process or the United State Bankruptcy Court. The Plan becameeffective in October 2002. Accordingly, the loss from impairment in investment in FLAG has been realised tothe consolidated statement of income.


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8. Trade accounts receivable, net


Baht Baht Baht BahtReceivable from TOT 2,447,760,493 2,979,419,890 2,447,760,493 2,979,419,890Billed customers 5,738,467,404 3,033,378,444 4,664,916,144 2,867,110,184Receivable from related parties (Note 9) 418,055,020 149,045,616 115,681,782 86,673,536

8,604,282,917 6,161,843,950 7,228,358,419 5,933,203,610Less: Allowance for doubtful accounts (1,451,877,640) (472,186,949) (1,127,428,614) (425,501,163)Trade accounts receivable, net 7,152,405,277 5,689,657,001 6,100,929,805 5,507,702,447

Outstanding trade accounts receivable as at 31 December can be analysed as follows:


Baht Baht Baht BahtCurrent 4,627,769,256 2,440,809,425 3,695,788,336 2,495,428,510Less than 3 months 1,084,708,462 1,130,163,559 751,706,582 863,807,8573 - 6 months 638,269,532 418,919,213 540,106,452 405,168,2816 - 12 months 761,539,655 442,763,110 740,042,025 467,890,865More than 12 months 1,491,996,012 1,729,188,643 1,500,715,024 1,700,908,097

8,604,282,917 6,161,843,950 7,228,358,419 5,933,203,610Less: Allowance for doubtful accounts (1,451,877,640) (472,186,949) (1,127,428,614) (425,501,163)Trade accounts receivable, net 7,152,405,277 5,689,657,001 6,100,929,805 5,507,702,447

Included in outstanding trade accounts receivable aged more than 6 months is Baht 955.30 million (2001: Baht1,546.42 million) against which no allowance has been established, being:

• Baht 889.67 million (2001: Baht 889.67 million) relating to disputed revenue sharing on value added tax withTOT, which is expected to be settled by offset with rental of network facilities payable to TOT;

• Baht 65.63 million (2001: Baht 57.03 million) relating to value added tax on assets transferred to TOT; and

• Baht 599.72 million as at 31 December 2001 for fault notification and dropwire maintenance services chargedto TOT which was collected during the year ended 31 December 2002.

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 experience in the collection of accounts indicates that the allowance created will be sufficient. 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.


83

9. Related party transactions

The following transactions were carried out with related parties:i) Sales of goods and services


For the years ended 31 December 2002 2001 2002 2001Baht’000 Baht’000 Baht’000 Baht’000

Sales of goods:Subsidiaries:

Telecom Holding Co., Ltd. - - 8.70 -Asia Wireless Communication Co., Ltd. - - 436.06 27.74Wire & Wireless Co., Ltd. - - 738.80 -Asia Multimedia Co., Ltd. - - 24,304.23 -

Joint ventures:BITCO Group of companies 16,997.48 - - -Asia Infonet Co., Ltd. 2,011.68 394.77 - -

Related companies:CP Group of companies 90,165.79 36,489.89 - -

109,174.95 36,884.66 25,487.79 27.74

Sales of services:Subsidiaries:

Asia Wireless Communication Co., Ltd. - - - 15,110.28Wire & Wireless Co., Ltd. - - 782.33 2,144.70

U-Net Co., Ltd. - - 27.27 -Joint ventures:

BITCO Group of companies 204,943.55 23,320.32 78,225.70 23.22Asia Infonet Co., Ltd. 17,733.54 7,638.96 902.18 988.80

Associated:UBC Cable Network Public Co., Ltd. 847,213.21 873,265.79 82.46 13.30

Related companies:CP Group of companies 330,005.13 146,417.42 5,911.60 1,494.49

1,399,895.43 1,050,642.49 85,931.54 19,774.79

Sales to the related companies, were carried out on commercial terms and conditions and at market prices. CP Group of companies are the major shareholders of the Company.

ii) Purchases of goods and servicesConsolidated Company


Purchases of goods:Subsidiaries:

Wire & Wireless Co., Ltd. - - 22,538.20 217,752.75Asia Wireless Communication Co., Ltd. - - 345.90 31,028.00Nilubon Co., Ltd. - - 45.56 1,151.83Telecom Holding Co., Ltd. - - 71.60 61.00Asia Multimedia Co., Ltd. - - - 13.72Telecom Training and Development Co., Ltd. - - 350,070.50 -

Joint ventures:BITCO Group of companies 136,707.27 - 1,207.92 -Asia infonet Co., Ltd. 22.96 26.44 50.00 0.93

Associated:UBC Cable Network Public Co., Ltd. 1.87 - - -

Related companies:NEC Communication Systems (Thailand) Co., Ltd. 71,943.86 70,343.84 71,943.86 70,343.84CP Group of companies 22,653.95 70,481.50 20,554.10 62,608.59

231,329.91 140,851.78 466,827.64 382,960.66


84

9. Related party transactions (Continued)

ii) Purchases of goods and services (Continued)Consolidated Company


Purchases of services:Subsidiaries:

Asia Wireless Communication Co., Ltd. - - 1,674,270.44 1,492,731.63Nilubon Co., Ltd. - - 345,486.80 356,514.82W7 Rental Services Ltd. - - 140,792.73 129,506.43Wire & Wireless Co., Ltd. - - 9,293.18 78,037.30Telecom Training and Development Co., Ltd. - - 18,000.00 18,000.00Asianet Corporation Co., Ltd. - - 11,658.28 4,729.38Telecom Holding Co., Ltd. - - 1.50 4.70Asia Multimedia Co., Ltd. - - 133.43 -

U-Net Co., Ltd. - - 411.51 -Joint ventures:

BITCO Group of companies 18,561.35 19,782.23 31,864.55 33,529.20Asia Infonet Co., Ltd. 1,867.92 1,850.80 3,884.12 2,641.76

Associated:UBC Cable Network Public Co., Ltd. 3,718.41 1,800.45 871.51 61.43

Related companies:CP Group of companies 147,192.29 49,546.11 42,253.17 21,133.65NEC Communication Systems (Thailand) Co., Ltd. 18,740.47 18,296.84 18,740.47 18,296.84Verizon Group of companies 2,944.66 4,214.17 2,944.66 4,214.17

193,025.10 95,490.60 2,300,606.35 2,159,401.31

Purchases from related companies were carried out on commercial terms and conditions and at marketprices. The Group holds a 9.62% equity interest in NEC Communication Systems (Thailand) Co., Ltd. andthe Verizon Group of companies holds 10.94% of the Company’s equity.


85


iii) Outstanding balances arising from sales and purchases of goods and services


Baht’000 Baht’000 Baht’000 Baht’000Receivables from related parties:Subsidiaries:

Asia Wireless Communication Co., Ltd. - - 31,924.29 56,931.15Nilubon Co., Ltd. - - 27,172.84 26,399.59Wire & Wireless Co., Ltd. - - 1,319.24 1,378.93Telecom Holding Co., Ltd. - - 773.42 734.39W7 Rental Services Ltd. - - 45.05 45.05Asia Multimedia Co., Ltd. - - 16,488.05 7.06U-net Co., Ltd. - - 29.17 -

Joint ventures:BITCO Group of companies 93,463.54 14,286.65 34,879.43 419.79Asia Infonet Co., Ltd. 9,136.13 6,456.07 168.44 625.73

Associated:UBC Cable Network Public Co., Ltd. 150,240.03 82,803.47 17.08 -

Related companies:CP Group of companies 165,215.32 45,499.43 2,864.77 131.85

418,055.02 149,045.62 115,681.78 86,673.54Less: allowance for doubtful accounts (391.41) (75.06) - -

417,663.61 148,970.56 115,681.78 86,673.54

Payables to related parties:Subsidiaries:

Asia Wireless Communication Co., Ltd. - - 597,367.96 661,565.59Telecom Holding Co., Ltd. - - 14,448.54 232,288.48Nilubon Co., Ltd. - - 90,942.03 48,817.70Wire & Wireless Co., Ltd. - - 11,777.14 39,136.87W7 Rental Services Ltd. - - 15,377.26 12,305.06Telecom Training and Development Co., Ltd. - - 22,179.83 1,605.00Asianet Corporation Co., Ltd. - - 3,628.99 1,222.11Tele Engineering and Services Co., Ltd. - - 170.13 170.13Asia Multimedia Co., Ltd. - - 139.73 -

U-net Co., Ltd. - - 193.29 -Joint ventures:

BITCO Group of companies 10,864.50 19,782.23 10,746.30 33,529.20Asia Infonet Co., Ltd. 2,346.73 5,681.76 5,462.37 12,010.23

Associated:UBC Cable Network Public Co., Ltd. 695.55 258.17 4.60 4.60

Related companies:NEC Communication System (Thailand) Co., Ltd. 10,583.11 58,964.05 10,583.11 58,964.05Verizon Group of companies 9,215.52 42,080.70 9,215.52 42,080.70CP Group of companies 14,880.89 19,514.76 10,379.22 16,568.95Kreditanstalt fuer Wiederaufbau 2,966.29 7,569.33 2,966.29 7,569.33Directors 31.78 - - -Others - 1,366.77 - -

51,584.37 155,217.77 805,582.31 1,167,838.00

Kreditanstalt fuer Wiederaufbau is the only preference shareholder of the Company and holds a 18.94% interest of total voting rights (2001: 21.72%).


86


iv) Short-term loan to joint venture

ConsolidatedAs at 31 December 2002 2001

Baht’000 Baht’000Asia Infonet Co., Ltd. 780.71 2,645.46

Movement of loan can be analysed as follows:

Consolidated

Baht’000For the year ended 31 December 2002

Opening net book value 2,645.46Interest payment during the year (1,864.75)Closing net book value 780.71

v) Loans from a related party

Consolidated and CompanyAs at 31 December 2002 2001

Baht’000 Baht’000Loans from Kreditanstalt fuer WiederaufbauCurrent 1,399,800.77 419,770.65Non-current 5,997,364.30 18,273,401.94Total (Note 17) 7,397,165.07 18,693,172.59

Movement of loan can be summarised as follows:

Consolidated andCompanyBaht’000

For the year ended 31 December 2002

Opening net book value 18,693,172.59Loan repayment during the year (11,007,837.45)Currency translation (299,259.93)Amortisation of debt issuance cost 11,089.86Closing net book value 7,397,165.07

The secured loans from Kreditanstalt fuer Wiederaufbau (“KfW”), the Company’s preferred shareholder rank pari passu with other secured lenders. The loans are denominated in United States Dollars and Thai Baht and carry interest at London Interbank Offer Rate (“LIBOR”) plus a fixed percentage and Minimum Lending Rate (“MLR”) plus a fixed percentage per annum. The related interest expenses were Baht 537.78 million and Baht 1,268.31 million for the years ended 31 December 2002 and 2001, respectively. These loans are presented in the balance sheet as part of borrowings (Note 17).


87


Maturity of loans from related party:Consolidated and Company

As at 31 December 2002 2001Baht’000 Baht’000

Between 1 and 2 years 3,980,445.43 1,623,916.42

Between 2 and 5 years 3,416,719.64 8,500,003.79

Over 5 years - 8,569,252.387,397,165.07 18,693,172.59

vi) Directors and key management’s remuneration

Directors and key management of the Company are listed in the Annual Report.

In 2002 the total remuneration of the directors of the Company and the Group was Baht 41.61 million and Baht 47.23 million (2001: Baht 33.95 million and Baht 45.72 million), respectively. Besides the aforementioned remuneration the key management of the Company received compensations in forms of salaries and other benefits in 2002 and 2001 of Baht 101.86 million and Baht 149.30 million, respectively.

vii) Equity warrants granted to directors and senior executives

During 2002, the Company granted 37.13 million units of warrants to directors and senior executives. Theoutstanding number of stock options granted to directors and senior executives of the Company at 31December 2002 was 66.04 million units (2001: 42.25 million units) (Note 22).

10. Inventories, netConsolidated Company


Spareparts for networks (at cost) 800,353,200 802,985,568 598,336,324 550,798,152Allowance for decline in value (273,040,908) (202,204,916) (122,890,617) (57,685,709)Spareparts for networks - net 527,312,292 600,780,652 475,445,707 493,112,443Merchandise (at cost) 809,081,786 578,513,407 189,859,745 289,714,905Allowance for decline in value (159,553,721) (69,591,909) - -Merchandise - net 649,528,065 508,921,498 189,859,745 289,714,905Work in process (at cost) 6,470,814 2,712,846 - -Goods in transit (at cost) 963,395 963,395 - -Inventories, net 1,184,274,566 1,113,378,391 665,305,452 782,827,348

11. Other current assetsConsolidated Company


Advances to contractors 732,464,283 1,220,738,988 652,673,119 875,052,582Income tax deducted at source 680,153,101 508,497,083 679,509,178 498,377,491Claimable value added tax 895,506,928 352,957,567 3,412,570 36,232,548Value added tax pending receipt of tax invoices 174,795,271 158,148,758 71,204,825 121,955,193Interest receivable 131,448,270 132,235,348 125,924,230 123,433,039Others 307,845,881 267,976,989 59,303,551 199,672,930

2,922,213,734 2,640,554,733 1,592,027,473 1,854,723,783


88

12. Investments in subsidiaries, joint ventures and associates

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

Asianet Corporation Co., Ltd. (Formerly “Interactive Media Services Co., Ltd.”) Audio text services Thailand

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

Nilubon Co., Ltd. Rental services Thailand

Tele Engineering and Services Co., Ltd. Construction and distributor Thailand

Telecom Equipment Manufacturing Co., Ltd. (59.99%)

Telecom equipment manufacturer Thailand

Telecom Holding Co., Ltd. Holding company Thailand

Telecom International Co., Ltd. Holding company Thailand

Telecom Training and Development Co., Ltd. Training service Thailand

U-Net Co., Ltd. Construction and distributor Thailand

Wire & Wireless Co., Ltd. (87.50%) Construction and distributor Thailand

W 7 Rental Services Ltd. Rental services Thailand

Yai Kaew Co., Ltd. Investment in property Thailand

K.I.N. (Thailand) Co., Ltd. (a foreign company) Holding company British Virgin Islands

Nilubon Co., Ltd. (a foreign company) Holding company British Virgin Islands

TA Orient Telecom Investment Co., Ltd. Holding company British Virgin Islands

Telecom Asia (China) Co., Ltd. Communication British Virgin Islands

Telecom International China Co., Ltd. Communication British Virgin Islands

An other subsidiaries Telecom Holding Co., Ltd. is 96.40% directly owned and 3.59% indirectly owned. An other subsidiaries 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 2001.

Principal joint ventures

Name of joint ventures Business Country incorporation

Bangkok Inter Teletech Co., Ltd.(43.86%) Cellular operator Thailand

Asia Infonet Co., Ltd. (65.00%) Internet provider Thailand

Details of the joint ventures are set out in Note 31.


89

12. Investments in subsidiaries, joint ventures and associates (Continued)

Investments are comprise:

At 31 December 2002 Consolidated

BusinessRelationsh

ip

Paid-upCapital

Baht’000

%Ownership

interest

Investment-At CostMethod

Baht’000

Investment-At

EquityMethod

Baht’000

Associates:United BroadcastingCorporation Public Company Limited Pay Television Shareholder 7,424,490 40.96 4,619,750 4,009,108

Public Radio Network Co., Ltd.Telecommunication Shareholder 10,000 32.00 3,200 -

Total investment inassociates 4,622,950 4,009,108

At 31 December 2001 Consolidated

BusinessRelationsh

ip

Paid-upCapital

Baht’000

%Ownership

interest

Investment-At CostMethod

Baht’000

Investment-At

EquityMethod

Baht’000

Associates:United BroadcastingCorporation Public Company Limited Pay Television Shareholder 7,407,736 40.96 4,619,750 4,492,130

Public Radio Network Co., Ltd.Telecommunication Shareholder 10,000 32.00 3,200 -

Total investment inassociates 4,622,950 4,492,130

At 31 December 2002 CompanyInvestmen

t Investment-Paid-up % -At Cost At Equity

CapitalOwnershi

p Method Method

BusinessRelationsh

ip Baht’000 interest Baht’000 Baht’000SubsidiaryTelecom Holding Co., Ltd. Investment

HoldingShareholder

13,339,144 96.40 12,859,144 6,384,070Joint ventureBangkok Inter Teletech Co.,Ltd.

Cellular Operator Shareholder21,000,000 43.86 8,236,871 4,255,465

Total 21,096,015 10,639,535

At 31 December 2001 CompanyInvestmen

t Investment-Paid-up % -At Cost At Equity

CapitalOwnershi

p Method Method

BusinessRelationsh

ip Baht’000 interest Baht’000 Baht’000SubsidiaryTelecom Holding Co., Ltd. Investment

HoldingShareholder

12,000,000 99.99 12,000,000 6,941,334Joint ventureBangkok 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


90

12. Investments in subsidiaries, joint ventures and associates (Continued)

Movement of investments is as follows:

Consolidated CompanyYear ended 31 December 2002 2001 2002 2001

Baht’000 Baht’000 Baht’000 Baht’000

Opening amount 4,492,130 5,405,003 11,155,635 10,879,510Acquisition (Note 4) - - 3,640,047 5,455,968Share of results (483,022) (912,873) (8,856,801) (2,159,056)Unrealised loss on available-for-sale securities - - (785,727) (3,020,787)Reversal of unrealised loss on available-for- sale securities - - 5,486,381 -

Closing amount 4,009,108 4,492,130 10,639,535 11,155,635

The share of results in the consolidated statements of income included the amortisation charge of goodwill amounting to Baht 380.06 million (2001: Baht 332.84 million) in respect of acquisition of associated undertakings. Investments in associated undertakings as at 31 December 2002 include goodwill of Baht 4,275.69 million, net of accumulated amortisation of Baht 1,461.98 million (2001: Baht 4,655.75 million, net of accumulated amortisation of Baht 1,081.92 million).

Investment in associates at the carrying value of Baht 4,006.23 million is secured against a subsidiary’s borrowings (Note 17 and Note 30).

Share of results in joint ventures in the consolidated and Company’s statements of income for the year ended 31 December 2002 are offset by the amortisation of negative goodwill amounting to Baht 2,336.78 million and amortisation of goodwill amounting to Baht 9.30 million (Note 4).

13. Investment property

ConsolidatedYear ended 31 December 2002 2001

Baht Baht

Opening net book value 54,293,898 57,972,973Reclassification (420,000) (3,679,075)Closing net book value 53,873,898 54,293,898

As at 31 December 2002 2001Baht Baht

Cost 121,867,845 124,930,289Less : Allowance for decline in value (67,993,947) (70,636,391)Net book value 53,873,898 54,293,898


91

14. Property, plant and equipment, netConsolidated Company


Network equipmentOpening net book value 60,005,337,178 61,816,021,927 46,121,627,946 49,979,486,650Additions 7,349,388,542 3,483,560,232 2,046,589,858 1,873,125,512Acquisition of joint venture (Note 4) 414,820,590 213,946,536 - -Disposals (82,770,408) (7,593,892) (68,333,534) (4,724,464)Adjustments/Reclassification 3,084,148,471 2,033,984,995 (184,115,492) 455,645,281Depreciation charge (7,804,951,973) (7,354,977,729) (6,089,366,142) (5,989,290,835)Impairment charge (1,605,415,556) (179,604,891) (1,598,252,736) (192,614,198)

Closing net book value 61,360,556,844 60,005,337,178 40,228,149,900 46,121,627,946

Non-network equipmentOpening net book value 4,027,322,227 2,446,575,128 611,746,490 647,587,120Additions 2,225,381,964 1,210,439,297 214,277,215 334,183,162Acquisition of joint venture (Note 4) 145,026,562 2,669,541,822 - -Disposals (21,172,382) (10,604,733) (8,872,599) (3,127,180)Adjustments/Reclassification (738,723) (1,774,896,820) 12,302,499 (211,214,073)Depreciation charge (857,734,714) (482,350,150) (184,507,809) (155,682,539)Impairment charge (7,998,545) (31,382,317) - -

Closing net book value 5,510,086,389 4,027,322,227 644,945,796 611,746,490

Total 66,870,643,233 64,032,659,405 40,873,095,696 46,733,374,436

Network equipment

Borrowing costs of Baht 140.48 million (2001: Baht 14.11 million) were capitalised as cost of assets duringthe year.

The Company replaced a portion of its existing Intelligent Network System (“IN System”) by a new system with substantially improved capabilities. The new IN System enables the Company to provide a variety of new Value Added Services to its fixed line customers and also accommodates a substantial increase in PCT subscribers when compared with the existing system. As a result, the Company impaired the value of the IN System that has to be replaced amounting to Baht 1,562.47 million in accordance with the Thai Accounting Standard No. 36 “Impairment of Assets”.

Network equipment in the consolidated financial statements at net book value of Baht 41,803.42 million, netof accumulated depreciation and allowances of Baht 42,080.29 million (2001: Baht 48,761.53 million, net ofaccumulated depreciation of Baht 34,465.44 million), was transferred to TOT under the concessionagreement (Note 2). According to the agreement, the Company has the right to operate and maintain theseassets over the concession periods.

Borrowings are secured by the right to operate network equipment of the Company and the Group.

Non–network equipment

Additions include Baht 719.38 million (2001: Baht 734.08 million) assets leased under finance leases (wherethe Group is the lessee).

Leased assets included in the table on page 33, where the Group is a lessee under a finance lease of vehiclesand computers are as follows:

Consolidated

2002Baht

2001Baht

Cost - capitalised finance leases 1,790,202,270 951,515,626Less: Accumulated depreciation (381,934,514) (127,553,018)

Net book value 1,408,267,756 823,962,608

Borrowings are secured by buildings in non-network equipment at a net book value of Baht 880.51 million(2001: Baht 943.76 million) (Note 17 and Note 30).


92

14. Property, plant and equipment (Continued)

ConsolidatedTelephone Wireless Multi-Media Power Supply

Land & Land Building & Network Network Public Network and Work inImprovement Improvement Equipment Equipment Phone Equipment Computer Progress Total

Network equipment Baht Baht Baht Baht Baht Baht Baht Baht Baht

At 31 December 2001Cost 1,867,928,070 1,940,320,598 65,931,490,431 17,553,235,542 1,043,332,161 5,260,635,855 3,567,880,675 1,098,909,834 98,263,751,166Accumulated depreciation - (526,682,399) (29,766,687,07

4)(2,523,423,179) (467,594,107) (2,427,798,621

)(2,198,914,411

)- (37,911,099,791

)Allowance for impairment - (433,374) (81,894,798) - - (154,700,000) (110,286,025) - (347,314,197)

Net book value 1,867,928,070 1,413,204,825 36,082,908,559 15,029,830,363 575,738,054 2,678,137,234 1,258,680,239 1,098,909,834 60,005,337,178

Year ended 31 December 2002Opening net book value 1,867,928,070 1,413,204,825 36,082,908,559 15,029,830,363 575,738,054 2,678,137,234 1,258,680,239 1,098,909,834 60,005,337,178Additions - 369,790 761,541,584 5,155,052,084 7,621,127 157,308,614 655,034 1,266,840,309 7,349,388,542Acquisition of joint venture (Note4)

- - - 414,820,590 - - - - 414,820,590

Disposals - - (65,837,213) - (1,768,067) (14,436,875) - (728,253) (82,770,408)Adjustments/Reclassification - 34,344,878 874,654,667 3,424,235,155 445,231,189 10,792,934 1,725,280 (1,706,835,632

)3,084,148,471

Depreciation charge - (99,060,683) (5,138,989,924) (564,442,070) (220,796,112) (451,688,058) (329,975,126) - (7,804,951,973)Impairment charge - - (1,809,652) (1,569,627,847) - - (33,978,057) - (1,605,415,556)

Closing net book value 1,867,928,070 1,348,858,810 32,512,468,021 20,889,868,275 806,026,191 2,380,113,849 897,107,370 658,186,258 61,360,556,844

At 31 December 2002Cost 1,867,928,070 1,975,035,267 67,375,479,281 26,638,233,333 1,490,736,245 5,405,243,976 3,333,764,089 658,186,258 108,744,606,519Accumulated depreciation - (625,743,083) (34,779,306,81

1)(4,148,037,212) (684,710,054) (2,870,430,127

)(2,387,144,426

)- (45,495,371,713

)Allowance for impairment - (433,374) (83,704,449) (1,600,327,846) - (154,700,000) (49,512,293) - (1,888,677,962)

Net book value 1,867,928,070 1,348,858,810 32,512,468,021 20,889,868,275 806,026,191 2,380,113,849 897,107,370 658,186,258 61,360,556,844


93


ConsolidatedLand and Furniture, Power

Land Building & Fixtures and Supply & Work inImprovement Improvement Equipment Computer Vehicles Progress Total

Non – network equipment Baht Baht Baht Baht Baht Baht Baht

At 31 December 2001Cost 245,211,581 1,788,089,143 1,575,416,497 1,007,450,018 1,154,227,734 778,942,107 6,549,337,080Accumulated depreciation (5,148,686) (668,780,153) (1,000,050,955) (513,887,802) (284,722,702) - (2,472,590,298)Allowance for impairment (3,700,000) (4,505,380) (12,519,175) - - (28,700,000) (49,424,555)

Net book value 236,362,895 1,114,803,610 562,846,367 493,562,216 869,505,032 750,242,107 4,027,322,227

Year ended 31 December 2002Opening net book value 236,362,895 1,114,803,610 562,846,367 493,562,216 869,505,032 750,242,107 4,027,322,227Additions - 12,292,393 114,241,399 105,745,459 676,981,835 1,316,120,878 2,225,381,964Acquisition of joint venture (Note 4) 3,230,203 12,572,368 11,202,155 440,709,732 511,082 (323,198,978) 145,026,562Disposals - (917,195) (9,376,572) (885,873) (9,992,742) - (21,172,382)Adjustments/Reclassification 1,686,500 52,732,241 68,668,828 1,242,142,843 (886,872) (1,365,082,263) (738,723)Depreciation charge (821,289) (110,233,576) (162,850,752) (312,745,815) (271,083,282) - (857,734,714)Impairment charge (7,998,545) - - - - - (7,998,545)

Closing net book value 232,459,764 1,081,249,841 584,731,425 1,968,528,562 1,265,035,053 378,081,744 5,510,086,389

At 31 December 2002Cost 252,770,728 1,861,622,921 1,669,021,488 2,750,847,848 1,720,962,934 378,081,744 8,633,307,663Accumulated depreciation (5,969,975) (772,924,605) (1,046,737,704) (782,319,286) (455,927,881) - (3,063,879,451)

Allowance for impairment (14,340,989) (7,448,475) (37,552,359) - - - (59,341,823)

Net book value 232,459,764 1,081,249,841 584,731,425 1,968,528,562 1,265,035,053 378,081,744 5,510,086,389


94


CompanyTelephone Wireless Power Supply

Land & Land Building & Network Network Public and Work inImprovement Improvement Equipment Equipment Phone Computer Progress Total

Network equipment Baht Baht Baht Baht Baht Baht Baht Baht

At 31 December 2001Cost 1,867,928,070 1,940,320,599 65,949,236,694 4,773,683,455 1,043,332,161 3,567,880,675 1,098,909,836 80,241,291,490Accumulated depreciation - (526,682,400) (29,852,253,797) (881,604,631) (467,594,108) (2,198,914,410) - (33,927,049,346)Allowance for impairment - (433,374) (81,894,798) - - (110,286,026) - (192,614,198)

Net book value 1,867,928,070 1,413,204,825 36,015,088,099 3,892,078,824 575,738,053 1,258,680,239 1,098,909,836 46,121,627,946

Year ended 31 December 2002Opening net book value 1,867,928,070 1,413,204,825 36,015,088,099 3,892,078,824 575,738,053 1,258,680,239 1,098,909,836 46,121,627,946Additions - 369,790 771,103,597 - 7,621,128 655,034 1,266,840,309 2,046,589,858Disposals - - (65,837,214) - (1,768,067) - (728,253) (68,333,534)Adjustments/Reclassification - 34,344,878 1,041,418,794 - 445,231,189 1,725,280 (1,706,835,63

3)(184,115,492)

Depreciation charge - (99,060,683) (5,151,711,193) (287,823,027) (220,796,113) (329,975,126) - (6,089,366,142)Impairment charge - - (1,809,651) (1,562,465,028) - (33,978,057) - (1,598,252,736)

Closing net book value 1,867,928,070 1,348,858,810 32,608,252,432 2,041,790,769 806,026,190 897,107,370 658,186,259 40,228,149,900

At 31 December 2002Cost 1,867,928,070 1,975,035,267 67,572,548,259 4,773,683,455 1,490,736,245 3,333,764,088 658,186,259 81,671,881,643Accumulated depreciation - (625,743,083) (34,880,591,377) (1,169,427,658) (684,710,055) (2,387,144,425) - (39,747,616,598)Allowance for impairment - (433,374) (83,704,450) (1,562,465,028) - (49,512,293) - (1,696,115,145)

Net book value 1,867,928,070 1,348,858,810 32,608,252,432 2,041,790,769 806,026,190 897,107,370 658,186,259 40,228,149,900


95


CompanyFurniture, Power

Leasehold and Fixtures and Supply & Work inImprovement Equipment Computer Vehicle Progress Total

Non – network equipment Baht Baht Baht Baht Baht BahtAt 31 December 2001Cost 69,854,668 451,949,715 873,661,885 - 40,799,595 1,436,265,863Accumulated depreciation (42,054,950) (283,779,946) (498,684,477) - - (824,519,373)

Net book value 27,799,718 168,169,769 374,977,408 - 40,799,595 611,746,490

Year ended 31 December 2002Opening net book value 27,799,718 168,169,769 374,977,408 - 40,799,595 611,746,490Additions 10,705,178 60,153,237 88,685,448 1,140,000 53,593,352 214,277,215Disposals (7) (8,012,200) (859,462) (930) - (8,872,599)Adjustments/Reclassification 30,275,177 53,874,914 16,114,683 1,856 (87,964,131) 12,302,499Depreciation charge (13,207,356) (53,908,641) (117,188,497) (203,315) - (184,507,809)

Closing net book value 55,572,710 220,277,079 361,729,580 937,611 6,428,816 644,945,796

At 31 December 2002Cost 109,935,022 478,077,501 925,556,505 1,140,000 6,428,816 1,521,137,844Accumulated depreciation (54,362,312) (257,800,422) (563,826,925) (202,389) - (876,192,048)

Net book value 55,572,710 220,277,079 361,729,580 937,611 6,428,816 644,945,796


96

15. Intangible assets, netConsolidated

Right to Right toComputer operate hang

Goodwill Trademark software NON-POTS Dropwire TotalBaht Baht Baht Baht Baht Baht

At 31 December 2001Cost -

121,159,377 494,790,047 381,489,000 227,325,0001,224,763,42

4Accumulated amortisation - (8,233,891) (288,167,471) (80,112,690) (43,949,500) (420,463,552)

Net book value - 112,925,486 206,622,576 301,376,310 183,375,500 804,299,872

Year ended 31 December2002Opening net book value - 112,925,486 206,622,576 301,376,310 183,375,500 804,299,872Additions 279,096,032 - 279,921,803 - - 559,017,835Acquisition of joint venture (Note4)

-7,510,488 - - - 7,510,488

Adjustments/Reclassification - - 532,382,728 - - 532,382,728Amortisation charge (9,303,202) (6,231,977) (88,466,092) (19,074,450) (9,093,000) (132,168,721)Closing net book value 269,792,830

114,203,997 930,461,015 282,301,860 174,282,5001,771,042,20

2

At 31 December 2002Cost 279,096,032

129,479,0321,308,094,15

9 381,489,000 227,325,0002,325,483,22

3Accumulated amortisation (9,303,202) (15,275,035) (377,633,144) (99,187,140) (53,042,500) (554,441,021)

Net book value 269,792,830114,203,997 930,461,015 282,301,860 174,282,500

1,771,042,202

Addition to goodwill was derived from the additional acquisition in a joint venture and is amortised using the straight-line method over its estimated useful life of 5 years (Note 4). The Company recognise amortisation charge under “Share of profit (loss) in subsidiaries, joint venture and associates” in the statement of income.

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 expiry, termination or cancellation of the Concession agreement to operate cellular telephone services as mentioned in Note 2.

The right to operate NON-POTS represents the fair value of TOT’s interest in the nationwide NON-POTS concession for which a subsidiary, 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

GoodwillComputer software

TotalBaht Baht Baht

At 31 December 2001Cost - 494,790,047 494,790,047Accumulated amortisation - (288,167,471) (288,167,471)

Net book value - 206,622,576 206,622,576

Year ended 31 December 2002Opening net book value - 206,622,576 206,622,576Additions 279,096,032 256,626,962 535,722,994Adjustment/Reclassification - 532,382,728 532,382,728Amortisation charge (9,303,202) (88,466,092) (97,769,294)Closing net book value 269,792,830 907,166,174 1,176,959,004

At 31 December 2002Cost 279,096,032 1,284,799,318 1,563,895,350Accumulated amortisation (9,303,202) (377,633,144) (386,936,346)

Net book value 269,792,830 907,166,174 1,176,959,004


97

16. Other non-current assets


As at 31 December 2002Baht

2001Baht

2002Baht

2001Baht

Subscribers acquisition cost,net 853,775,584 841,746,064 692,516,672 733,951,538Value added tax pending receipt of tax invoices related to debt restructuring 239,418,614 287,984,062 239,418,614 287,984,062

Prepaid withholding tax 326,696,439 237,305,437 - -

Deposits 146,432,872 68,506,688 30,980,674 29,374,251Others 1,610,800 17,280,195 - -Total 1,567,934,309 1,452,822,446 962,915,960 1,051,309,851

Subscribers acquisition cost is the cost of PCT handsets distributed to subscribers free of charge under the 3-year usage contract campaign. Subscribers acquisition cost is amortised over the contract period. The amortisation for the year recorded under “Cost of services” in the consolidated and the Company’s financial statements are Baht 426.51 million and Baht 350.55 million, respectively (2001: Baht 58.01 million and Baht 54.94 million, respectively).

17. Borrowings

The borrowings are denominated in Thai Baht, United States Dollars and Japanese Yen.


Baht Baht Baht BahtCurrent- Bank overdrafts 26,619,264 - - -- Bank and financial institutionloans 4,950,356,109 2,982,358,693 2,882,906,664 1,170,657,842- Finance leases 514,026,329 231,933,730 - -- Debentures 363,177,400 - 363,177,400 -Total Current 5,854,179,102 3,214,292,423 3,246,084,064 1,170,657,842Non-Current- Bank and financial institutionloans 36,416,063,823 53,780,559,596 28,054,384,857 50,974,248,343- Finance leases 506,780,477 400,071,152 - -- Debentures 17,719,263,220 - 17,719,263,220 -- Suppliers Credit 4,687,777,228 7,763,551,737 4,687,777,228 7,763,551,737Total Non-Current 59,329,884,748 61,944,182,485 50,461,425,305 58,737,800,080

Total Borrowings 65,184,063,850 65,158,474,908 53,707,509,369 59,908,457,922

Movement of borrowings can be analysed as follows:

Year ended 31 December 2002 ConsolidatedBaht

CompanyBaht

Opening net book value 65,158,474,908 59,908,457,922Additional borrowings

- principal 26,508,730,587 19,190,057,803- non cash finance leases 719,380,894 -- interest 81,093,279 46,359,330

Acquisition of joint venture 393,467,598 -Repayment of loans

- cash transactions (23,713,250,868) (22,545,368,073)- non cash transactions (4,119,159,568) (2,968,902,895)

Currency translation 11,466,376 26,757,383Amortisation of debt issuance costs 143,860,644 50,147,899

Closing net book value 65,184,063,850 53,707,509,369


98

17. Borrowings (Continued)

The borrowing amounts are net of unamortised debt issuance costs of Baht 668.54 million for consolidation (2001: Baht 145.84 million) and Baht 496.04 million for the Company (2001: Baht 145.84 million).

Secured liabilities

Borrowings include secured liabilities being loans from leases, banks and financial institutions of Baht 59.81 billion (2001: Baht 57.39 billion) and Baht 49.02 billion (2001: Baht 52.14 billion) in the consolidated and the Company financial statements, respectively. The bank borrowings are secured with some of the available-for-sale securities, shares of subsidiaries and associates, network property and equipment, land and building of the Group (Note 30). Lease liabilities are effectively secured as the rights to the leased assets revert to the lessor in the event of default.

Bank and financial institution loans under current and non-current liabilities include secured loans of Baht 7.40 billion (2001: Baht 18.69 billion) from Kreditanstalt fuer Wiederaufbau (“KfW”) which in March 2000 became a related party (Note 9).

Effective on 30 April 2002, the SAILS Mandatory Exchangeable Securities Contracts dated 3 October 2000 and 26 March 2001 among K.I.N. (Thailand) Co., Ltd. (“K.I.N.”), Telecom Holding Co., Ltd. and Credit Suisse First Boston International (“CSFBI”) (collectively, the “SAILS Contracts”) were terminated because all related parties have agreed to unwind the SAILS transactions early as the result of the voluntary petition under Chapter 11 of the United States Bankruptcy Code by FLAG Telecom Holdings Limited (“FLAG”). Consequently K.I.N. delivered a total of 2,185,000 shares in FLAG to CSFBI and the rights and obligations of all parties under the SAILS Contracts were released. As a result, borrowings of Baht 943.25 million accounted for by the SAILS transactions were eliminated (non-cash repayment) and recorded as a gain on sale of investment in the consolidated statement of income.

On 3 June 2002, the Company entered into a loan agreement (“Agreement”) with International Finance Corporation (“IFC”). The loan is denominated in Thai Baht amounting to Baht 1,125.00 million and carries interest at a fixed percentage per annum as stipulated in the Agreement and is due for repayment on 15 June 2011. Under the terms of the Agreement, the Company must comply with certain conditions as specified in the Agreement. This loan was fully drawndown on 17 October 2002 to partially refinance the Company’s existing US Dollars debts.

The borrowings of the Group include Baht 6,865.98 million which represents the Group’s proportionate interest in loans of a joint venture, BITCO. The loans represent long-term loans from local and overseas financial institutions for financing the construction of the mobile phone network equipment. The loans are denominated in both Baht and United States Dollars, secured against investments in subsidiaries and a mortgage of land and building of a subsidiary in the BITCO Group of companies and guaranteed by another subsidiary in the BITCO Group of companies. The loans carry interest at LIBOR plus a fixed percentage per annum and MLR plus a fixed percentage per annum, and are due for repayment during 2004. Under the terms of the loan agreements, the subsidiary in BITCO Group of companies must comply with certain conditions throughout the period of the loans, such as to maintain debt to equity ratio of the subsidiary in BITCO Group of companies which is determined according to the terms as specified in the loan agreements.

Baht debentures

On 15 October 2002, the Company issued two tranches of debentures as follows:

1. Early redeemable secured debentures with periodic payments of TelecomAsia Corporation Public Company Limited No. 1/2545, due in 2008. The Company issued 11,715,400 units of such debenture at par value of Baht 1,000 per unit, is a total amount of Baht 11,715.40 million. The debentures carry interest at the fixed rate of 6.1% per annum, payable on a quarterly basis commencing from 7 January 2003 through 7 July 2008. The debenture principal will be redeemed by installment on every interest payment date commencing on 7 January 2003 onwards.


99


Baht debentures (Continued)

2. Partially guaranteed early redeemable secured debenture with periodic payments of TelecomAsia Corporation Public Company Limited No. 2/2545, due in 2011. The Company issued 6,750,000 units of debenture at par value of Baht 1,000 per unit, to a total amount of Baht 6,750 million. The debentures carry interest at MLR per annum, payable on a quarterly basis commencing from 3 February 2003 through 3 February 2011. The debenture principal will be redeemed by installment on every interest payment date commencing on 3 November 2009 onwards.

Debt restructuring

In December 2001, Telecom Holding Company Limited (“Telecom Holding”) commenced a 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 pursuant Debts Restructuring Agreement from 30 December 2001 to 30 December 2002.

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 included are below.

1. The Assignee will pay the Transfer Price to the Assignor in six installments in the respective amounts set out in the Agreement starting 17 December 2001 and continuing until 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, The Assignee paid the first installment to the Assignor amounting to Baht 216.81 million.

On 15 May 2002, a subsidiary of Telecom Holding paid all Transfer Price to the Assignor. The amount of Baht 108.40 million was recognised as gain on repayment of borrowing under “Other non-operating income” in the consolidated statement of income (non-cash repayment).

On 30 July 2002, Telecom Holding and certain of its subsidiaries entered into the Restructuring Agreement (“Agreement”) with its existing creditors to achieve a realistic recovery for the creditors’ indebtedness. Subject to the terms and conditions under the Agreement, the concerned parties have to carry on a series of transactions as stipulated in the Agreement. By the end of August 2002, Telecom Holding and certain of its subsidiaries had accomplished the first phase of the series of transactions stipulated in the Agreement, resulting in a decrease in the Group’s indebtedness amounting to Baht 655.25 million, which repaid its principal amounting to Baht 550.00 million. The Company recognised this gain from debt restructuring (net of related expenses) in the consolidated statement of income, affecting earnings by Baht 0.03 per share. The group of subsidiaries are carrying on the next phase as stipulated in the Agreement.

Settlement of Deferred Payment Notes obligation

On 27 December 2002 the Company and certain unsecured creditors entered into and executed an Agreement to Settle Obligations Pursuant to the Deferred Payment Note Agreement and the Unsecrued Creditors Restructuring Agreement dated 22 December 1999 (“Agreement”). Under the terms of the Agreement, the Company agreed to pay the Settlement Price of Baht 682.57 million as stipulated in the Agreement and the unsecured creditors agreed to return the Deferred Payment Notes of Baht 3,770.40 million to the Company and release all outstanding liabilities. Consequently, the amount of Baht 3,087.83 million was recognised as a gain on repayment of borrowings under “Other non-operating income” in the consolidated and Company’sstatements of income.


100


The interest rate exposure of the borrowings of the Group is as follows:

Consolidated Company2002 2001 2002 2001

Total borrowings Baht Baht Baht Baht

- at fixed rates 6,165,351,372 9,365,633,960 4,687,777,229 7,763,551,737

- at floating rates 59,018,712,478 55,792,840,948 49,019,732,140 52,144,906,18565,184,063,850 65,158,474,908 53,707,509,369 59,908,457,922


2002 2001 2002 2001Weighted average

effective interest rates:

- bank overdrafts - 8.59% - 8.59%- bank and finance institution

borrowings 7.15% 5.94% 7.15% 5.70%

- debenture 6.55% - 6.55% -

- lease liabilities 7.00% 9.10% - -

- suppliers credit 1.00% 1.00% 1.00% 1.00%

The carrying amounts and fair values of certain non-current borrowings (excluding finance lease liabilities) of the Group are as follows:

Carrying amounts Fair values2002 2001 2002 2001Baht Baht Baht Baht

Non-current bank borrowings 36,416,063,823 35,087,387,004 36,750,269,210 35,705,654,215Loans from a related company

(Note 9) 5,997,364,304 18,693,172,592 6,118,710,567 18,895,679,476Suppliers credit 4,687,777,228 7,763,551,737 4,088,793,539 7,102,289,550Debentures 18,082,440,620 - 18,000,423,051 -

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 values.

Maturity of non-current borrowings (excluding finance lease liabilities):

Consolidated Company2002 2001 2002 2001Baht Baht Baht Baht

Between 1 and 2 years 13,316,037,839 3,915,836,852 6,022,285,218 3,320,282,394

Between 2 and 5 years 24,779,200,418 25,414,166,830 23,928,124,073 23,586,010,035

Over 5 years 20,727,866,014 32,214,107,651 20,511,016,014 31,831,507,65158,823,104,271 61,544,111,333 50,461,425,305 58,737,800,080


101


Finance lease liabilities-minimum lease payments:Consolidated

2002 2001Baht Baht

Not later than 1 year 572,877,504 265,177,858

Later than 1 year and not later than 5 years 536,132,937 361,795,037

1,109,010,441 626,972,895

Future finance charges on finance leases (88,203,635) 5,031,983

Present value of finance lease liabilities 1,020,806,806 632,004,878

Representing lease liabilities:

- current 514,026,329 231,933,726

- non-current 506,780,477 400,071,1521,020,806,806 632,004,878

The present value of finance lease liabilities is as follows:Consolidated

2002 2001Baht Baht

Not later than 1 year 514,026,329 231,933,726

Later than 1 year and not later than 5 years 506,780,477 400,071,1521,020,806,806 632,004,878

Facilities:

The Group has the following undrawn committed borrowing facilities:

Consolidated Company2002 2001 2002 2001Baht Baht Baht Baht

Floating rate

- expiring within one year - - - -

- expiring beyond one year 159,465,000 120,000,000 120,000,000 120,000,000

Fixed rate

- expiring within one year - - - -

- expiring beyond one year - - - -159,465,000 120,000,000 120,000,000 120,000,000


102

18. Accrued expenses

Included in accrued expenses at 31 December 2002 is an amount of Baht 865.52 million (2001: Baht 446.48 million) related to long distance circuit and conduit rental.

Previously, the Company has been in dispute with TOT over the methodology for computing rental charges for 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 partner with TOT.

During 2001, the Board of TOT reconsidered and reapproved an increase in the tariffs of conduit rental fromthe previous approval given in November 2000. As a result, the amount of conduit rental for the periods 1992 -2000 increased by Baht 156.88 million and was recognised in the 2001 statements of income as a change inaccounting estimate in accordance with TAS 39, Net Profit and Loss for the Period, Fundamental Errors andAccounting Changes.

During 2002, the methodology for computing rental charges for conduits has been informally concluded. As aresult, the amount of conduit rental for the periods 1992 - 2001 increased by Baht 277.86 million and wasrecognised in the 2002 statements of income as a change in accounting estimate in accordance with TAS 39,Net Profit and Loss for the Period, Fundamental Errors and Accounting Changes.

19. Other current liabilities


Baht Baht Baht BahtOther payables 2,173,291,071 1,383,910,561 1,885,126,064 1,093,943,913Output VAT pending tax invoice 195,003,421 231,377,049 115,833,379 176,577,602Unearned income 230,510,516 227,978,608 130,593,148 166,339,153Others 438,156,907 300,704,243 102,545,548 158,119,151Total 3,036,961,915 2,143,970,461 2,234,098,139 1,594,979,819


103

20. Long-term trade accounts payable

This account represents trade accounts payable pertaining to the supply and installation of the PCT project.

On 30 July 2002, four related subsidiaries entered into a Restructuring Agreement (“Agreement”) with their existing creditors. Under the provisions of the Agreement the concerned parties must carry on a series of transactions as stipulated therein. On 29 August 2002 the group of subsidiaries had accomplished the first phase of a series of transactions, resulting in a prepayment of the Group’s long-term trade accounts payable amounting to Baht 500 million. The concerned subsidiaries are carrying out the following phases as stipulated in the Agreement.

The outstanding restructured trade accounts payable is as follows:

Consolidated

2002 2001Foreign

Currency BahtForeign

Currency BahtInterest rate Million Million Million Million

Current (included in trade accounts payable)Average MLR USD - - USD 0.63 28.10JLTPR + 0.5% & 2.0% JPY 407.45 147.54 JPY 407.45 138.15Average MLR Baht 35.27 35.27 Baht 10.48 10.48

182.81 176.73Non-CurrentAverage MLR USD - - USD 23.92 1,060.90JLTPR + 0.5% & 2.0% JPY 18,063.22 6,540.75 JPY 19,167.82 6,499.22Average MLR Baht 1,471.83 1,471.83 Baht 739.31 739.31

8,012.58 8,299.43Total 8,195.39 8,476.16

Movement of long-term trade accounts payable can be analysed as follows:

Year ended 31 December 2002 ConsolidatedBaht Million

Opening net book value 8,476.16Repayment (675.60)Currency translation 394.83Closing net book value 8,195.39

The interest rate exposure and fair values of debt under restructuring agreements as at 31 December are as follows:

2002 2001Baht Million Baht Million

Total debt under restructuring exposurefrom interest rate – borrowing at floating rates 8,582.56 8,860.75

Weighted average effective interest rates- Denominated in Japan Yen 3.22% 3.16%- Denominated in U.S. Dollars 6.92% 7.08%- Denominated in Thai Baht 6.92% 7.08%

Fair values of non-current restructuring debts- Denominated in Japan Yen 7,100.78 7,033.37- Denominated in U.S. Dollars 867.69 1,042.98- Denominated in Thai Baht 605.62 717.28

8,574.09 8,793.63

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 will be available to the Group at the balance sheet date.


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21. Other non-current liabilities


Baht Baht Baht BahtValued added tax pending receipt of tax invoice related to debt restructuring 239,418,614 287,984,062 239,418,614 287,984,062Withholding tax related to debt restructuring 115,360,058 226,138,677 115,360,058 226,138,677Unbilled mobile network construction costs 3,951,067,892 220,503,235 - -Deposit received from customers 4,479,516 5,434,422 - -Total 4,310,326,080 740,060,396 354,778,672 514,122,739

Unbilled mobile network construction costs is the completed construction work which the joint venture has not yet received invoices from its contractor.

22. Share capital, premium and discount on share capital

Number ofShares

CommonSharesBaht

PreferredSharesBaht

SharePremium(Discount)

Total

Million Million Million Baht Million Baht MillionAt 31 December 2001 3,232.50 25,305.00 7,020.00 9,616.93 41,941.93

- Conversion of preferred shares - 22.46 (22.46) - -- Issue of shares 462.00 4,619.97 - (1,621.84) 2,998.13

At 31 December 2002 3,694.50 29,947.43 6,997.54 7,995.09 44,940.06

The total authorised number of shares is 4,446.12 million shares (2001: 3,390.65 million shares) with a par valueof Baht 10 per share (2001: Baht 10 per share). All issued shares are fully paid.

On 18 September 2002, at the Extraordinary General Shareholders Meeting No. 1/2545 of the Company, the shareholders approved an increase of authorised share capital from Baht 34,277,815,750 to Baht 44,461,181,920 by issuing 1,018,336,617 new common shares at a par value of Baht 10 per share in order to increase its investment in certain joint venture and to partly repaid certain indebtedness. The Company registered the increased of Baht 44,461,181,920 authorised share capital with the Ministry of Commerce on 4 October 2002. The Company registered the newly issued and paid up share capital of 461,997,236 common shares with the Ministry of Commerce on 29 October 2002.

Preferred shares

The preferred shares of the Company confer the following rights on the holders:

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 2002, the undeclared cumulative dividends were Baht 1,929.35 million (2001: Baht 1,230.90 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.


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22. Share capital, premium and discount on share capital (Continued)

Preferred shares (Continued)

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.

Pursuant to the Terms and Material Information of Purchase Rights dated 31 March 2000 (“Terms”), KfW has granted rights to qualified shareholders of the Company to purchase common shares issued upon the conversion of the preference shares from KfW to enable the shareholders to maintain their existing equity position in the Company in connection with the increase in capital and the issuance of the said preference shares.

On 29 March 2002, which was the first exercise date, the qualified shareholders exercised the purchase rights of KfW in the amount of 2,246,470 shares and the Company completed the registration of the conversion of the preference shares into common shares with the Ministry of Commerce on 10 April 2002.

Equity warrants

On 22 February 2002 the Company issued warrants to purchase the Company’s common shares to directors and employees at executive level of the Company and certain of its subsidiaries in the total number of 37,131,597 units. The exercise price is Baht 10.60 per common share. The warrants will expire on 21 February 2007.

In addition, the Company changed the exercise price of the warrants issued under the Stock Option Plan of year 2000 to certain directors and employees to Baht 10.60 per share in accordance with the terms of the warrants as approved by the Annual General Sahreholders’ Meeting held on 27 April 2000. At the time of this reduction in exercise price, each of the warrant holders agreed to cancel a portion of their outstanding warrants such that the overall value of warrants outstanding as estimated by the Black-Sholes option pricing model remained unchanged. The total amount cancelled was 21,155,000 units.

Movements in the number of warrants outstanding are as follows:2002

In thousand2001

In thousandAt beginning of year 158,150 58,150Granted 37,132 100,000Exercised - -Cancelled (21,155) -Lapsed - -At end of year 174,127 158,150

Compensation cost is not recognised in these financial statements for the fair value or the intrinsic value of share options granted.

Warrants outstanding at the end year have the following terms:

Exercise price 2002 2001

Expiry dateBaht In thousand In thousand

31 October 2003 32.00 100,000 100,00021 February 2007 10.60 37,132 -30 June 2010 10.60 27,720 39,60031 December 2010 10.60 9,275 18,550

174,127 158,150


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23. 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.

24. Consolidated segment information

Primary reporting format - business segments

Baht : MillionFor the year ended31 December 2002 Wireline DDN Wireless Multimedia Internet Other Group

Revenues 16,125 1,199 6,096 954 198 1,203 25,775

Segment result 4,807 738 (3,959) 35 25 167 1,813Unallocated costs (3,173)Operating results (1,360)Finance cost (4,247)Share of associates 1,844Loss on impairment investment (5,722)Gain on sale investment 943Other income and other non operating expenses 3,196Loss before tax (5,346)Income tax (144)Loss from ordinary activities (5,490)Extraordinary item 95Loss before minority interest (5,395)Minority interest 1Net loss for the year (5,394)

Segment assets 44,914 1,474 30,850 3,571 111 3,407 84,327Investment in joint venture, associates and other 4,354Unallocated assets 4,566Consolidated total assets 93,247

Segment liabilities 56,608 175 22,368 602 56 2,392 82,201Unallocated liabilities 3,848Consolidated total liabilities 86,049

Capital expenditure 2,238 6 6,584 160 8 735 9,731Unallocated capital expenditure 115Consolidated total capitalexpenditure 9,846

Depreciation and amortisation (5,739) (153) (1,811) (499) (5) (406) (8,613)Unallocated depreciation andamortisation (173)Consolidated total depreciationand amortisation (8,786)


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24. Consolidated segment information (Continued)

Primary reporting format - business segments

Baht : MillionFor the year ended31 December 2001 Wireline DDN Wireless Multimedia Internet Other Group

Revenues 15,618 503 3,072 894 154 395 20,636

Segment result 4,866 238 (1,195) (106) 19 9 3,831Unallocated costs (2,882)Operating profit 949Finance cost (3,721)Share of associates (601)Other income and other non operating expenses (27)Loss before tax (3,400)Income tax (69)Loss before minority interest (3,469)Minority interest 44Net loss for the year (3,425)

Segment assets 48,291 1,245 18,982 4,069 68 3,059 75,714Investment in joint venture, associates and other 5,581Unallocated assets 5,177Consolidated total assets 86,472

Segment liabilities 62,335 75 11,634 571 41 1,625 76,281Unallocated liabilities 5,296Consolidated total liabilities 81,577

Capital expenditure 1,450 545 4,573 158 6 748 7,480Unallocated capital expenditure 246Consolidated 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)


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24. 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 broadband access; and

• Internet - to provide internet services, online-portal in name of ClickTA.com and corporate network and technology services.

Other operations of the Group mainly comprise holding investment and providing vehicle and building rental services, neither of which are of a sufficient size to be reported separately.

Sales transactions between business segments are 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 14) and intangible assets (Note 15), including additions resulting from acquisition through business combination (Note 4, Note 14 and Note 15).

The Group operates only in Thailand. Therefore, no geographical segments are reported under the secondary reporting format.

25. Cost of services

Cost of services includes major operating and administrative expenses directly related to the provision of telephone and other services.

Consolidated Company31 December 31 December 31 December 31 December

2002 2001 2002 2001Baht Million Baht Million Baht Million Baht Million

Cost of services:Depreciation and amortisation 8,772.28 7,784.28 6,548.93 6,109.87Revenue sharing 4,290.50 3,227.36 5,227.99 4,719.78Network operating expenses 4,588.75 3,229.84 2,864.55 2,742.59

Total 17,651.53 14,241.48 14,641.47 13,572.24


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26. Operating results

The following items have been included in arriving at operating profit:

Consolidated CompanyFor the year ended 31 December 2002 2001 2002 2001

Baht Baht Baht BahtDepreciation on property, plant and

equipment (Note 14)- owned assets 8,373,830,621 7,691,373,562 6,273,873,951 6,144,973,374- owned assets (vehicles) leased out

under operating leases 31,203,800 81,997,971 - -- leased assets under finance leases 257,652,266 63,956,346 - -

Impairment (included in “Other expenses”)- Property, plant and equipment (Note 14) 1,613,414,101 210,987,208 1,598,252,736 192,614,198

(Profit)/loss on disposal of property,plant and equipment 20,680,448 (101,751,164) 75,476,159 7,619,003

Repairs and maintenance expenditureon property, plant and equipment 855,124,701 877,910,200 623,049,463 801,275,628

Amortisation of intangible assets(included in “selling andadministration expenses andcost of services”) (Note 15) 122,865,519 69,949,973 88,466,092 40,769,131

Operating lease rentals- building 202,893,123 98,294,563 396,332,143 388,041,577- vehicles 65,635,250 40,419,464 165,994,341 152,357,093

Obsolete inventories 180,418,008 30,631,533 65,204,908 30,132,937

Trade receivables- doubtful debts 828,512,307 166,698,861 455,623,727 130,625,657

Staff cost- Wages and salaries 2,676,013,280 2,083,134,671 1,638,769,724 1,452,214,195- Social security cost 57,384,301 30,161,691 49,430,640 21,923,418- Provident fund 82,999,901 - 56,046,345 -- Other benefits 101,623,828 100,608,171 75,700,350 93,620,794

The number of persons employed by the Group at the end of year are as follows:


Full time 6,723 7,438 4,011 4,062Part time 1,683 1,174 779 696

8,406 8,612 4,790 4,758


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27. 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 year (2,531.56 and 2,274 million shares for the years ended 31 December 2002 and 2001, respectively).


Net loss attributable to shareholders (5,394.45) (3,425.13)Cumulative dividend of preferred shares (698.44) (702.00)Net loss used to determine basic loss per share (6,092.89) (4,127.13)Weighted average number of common shares in issue (million shares) 2,609 2,274Basic loss per share (Baht per share) (2.34) (1.81)

Diluted loss per share for the year ended 31 December 2002 include the effect of 699,753,530 shares (2001:702,000,000 shares) of convertible preferred share and 174,126,597 (2001: 158,150,000 ) stock options on an as-if-converted method. The results of their inclusion is antidilutive. Therefore, the basic loss per share anddiluted loss per share are presented in the same amount.

Supplementary earnings per share data excluding the extraordinary item (for this purpose the weighted averageshares number is not changed).


Net loss attributable to shareholder (5,394.45) (3,425.13)Cumulative dividend of preferred shares (698.44) (702.00)Extraordinary item (Note 17) (95.45) -Net loss used to determine basic loss per share (6,188.34) (4,127.13)Weighted average number of common shares in issue (million shares) 2,609 2,274Basic loss per share excluding extraordinary item (Baht per share) (2.37) (1.81)


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28. Cash flows from operating activities

Reconciliation of loss before minority interest to cash flows from operating activities:


2002 2001 2002 2001Notes Baht Baht Baht Baht

Loss before minority interest (5,395,581,988) (3,469,417,559) (5,394,449,478) (3,425,126,882)Add: Interest expense 3,899,940,673 4,718,426,956 2,912,208,760 3,718,396,991 Income tax 143,683,537 68,933,164 - -

Profit (loss) before interest andtax (1,351,957,778) 1,317,942,561 (2,482,240,718) 293,270,109Adjustments for:Depreciation and amortisation 9,276,717,335 8,004,148,666 6,754,039,318 6,271,532,549(Gain) loss on disposal of property, plant and equipment 20,680,448 (101,751,164) 75,476,159 7,619,003Doubtful accounts 828,512,307 166,698,861 455,623,727 130,625,657Loss on impairment of investment 7 5,721,988,062 - - -Net loss on impairment of fixed assets and intangible assets 26 1,613,414,101 192,804,209 1,598,252,736 201,614,198Obsolete inventories 180,418,008 30,631,533 65,204,908 30,132,937Other operating assets andliabilities written-off 2,967,910 (13,995,918) - -Gain on sale of available-for-sale securities 17 (943,248,540) - - -Unrealised (gain) loss on foreign exchange 394,880,591 (944,939,754) 41,203,525 (71,454,366)Gain on repayment of borrowing 17 (3,291,682,916) - (3,087,826,418) -Gain from forgiveness (27,698) (348,058) (27,698) (348,058)Share of loss (profit) in

subsidiaries, joint venture andassociates (1,844,460,287) 628,472,598 6,529,318,873 1,874,652,529

Changes in operating assets andliabilities (excluding theeffects of acquisition of jointventure)

- Trade accounts receivable (2,352,323,716) 61,698,976 (1,149,640,882) 111,271,488- Inventories (552,798,265) (1,499,311,282) (256,799,525) (1,399,950,623)- Other current assets (127,172,116) (590,371,410) 527,121,243 (648,480,715)- Other non-current assets (131,082,210) (20,031,494) 66,522,669 (1,573,687)- Trade accounts payable (373,584,632) 524,363,886 (403,723,846) (119,492,583)- Accrued expenses and other current liabilities 874,240,817 1,535,614,647 778,538,817 369,035,051- Other non-current liabilities 560,355,323 (195,111) (75,346,482) -

Cash generated from operations 8,505,836,744 9,291,431,746 9,435,696,406 7,048,453,489Less:Interest paid (3,543,297,594) (4,481,730,402) (2,608,942,590) (3,610,557,207)

Income tax paid (507,093,521) (330,670,087) (286,137,016) (155,971,133)

Net cash from operating activities 4,455,445,629 4,479,031,257 6,540,616,800 3,281,925,149


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29. Financial instruments

i) Objective and significant terms and conditions

In order to manage the risks arising from fluctuations in currency exchange rates, the Group 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

Transaction 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 2002 and 2001, the Group had outstanding foreign currency assets and liabilities as follows:


Currency Currency Currency Currency Million Million Million Million

AssetsUS dollars 3.14 23.87 - -GBP 0.09 0.08 - -

LiabilitiesUS dollars 144.45 601.37 77.77 547.73Japanese Yen 32,343.49 43,230.84 12,945.98 22,896.67GBP 1.85 2.75 - -EUR 0.58 0.17 - -SGD 0.01 - - -

Foreign currencies assets represents investment in available-for-sale securities in 2001, and represents cash and accounts receivable in 2002 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. The Groups’ 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 2002, the settlement dates on open forward contracts is in 31 July 2003. The Baht amounts to be received and contractual exchange rates of the Group's outstanding contracts were as follows:

Consolidated2002 2001Baht Baht

United States dollars 86.27 million (2001: USD 14.39 million) at rates averaging USD Baht 43.30/USD (2001 : Baht 43.99/USD) 3,731,645,136 632,888,397


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29. Financial instruments (Continued)

i) Objective and significant terms and conditions (continued)

Net fair values

The net fair values of the Group's derivative financial instruments at the balance sheet date were as follows:

Consolidated2002 2001

Million Baht Million Baht

(Unfavourable) favourable forward foreign exchange contracts (6.08) 3.96

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 17 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 13.92% (2001: 30.25%) 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 17 and in section (i) of this note, respectively.

30. Contracts and commitments

30.1 The Company entered into the agreement for Joint-Operation and Investments for Expansion of 2.6million lines Telephone Services with TOT and other supplements to the Agreement for the followingservices:

- 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


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30. Contracts and commitments (Continued)

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 out 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 favour of TOT totaling Baht 300 million.

30.2 Agreement for PCT operation

According to the Concession Agreement and the PCT Supplemental Agreement (“the ConcessionAgreement”) between the Company and TOT to jointly operate and invest in the expansion of basictelephone services, including a personal communication telephone system in the telephone areas ofBangkok using the same long-distance telephone area code (the “Territory”), the Company is obligedto operate and comply with the Concession Agreement. Asia Wireless Communication Co., Ltd.(“AWC”), a subsidiary of the Company will operate and share revenues with the Company inaccordance with the PCT Contract (the “Contract”). In July 2001, the Company entered into theContract with AWC, which became effective on 25 July 2001. The principal terms and conditionsinclude the following.

a. AWC is responsible, at its own cost and expense, to procure, purchase, install, operate andmaintain a personal communication telephone system in the Territory, all of which are to beperformed in accordance with the requirements of the Concession Agreement; and

b. In consideration of the foregoing, AWC is entitled to receive a portion of the revenue generated bythe PCT services in accordance with the calculation methodology set out in the Contract.

30.3 Two subsidiaries and two joint ventures have agreements with state enterprises, namely the Communication Authority of Thailand (CAT) and the Telephone Organisation 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 34.01 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.

30.4 The Company, subsidiaries and joint ventures were contingently liable to certain foreign and local banks for letters of guarantee in favour of certain government agencies, certain state enterprises and companies amounting to Baht 43.12 million for the Company and Baht 110.31 million and US Dollars 1.50 million for the subsidiaries and joint ventures.


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30. Contracts and commitments (Continued)

30.5 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 2002, the subsidiary has an outstanding loan with the finance company amounting to Baht 190.76 million (2001 : Baht 205.26 million).

30.6 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 DecemberConsolidated Company

Mortgaged Value2002 2001 2002 2001 2002 2001Baht Baht Baht Baht Baht Baht

Million Million Million Million Million Million

Fixed and savings deposits 4,482.28 4,576.45 - - 3,626.16 4,018.29Investment in available-for-sale

securities - 1,036.27 - - - -Investment in shares of

subsidiaries, associates andjoint venture (excludinginvestment in shares of certainsubsidiaries pledged ascollateral, which have beeneliminated in the consolidatedfinancial statements) 4,006.23 4,488.91 - - - -

Land, building and machinery 880.51 943.76 1,000.00 1,000.00 - -

In addition, the Group and the Company’s network assets are secured against borrowings (Note 17).

30.7 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 2002 are approximately Baht 1,014.38 million (2001: 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 169.50 million (2001: Baht 222.50 million).


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31. Interests in joint ventures

The Group has a 65% interest in a joint venture, Asia Infonet Co., Ltd.,(“AI”) which operates as an Internet provider and 43.86% in Bangkok Inter Teletech Co., Ltd.,(“BITCO”) (2001: 41%) that holds 99.99% in TA Orange, an operator of 1800 MHz cellular telephone system. The following amounts represent the Group’s share of the assets and liabilities and revenues and expenses of the joint ventures included in the consolidated balance sheets and statements of income:

2002 2001BITCO AI BITCO AI

Baht Baht Baht BahtCash and restrict cash 2,211,012,127 36,903,351 1,676,062,157 13,531,605Current assets 1,865,821,222 43,736,746 637,024,059 27,069,517Non-current assets 84,757,914 8,583,670 22,733,750 9,077,456Property, plant and equipment 13,343,948,218 21,427,344 4,147,631,458 18,604,846Intangible assets, net 114,203,998 - 112,925,487 -

Total assets 17,619,743,479 110,651,111 6,596,376,911 68,283,424

Current liabilities (2,656,755,852) (55,528,503) (2,163,355,083) (39,828,008)Non-current liabilities (10,694,494,986) (741,314) (232,468,305) (920,057)

Total liabilities (13,351,250,838) (56,269,817) (2,395,823,388) (40,748,065)

Net assets 4,268,492,641 54,381,294 4,200,553,523 27,535,359

Sales 2,910,788,087 197,768,899 - 153,837,901

Operating results (2,683,183,818) (805,208) (1,263,928,340) 19,393,187Financial income 19,927,920 58,850 8,843,781 44,485Income tax - (5,683,139) - -

Net profit (loss) (2,663,255,898) (6,429,497) (1,255,084,559) 19,437,672

Depreciation and amortisation 679,328,078 4,847,189 13,858,669 3,570,433

Proportionate interest in joint venture capital commitments 1.61 billion nil 8.68 billion nil

Proportionate interest in joint venture contingent liabilities 30.11 million 0.50 million 218.59 million 0.90 million

The number of employees in the joint ventures in 2002 was 1,585 (2001: 2,131).


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32. Concession conversion

Under the National Telecommunication Master Plan adopted since November 1997 regarding the privatisation of TOT and CAT and the conversion of the concession under their operations, the National Telecommunication Commission (“NTC”) has to be established to regulate and oversee the country’s telecommunication business. The selection process of NTC member had been delayed.

On 2 October 2002, the Information and Communication Technology (“ICT”) Ministry was established to look after the Industry more closely, at the end of the year, new framework of concession conversation was proposed by ICT Minister and approved by the Cabinet. Part of revenue sharing was proposed to be converted into excise tax. The concession conversion process is ongoing and no determination can be made at the date of these financial statements of the likely outcome and the impact of conversion on the consolidated and Company’s financial and operation position.

33. Post balance sheet events

1. On 18 February 2003 the Company issues secured debentures with periodic payments of TelecomAsia Corporation Public Company Limited No. 1/2546, due 2007. The Company issues 3.319 million units of debentures at par value of Baht 1,000 per unit, valuing in the amount of Baht 3,319 million. The debentures carry interest at the fixed rate of 5.80% per annum payable on an quarterly basis commencing from 7 April 2003 through 7 October 2007. The principal of debentures will be redeemed by installment on every interest payment date commencing on 7 January 2005 onwards.

2. On 27 February 2003, at the Board of Directors’ Meeting 1/2546 of the Company, the Board of Directors approved the followings:

2.1 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 certain of its subsidiaries in the total number not exceeding 35 persons (the “ESOP 2003 Project”). The total number of warrants to be offered is not exceeding 19,862,729 units.

2.2 The reduction of the registered share capital from Baht 44,461,181,920 to Baht 38,897,788,110 by cancelling the common shares registered but not yet issued in the number of 556,339,381 shares so as to be in accordance with the provision of the Public Limited Company Act. In addition, an increase of registered share capital from Baht 38,897,788,110 to Baht 43,892,281,600 by issuing 499,449,349 new common shares at a par value of Baht 10 each in accordance with the past resolution at the Extraordinary General Meeting No. 1/2545 of the company and reserve for the exercise of the warrants under the ESOP 2003 Project.

All the aforementioned issues shall be proposed to the Annual General Shareholders’ Meeting for further consideration and approval.

2.3 These financial statements.

TRUE : Annual Report 2002

Documents

Transcript of TRUE : Annual Report 2002