TRUE : Annual Report 2002 by True Corporation Public Company Limited

Corporate Governance Compliance Report The Board and management of the Company believe good governance can create value for all stakeholders. Transparency, performance and accountability are essential elements of good corporate governance. This year marks the fourth consecutive year that the Company has published a special section in its Annual Report which discloses to all stakeholders and interested persons its good corporate governance commitment and efforts. The following Corporate Governance Compliance Report is the realization of an initiative by the Company, as broadened and defined by directives of the SET and the Company’s Board of Directors.

1. POLICY ON CORPORATE GOVERNANCE [PRINCIPLE 1] Several years ago the Company expressly committed itself to making good corporate governance an essential component of its corporate culture. The Corporate Governance Guidelines (the “Guidelines”), originally prepared by a working group comprised of directors, both independent and non-independent, management and outside legal advisors, was a focal point of the Board’s final meeting of 2001. Fully meant to be a “living document,” adaptable to the evolution of the Company and to the interests of its stakeholders, the Guidelines have been implemented throughout 2002. The Guidelines will be reviewed annually so as to underscore those governance principles that will bring lasting benefits to the Company and its stakeholders.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

The matters covered by the Guidelines are:

•

DUTIES AND RESPONSIBILITIES OF THE BOARD OF DIRECTORS

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COMPOSITION AND SELECTION OF THE BOARD OF DIRECTORS

• • • • • • •

BOARD STRUCTURE AND PROCEDURES BOARD LEADERSHIP BOARD RELATIONSHIP TO MANAGEMENT MEETING PROCEDURES COMMITTEES OF THE BOARD OF DIRECTORS GENERAL COMMITTEE MATTERS POLICY REGARDING RELATED PARTY TRANSACTIONS AND CODE OF CONDUCT

2. RIGHTS AND EQUITABLE TREATMENT OF SHAREHOLDERS AND OF VARIOUS GROUPS OF STAKEHOLDERS [PRINCIPLES 2, 3, 4, 7, 11 AND 15] Although the ten largest common shareholders hold a majority of the common stock, these shareholders are listed elsewhere in this Annual Report, the Board and the Company

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

•

allocating not less than four (4) Board seats to independent persons;

•

holding all shareholder meetings, there having been one general and one extraordinary in 2002, within Bangkok;

•

providing written proxy materials to shareholders sufficiently prior to each meeting to enable careful consideration of the agenda matters;

•

allowing shareholders or their proxy an opportunity to speak and ask questions of Directors and management at shareholder meetings;

•

scheduling all Board of Directors meetings at the final Board meeting of the prior year and providing written notice of every meeting in accordance with all applicable rules and regulations;

•

posting material financial, management and operational information, including information required by law, on the Company’s publicly accessible web site;

•

offering to anyone a subscription to emailed information releases from the Company’s Investor Relations Department;

•

chartering the Independent Committee to add an additional tier of scrutiny to matters that may give rise to conflicts of interest or favor any particular interest group; and

•

utilizing independent advisors to give opinions and provide expertise on matters of material concern.

The Company recognizes the valuable contribution of various stakeholder groups, groups that are similarly diverse as are the shareholders. In addition to the implementation of the measures listed above, during the second half of 2002, the Board approved and the Company implemented a Code of Conduct. The Code of Conduct seeks to instill appropriate regard for the interests of employees, customers, suppliers and other vendors, creditors and competitors of the Company, as well as of the government and the local community. The Code of Conduct is the moral guideline, encompassing both business and personal ethics within the workplace, for the Company’s employees. The Company’s commitment to the interests of stakeholders reaches far beyond only stakeholders holding a financial interest in the Company. Contributions to society, through many different projects in order to encompass the broad spectrum of the Thai community, is spread well beyond the Company’s Bangkok Metropolitan service area. Information about community projects including the following can be found at the Social Contribution page of the Company’s web site:

•

introducing TelecomAsia and Its Role in Society package to the public;

•

organizing TelecomAsia’s Nature Classroom for youth;

•

teaching children about their cultural heritage through TelecomAsia’s Arts and Culture Classroom;

•

encouraging the study of science through TelecomAsia’s Science Classroom to children in various schools;

improved internal controls throughout the Company. Each committee is authorized to (and has) retain(ed) assistances of outside experts in carrying out their respective mandates.

•

encouraging youth to become environmentallyaware through a number of conservation and communication programs.

Each committee is obligated further to provide periodic detailed reports on its activities to the entire Board, and to follow a formal charter which specifies its role and responsibilities.

The Board of Directors convened five meetings during 2002. Non-executive directors constitute majority of the Board, placing the balance of power with non-executive directors and ensuring credible oversight of management. The Chairman of the Board is a non-executive director. The size and diversity of the Board reflects the Company’s objective to accommodate the diversity of shareholders and stakeholders. The membership strives to ensure that there is an appropriate number 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 providing representation to diverse constituencies, directors are elected on the basis of experience, wisdom, integrity and an understanding of telecommunications technologies and the industry as a whole. Compensation of top executives and the Board are recommended by the Compensation and Nominating Committee (which retains independent advisor to perform this function) and approved by the entire Board. The present remuneration paid to Board members was set at and approved by the Company’s shareholders. Besides their salaries, key members of executive management have been provided, with approval of the Company’s shareholders given at 2000‘s and 2002‘s Annual General Shareholders Meetings, stock options as a key component of their compensation in order to link their compensation to the performance of the Company and to be a long term incentive plan. In the fourth quarter of 2002 the Compensation and Nominating Committee engages of Hewitt Associates, a consulting firm specializing in human capital management, to provide assessment of the Company’s remuneration principles and policies on executive compensation, particularly within Thailand’s telecommunications industry.

4. RISK MANAGEMENT AND OVERSIGHT [PRINCIPLES 12, 13, 14 AND 15] Risk is managed at both the Board and the management levels, in several complementary ways. The Company in consultation with Marsh UK Ltd. (insurance advisor of the Company’s secured creditors) develops and evaluates insurance package on annual basis. Likewise, risk and the Company’s efforts to manage such risk are disclosed via different media. At the Board level, risk management and oversight are supported by four very active standing committees: (a) the Independent Audit Committee; (b) the Finance Committee; (c) the Independent Committee; and (d) the Compensation and Nominating Committee. Over the course of 2002 the Independent Audit Committee engaged the services of PricewaterhouseCoopers Risk Assessment Services Limited to provide consulting services in enhancing the effectiveness of the internal audit function of the Company, which will result in

In the past several years the Company has made great progress in providing investors and potential investors with access to important information on a timely basis. The Company, primarily through its Investor Relations department, utilizes the Internet (www.telecomasia.co.th) to communicate with the public efficiently and effectively. Copies of all regulatory filings and press releases are posted within a matter of days, and often on the day of release, analyst conferences are available via webcast, past and current annual reports can be 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 regularly reminded of each person’s obligation to avoid situations where a conflict of interest may be involved. In addition to government regulations, the Guidelines and the Code of Conduct define and establish a resolution and/or disclosure solution for conflict of interest situations. With the encouragement of the Board and management, beginning in 2002 vendors entering into material contracts with the Company are required to attest to the absence of a “connected transaction”, as such transactions are defined by the Stock Exchange of Thailand. In addition, the in-house publication distributed to all employees, Yai Kaew, has published reminders to, and from time-to-time will continue to remind, employees of their obligation to report and avoid conflicts of interest situations. The aforementioned Independent Committee plays a key role in any Board matter involving a related party transaction or a corporate opportunity, as well as all matters which are covered by the Stock Exchange of Thailand’s Rules and Procedures and Disclosure of Connected Transactions of Listed Companies. Furthermore, a Policy Regarding Related Party Transactions comprises the final section of the Guidelines. Additional circumstances which could cause conflicts of interest, such as trading on insider information and having a personal relationship in matters involving the Company, are discussed in detail with alternative ways to resolve the matter in the Code of Conduct.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

3. LEADERSHIP AND VISION [PRINCIPLES 5, 8, 9 AND 10]

Management bears the day-to-day task of evaluating risk and providing oversight, and it does so primarily through the activities of the Group Management Committee, which is convened weekly and consists of the Company’s most senior executive management, of the Office of the Chief Financial Officer, of the Internal Audit Department, and of the Office of the Group General Counsel. Such activities of management are kept transparent through regular reports by the President given at each Board meeting and through the Management’s Discussion and Analysis included in the latter part of this Annual Report. At all times, Board members have direct access to members of executive management to discuss any business matter.

Company Background and Major Development TelecomAsia Corporation Public Company Limited (the “Company”) was established on 13 November 1990, initially under the name of CP Telecommunications Company Limited to undertake the Build Transfer Operate (BTO) concession from the Telephone Organization of Thailand (now TOT Corporation PLC or “TOT”). This was to construct, install and jointly operate a 2.6 million fixed telephone lines expansion in the Bangkok Metropolitan Area (the “BMA”) (the BMA includes Bangkok, Nonthaburi, Samutprakarn and Pathumthani) for a period of 25 years. The Company must also provide maintenance of the network of 2.6 million lines throughout the term of the agreement. In addition to the original fixed line concession with the TOT, the Company has been granted approval to expand a range of valued-added services for its fixed line subscribers. These include TA Connex, a public phone service, Personal Communication Telephone service (“PCT”), data network service, internet and multimedia services. The Company has also invested in cable TV and mobile phone business. The Company subsequently registered as a public company limited with registration no. Bor Mor Jor 82 on 11 February 1993 with Nynex Network System (Thailand) Company Limited (“NYNEX”) as a strategic partner. NYNEX is an affiliate of Verizon Communications Inc (“Verizon”), a leading telecommunications service provider in the USA. As at 31 December 2002, NYNEX holds approximately 10.94% of fully paid-up capital of the Company while CP Group and its affiliates hold 42.75%.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Major Development in Business Operation and Management

November 1990

Company established with registered capital of Baht 1,000 million.

August 1991

Entered into the BTO concession with the TOT to build, install, jointly operate and maintain a 2 million fixed telephone lines in the Bangkok Metropolitan Area (BMA) for a period of 25 years.

December 1991

Telecom Holding Company Limited established to invest in telecommunications projects.

July 1992

Fifteen percent shareholding in the Company acquired by Nynex Network System (Thailand) Company Limited.

December 1993

Company listed on the Stock Exchange of Thailand with registered capital of Baht 22,230 million.

March 1995

Start of cable TV service of UTV Cable Network Company Limited (UTV), one of the Company’s affiliates.

September 1995

Company received approval for additional 600,000 fixed lines expansion in the BMA.

May 1996

Company gained approval to provide value-added services, such as digital network services and TA Connex.

August 1996

The Company gained approval to provide PCT service.

January 1997

The Company received approval to provide a public telephone service in the BMA.

May 1998

UTV and Inter national Broadcasting Corporation PLC (IBC) merged to become a leading cable TV service provider under the name of United Broadcasting Corporation PLC (UBC).

November 1999

Official start of PCT service.

March 2000

Debt restructuring successfully completed with a principle term that Kreditanstalt für Wiederaufbau (KfW), a major foreign creditor, subscribes 702 million preference shares totaling USD 150 million, equal to 24% of total shares of the Company after the capital increase.

August 2000

Start of Click TA service, an alternative Internet service that allows customers to log on for up to 2 hours.

November 2000

“TA 1234” service, an economical rate for long distance calls Launched.

February 2001

Prepayment of loans of Baht 532 million from cash surplus.

April 2001

Start of prepaid PCT service under the name “PCT Buddy”.

July 2001

High-speed data transmission services, including ADSL, Cable Modem and TA Megaport services launched. Additional prepayment of loan of Baht 368 million from cash surplus.

September 2001

Entered into a cross-currency swap agreement with KfW for repayment of loans of $US97 million in Baht to reduce foreign exchange risk.

October 2001

Invested 41% in shares of Bangkok Inter Teletech Co., Ltd. (“BITCO”), which holds 99.81% of shares in TA Orange Company Limited (formerly known as CP Orange Company Limited) via a share swap transaction. TA Orange is a GSM 1800 cellular operator under a concession granted by the Communication Authority of Thailand (“CAT”).

Entered into a new Baht loan agreement of Baht 5 billion to repay the US dollardenominated debt to reduce the foreign exchange risk.

March 2002

TA Orange, a 41% joint venture of TelecomAsia Corporation Public Company Limited launched its cellular service under the “Orange” brand name.

corporate debentures rated by TRIS and the second largest offering in Thai history. The debentures were offered in two tranches, both of which were oversubscribed by investors. Prepayment of the Company’s indebtedness in the amount of US Dollar 452 million or Baht 19,590 million, funded by the proceeds from Thai Baht Debentures of Baht 18,465 million and Baht loan from IFC of Baht 1,125 million.

Additional prepayment of loan of Baht 948 million from the Company’s cash surplus. April 2002

The Company gained approval to install and operate an additional 6,000 public phone sets, increasing the Company’s capability to provide public phone service to 26,000 sets.

July 2002

Telecom Holding Company Limited and its subsidiaries entering into a Restructuring Agreement with its creditors.

Offered new ordinary shares to the existing shareholders (whose names appeared in the Share Register Book as of 26 September 2002) by the resolution of the Extraordinary General Shareholders Meeting No. 1/2545 during 14 -18 October 2002. The number of total shares subscribed was 461,997,236 shares or 85.757 % of the total shares offered to the existing shareholders. The Company registered the change in the Company’s paid up capital from Baht 32,325 million to Baht 36,945 million. The proceeds from this rights offering of Baht 3,003 million, which came from the CP Group and other existing shareholders, was used for additional investment in TA Orange through Bangkok Inter Teletech Company Limited. The Company’s holding stake in TA Orange increased from 41% to 44% after the transaction.

Further prepayment of loans of Baht 345 million from the Company’s cash surplus. August 2002

The Company signed a Memorandum of Understanding with Thailand’s 10 leading providers of information, entertainment, healthcare, financial services and on-line games in order to jointly promote and develop fully integrated services for Thailand’s first Broadband Community.

September 2002

Approval granted by the Extraordinary General Shareholders Meeting No. 1/2545 to increase the registered capital of the Company from Baht 34,278 million to Baht 44,461 million by issuing 1,018 million new shares at a par value of Baht 10 each. The proceeds were used for investment in TA Orange and repayment of debts. Launch of a new business broadband solution called “TA Metronet” which is based on Fibre-to-Building technology. This technology provides transmission rates of 512 Kbps to 1 Gbps for each customer.

October 2002

Successfully placed Baht 18,465 million in new debentures, the largest offering of

December 2002

Bought back Yen-denominated, long-term trade accounts worth Baht 3.6 billion (Yen 10.1 billion) at a 81.3% discount to their book value, representing a gain from the buy-back of Yen-denominated notes of approximately Baht 3.1 billion in the Company’s fourth quater 2002 results. Signed an MOU with additional 13 providers of information, entertainment, hospital and on-line games for the development of the Broadband Community.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

December 2001

Nature of Business Products and Services Under the Build Transfer Operate Concession with TOT and CAT

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

The Company is a leading telecommunications service

Service Center. Technical support is provided by its Network

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

Maintenance Centers throughout the BMA area. A customer

applications, based on the integrated multi-platform network.

Call Center provides customer information and addresses

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

customer concerns.

the highest market share in the Bangkok Metropolitan Area

Value-Added Services

(“BMA”). In addition to the wireline service, the Company offers a The Company’s core wireline network combines a fibre

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

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

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

the Company to provide customers with the best quality of

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

wireline service and supports the development of new

and Integrated Service Digital Network.

value-added services that better serve customers’ needs. The Company has also installed ATM (Asynchronous Transfer Mode)

•

The Company has provided a public phone service in the BMA area since 1997 with 20,000 telephone

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

units. In April 2002, the Company gained approval

expand the capacity and speed of data transmission and to

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

offer new alternative services to customers.

ing the total number of units to 26,000.

The Company has a Network Management System, which

•

The Company operates 1177 Service and Drop Wire

enables it to track errors and to provide highly effective

Maintenance Centres to handle network problems

maintenance 24 hours a day, including the advanced

and maintenance.

Computerized Customer Service System (CCSS).

•

answering service that answers incoming calls when

The Company, its subsidiaries and affiliates provide : 1.

TA Voice Mailbox is an automatic telephone 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

Wireline and Value-Added Services

Annual Report 2002 TelecomAsia Corporation Public Company Limited

just calling the Voice Mailbox Center.

Wireless Service (PCT) and Mobile Phone (Orange)

Multimedia Services

Data Transmission Services

Internet and E-Commerce Services

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TA Connex provides Call Waiting, Conference Calling, Call Forwarding, Hot Line, Abbreviated Dialing, Automatic Call Repetition and Outgoing Call

1. Wireline and Value-Added Services In 1991, the Company was formally awarded a Build

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:

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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

incoming calls to a party.

•

The TA Hunting Lines service bundles two or more telephone lines at one location into a single number.

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

Direct Inward Dialing (DID automatically directs

•

The Integrated Service Digital Network (ISDN) enables

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

a telephone network to handle all forms of voice,

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

data and image communications simultaneously on

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

the same telephone line.

• 2

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

TA Orange Company Limited through Bangkok Inter Teletech

Phone 1-800, were launched in 2002.

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

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

increased from 41 percent to 44 percent after this transaction.

3. Multimedia Services Multimedia service is provided through Asia Multimedia

The PCT business is operated by Asia Wireless

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

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

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

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

Asia Multimedia has been operating since October 20, 1997.

Company Limited. TelecomAsia has an almost 44 percent

AM currently jointly operates a cable TV business with United

shareholding, held by Bangkok Inter Teletech Company Limited.

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

Details will be said as follow :

Company affiliate and Thailand’s leading cable TV service provider. AM has rented its HFC network of 35 analog channels

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

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.

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.

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,

PCT is provided under the BTO concession with TOT.

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

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

saving users’ time, and does not require a separate telephone

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

line.

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

4. Data Transmission Services

compensation for operating the PCT service. The PCT service is also available to TOT subscribers. Because the PCT network

The Company offers various alternatives in both speed

belongs to the Company, TOT shares approximately 80 percent

and flexibility for data transmission to best meet customers’

of revenue received from its subscribers to the Company as a

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

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

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

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

increased in speed and quality. Data transmission services

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

include :

•

Digital Data Network (DDN) DDN facilitates voice, data and image transmission

2.2 Mobile Phone Business (Orange)

between two different points of the Company’s In October 2001, the Company invested in a 41 percent

Intelligent Network. Users can use this special

shareholding in Bangkok Inter Teletech Company Limited

route to transmit data that is suitable for business

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

institutions, e.g. banks and financial institutions,

Orange Company Limited (formerly known as CP Orange

which rely upon continuous transmission of accurate

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

data or information, often in large volumes.

business under a concession granted by the Communication Authority of Thailand (“CAT”) until 2013.

•

normal telephone usage at the same time as high and stable speed wireline data transmission. It is

In March 2002, TA Orange Company Limited formally

marketed under the name of “TA Express”.

launched its business in both post-paid and pre-paid mobile phone services.

Asymmetric Digital Subscriber Line (ADSL) allows for

•

IP Access Service (IPAS)

In October 2002, the Company used the proceeds from

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

a Baht 3 billion Capital Increase to increase its investment in

provides RAS management services for customers

Annual Report 2002 TelecomAsia Corporation Public Company Limited

38-45 per USD1).

who require an external access port, for example,

The consumer segment comprises : Teenagers; Housewives

internet service providers, web information

and Families; Businessmen and Professionals and New Housing

providers, and business groups which require a

Residents.

Virtual Private Network Service (VPN), without the additional cost for equipment and management of the access port.

5. Internet and E-Commerce Services

Distribution Scheme and Distribution Channels Distribution channels are divided into: 1)

Business Channel

Since receiving approval from CAT in November 1996,

•

the Company’s subsidiary, Asia Infonet Company Limited (“AI”)

Small and Medium Enterprises The distribution channel for this customer group is

has provided internet and e-commerce services under the

based upon the territory and area approach. Each

name of “Asianet” AI customers are offered various service

area is under the responsibility of a sales manager

alternatives. Corporate customers can, for example, select leased

and sales executives in charge of a specific territory.

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

The marketing strategy is tailored and can be

select from monthly or hourly membership packages, or

adjusted to meet the requirements of customers.

purchase an internet kit or international roaming services.

Sales executives are trained in presentation, negotiation and marketing.

In addition to AI’s internet service, the Company has

•

created its own website, ClickTA.com, which is an economical

Banking, Finance and Insurance

internet service designed to serve its telephone subscribers

Account Executives (“AE”) are responsible for

exclusively. ClickTA.com is accessed through an on-line portal

particular customers, providing a single point of

that provides customers with high-speed, data transmission

contact to meet customers’ total communication requirements provide quality customer care services.

through a special gateway to the internet. Service charges collected by AI are shared with the Company, the ratio

•

Government and State Enterprises

dependent on the number of ClickTA.com subscribers. The Company has established a team specifically In addition, the Company also provides corporate and

responsible for these customers, to ensure

institutional customers with e-commerce services, including

compliance with regulatory requirements and to

end-to-end web development solutions.

provide appropriate services.

•

Marketing Strategy

Wholesale Services and Solutions

Annual Report 2002 TelecomAsia Corporation Public Company Limited

This group includes other telecommunications and

The Company seeks to provide customers with a

e-commerce businesses and internet service

complementary variety of bundled telecommunications services.

providers with large demands for high technology

It considers that the demand for the combination of wireline,

ICT services. The Company has technical specialists

wireless, internet and multimedia products and services will

available to give advice and assistance to this

increase significantly in future. As high technology products

customer group.

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,

Consumer Channel

•

Customers can subscribe to telephone wireline

and to improve customers’ perception and understanding of

services through 23 telesales outlets.

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.

Retail and Telesales Channel Management (RTM)

•

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.

Revenues Breakdown by Business Group Business Group / Operation by

Percentage 2002 of Shares Held by the Baht Company Million

2001

2000

Baht Million

62.5%

15,618

75.7%

14,732

75.9%

1. Business in Telephone and Value Added Service1 TelecomAsia Corporation Public Company Limited Revenues

16,125

2. Business in Personal Communication Telephone (PCT) and Mobile Phone (Orange) TelecomAsia Corporation Public Company Limited 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%

954

3.7%

894

4.3%

881

4.5%

1,199

4.7%

503

2.4%

342

1.8%

198

0.8%

154

0.8%

0.5%

1,203

4.7%

395

1.9%

304

1.6%

3. Business in Service Multimedia Network Provider Asia Multimedia Co., Ltd.

90.45% Revenues

4. Business in Data Service TelecomAsia Corporation Public Company Limited Revenues

5. Business in Internet and E-Commerce 65.00% Revenues

6. Other Business W7 Rental Services Co., Ltd.

99.99%

Nilubon Co., Ltd.

99.99%

Wire & Wireless Co., Ltd.

87.50%

Other Company Revenues Total Revenues

25,775

Source: The Company

Includes Fault Reporting and Dropwiring, Public Phone and Audiotext

100%

20,636

100%

19,388

100%

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Asia Infonet Co., Ltd.

Corporate Information The 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 a public company limited with registration no. Bor Mor Jor 82 on 11th February 1993. As at 31 st December 2002, the Company’s registered capital is Baht 44,461,181,920, consisting of 3,746,364,662 common shares 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 Baht 36,944,972,140 is paid-up capital, comprising of 2,994,743,684 common shares with a par value of Baht 10 per share and 699,753,530 preference shares with a par value of Baht 10 per share. The Company’s head office is located at :

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320 Telephone : (662) 643-1111 Fax : (662) 643-1651 Website : www.telecomasia.co.th

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

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Company Name

Address

Type of Business

Paid-up Capital

Telecom Holding Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Investment company both locally and internationally

THB 13,339 million

Nilubon Co., Ltd.

18 Telecom Tower Huai Khwang, Bangkok 10320 Ratchadaphisek Road

Real estate developer and provider of office space

THB 900 million

Nilubon Co., Ltd. (BVI)

P.O. Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands

Incorporate an international business

USD 50,000

Telecom International Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Investment in telecom projects both locally and internationally

THB 300 million

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

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Investment in international telecommunication projects

THB 75 million

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

P.O. Box 957 Offshore Incorporations Road Town, Tortola, British Virgin Islands

Investment in international telecommunication projects

USD 1

Asia Wireless Communication Co., Ltd. (Formerly named Multimedia Network Co., Ltd.)

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Investment in PCT Project and distributor of telecommunications equipment

THB 5,287 million

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

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

AUDIO TEXT service provider

THB 75 million

W7 Rental Services Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Car rental services

THB 50 million

Address

Type of Business

Paid-up Capital

Telecom Training and Development Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Professional training and seminar organizer

THB 50 million

Tele Engineering and Services Co., Ltd.

719 KPN Tower, 9/F Rama 9 Road, Bangkapi Huai Khwang, Bangkok

Dropwire installation contractor and distributor of telecommunications equipment

THB 25 million

Yai Kaew Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Real estate investment and land acquisition for RCU

THB 10 million

U-Net Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Supplier of cable TV accessories and telecommunications equipment

THB 5 million

TA Orient Telecom Investment Co., Ltd.

3/F, Hing Yip Commercial Centre, 272 Des Voeux Road C., Hong Kong

Investment in telecommunication projects in PR China

HK$ 117 million

Telecom International China Co., Ltd.

P.O. Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands

Investment in telecommunication projects in PR China

HK$ 78

Telecom Asia (China) Co., Ltd.

P.O. Box 71, Craigmuir Chambers, Road Town, Tortola, British Virgin Islands

Investment in telecommunication projects in PR China

HK$ 78

Asia Multimedia Co., Ltd.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

Multimedia network service provider

THB 6,127 million

Asia DBS PLC.

18 Telecom Tower Ratchadaphisek Road Huai Khwang, Bangkok 10320

DBS system operator

THB 100 million

Wire & Wireless Co., Ltd.

719 KPN Tower, 9/F Rama 9 Road, Bangkapi Huai Khwang, Bangkok

Dropwire and outside plant installation contractor

THB 100 million

Asia Infonet Co., Ltd.

1 Fortune Town Bldg., 17/F Ratchadaphisek Road Din-Dang, Bangkok

Internet service provider

THB 15 million

Telecom Equipment Manufacturing Co., Ltd.

111/2 Moo 2 Nikom Pattana Subdistrict Nikom Pattana District Rayong Province

Telecom equipment manufacturer

THB 24 million

United Broadcasting Corporation PLC.

118/1 Tipco Building Rama 6 Road, Phayathai, Bangkok

Cable TV service provider

THB 7,424 million

Chongqing Communication Equipment Co., Ltd.

140 Daping Zhengjie Chongqing, PR China

Distributor of telecommunications equipment

RMB 292 million

Public Radio Network Co., Ltd.

900/9 SVOA Tower Building Rama 3 Road, Bangpongpang Yannawa, Bangkok

Public radio network service provider

THB 10 million

NEC Communication Systems (Thailand) Co., Ltd.

9/25 Moo 5 Phaholyothin Road, Klong Luang District

Manufacturer of digital switching equipment

THB 343 million

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Company Name

Address

Type of Business

Paid-up Capital

Pathumthani Province N.T.U. (Thailand) Limited

518/5 Maneeya Center Building, Telecommunication 6th Floor, Ploenchit Road, Lum Pinee, Pratumwan, Bangkok

THB 7.5 million

Bangkok Inter Teletech Co., Ltd.

986 U Chu Liang Building, 14th Floor, Unit D 1, Rama IV Road, Silom, Bangrak, Bangkok

Telecommunication

THB 21,000 million

TA Orange Co., Ltd.

986 U Chu Liang Building, 4th - 5th Floors, 11-15th Floors, Rama IV Road, Silom, Bangrak, Bangkok

Mobile - Phone Service

THB 22,100 million

Thai Smart Card Co., Ltd.

283 Silom Road, Bangrak, Bangkok

Central Service Bureau for clearing electronic payment transactions

THB 395 million

Asia Remanufacturing Industries Co., Ltd.

102,15th Floor, Na Ranong Road, Klongtoey, Bangkok

Modification, repair and maintenance services of equipment for governmental offices and private enterprises

THB 5.6 million

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

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Auditor :

Mr. Somchai Jinnovart (CPA Registration No. 3271) and/or Mr. Kajornkiet Aroonpirodkul (CPA Registration No. 3445) and/or Mrs. Nattaporn Phan-Udom (CPA Registration No. 3430) PricewaterhouseCoopers ABAS Ltd. 15th Floor, Bangkok City Tower 179/74-80 South Sathorn Road, Khet Sathorn Bangkok 10120 Telephone : (662) 286-9999, (662) 344-1000 Fax : (662) 286-5050

Debenture Registrar/ : Debentureholdersâ&#x20AC;&#x2122; Representative DBS Thai Danu Bank Public Company Limited 393 Silom Road, Bangrak, Bangkok 10500 Telephone : (662) 233-9160-79 (662) 230-5000 Fax : (662) 236-7939 Legal Counsel : of the Issuer Minter Ellison (Thailand) Ltd. 17th Floor Tonson Tower Building 900 Ploenchit Road, Lumpini, Patumwan Bangkok 10330 (Thailand) Telephone : (662) 689-3333 Fax : (662) 689-3300

Investment Structure INVESTMENT STRUCTURE (As at 31 December 2002) TelecomAsia Corporation Public Company Limited Personal Communication Telephone, Value Added Service and Digital Data Network 99.99%

10.76%

Telecom Holding Co., Ltd. Service Multimedia Network

Telephone

Provider

99.99% Asia Wireless Communication Co., Ltd. 99.99%

W7 Rental Services Limited

90.45% Asia multimedia Co., Ltd.

Thai Smart Card Company Limited

Bangkok Inter Teletech Co., Ltd.

Other Business

The Operator of 1800 MHz

Internet Service

Cellular Telephone Services 65.00%

99.81%

Asia Infonet Co., Ltd.

TA Orange Co., Ltd. 99.99%

Nilubon Co., Ltd.

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 and Services 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%

100%

Chongqing Communication Equipment Co., Ltd.

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

89.99% Asia DBS Public Company Limited 87.50%

Wire & Wireless Co., Ltd. 20.00% Asia Remanufacturing Industries Company Limited

59.99%

Telecom Equipment Manufacturing Co., Ltd.

40.96% United Broadcasting Corporation Public 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)

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Personal Communication

43.86%

Risk Factors Risk Related to Operations Relationship with the TOT and the CAT creates a number of business risks that are outside of the Company’s ability to control. The Company operates a number of telecommunicationsrelated businesses under concessions granted by the TOT Corporation Public Company Limited (“TOT”) and the Communications Authority of Thailand (“CAT”). The TOT and CAT, also oversee the Company’s compliance with the terms of each concession agreement. Differences of interpretation with the TOT and the CAT over the material terms of a concession agreement could impair the Company’s ability to conduct the business or otherwise deny the Company its rights. The Company currently depends on the operation of a concession-based, wireline telephone network for a significant portion of the Company’s operating revenues. The concession expires in 2017. In certain circumstances if the Concession was cancelled, the Company would no longer be able to conduct a substantial portion of its business. Under the revenue-sharing provisions of the Concession, TOT collects and retains a portion of the Company’s revenues and can withhold or delay the forwarding of these payments to the Company or offset obligations it believes the Company owes to it.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

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

Regulatory changes in the Thai telecommunications industry may significantly affect the Company’s operating environment. The Thai telecommunications industry is heavily regulated and supervised by the Government. However, to fulfil its commitment to the World Trade Organization, the Thai Government has announced plans to liberalize the industry before 2006. Liberalisation could materially affect the Company’s operations.

Increased competition in Thailand has had and may continue to have an adverse effect on the Company’s results of operations and financial conditions. The telecommunications sector in Thailand is rapidly evolving. The Company faces increasing competition from cellular operators and the TOT. The Company expects high competition to be remained in the future.

The telecommunications industry is subject to rapid technological change. Emerging and future technological changes may adversely affect the viability or competitiveness of the Company’ s businesses. Furthermore, changing market demand may require the Company to adopt new technologies that could render many of the technologies it is currently implementing less competitive or obsolete. Substantial capital expenditure and access to related or enabling technologies may be required to integrate new and existing technology into the existing network infrastructure.

Risk Related to Financial Situation The Company’s operations are restricted by various financial agreements. Agreements covering long-term debt and restructured debt contain conditions and limitations on the Company’s operations. These may force the Company to pursue less than optimal business strategies or forego business arrangements that could be financially advantageous to Company and shareholders.

Repayment of the Company’s indebtedness could be accelerated without its control. The Company’s restructuring agreements permit its creditors to accelerate the repayment of its secured indebtedness if : TOT materially breaches its concession agreement with the Company; Principal shareholders are unable to direct the Company’s management; or In any of these events, the Company’s creditors could request immediate repayment of the indebtedness to them.

Subject to exchange rate fluctuations Any further depreciation of the Thai Baht against foreign currencies, principally the Japanese Yen, would increase the Company’s outstanding foreign debt and related interest expenses, as well as the amount of Baht revenue required to meet capital expenditure plans.

Shareholders TelecomAsia Corporation Public Company Limited List of Major Shareholders1 (as of 24th February 2003)

1. CP Group2

% of Total Issued Shares

1,579.57

42.75

NYNEX NETWORK SYSTEMS (THAILAND) COMPANY

404.35

10.94

THAI TRUST FUND3

357.99

9.69

KREDITANSTALT FüR WIEDERAUFBAU (“KfW”)

341.75

9.25

CLEARSTREAM NOMINEES LTD

69.70

1.89

HSBC SECURITIES (SINGAPORE) PTE LIMITED

38.79

1.05

THANA HOLDING CO., LTD.

34.00

0.92

STATE STREET BANK AND TRUST COMPANY

28.45

0.77

GOVERNMENT PENSION FUND

20.18

0.55

19.14

0.52

10. THAI NVDR CO., LTD.

No. of Shares (Million Shares)

Including common shares and preferred shares. There are Charoen Pokphand Group Co., Ltd. and its related persons, namely, Bangkok Telecom Holding Company Limited, Charoen Pokphand Foods Public Company Limited, Bangkok Produce Merchandising 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 Limited and Advance Pharma Company Limited 3 Shares, in Thai Trust Fund, are preferred shares of KfW, which have no right to vote. 2

Annual Report 2002 TelecomAsia Corporation Public Company Limited

NAME

Management Management Structure of the Company consists of the Board of Directors, the Committees and the executive officers, details of which are as follows :

Board of Directors

Annual Report 2002 TelecomAsia Corporation Public Company Limited

As of 31 st December 2002, the Board of Directors comprises of 23 directors who are (a) Executive Directors (b) Non-Executive Directors including directors representing the creditors, and (c) Independent Directors. The Board of Directors of the Company is as follows :

1. Mr. Narong

Srisa-an

Independent Director

2. Mr. Vitthya

Vejjajiva

Independent Director and Chairman of the Audit Committee

3. Dr. Kosol

Petchsuwan

Independent Director and Member of the Audit Committee

4. Mr. Joti

Bhokavanij

Independent Director and Member of the Audit Committee

5. Mr. Dhanin

Chearavanont

Chairman

6. Mr. Sumet

Jiaravanon

Vice Chairman

7. Dr. Ajva

Taulananda

Vice Chairman

8. Mr. Chaleo

Souvannakitti

Vice Chairman

9. Mr. Athueck

Asvanund

Vice Chairman and Group General Counsel

10. Mr. Supachai

Chearavanont

Director, President and Chief Executive Officer

11. Mr. Soopakij

Chearavanont

Director

12. Mr. Chatchaval

Jiaravanon

Director 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 Companyâ&#x20AC;&#x2122;s Board of Directors 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 Board of Directors The Board of Directors is granted the authority and duty to manage the Company in compliance with the objectives and articles of association of the Company and the resolutions of the shareholders meetings. With regard to the management of the Company, the Board of Directors has authority to make any decision related to the Companyâ&#x20AC;&#x2122;s regular operation except for the matter required the approval of the shareholders meeting as specified by law. In addition, the Board of Directors may grant the authorization to one director or more or any other person to perform any acts on its behalf, however, any decision on major operations such as major investment and major procurement of loan, the management team shall propose the said transactions to the Board of Directors for approval.

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 2. Dr. Kosol 3. Mr. Joti

Vejjajiva Petchsuwan Bhokavanij

Chairman of the Audit Committee Member of the Audit Committee Member of the Audit Committee

The scope of duty and responsibility of the Audit Committee is as follows : 1. 2. 3. 4.

To review the Company’s financial reports to ensure accuracy and adequate information for public disclosure; To ensure the appropriateness and effectiveness of internal control system and internal auditing system of the Company; To consider and propose the appointment and remuneration of an external auditor of the Company; 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.

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 2. Mr. Joti 3. Mr. Daniel C.

Srisa-an Bhokavanij Petri

4. Mr. Klaus

Tuengeler

5. Mr. Supachai 6. Mr. Athueck

Chearavanont Asvanund

Independent Director Independent Director Verizon-nominated Director (with the alternate of Mr. Stephen G. Parker or Mr. John J. Lack) KfW-nominated Director (with the alternate of Mr. Andreas Klocke or Mr. Claus Stadler) CP-nominated Director 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.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Independent Committee

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

Annual Report 2002 TelecomAsia Corporation Public Company Limited

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

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 relevant Committee (such as the Finance Committee, the Compensation and Nominating Committee or the Independent Committee) and/or the Board of Directors, as the case may be, to approve said matter/ transaction. In addition, the President has no authority to approve any matter/ transaction that he or the person who may have a conflict of interest or any other form of conflict, which the Company or the Company’s subsidiaries have or propose to enter into, with the Company or the Company’s subsidiaries. In such case, such matter/ transaction shall have to be approved by the independent directors and/or the relevant Committee and/or the Board of Directors, 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 :

Compensation

Amount (Baht)

Salary Directors’ Remuneration Other

41,611,000.00 -

Total

41,611,000.00

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

No. of Executive Officers 5

Compensation Salary Bonus Other Total

Amount (Baht) 70,230,377.00 7,306,760.00 24,324,240.77 101,861,377.77

Annual Report 2002 TelecomAsia Corporation Public Company Limited

No. of Directors

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 the issuance and the 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 : Number of Warrants issued Maturity :

37,131,597 units

Exercise Period

Exercise Ratio

Each Warrant Holder received 3 separate warrant certificates. Each certificate represented 1/3 of the whole 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. One unit of warrants entitles to purchase one ordinary share at Baht 10.60

5 years from the issuance date

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 the issuance 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 : Number of Warrants issued Maturity : Exercise Period :

Exercise Ratio

36,995,000 units

10 years from the issuance date (a) Warrant Type 1 : Each Warrant Holder received 3 separate warrant certificates. Each certificate represented 1/3 of the whole amount of warrants allotted and is exercisable for subscribing ordinary shares starting from June 30, 2000, 2001 and 2002 respectively. (b) Warrant Type 2 : Each Warrant Holder received 3 separate warrant certificates. Each certificate represented 1/3 of the whole amount of warrants allotted and is exercisable for subscribing ordinary shares starting from December 31, 2000, 2001 and 2002 respectively. One unit of warrants entitles to purchase one ordinary share at Baht 10.60

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Insider Trading Policy

The Company is currently in compliance with applicable laws to monitor and prevent the personal use of confidential information of the Company by its management, including the use of said information for the purpose of insider trading. Material information which has not yet been disclosed will be kept confidential but will be disclosed only to the relevant senior management of the Company. The relevant senior management of the Company who shall access or receive said information are required to report their trading of shares in the Company pursuant to the Regulations of the Stock Exchange of Thailand and the Office of Securities and Exchange Commission Regarding Rules, Conditions, and Procedures Governing the Preparation and Disclosure of Reports on 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 foreign institutions to be applied as a guideline to enhance transparency and boost the confidence in the Company amongst the analyst and investor community.

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

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

Work Group and Classification

No. of Employee

Management Service Area & Network Operation Marketing & Sales Information Technology Customer Services Finance & Accounting Supporting

58 1,965 370 349 772 216 281

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 Baht 15,000 a month, it was calculated only Baht 15,000 as the basic of funding). Said employee will gain special benefits from 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 year subject 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 remaining annual leave to the subsequent year, but can carry a balance of no more than 30 days. If the accumulated annual leave balance exceeds 30 days, the Company will compensate for the excess.

•

Employees at the level lower than Vice President can take annual leave for 10 days and can accumulate remaining annual leave to the subsequent year, but can carry a balance of no more than 20 days. If the accumulated annual leave balance exceeds 20 days, the company will compensate for the excess.

Compensation

• • •

Monthly Salary Annual Performance Pay : between 0-4 times of monthly salary, subject to the Company’s performance and financial status. Retirement : the employee must be at the age of 60 years or early retirement by agreement of company and employee, severance pay will be paid accordingly the labor law.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Employee Training and Development Employee Training and Development Policy

Annual Report 2002 TelecomAsia Corporation Public Company Limited

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

DIRECTORSâ&#x20AC;&#x2122; INFORMATION (AS OF 31ST DECEMBER 2002)

Mr. Narong Srisa-an

Position

Independent Director

Age

TA Share Ownership

Experience

(year)

(31 December 2002)

10,000 shares

1998-Present Present

Mr. Vitthya Vejjajiva

Independent Director and Chairman of Audit Committee

1998-Present

1991-1992 1988

1984

1981 1979

Dr. Kosol Petchsuwan

Independent Director and Member of Audit Committee

1999- Present 1999- Present

1997- Present 2000-2001 1997-2001 1998-2000

- Independent Director TelecomAsia Corporation Plc. - 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 of the Executive Board Siam Food Products Plc. - Vice Chairman General Tobacco Co., Ltd. - Vice Chairman Berli Jucker Plc. - Executive Director Com-link Co., Ltd. - Independent Director and Chairman of Audit Committee, TelecomAsia Corporation Plc. - Chairman, K Line (Thailand) Ltd. and its subsidiaries - Permanent Secretary of the Ministry of Foreign Affairs - Ambassador Extraordinary and Plenipotentiary of the United States of America - Ambassador Extraordinary and Plenipotentiary of Belgium and the European Community - Ambassador Extraordinary and Plenipotentiary of Canada - Director - General of Department of Economic Affairs - Member of Audit Committee, TelecomAsia Corporation Plc. - President The Telecommunications Association of Thailand - Independent Director, TelecomAsia Corporation Plc. - Chairman, The Aeronautical Radio of Thailand Limited - Director, The Press Council of Thailand - Independent Director and Member of Audit Committee, PTT Exploration and Production Plc.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Name

Mr. Joti Bhokavanij

Position

Independent Director and Member of Audit Committee

Age

TA Share Ownership

Experience

(year)

(31 December 2002)

1999-Present

2000-2001 1994-1997 1992-1994

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Mr. Dhanin Chearavanont

- Independent Director and member of the Audit Committee TelecomAsia Corporation Plc. Company Limited - Executive Chairman TISCO Finance Plc. - Executive Chairman, Thai Wah Group of Companies - Managing Director and Consult General of Denmark for Bangkok The East Asiatic Company (Thailand) Limited

Chairman

1989-Present

- Chairman 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 Jiaravanon

Vice Chairman

150,000 shares

1993- Present

- Vice Chairman, TelecomAsia Corporation Plc. - Executive Chairman, Charoen Pokphand Group Co., Ltd.

Dr. Ajva Taulananda

Vice Chairman

Present

- Vice Chairman, TelecomAsia Corporation Plc. - Vice Chairman Charoen Pokphand Group Co., Ltd. - Chairman The Thai Chamber of Commerce and Board of Trade of Thailand - Director and President TelecomAsia Corporation Plc. - Deputy Minister, Ministry of Agriculture and Cooperatives

1993-1999 1991-1992

Mr. Chaleo Souvannakitti

Vice Chairman

3,486,900 shares 1992- Present

- Vice Chairman, TelecomAsia Corporation Plc. - Director Telecom Holding Co., Ltd.

Mr. Athueck Asvanund*

Position

Vice Chairman and Group General Counsel

Age

TA Share Ownership

Experience

(year)

(31 December 2002)

1997-Present

1978-1997 Mr. Supachai Chearavanont*

Director, President and Chief Executive Officer

1,240,000 shares 1999-Present

1992- 1999

Mr. Soopakij Chearavanont*

Director

Present 2000-Present 1998-Present

1991-Present

Mr. Chatchaval Jiaravanon*

Director and Executive Director

Present 2001-Present

2000-Present

1998-Present

1997-Present

1990-Present

*Authorized Signatory

- Director TelecomAsia Corporation Plc. - 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. - Baker & McKenzie - Director, President and Chief Executive Officer TelecomAsia Corporation Plc. - Director and Senior Executive Vice President TelecomAsia Corporation Plc. - Director, TelecomAsia Corporation Plc. - Executive Chairman, Telecom Holding Co., Ltd. - Chairman United Broadcasting Corporation Plc. - Chairman AT&T Network Technology (Thailand) Co., Ltd. - Director, TelecomAsia Corporation Plc. - Director and Director of Audit Committee Ticon Industrial Connection Public Company Limited - President and C.E.O., Telecom Holding Co., Ltd. - Independent Director, Cal-Comp Electronics (Thailand) Plc. - Executive Chairman, Cambodia Mobile Telephone Co., Ltd. - President and C.E.O., Asia Multimedia Co., Ltd. - President, Asianet Corporation Co., Ltd. - President, Asia Infonet Co., Ltd. - Director, Metro Machinery Plc. - Director, Thai Kodama Co., Ltd.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Name

Mr. Vichaow Rakphongphairoj*

Position

Director and Managing Director

Age

TA Share Ownership

Experience

(year)

(31 December 2002)

150,000 shares

2000-Present 1998-2000 1997-1998

1996-1997

1995-1996

Mr. Umroong Sanphasitvong

Director

384,000 shares

Mr. Daniel C.Petri

Director

Present

- Deputy Group CFO Charoen Pokphand Group Co., Ltd. - Director, C.P. Seven Eleven Plc. - Director, Vinythai Plc.

2002-Present 2000-2002

- Group President - International - President - International, Europe and Asia, Verizon Communications - Director, TelecomAsia Corporation Plc. - President - International, Bell Atlantic Corp. - President - Global Systems Bell Atlantic/NYNEX

1998-2000 1995-1998

Mr. Stephen G. Parker*

Director

Present 2000-2002

Annual Report 2002 TelecomAsia Corporation Public Company Limited

1995-2000

1992-1995

Mr. Heinrich Heims

Director

1998- Present 1978-1998

Mr. Klaus Tuengeler

* Authorized Signatory

Director

- Managing Director TelecomAsia Corporation Plc. - E.V.P., Business & Enterprise, TelecomAsia Corporation Plc. - E.V.P., Central Operation & Information Technology TelecomAsia Corporation Plc. - Region Director, Bangkok-Southeast Region TelecomAsia Corporation Plc. - Region Director, Bangkok-West Region TelecomAsia Corporation Plc.

Present

- Director, TelecomAsia Corporation. Plc. - Executive Director Verizon International - Asia - Managing Director NYNEX Network Systems Siam Limited Bangkok, Thailand - Executive Managing Director NYNEX Network Systems Company Hong Kong - Senior Vice President Export and Project Finance, KfW - Export Finance, KfW - First Vice President Export and Project Finance Telecommunications, Natural Resources, KfW

Ms. Gabriele Gunia

Position

Director

Age

TA Share Ownership

Experience

(year)

(31 December 2002)

Present 2001-2002 1996-2001 1994-1995 1988-1994

- Vice President, Asset Securitisation, KfW - Vice President, Investor Relations, KfW - Export and Project Finance Telecommunications, KfW - Delegation to the Ministry of Finance, Bonn - Position in the areas of Secretariat of Domestic and European Credit Affairs, Export and Project Finance, KfW

Mr. Claus Stadler

Director

Present

- Deputy General Counsel Head of the Legal Department (Frankfurt), KfW

Mr. Andreas Klocke

Director

Present

- Head of KfWâ&#x20AC;&#x2122;s Southeast Asia Regional office in Bangkok in Charge of KfW Affairs in Thailand and Southeast Asia Region

Mr. Harald Link

Director

50,000 shares

1997- Present

- Managing Partner, B. Grimm & Co. R.O.P.

Mr. John J. Lack

Director

2000-Present

- Group Vice President Asia, the Verizon Corporation - Vice President Asia Pacific, Bell Atlantic International Wireless - Chief Operating Officer, Excelcomindo Pratama, Indonesia

1998-2000 1995-1998

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Name

EXECUTIVE OFFICERSâ&#x20AC;&#x2122; INFORMATION (AS OF 31ST DECEMBER 2002) Name

Position

Age (year)

Mr. Supachai

Director, President

Chearavanont

and

TA Share Ownership

Experience

(31 December 2002) 1,240,000 shares 1999-Present

- Director, President and Chief Executive Officer

Chief Executive Officer

TelecomAsia Corporation Plc. 1992- 1999

- Director and Senior Executive Vice President TelecomAsia Corporation Plc.

Mr. Vichaow Rakphongphairoj

Director

150,000 shares

2000- Present

and

- Managing Director TelecomAsia Corporation Plc.

Managing Director

1998-2000

- E.V.P., Business & Enterprise, TelecomAsia Corporation Plc.

1997-1998

- E.V.P., Central Operation & Information Technology TelecomAsia Corporation Plc.

1996-1997

- Region Director Bangkok-Southeast Region TelecomAsia Corporation Plc.

1995-1996

- Region Director, Bangkok-West Region TelecomAsia Corporation Plc.

Mr. Chatchaval Jiaravanon

Director

Present

- Director

2001- Present

- Director and Director of

and Executive Director

TelecomAsia Corporation Plc. Audit Committee Ticon Industrial Connection Public Company Limited 2000-Present

- President and C.E.O., Telecom Holding Co., Ltd. - Independent Director, Cal-Comp Electronics (Thailand) Plc.

1998-Present

- Executive Chairman,

Annual Report 2002 TelecomAsia Corporation Public Company Limited

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.

Mr. Athueck Asvanund

Position

Vice Chairman and Group General Counsel

Age

TA Share Ownership

Experience

(year)

(31 December 2002)

1997-Present

1978-1997 Mr. William E. Harris

Chief Financial Officer

100,000 shares

Present 1998-2000

1993-1998

- Director, TelecomAsia Corporation Plc. - 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. - Baker & McKenzie - Chief Financial Officer - Executive Vice President Corporate Finance TelecomAsia Corporation Plc. - Director, Credit Policy, Verizon Communications, Philadelphia

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Name

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 Chearavanont

Telecom Holding Co., Ltd. Bangkok Inter Teletech Co., Ltd.

1 1

Mr. Chaleo Souvannakitti

Telecom Holding Co., Ltd. Telecom International Co., Ltd. Telecom Equipment Manufacturing Co., Ltd.

1 1 1

Mr. Vichoaw Rakphongphairoj

1 -

1 1 1 1

1 1 1 1 1

Telecom International Co., Ltd. Telecom Training and Development Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. U-Net Co., Ltd. Asianet Corporation Co., Ltd. (Formerly named Interactive Media Services Co., Ltd.) Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd. Yai Kaew Co., Ltd.

1 1 1 1 1

1 1 1 5 1 1

1 1 1 1

Dr. Ajva Taulananda

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Mr. Chatchaval Jiaravanon

Yai Kaew Co., Ltd. Telecom International Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. Wire & Wireless Co., Ltd. U-Net Co., Ltd. Asianet Corporation Co., Ltd. (Formerly named Interactive Media Services Co., Ltd.) Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd.

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

Company

Change in 2002

Outstanding

Mr. Soopakij Chearavanont

Mr. Supachai Chearavanont

Telecom International Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. U-Net Co., Ltd. Asianet Corporation Co., Ltd. (Formerly named Interactive Media Services Co., Ltd.) Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd. Telecom Holding Co., Ltd. Telecom International Co., Ltd. Telecom Training and Development Co., Ltd. Telecom Equipment Manufacturing Co., Ltd. Wire & Wireless Co., Ltd. U-Net Co., Ltd. Asianet Corporation Co., Ltd. (Formerly named Interactive Media Services Co., Ltd.) Asia DBS Public Company Limited Asia Infonet Co., Ltd. Asia Wireless Communication Co., Ltd. Asia Multimedia Co., Ltd.

1 1 1 1

1 1 1 1 5 1 1

1 1 1 1

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Share (s)

Connected Transactions During 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 December 2002.

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 in compliance with the Rules and Regulations of the office of Securities and Exchange Commission (“SEC”) and the Stock Exchange of Thailand (“SET”), and the provisions of the Public Companies Act, the Company must comply with the terms and conditions of the Security Agreement Amendment and Restatement Agreement (the “SAARA”) which is the principal debt restructuring agreement executed between the Company and its Secured Creditors, and related agreements. The key terms and conditions in the SAARA and related agreements with regard to connected transactions specifies that the Company shall not enter into any contract, agreement, or arrangement with any affiliates other than on the arms’length open market terms. In any event the Company wishes to enter into any contract which creates material payment with the Company’s affiliates, Telecom Holding Company Limited or any affiliate thereof, TA Orange Company Limited, Charoen Pokphand Group Company Limited or group of companies or affiliate thereof, Nynex Network Systems (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 annual budget. Nonetheless, the Secured Creditors of the Company shall have right to make certain objection on the Company’s annual budget. Apart from the obligations under the SAARA, the terms and conditions of the Shareholders Agreement executed with Kreditanstalt für Wiederaufbau dated 22nd December 1999 specifies that the Company shall have to disclose the entering into any connected transactions of the major shareholders or its affiliates. In addition to the foregoing obligations, in the event of a material connected transaction involving affiliates of major shareholders of the Company, the Company shall propose to the Board of Directors to appoint the Committee comprising of the independent directors and directors nominated by non-interested shareholders to consider and negotiate the terms of said transaction. (The directors nominated by the interested major shareholders shall abstain from attending and voting at said meeting.) As part of its consideration and negotiation process, the Committee is authorized to appoint an independent financial advisor, an independent legal advisor and other advisors to assist, as it deems appropriate. The executive directors appointed by interested shareholders shall also refrain from participating in said connected transaction. In the event the Committee approves said connected transaction, it will then be proposed to the Board of 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 the shareholders’ meeting for approval with at least three-fourths of the vote of the shareholders present and entitled to vote at such meeting provided that the interested shareholders shall abstain in the vote on said connected transaction.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Policy for Future Connected Transactions

In addition to strictly compliance with the rules and regulations of the SEC and the SET, the Company has applied said rules and regulations to implement an internal guideline for connected transactions by carrying on the comparative study of the connected transactions guidelines from various foreign institutions to enhance transparency and create the parallel understanding with the foreign analysts and investors. With regard to future connected transactions, the Company anticipates that there will be the connected transactions under the ordinary course of business of the Company with its affiliates and the Company shall proceed such transactions in a transparent manner pursuant to the good corporate governance policy of the Company as well as all relevant regulations.

Report of The Audit Committee 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 perform duties and discharge responsibilities under the charter for the Audit Committee. During the year 2002 the Audit Committee carried out the following work: 1. held committee meetings, totalling 10 times during the year 2002 in order to discharge its functions as assigned by the Board of Directors. Management was invited to participate in some of the meetings to provide extra information in certain agendas. 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 the Company’s external auditor for the year 2002; 3. reviewed quarterly and annually financial reports of the Company and its subsidiaries to ensure correctness, reliability and adequacy 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 compliance with 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 the management; 7. closely monitored the work progress of Internal Auditing Department in order to enhance effectiveness of the internal audit function and continuously ensured that the Company improved its internal controls system to enhance efficiency and effectiveness;

(Mr. Vitthya Vejjajiva) Chairman of the Audit Committee

Annual Report 2002 TelecomAsia Corporation Public Company Limited

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

Management’s Discussion and Analysis Overview 2002 saw a number of improvements in TelecomAsia’s financial and operational results. Revenue, EBITDA (Earnings Before Interest,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 TA Orange, which started to generate revenues from the first quarter of 2002. In addition, there was significant growth in revenue from the Digital Data Network (DDN) and other business. Revenues from core businesses, excluding TA Orange, grew by 11.6 percent compared 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 ongoing operations, excluding TA Orange, decreased 65.5 percent to Baht 1.2 billion in the year under review from Baht 3.4 billion the previous year. Revenue growth pushed up the year-end consolidated EBITDA margin (excluding TA Orange) from 49.5 in 2001 to 51.0 percent, reflecting continued successful cost control in core operations. When TA Orange is included, the EBITDA margin decreased from 43.7 percent in 2001 to 37.9 percent due to a higher negative EBITDA contribution from TA Orange as the Company started 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 margins while providing strong cash flows - the springboard for TelecomAsia to reduce debt and to provide for future growth. Net loss from ongoing operations continued to decrease to Baht 107 million in 2002, compared with a loss of Baht 1.4 billion in 2001. After funding capital expenditure, free cash flows almost tripled to Baht 4.3 billion, enabling the Company to prepay its debts by Baht 1.1 billion. The Company’s balance sheet improved significantly with a successful bond offering, the settlement of yen-denominated obligation and other measures. The successful placement of Baht 18.5 billion in new debentures, the second largest offering of corporate debentures in Thai history, and new borrowing of Baht 1.1 billion from International Finance Corporation (IFC) reduced US dollar 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-off gain of Baht 3.1 billion in the fourth quarter of 2002. As a result of the successful balance sheet improvement program, the proportion of foreign denominated debt decreased from 55 percent in 2001 to 22 percent. The net debt/EBITDA ratio, excluding TA Orange, 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, 78 percent share of market growth in the Bangkok metropolitan area in 2002. This increased total billable subscribers to more than 2.0 million and secured the Company’s number one position in the BMA with 56 percent market share.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

TA Orange successfully launched its cellular service to the market in March 2002, gaining 1.3 million subscribers in its first nine months of operation and exceeding its original target. TA Orange contributed higher revenues and less negative EBITDA to the Company’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 competition within the wireless business. The Company, therefore, has developed a four-part plan to revitalize the PCT business by reducing financial and regulatory constraints, improving the network signal quality and range, and marketing products and services to attract and 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 on a sustainable footing for future growth. Internet and Broadband business grew strongly with 121 percent and 140 percent growth respectively in subscribers. TelecomAsia launched its broadband service a year and a half ago and, to date, has captured approximately 50 percent market share. Broadband services offered by the Company include ADSL, Cable Modem, Internet Protocal Access Service (IPAS) and TA Metronet, the first fiber- to-the- building Service in Thailand. The Company also successfully established a broadband community that brings together 21 leading providers of information, entertainment and on-line games to jointly develop broadband content. With high ARPU, compared to core fixed line telephone services, and rapid growth in subscriber numbers, broadband will position TelecomAsia for future growth.

Consolidated Results of Operations The results of operations are discussed on a normalized basis without taking into account non-recurring items. We believe this enables a better overview of the Company’s operating results and trends from period to period. All non-recurring items are disclosed in consolidated profit and loss statement based on adjusted basis. The Company began to consolidate results from TA Orange for a full 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 percent in 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 to Baht 23 billion, compared with 6.5 percent growth in 2001. More connections and increased revenue from value-added services, 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 operating expenses in 2002 totalled Baht 25.2 billion, an increase of 28.8 percent compared with 2001. The increase resulted mainly from depreciation of Baht 1.3 billion, selling, general and administrative expenses of Baht 1.3 billion and revenue sharing of Baht 1.1 billion. The increase in depreciation was mainly due to TA Orange (Baht 665 million), promotional lending of PCT handsets to customers (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 2002 and Baht 114 million in 2001, following TOT reviews. In addition, there was a Baht 33 million one-off compensation in 2002.

•

Consolidated EBITDA grew Baht 756 million (8.4 percent) to Baht 9.8 billion. This was a strong improvement on 2001 when 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 contribution 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 of a loss contribution from UBC of Baht 483 million and net gain from amortization of goodwill from TelecomAsia’s investment in TA Orange of Baht 2.3 billion. For 2001, the consolidated share of loss in associated companies totalled Baht 629 million, consisting of a loss contribution from UBC of Baht 913 million and gain from negative goodwill write-back of Baht 284 million.

•

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 the fourth quarter of 2002, the Company’s cost of debt increased as a result of the issuance of high-interest-rate Baht bonds to 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 nonrecurring 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 share of loss in affiliated companies, a decrease of Baht 2.7 billion compared with 2001, resulting mainly from increased EBITDA and 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 in 2001. The 2002 loss contribution comprised an operational loss of Baht 2.6 billion and a goodwill write-back of Baht 2.3 billion. TA Orange’s loss contribution to EBITDA increased to Baht 1.8 billion in 2002, compared with Baht 1.2 billion the previous year as TelcomAsia started to consolidate TA Orange’s results for a full year in 2002. However, the loss contribution declined for three consecutive quarters from Baht 728 million in the second quarter to Baht 204 million by year-end due to an increase in revenues.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

The loss contribution from UBC decreased by Baht 434 million as its operations improved strongly. The share in operating results of UBC, excluding amortization of goodwill, was a loss of Baht 103 million in 2002, compared with a loss of Baht 580 million the previous year. The improvement was derived mainly from an increase in the customer base from 406,589 in 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 Results of Operations - Adjusted Basis

FY 2002 (Baht in millions unless otherwise indicated) Revenues Revenues from telephone and other services Revenues from product sales

24,207 1,568

20,118 519

20.3 202.2

Total revenues

25,775

20,636

24.9

Operating expenses Cost of services Depreciation and amortization Revenue sharing Network operating expenses Cost of sales Selling and administrative expenses

17,366 8,772 4,290 4,303 1,758 6,160

14,127 7,784 3,227 3,116 685 4,816

22.9 12.7 32.9 38.1 156.8 27.9

Total operating expenses

25,284

19,628

28.8

9,768 9,277

9,012 8,004

8.4 15.9

Operating profit Interest income Interest expense Tax

492 54 (3,900) (144)

1,008 42 (4,718) (69)

(51.2) 28.0 (17.3) 108.4

Net income (loss) from continuing operations Share of profit (loss) in subsidiaries and associates

(3,498) 1,844

(3,737) (628)

6.4 393.5

Net income from continuing operations including share of profit (loss) in subsidiaries

(1,653)

(4,365)

62.1

Non recurring items Gain ( loss ) on Foreign Exchange Accounting adjustment-leased circuit & conduit rental Adjustment-personnel compensation Other (expense) income Gain from settlement of DPN obligation Loss on impairment of investment Loss on impairment of IN Gain on sale of investment Gain from debt restructuring

(3,743) (403) (286) (33) 137 3,088 (5,722) (1,562) 943 95

896 955 (114) 55 -

(517.8) (142.3) (150.7) 149.3 -

Net Profit (Loss) before minority interest (Income) loss attributable to minority interest

(5,396) 1

(3,469) 44

(55.5) (97.4)

Net Profit (Loss) for the period

(5,395)

(3,425)

(57.5)

Annual Report 2002 TelecomAsia Corporation Public Company Limited

EBITDA Depreciation & Amortization

% Change FY 2001 FY 2002/ FY 2001

Balance Sheets Current assets Property, plant and equipment, net Total assets Current liabilities Borrowing Total liabilities Shareholderâ&#x20AC;&#x2122;s equity

18,899 66,871 93,247 14,396 59,330 86,049 7,198

16,884 64,033 86,472 10,594 61,944 81,577 4,895

11.9 4.4 7.8 35.9 (4.2) 5.5 47.1

Cash Flow Cash flows from operating activities Cash flows from investment activities Cash flows from financing activities Ending cash balance

4,455 (9,120) 5,116 3,136

4,479 (1,400) (1,450) 2,684

(0.5) (551.9) 452.8 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.

Segment results Wireline

•

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

•

An additional 6,000 public phones were installed during 2002, resulting in revenue growth of 26.6 percent to Baht 1.8 billion 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 million, 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 in market 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 for businesses 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 from usage 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 regulatory constraints, 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 a goodwill 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 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 enhancing 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 the high-speed subscribers.

•

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

Annual Report 2002 TelecomAsia Corporation Public Company Limited

DDN (Digital Data Network)

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 providers of information, entertainment, healthcare and other applications to develop fully integrated broadband services.

Results by Segment

Turnover (Baht In millions )

2002

2001

Wireline - voice Basic (POTS) Value-added services

16,125 13,687 2,438

15,618 13,277 2,341

Digital Data Network (DDN)

1,199

Wireless PCT TA Orange

Segment Results 2002

2001

3.2 3.1 4.1

5,093

4,980

2.3

503

138.4

738

238

209.9

6,096 2,949 3,147

3,072 3,072 -

98.4 (4.0) NA

(2,397)

(1,195)

(100.6)

Internet

198

154

28.6

32.8

Multimedia/Broadband

954

894

6.7

(106)

132.7

Others

1,203

396

203.8

200

2,090.6

Group

25,776

20,636

24.9

3,694

3,945

(6.4)

(3,173)

(2,882)

10.1

Unallocated Costs

% Change

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

Annual Report 2002 TelecomAsia Corporation Public Company Limited

•

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

Liabilities

•

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

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 net loss of Baht 0.7 billion, excluding unrealized loss on available for sale securities of Baht 4.7 billion, already recorded as a deduction to shareholders’ equity in the year 2001.

•

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

•

Net cash used in investing activities was Baht 9.1 billion, an increase of Baht 7.7 billion, compared to 2001, due mainly to an 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 for network investment.

Annual Report 2002 TelecomAsia Corporation Public Company Limited

Cash Flow

Report of the Board of Directorsâ&#x20AC;&#x2122; Responsibilities for Financial Statements The 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 Companyâ&#x20AC;&#x2122;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

Annual Report 2002 TelecomAsia Corporation Public Company Limited

2002.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2002 and 2001 Consolidated

Notes

Company

31 December

2002

2001

2002

2001

Baht

Assets Current assets Cash and cash equivalents

3,135,696,393

2,684,255,574

372,900,545

253,486,485

Restricted cash

4,482,279,607

4,576,450,120

3,626,163,288

4,018,292,184

Short-term investments

21,209,967

177,337,181

Trade accounts receivable, net

7,152,405,277

5,689,657,001

Short-term loans to related parties

780,710

2,645,463

Inventories, net

1,184,274,566

1,113,378,391

665,305,452

782,827,348

Other current assets

2,922,213,734

2,640,554,733

1,592,027,473

1,854,723,783

18,898,860,254

16,884,278,463

12,357,326,563

12,417,032,247

1,036,273,212

Total current assets Non-current assets Investments: - Available-for-sale securities

6,100,929,805 -

5,507,702,447 -

- Investments in subsidiaries, joint venture and associates

4,009,108,477

4,492,129,457

10,639,534,769

- Other long-term investments

75,571,404

52,322,000

21,250,000

- Investment property

53,873,898

54,293,898

66,870,643,233

64,032,659,405

40,873,095,696

46,733,374,436

1,771,042,202

804,299,872

1,176,959,004

206,622,576

Property, plant and equipment, net Other assets: - Intangible assets, net - Negative goodwill, net

- Other non-current assets

Total non-current assets Total assets

(2,336,785,064)

11,155,634,650 -

(2,336,785,064)

1,567,934,309

1,452,822,446

962,915,960

1,051,309,851

74,348,173,523

69,588,015,226

53,673,755,429

56,810,156,449

93,247,033,777

86,472,293,689

66,031,081,992

69,227,188,696

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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Balance Sheets As at 31 December 2002 and 2001 Consolidated

Notes Liabilities and shareholders' equity Current liabilities Trade accounts payable Current portion of long-term borrowings Accrued expenses Other current liabilities Total current liabilities Non-current liabilities Long-term borrowings Long-term trade accounts payable Other non-current liabilities Total non-current liabilities

31 December 2001 Baht

Company 31 December 2002 Baht

31 December 2001 Baht

2,244,583,101

2,740,022,723

1,615,483,584

2,121,537,923

17 18 19

5,854,179,102 3,260,267,951 3,036,961,915 14,395,992,069

3,214,292,423 2,495,300,207 2,143,970,461 10,593,585,814

3,246,084,064 1,374,189,048 2,234,098,139 8,469,854,835

1,170,657,842 647,407,215 1,594,979,819 5,534,582,799

17 20 21

59,329,884,748 8,012,582,879 4,310,326,080 71,652,793,707

61,944,182,485 8,299,424,585 740,060,396 70,983,667,466

50,461,425,305 354,778,672 50,816,203,977

58,737,800,080 514,122,739 59,251,922,819

86,048,785,776

81,577,253,280

59,286,058,812

64,786,505,618

6,997,535,300 37,463,646,620

7,020,000,000 25,304,999,780

6,997,535,300 37,463,646,620

7,020,000,000 25,304,999,780

6,997,535,300 29,947,436,840

7,020,000,000 25,304,999,780

6,997,535,300 29,947,436,840

7,020,000,000 25,304,999,780

11,432,046,462

(1,493,683,023) (1,943,271,209) 104,344,130

(1,498,478,153) (316,639,974) 104,344,130

(1,493,683,023) (1,943,271,209) 104,344,130

(1,498,478,153) (316,639,974) 104,344,130

(2,712,750)

(4,703,366,075)

(2,712,750)

(4,703,366,075)

34,880,969 34,880,969 (32,937,104,061) (38,331,553,539) 4,440,683,078 6,745,023,180 454,357,331 4,895,040,409 6,745,023,180

34,880,969 (32,937,104,061) 4,440,683,078 4,440,683,078

Total liabilities Shareholders' equity Share capital Authorised share capital Preferred shares Common shares Issued and fully paid-up share capital Preferred shares Common shares Premium on share capital Common shares Discount on share capital Preferred shares Common shares Foreign currency translation adjustment Unrealised loss on available-for-sale securities Retained earnings (deficit) Appropriated legal reserve Deficit Total Parent's shareholders' equity Minority interest in subsidiaries Total shareholdersâ&#x20AC;&#x2122; equity Total liabilities and shareholders' equity

31 December 2002 Baht

22 22

34,880,969 (38,331,553,539) 6,745,023,180 453,224,821 7,198,248,001 93,247,033,777

86,472,293,689

66,031,081,992

69,227,188,696

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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Income For the years ended 31 December 2002 and 2001 Consolidated 31 December 31 December 2002 2001 Baht Baht

Company 31 December 31 December 2002 2001 Baht Baht

24,206,831,133 1,568,461,523 25,775,292,656

20,117,763,719 518,678,786 20,636,442,505

20,277,308,944 34,498,894 20,311,807,838

18,746,108,803 191,645,371 18,937,754,174

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

2,181,737,865

Other revenues

253,313,675

280,133,421

97,930,764

119,251,927

Revenues Revenues from telephone and other services Revenues from product sales Total revenues

Notes 9

Operating expenses

Cost of services

Other expenses

(1,786,178,721)

(225,172,527)

(1,676,410,595)

(231,747,135)

Operating results

(1,360,194,709)

949,123,403

887,413,433

2,069,242,657

Share of profit (loss) in subsidiaries, joint venture and associates Loss on impairment of investment Gain on sale of investment Other non-operating income

7 17 17

1,844,460,287 (5,721,988,062) 943,248,540 3,196,228,940

(628,472,598) -

(6,529,318,873) 3,087,826,418

(1,874,652,529) -

(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)

(403,465,884)

954,874,217

45,390,430

80,251,840

(5,347,352,427)

(3,400,484,395)

(5,394,449,478)

(3,425,126,882)

(143,683,537)

(68,933,164)

(5,491,035,964)

(3,469,417,559)

Profit (loss) before interest and tax

Foreign exchange gain (loss) Loss before income tax Income tax Loss before extraordinary item

(5,394,449,478)

(3,425,126,882)

Extraordinary item Gain from debt restructuring

Loss before minority interest Loss attributable to minority interest Net loss for the year Basic and diluted loss per share Loss from ordinary activities Extraordinary item Gain from debt restructuring Net loss for the year

95,453,976

(5,395,581,988)

(3,469,417,559)

(5,394,449,478)

1,132,510

44,290,677

(5,394,449,478)

(3,425,126,882)

(5,394,449,478)

(3,425,126,882)

(2.37)

(1.81)

(2.37)

(1.81)

0.03 (2.34)

(3,425,126,882) -

0.03 (2.34)

(1.81)

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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes in Shareholdersâ&#x20AC;&#x2122; Equity For the years ended 31 December 2002 and 2001

Consolidated Unrealised Issued and fully paid-up

Notes Beginning balance 2002 Issue of common shares

Conversion of shares

Foreign currency

loss on

Minority

Preferred

Common

Premium

Discount

translation

available-for-

Legal

on shares

adjustment

sale securities

reserve

Deficit

subsidiaries

Baht

7,020,000,000

25,304,999,780

4,619,972,360

22,464,700

(22,464,700)

11,432,046,462

(1,815,118,127) (1,621,836,105) -

104,344,130

(4,703,366,075)

34,880,969

interest in

(32,937,104,061)

454,357,331

Total Baht 4,895,040,409 2,998,136,255 -

Unrealised loss on available-forsale securities

Net loss for the year

(785,727,182) -

(5,394,449,478)

(785,727,182)

(5,394,449,478)

5,486,380,507

Reversal of unrealised loss on available-for-sale securities

Share of loss in subsidiaries Ending balance 2002

6,997,535,300

29,947,436,840

11,432,046,462

(3,436,954,232)

5,486,380,507

104,344,130

(2,712,750)

34,880,969

(1,132,510)

(38,331,553,539)

453,224,821

7,198,248,001

Consolidated Unrealised Issued and fully paid-up

Notes Beginning balance 2001 Issue of common shares

Foreign currency

loss on

Minority

Preferred

Common

Premium

Discount

translation

available-for-

Legal

on shares

adjustment

sale securities

reserve

Deficit

subsidiaries

Baht

7,020,000,000

22,230,000,000

3,074,999,780

11,432,046,462 -

(1,498,478,153) (316,639,974)

104,344,130 -

(1,682,579,258) -

34,880,969 -

interest in

(29,511,977,179) -

498,648,008 -

Total Baht 8,626,884,979 2,758,359,806

Unrealised loss on available-for-

Net loss for the year

sale securities

Share of loss in subsidiaries

7,020,000,000

25,304,999,780

Ending balance 2001

11,432,046,462

(1,815,118,127)

104,344,130

(3,020,786,817)

(4,703,366,075)

34,880,969

(3,425,126,882)

(3,020,786,817)

(3,425,126,882)

(44,290,677)

(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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Changes in Shareholdersâ&#x20AC;&#x2122; Equity (Continued) For the years ended 31 December 2002 and 2001

Company Unrealised Issued and fully paid-up

Notes Beginning balance 2002 Issue of common shares

Conversion of shares

Foreign currency

loss on

Preferred

Common

Premium

Discount

translation

available-for-

Legal

on shares

adjustment

sale securities

reserve

Deficit

Total

Baht

7,020,000,000

25,304,999,780

4,619,972,360

22,464,700

(22,464,700)

11,432,046,462

(1,815,118,127) (1,621,836,105) -

104,344,130

(32,937,104,061)

4,440,683,078

(4,703,366,075) -

34,880,969 -

2,998,136,255

Unrealised loss on available-forsale securities

Net loss for the year

(785,727,182) -

(5,394,449,478)

(785,727,182) (5,394,449,478)

Reversal of unrealised loss on available-for-sale securities

Ending balance 2002

6,997,535,300

29,947,436,840

11,432,046,462

(3,436,954,232)

104,344,130

5,486,380,507 (2,712,750)

34,880,969

5,486,380,507

(38,331,553,539)

6,745,023,180

Company Unrealised Issued and fully paid-up

Notes Beginning balance 2001 Issue of common shares

Foreign currency

loss on

Preferred

Common

Premium

Discount

translation

available-for-

Legal

on shares

adjustment

sale securities

reserve

Baht

7,020,000,000

22,230,000,000

3,074,999,780

Baht 11,432,046,462 -

Baht (1,498,478,153) (316,639,974)

Baht 104,344,130 -

Baht (1,682,579,258) -

Baht 34,880,969 -

Deficit Baht

Total Baht

(29,511,977,179)

8,128,236,971

2,758,359,806

(3,020,786,817)

Unrealised loss on available-forsale securities Net loss for the year Ending balance 2001

7,020,000,000

25,304,999,780

11,432,046,462

(1,815,118,127)

104,344,130

(3,020,786,817) (4,703,366,075)

34,880,969

(3,425,126,882)

(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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Retained Earnings For the years ended 31 December 2002 and 2001 Consolidated

Note

Company

31 December

2002

2001

2002

2001

Baht

Deficit Beginning balance

(32,937,104,061)

Net loss for the year

(5,394,449,478)

Ending balance

(38,331,553,539)

(29,511,977,179) (32,937,104,061) (3,425,126,882)

(29,511,977,179)

(5,394,449,478)

(3,425,126,882)

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

(32,937,104,061)

Appropriated retained earnings Legal reserve Total deficit

34,880,969 (38,296,672,570)

34,880,969

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

(32,902,223,092)

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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Statements of Cash Flows For the years ended 31 December 2002 and 2001 Consolidated

Notes Cash flows from operating activities Cash flows from investing activities Withdrawal (deposit) in restricted cash Withdrawal (deposit) in time deposit Acquisition of subsidiary Acquisition of joint venture, net of cash acquired Acquisition of long-term investment in other companies Purchases of property, plant and equipment Purchases of intangible assets Disposal of property, plant and equipment Net cash used in investing activities Cash flows from financing activities Issue of common shares Proceeds from debentures Proceeds from borrowings Repayments on long-term trade accounts payable Repayments on borrowings Net cash received from (used in) financing activities

31 December 2002 Baht

Company

31 December 2001 Baht

31 December 2002 Baht

31 December 2001 Baht

4,455,445,629

4,479,031,257

6,540,616,800

3,281,925,149

94,170,513 161,264,302 -

(251,124,483) (82,810,932) -

392,128,896 (859,143,560)

39,845,250 -

(402,161,904)

2,782,125,446

(3,060,000,000)

(76,419,234)

(23,250,000)

(100,000)

(21,250,000)

(8,753,437,834) (279,921,803)

(3,930,955,821) (33,881,549)

(2,260,867,073) (256,626,962)

(2,207,308,673) (33,881,549)

83,262,342 (9,120,074,384)

117,267,777 (1,399,479,562)

1,729,974 (6,064,028,725)

232,643 (2,277,531,563)

22 17 17

2,998,136,255 18,065,057,803 8,443,672,784

5,265,404,643

2,998,136,255 18,065,057,803 1,125,000,000

5,000,000,000

20 17

(677,546,400) (23,713,250,868)

(187,972,765) (6,527,349,456) (22,545,368,073)

(5,904,718,926)

5,116,069,574

(1,449,917,578)

(357,174,015)

(904,718,926)

Net increase in cash and cash equivalents Beginning balance

451,440,819 2,684,255,574

1,629,634,117 1,054,621,457

119,414,060 253,486,485

99,674,660 153,811,825

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 - Repayments on borrowings amounting to Baht 4,119.16 million through debt restructuring and settlement agreements (Note 17).

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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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.

Concession agreements Telephone services In August 1991, the Company entered into the Joint Operation and Joint Investment for Expansion of Telephone Services Agreement (“the Concession”) with the Telephone 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) 2) 3)

procuring and constructing the expansion of the existing TOT network. on completion of construction of the network expansion, transferring legal ownership of certain network assets, land and buildings to TOT. 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 services In 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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 2

Concession agreements (Continued) Internet services In October 1996, the Group entered into the Joint Investment in the Internet Services Agreement (the “Agreement”) with the Communication Authority of Thailand (“CAT”) to provide commercial internet services to users throughout Thailand for a 10 year term. Under the terms of the Agreement, the Group is required to provide its internet service over facilities leased from CAT or authorities approved by CAT. Under the terms of the Agreement, the Group has certain commitments including acquiring, installing, managing and maintaining all equipment necessary to provide internet services. The legal ownership of the system assets is transferred to CAT as installations are completed. 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 services The 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.

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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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.

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.

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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 3.

Accounting policies (Continued) (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.

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.

Investments The Group classifies its investments into the following categories; trading, held-to-maturity, available-forsale 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-tomaturity 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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

Accounting policies (Continued) 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 shareholdersâ&#x20AC;&#x2122; 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 Groupâ&#x20AC;&#x2122;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 Groupâ&#x20AC;&#x2122;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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 3.

Accounting policies (Continued) 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:

Land Land improvement Buildings and improvements Leasehold building improvements Furniture, fixtures, tools and office equipment Power supply and computer Multimedia network equipment Vehicle

Years Nil 10 5 – 20 Lease period 5 – 10 5 8 – 20 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:

Land Land improvement Buildings Telephone network equipment - Switching equipment - Transmission - Outside plant - Mobile phone network equipment PCT network equipment - Outside plant and buildings - Cable and drop wire - Inside plant Public phone Power supply and computer Network management systems

Years Nil 10 10 – 20 12 10 10 – 25 10 20 15 5 - 12 7 5 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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 3.

Accounting policies (Continued) 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 Groupâ&#x20AC;&#x2122;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 Groupâ&#x20AC;&#x2122;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 Groupâ&#x20AC;&#x2122;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 costs Generally, 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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 3.

Accounting policies (Continued) l)

Intangible assets (Continued) (3)

Trademarks and licences Expenditure 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 assets Other intangible assets represent fair value of subsidiariesâ&#x20AC;&#x2122; shares issued in exchange for rights to operate NON-POTS and to hang dropwire. This intangible asset is amortised using the straight-line method over its estimated useful life, ranging from 20 - 25 years.

(5)

Impairment of intangible assets Where an indication of impairment exists, the carrying amount of intangible assets is assessed annually and written down immediately to its recoverable amount.

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.

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.

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 Groupâ&#x20AC;&#x2122;s contributions to provident fund are charged to the statement of income in the period to which the contributions relate. 76

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 3.

Accounting policies (Continued) 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 Companyâ&#x20AC;&#x2122;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 handsets or 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 Groupâ&#x20AC;&#x2122;s right to receive payment is established.

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.

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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 3.

Accounting policies (Continued) 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. 78

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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:

Purchase consideration: - Cash paid - Fair value of shares and warrants issued Total purchase consideration Fair value of net assets acquired Goodwill (negative goodwill)

31 October 2002 Baht

31 October 2001 Baht

3,060,000,000 3,060,000,000 (2,780,903,968) 279,096,032

76,419,234 2,758,359,806 2,834,779,040 (5,455,967,438) (2,621,188,398)

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

Cash and cash equivalents Short-term investments Accounts receivable Inventories Advance to contractors Other accounts receivable Other current assets Property and equipment, net - Network equipment - Non-network equipment Trademark, net Other assets Borrowings Other accounts payable Amount due to related company Accrued expenses Other current liabilities Fair value of net assets acquired

31 October 2002 Baht 2,657,838,096 7,659,551 24,235,695 10,626,617 1,749,804 51,086,609 13,350,447

31 October 2001 Baht 2,858,544,680 82,000,000 305,912,302 153,856,230 56,752,771

414,820,590 145,026,562 7,510,488 2,417,169 (393,467,598) (43,126,093) (20,132,726) (59,713,760) (38,977,483) 2,780,903,968

213,946,536 2,669,541,822 113,938,878 21,369,103 (509,512,403) (208,914,181) (285,015,183) (16,453,117) 5,455,967,438

Baht 2,657,838,096 (3,060,000,000) (402,161,904)

Baht 2,858,544,680 (76,419,234) 2,782,125,446

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

Cash and cash equivalents Less: cash paid for directly attributable acquisition costs Net cash (outflow) inflow on acquisition

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 4.

Acquisition (Continued) Movement of goodwill is as follows: Goodwill Baht 279,096,032 (9,303,202) 269,792,830

Opening net book value Acquisition of joint venture Amortisation (Note 12) Closing net book value (Note 15) 5.

Negative goodwill Baht (2,336,785,064) 2,336,785,064 -

Cash and cash equivalents

As at 31 December Cash on hand and at banks Saving deposits

Consolidated 2002 2001 Baht Baht 92,239,788 57,611,146 3,043,456,605 2,626,644,428 3,135,696,393 2,684,255,574

Company 2002 2001 Baht Baht 30,316,275 22,244,088 342,584,270 231,242,397 372,900,545 253,486,485

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 cash As at 31 December Saving deposits Fixed deposits

Consolidated 2002 2001 Baht Baht 2,082,191,985 2,406,064,983 2,400,087,622 2,170,385,137 4,482,279,607 4,576,450,120

Company 2002 2001 Baht Baht 1,316,400,292 2,218,978,589 2,309,762,996 1,799,313,595 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 the above bank accounts as collateral with the contracted parties. 7.

Investments

As at 31 December Investments Current Non-current Total

Consolidated 2002 2001 Baht Baht

2002 Baht

Company

21,209,967 75,571,404 96,781,371

177,337,181 1,088,595,212 1,265,932,393

21,250,000 21,250,000

9,803,725 11,406,242 21,209,967

12,326,189 165,010,992 177,337,181

1,036,273,212

2001 Baht -

Current: Available-for-sale securities General investment - Fixed deposits Total Non-current: Available-for-sale securities 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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 Current: Opening net book value Currency translation Revaluation deficit Closing net book value Non-current: Opening net book value Currency translation Impairment of investment Revaluation deficit Reversal of unrealised loss on available-for-sale securities Closing net book value

2002 Baht

2001 Baht

12,326,189 (31,207) (2,491,257) 9,803,725

21,416,064 27,918 (9,117,793) 12,326,189

1,036,273,212 (17,429,732) (5,721,988,062) (783,235,925) 5,486,380,507 -

3,960,783,332 87,158,904 (3,011,669,024) 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 as collateral 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 United States Bankruptcy Court. Accordingly, FLAG’s ongoing business operations will be no longer subject to the restrictions imposed by the Chapter 11 process or the United State Bankruptcy Court. The Plan became effective in October 2002. Accordingly, the loss from impairment in investment in FLAG has been realised to the consolidated statement of income.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 8.

Trade accounts receivable, net

As at 31 December Receivable from TOT Billed customers Receivable from related parties (Note 9) Less: Allowance for doubtful accounts Trade accounts receivable, net

Consolidated 2002 2001 Baht Baht 2,447,760,493 2,979,419,890 5,738,467,404 3,033,378,444 418,055,020 149,045,616 8,604,282,917 6,161,843,950 (1,451,877,640) (472,186,949) 7,152,405,277 5,689,657,001

Company 2002 2001 Baht Baht 2,447,760,493 2,979,419,890 4,664,916,144 2,867,110,184 115,681,782 86,673,536 7,228,358,419 5,933,203,610 (1,127,428,614) (425,501,163) 6,100,929,805 5,507,702,447

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

As at 31 December Current Less than 3 months 3 - 6 months 6 - 12 months More than 12 months Less: Allowance for doubtful accounts Trade accounts receivable, net

Consolidated 2002 2001 Baht Baht 4,627,769,256 2,440,809,425 1,084,708,462 1,130,163,559 638,269,532 418,919,213 761,539,655 442,763,110 1,491,996,012 1,729,188,643 8,604,282,917 6,161,843,950 (1,451,877,640) (472,186,949) 7,152,405,277 5,689,657,001

Company 2002 2001 Baht Baht 3,695,788,336 2,495,428,510 751,706,582 863,807,857 540,106,452 405,168,281 740,042,025 467,890,865 1,500,715,024 1,700,908,097 7,228,358,419 5,933,203,610 (1,127,428,614) (425,501,163) 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: Baht 1,546.42 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 with TOT, 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 charged to 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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 9.

Related party transactions The following transactions were carried out with related parties: i) Sales of goods and services Consolidated For the years ended 31 December 2002 2001 Baht’000 Baht’000 Sales of goods: Subsidiaries: Telecom Holding Co., Ltd. Asia Wireless Communication Co., Ltd. Wire & Wireless Co., Ltd. Asia Multimedia Co., Ltd. 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 Sales of services: Subsidiaries: Asia Wireless Communication Co., Ltd. Wire & Wireless Co., Ltd. U-Net Co., Ltd. Joint ventures: BITCO Group of companies Asia Infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related companies: CP Group of companies

Company 2002 Baht’000

2001 Baht’000

8.70 436.06 738.80 24,304.23

27.74 -

25,487.79

27.74

782.33 27.27

15,110.28 2,144.70 -

204,943.55 17,733.54

23,320.32 7,638.96

78,225.70 902.18

23.22 988.80

847,213.21

873,265.79

82.46

13.30

330,005.13 1,399,895.43

146,417.42 1,050,642.49

5,911.60 85,931.54

1,494.49 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 services For the years ended 31 December Purchases of goods: Subsidiaries: Wire & Wireless Co., Ltd. Asia Wireless Communication Co., Ltd. Nilubon Co., Ltd. Telecom Holding Co., Ltd. Asia Multimedia Co., Ltd. Telecom Training and Development Co., Ltd. Joint ventures: BITCO Group of companies Asia infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related companies: NEC Communication Systems (Thailand) Co., Ltd. CP Group of companies

Consolidated 2002 2001 Baht’000 Baht’000

Company 2002 Baht’000

2001 Baht’000

22,538.20 345.90 45.56 71.60 -

350,070.50

1,207.92 50.00

136,707.27 22.96

1.87

71,943.86 22,653.95 231,329.91

26.44

70,343.84 70,481.50 140,851.78

71,943.86 20,554.10 466,827.64

217,752.75 31,028.00 1,151.83 61.00 13.72

0.93

70,343.84 62,608.59 382,960.66

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

Related party transactions (Continued) ii) Purchases of goods and services (Continued) For the years ended 31 December Purchases of services: Subsidiaries: Asia Wireless Communication Co., Ltd. Nilubon Co., Ltd. W7 Rental Services Ltd. Wire & Wireless Co., Ltd. Telecom Training and Development Co., Ltd. Asianet Corporation Co., Ltd. Telecom Holding Co., Ltd. Asia Multimedia Co., Ltd. U-Net Co., Ltd. Joint ventures: BITCO Group of companies Asia Infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related companies: CP Group of companies NEC Communication Systems (Thailand) Co., Ltd. Verizon Group of companies

Consolidated 2002 2001 Baht’000 Baht’000

Company 2002 2001 Baht’000 Baht’000

1,674,270.44 345,486.80 140,792.73 9,293.18

1,492,731.63 356,514.82 129,506.43 78,037.30

18,000.00 11,658.28 1.50 133.43 411.51

18,000.00 4,729.38 4.70 -

18,561.35 1,867.92

19,782.23 1,850.80

31,864.55 3,884.12

33,529.20 2,641.76

3,718.41

1,800.45

871.51

61.43

147,192.29

49,546.11

42,253.17

21,133.65

18,740.47 2,944.66

18,296.84 4,214.17

18,740.47 2,944.66

18,296.84 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 market prices. The Group holds a 9.62% equity interest in NEC Communication Systems (Thailand) Co., Ltd. and the Verizon Group of companies holds 10.94% of the Company’s equity.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

Related party transactions (Continued) iii) Outstanding balances arising from sales and purchases of goods and services

As at 31 December Receivables from related parties: Subsidiaries: Asia Wireless Communication Co., Ltd. Nilubon Co., Ltd. Wire & Wireless Co., Ltd. Telecom Holding Co., Ltd. W7 Rental Services Ltd. Asia Multimedia Co., Ltd. U-net Co., Ltd. Joint ventures: BITCO Group of companies Asia Infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related companies: CP Group of companies Less: allowance for doubtful accounts Payables to related parties: Subsidiaries: Asia Wireless Communication Co., Ltd. Telecom Holding Co., Ltd. Nilubon Co., Ltd. Wire & Wireless Co., Ltd. W7 Rental Services Ltd. Telecom Training and Development Co., Ltd. Asianet Corporation Co., Ltd. Tele Engineering and Services Co., Ltd. Asia Multimedia Co., Ltd. U-net Co., Ltd. Joint ventures: BITCO Group of companies Asia Infonet Co., Ltd. Associated: UBC Cable Network Public Co., Ltd. Related companies: NEC Communication System (Thailand) Co., Ltd. Verizon Group of companies CP Group of companies Kreditanstalt fuer Wiederaufbau Directors Others

Consolidated 2002 2001 Baht’000 Baht’000

Company 2002 2001 Baht’000 Baht’000

31,924.29 27,172.84 1,319.24 773.42 45.05 16,488.05 29.17

56,931.15 26,399.59 1,378.93 734.39 45.05 7.06 419.79 625.73

93,463.54 9,136.13

14,286.65 6,456.07

34,879.43 168.44

150,240.03

82,803.47

17.08

165,215.32 418,055.02 (391.41) 417,663.61

45,499.43 149,045.62 (75.06) 148,970.56

2,864.77 115,681.78 115,681.78

131.85 86,673.54 86,673.54

597,367.96 14,448.54 90,942.03 11,777.14 15,377.26

661,565.59 232,288.48 48,817.70 39,136.87 12,305.06

22,179.83 3,628.99 170.13 139.73 193.29

1,605.00 1,222.11 170.13 -

10,864.50 2,346.73

19,782.23 5,681.76

10,746.30 5,462.37

33,529.20 12,010.23

695.55

258.17

4.60

10,583.11 9,215.52 14,880.89 2,966.29 31.78 51,584.37

58,964.05 42,080.70 19,514.76 7,569.33 1,366.77 155,217.77

10,583.11 9,215.52 10,379.22 2,966.29 805,582.31

58,964.05 42,080.70 16,568.95 7,569.33 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%).

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

Related party transactions (Continued) iv) Short-term loan to joint venture Consolidated As at 31 December Asia Infonet Co., Ltd.

2002 Baht’000 780.71

2001 Baht’000 2,645.46

Movement of loan can be analysed as follows: Consolidated Baht’000 For the year ended 31 December 2002 Opening net book value Interest payment during the year Closing net book value v)

2,645.46 (1,864.75) 780.71

Loans from a related party

As at 31 December Loans from Kreditanstalt fuer Wiederaufbau Current Non-current Total (Note 17)

Consolidated and Company 2002 2001 Baht’000 Baht’000 1,399,800.77 5,997,364.30 7,397,165.07

419,770.65 18,273,401.94 18,693,172.59

Movement of loan can be summarised as follows: Consolidated and Company Baht’000 For the year ended 31 December 2002 Opening net book value Loan repayment during the year Currency translation Amortisation of debt issuance cost Closing net book value

18,693,172.59 (11,007,837.45) (299,259.93) 11,089.86 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).

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 9.

Related party transactions (Continued) Maturity of loans from related party: Consolidated and Company 2002 2001 Baht’000 Baht’000

As at 31 December Between 1 and 2 years Between 2 and 5 years Over 5 years

3,980,445.43 3,416,719.64 7,397,165.07

1,623,916.42 8,500,003.79 8,569,252.38 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. The outstanding number of stock options granted to directors and senior executives of the Company at 31 December 2002 was 66.04 million units (2001: 42.25 million units) (Note 22).

10.

Inventories, net As at 31 December Spareparts for networks (at cost) Allowance for decline in value Spareparts for networks - net Merchandise (at cost) Allowance for decline in value Merchandise - net Work in process (at cost) Goods in transit (at cost) Inventories, net

11.

Consolidated 2002 2001 Baht Baht 800,353,200 802,985,568 (273,040,908) (202,204,916) 527,312,292 600,780,652 809,081,786 578,513,407 (159,553,721) (69,591,909) 649,528,065 508,921,498 6,470,814 2,712,846 963,395 963,395 1,184,274,566 1,113,378,391

Company 2002 Baht 598,336,324 (122,890,617) 475,445,707 189,859,745 189,859,745 665,305,452

2001 Baht 550,798,152 (57,685,709) 493,112,443 289,714,905 289,714,905 782,827,348

Other current assets As at 31 December Advances to contractors Income tax deducted at source Claimable value added tax Value added tax pending receipt of tax invoices Interest receivable Others

Consolidated 2002 2001 Baht Baht

Company 2002 Baht

2001 Baht

732,464,283 680,153,101 895,506,928

1,220,738,988 508,497,083 352,957,567

652,673,119 679,509,178 3,412,570

875,052,582 498,377,491 36,232,548

174,795,271 131,448,270 307,845,881 2,922,213,734

158,148,758 132,235,348 267,976,989 2,640,554,733

71,204,825 125,924,230 59,303,551 1,592,027,473

121,955,193 123,433,039 199,672,930 1,854,723,783

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 â&#x20AC;&#x153;Interactive Media Services Co., Ltd.â&#x20AC;?)

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

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

Wire & Wireless Co., Ltd. (87.50%)

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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

12.

Investments in subsidiaries, joint ventures and associates (Continued) Investments are comprise: At 31 December 2002

Consolidated

Business Associates: United Broadcasting Corporation Public Company Limited

Pay Television Telecommunicatio Public Radio Network Co., Ltd. n Total investment in associates

Relationsh ip

Paid-up Capital Baht’000

Shareholder

7,424,490

40.96

4,619,750

Shareholder

10,000

32.00

3,200

At 31 December 2001

Associates: United Broadcasting Corporation Public Company Limited

Pay Television Telecommunicatio Public Radio Network Co., Ltd. n Total investment in associates

Relationsh ip

Paid-up Capital Baht’000

Investmen % t-At Cost Ownership Method interest Baht’000

Investmen t-At Equity Method Baht’000

40.96

4,619,750

Shareholder

10,000

32.00

3,200 4,622,950

4,492,130 4,492,130

Company

Business

Relationsh ip

Investment Holding

Shareholder

Cellular Operator

Shareholder

At 31 December 2001

Capital

% Ownershi p

Baht’000

interest

Investmen t -At Cost

InvestmentAt Equity

Method

Baht’000

13,339,144

96.40

12,859,144

6,384,070

21,000,000

43.86

8,236,871 21,096,015

4,255,465 10,639,535

Investmen t -At Cost

InvestmentAt Equity

Method

Baht’000

Company

Paid-up

Business

Joint venture Bangkok Inter Teletech Co., Ltd. Total

4,009,108

7,407,736

Paid-up

Subsidiary Telecom Holding Co., Ltd.

4,009,108

4,622,950

Shareholder

At 31 December 2002

Joint venture Bangkok Inter Teletech Co., Ltd. Total

Investmen t-At Equity Method Baht’000

Consolidated

Business

Subsidiary Telecom Holding Co., Ltd.

Investmen % t-At Cost Ownership Method interest Baht’000

Relationsh ip

Investment Holding

Shareholder

Cellular Operator

Shareholder

Capital

% Ownershi p

Baht’000

interest

12,000,000

99.99

12,000,000

6,941,334

15,000,000

41.00

5,455,968 17,455,968

4,214,301 11,155,635

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

12.

Investments in subsidiaries, joint ventures and associates (Continued) Movement of investments is as follows:

Year ended 31 December

Opening amount Acquisition (Note 4) Share of results Unrealised loss on available-for-sale securities Reversal of unrealised loss on available-forsale securities Closing amount

Consolidated 2002 2001 Baht’000 Baht’000

Company 2002 2001 Baht’000 Baht’000

4,492,130 (483,022) -

5,405,003 (912,873) -

11,155,635 3,640,047 (8,856,801) (785,727)

10,879,510 5,455,968 (2,159,056) (3,020,787)

4,009,108

4,492,130

5,486,381 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

Year ended 31 December

Consolidated 2002 2001 Baht Baht

Opening net book value Reclassification Closing net book value

54,293,898 (420,000) 53,873,898

57,972,973 (3,679,075) 54,293,898

As at 31 December

2002 Baht

2001 Baht

Cost Less : Allowance for decline in value Net book value

121,867,845 (67,993,947) 53,873,898

124,930,289 (70,636,391) 54,293,898

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 14.

Property, plant and equipment, net As at 31 December

Consolidated 2001 Baht

2002 Baht

Company 2002 Baht

2001 Baht

Network equipment Opening net book value Additions Acquisition of joint venture (Note 4) Disposals Adjustments/Reclassification Depreciation charge Impairment charge Closing net book value

60,005,337,178 7,349,388,542 414,820,590 (82,770,408) 3,084,148,471 (7,804,951,973) (1,605,415,556) 61,360,556,844

61,816,021,927 3,483,560,232 213,946,536 (7,593,892) 2,033,984,995 (7,354,977,729) (179,604,891) 60,005,337,178

46,121,627,946 2,046,589,858 (68,333,534) (184,115,492) (6,089,366,142) (1,598,252,736) 40,228,149,900

49,979,486,650 1,873,125,512 (4,724,464) 455,645,281 (5,989,290,835) (192,614,198) 46,121,627,946

Non-network equipment Opening net book value Additions Acquisition of joint venture (Note 4) Disposals Adjustments/Reclassification Depreciation charge Impairment charge Closing net book value

4,027,322,227 2,225,381,964 145,026,562 (21,172,382) (738,723) (857,734,714) (7,998,545) 5,510,086,389

2,446,575,128 1,210,439,297 2,669,541,822 (10,604,733) (1,774,896,820) (482,350,150) (31,382,317) 4,027,322,227

611,746,490 214,277,215 (8,872,599) 12,302,499 (184,507,809) 644,945,796

647,587,120 334,183,162 (3,127,180) (211,214,073) (155,682,539) 611,746,490

66,870,643,233

64,032,659,405

40,873,095,696

46,733,374,436

Total Network equipment

Borrowing costs of Baht 140.48 million (2001: Baht 14.11 million) were capitalised as cost of assets during the 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, net of accumulated depreciation and allowances of Baht 42,080.29 million (2001: Baht 48,761.53 million, net of accumulated depreciation of Baht 34,465.44 million), was transferred to TOT under the concession agreement (Note 2). According to the agreement, the Company has the right to operate and maintain these assets over the concession periods. Borrowings are secured by the right to operate network equipment of the Company and the Group. Non–network equipment Additions include Baht 719.38 million (2001: Baht 734.08 million) assets leased under finance leases (where the Group is the lessee). Leased assets included in the table on page 33, where the Group is a lessee under a finance lease of vehicles and computers are as follows:

Cost - capitalised finance leases Less: Accumulated depreciation

Consolidated 2002 2001 Baht Baht 1,790,202,270 951,515,626 (381,934,514) (127,553,018)

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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

14.

Property, plant and equipment (Continued) Consolidated Telephone Network Equipment Baht

Wireless Network Equipment Baht

Public Phone Baht

Multi-Media Network Equipment Baht

Power Supply and Computer Baht

17,553,235,542 (2,523,423,179)

1,043,332,161 (467,594,107)

(433,374)

65,931,490,431 (29,766,687,07 4) (81,894,798)

5,260,635,855 (2,427,798,621 ) (154,700,000)

3,567,880,675 (2,198,914,411 ) (110,286,025)

1,098,909,834 -

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

1,867,928,070 -

1,413,204,825 369,790 -

36,082,908,559 761,541,584 -

15,029,830,363 5,155,052,084 414,820,590

575,738,054 7,621,127 -

2,678,137,234 157,308,614 -

1,258,680,239 655,034 -

1,098,909,834 1,266,840,309 -

60,005,337,178 7,349,388,542 414,820,590

34,344,878

(65,837,213) 874,654,667

3,424,235,155

(1,768,067) 445,231,189

(14,436,875) 10,792,934

1,725,280

(82,770,408) 3,084,148,471

(99,060,683) -

(5,138,989,924) (1,809,652)

(564,442,070) (1,569,627,847)

(220,796,112) -

(451,688,058) -

(329,975,126) (33,978,057)

(728,253) (1,706,835,632 ) -

(7,804,951,973) (1,605,415,556)

Land & Land Improvement Baht

Building & Improvement Baht

At 31 December 2001 Cost Accumulated depreciation

1,867,928,070 -

1,940,320,598 (526,682,399)

Allowance for impairment

Network equipment

Net book value Year ended 31 December 2002 Opening net book value Additions Acquisition of joint venture (Note 4) Disposals Adjustments/Reclassification Depreciation charge Impairment charge

Work in Progress Baht

Total Baht

98,263,751,166 (37,911,099,791 ) (347,314,197)

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 2002 Cost Accumulated depreciation

1,867,928,070 -

1,975,035,267 (625,743,083)

26,638,233,333 (4,148,037,212)

1,490,736,245 (684,710,054)

(433,374)

(1,600,327,846)

5,405,243,976 (2,870,430,127 ) (154,700,000)

3,333,764,089 (2,387,144,426 ) (49,512,293)

658,186,258 -

Allowance for impairment

67,375,479,281 (34,779,306,81 1) (83,704,449)

108,744,606,519 (45,495,371,713 ) (1,888,677,962)

1,348,858,810

32,512,468,021

20,889,868,275

2,380,113,849

897,107,370

658,186,258

Net book value

1,867,928,070

806,026,191

61,360,556,844

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

14.

Property, plant and equipment (Continued)

Non â&#x20AC;&#x201C; network equipment

Land and Land Improvement Baht

Building & Improvement Baht

Furniture, Fixtures and Equipment Baht

Consolidated Power Supply & Computer Baht

Vehicles Baht

Work in Progress Baht

Total Baht

At 31 December 2001 Cost Accumulated depreciation Allowance for impairment

245,211,581 (5,148,686) (3,700,000)

1,788,089,143 (668,780,153) (4,505,380)

1,575,416,497 (1,000,050,955) (12,519,175)

1,007,450,018 (513,887,802) -

1,154,227,734 (284,722,702) -

778,942,107 (28,700,000)

6,549,337,080 (2,472,590,298) (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 2002 Opening net book value Additions Acquisition of joint venture (Note 4) Disposals Adjustments/Reclassification Depreciation charge Impairment charge

236,362,895 3,230,203 1,686,500 (821,289) (7,998,545)

1,114,803,610 12,292,393 12,572,368 (917,195) 52,732,241 (110,233,576) -

562,846,367 114,241,399 11,202,155 (9,376,572) 68,668,828 (162,850,752) -

493,562,216 105,745,459 440,709,732 (885,873) 1,242,142,843 (312,745,815) -

869,505,032 676,981,835 511,082 (9,992,742) (886,872) (271,083,282) -

750,242,107 1,316,120,878 (323,198,978) (1,365,082,263) -

4,027,322,227 2,225,381,964 145,026,562 (21,172,382) (738,723) (857,734,714) (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 2002 Cost Accumulated depreciation Allowance for impairment

252,770,728 (5,969,975) (14,340,989)

1,861,622,921 (772,924,605) (7,448,475)

1,669,021,488 (1,046,737,704) (37,552,359)

2,750,847,848 (782,319,286) -

1,720,962,934 (455,927,881) -

378,081,744 -

8,633,307,663 (3,063,879,451) (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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

14.

Property, plant and equipment (Continued) Telephone Network Equipment Baht

Company Wireless Network Public Equipment Phone Baht Baht

Power Supply and Computer Baht

Work in Progress Baht

Total Baht

1,043,332,161 (467,594,108) -

3,567,880,675 (2,198,914,410) (110,286,026)

1,098,909,836 -

80,241,291,490 (33,927,049,346) (192,614,198)

3,892,078,824

575,738,053

1,258,680,239

1,098,909,836

46,121,627,946

36,015,088,099 771,103,597 (65,837,214) 1,041,418,794

3,892,078,824 -

575,738,053 7,621,128 (1,768,067) 445,231,189

1,258,680,239 655,034 1,725,280

46,121,627,946 2,046,589,858 (68,333,534) (184,115,492)

(99,060,683) -

(5,151,711,193) (1,809,651)

(287,823,027) (1,562,465,028)

(220,796,113) -

(329,975,126) (33,978,057)

1,098,909,836 1,266,840,309 (728,253) (1,706,835,63 3) -

(6,089,366,142) (1,598,252,736)

Land & Land Improvement Baht

Building & Improvement Baht

1,867,928,070 -

1,940,320,599 (526,682,400) (433,374)

65,949,236,694 (29,852,253,797) (81,894,798)

4,773,683,455 (881,604,631) -

Net book value

1,867,928,070

1,413,204,825

36,015,088,099

Year ended 31 December 2002 Opening net book value Additions Disposals Adjustments/Reclassification

1,867,928,070 -

1,413,204,825 369,790 34,344,878

Network equipment At 31 December 2001 Cost Accumulated depreciation Allowance for impairment

Depreciation charge Impairment charge

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 2002 Cost Accumulated depreciation Allowance for impairment

1,867,928,070 -

1,975,035,267 (625,743,083) (433,374)

67,572,548,259 (34,880,591,377) (83,704,450)

4,773,683,455 (1,169,427,658) (1,562,465,028)

1,490,736,245 (684,710,055) -

3,333,764,088 (2,387,144,425) (49,512,293)

658,186,259 -

81,671,881,643 (39,747,616,598) (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

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

14.

Property, plant and equipment (Continued)

Non â&#x20AC;&#x201C; network equipment At 31 December 2001 Cost Accumulated depreciation Net book value Year ended 31 December 2002 Opening net book value Additions Disposals Adjustments/Reclassification Depreciation charge Closing net book value At 31 December 2002 Cost Accumulated depreciation Net book value

Leasehold and Improvement Baht

Furniture, Fixtures and Equipment Baht

Company Power Supply & Computer Vehicle Baht Baht

Work in Progress Baht

Total Baht

69,854,668 (42,054,950)

451,949,715 (283,779,946)

873,661,885 (498,684,477)

40,799,595 -

1,436,265,863 (824,519,373)

27,799,718

168,169,769

374,977,408

40,799,595

611,746,490

27,799,718 10,705,178 (7) 30,275,177 (13,207,356)

168,169,769 60,153,237 (8,012,200) 53,874,914 (53,908,641)

374,977,408 88,685,448 (859,462) 16,114,683 (117,188,497)

1,140,000 (930) 1,856 (203,315)

40,799,595 53,593,352 (87,964,131) -

611,746,490 214,277,215 (8,872,599) 12,302,499 (184,507,809)

55,572,710

220,277,079

361,729,580

937,611

6,428,816

644,945,796

109,935,022 (54,362,312)

478,077,501 (257,800,422)

925,556,505 (563,826,925)

1,140,000 (202,389)

6,428,816 -

1,521,137,844 (876,192,048)

55,572,710

220,277,079

361,729,580

937,611

6,428,816

644,945,796

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 15.

Intangible assets, net

Goodwill Baht At 31 December 2001 Cost Accumulated amortisation Net book value

Year ended 31 December 2002 Opening net book value Additions 279,096,032 Acquisition of joint venture (Note 4) Adjustments/Reclassification Amortisation charge (9,303,202) Closing net book value 269,792,830

At 31 December 2002 Cost Accumulated amortisation Net book value

Trademark Baht

Consolidated Right to Computer operate software NON-POTS Baht Baht

279,096,032 (9,303,202) 269,792,830

Right to hang Dropwire Baht

Total Baht

121,159,377 494,790,047 (8,233,891) (288,167,471) 112,925,486 206,622,576

381,489,000 (80,112,690) 301,376,310

1,224,763,42 227,325,000 4 (43,949,500) (420,463,552) 183,375,500 804,299,872

112,925,486 -

206,622,576 279,921,803

301,376,310 -

183,375,500 -

7,510,488 (6,231,977)

532,382,728 (88,466,092)

(19,074,450)

114,203,997

930,461,015

282,301,860

7,510,488 532,382,728 (9,093,000) (132,168,721) 1,771,042,20 174,282,500 2

1,308,094,15 129,479,032 9 (15,275,035) (377,633,144)

381,489,000 (99,187,140)

114,203,997

282,301,860

930,461,015

804,299,872 559,017,835

2,325,483,22 227,325,000 3 (53,042,500) (554,441,021) 1,771,042,20 174,282,500 2

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 Computer software Goodwill Baht At 31 December 2001 Cost Accumulated amortisation Net book value

Baht

Total Baht

494,790,047 (288,167,471) 206,622,576

Year ended 31 December 2002 Opening net book value Additions Adjustment/Reclassification Amortisation charge Closing net book value

279,096,032 (9,303,202) 269,792,830

206,622,576 256,626,962 532,382,728 (88,466,092) 907,166,174

206,622,576 535,722,994 532,382,728 (97,769,294) 1,176,959,004

At 31 December 2002 Cost Accumulated amortisation Net book value

279,096,032 (9,303,202) 269,792,830

1,284,799,318 (377,633,144) 907,166,174

1,563,895,350 (386,936,346) 1,176,959,004

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 16.

Other non-current assets Consolidated As at 31 December Subscribers acquisition cost, net Value added tax pending receipt of tax invoices related to debt restructuring Prepaid withholding tax Deposits Others Total

2002 Baht

Company 2001 Baht

2002 Baht

2001 Baht

853,775,584

841,746,064

692,516,672

733,951,538

239,418,614 326,696,439 146,432,872 1,610,800 1,567,934,309

287,984,062 237,305,437 68,506,688 17,280,195 1,452,822,446

239,418,614 30,980,674 962,915,960

287,984,062 29,374,251 1,051,309,851

Subscribers acquisition cost is the cost of PCT handsets distributed to subscribers free of charge under the 3year 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.

As at 31 December

2002 Baht

Consolidated 2001 Baht

Company 2002 Baht

2001 Baht

Current - Bank overdrafts - Bank and financial institution loans - Finance leases - Debentures Total Current Non-Current - Bank and financial institution loans - Finance leases - Debentures - Suppliers Credit Total Non-Current

4,950,356,109 514,026,329 363,177,400 5,854,179,102

2,982,358,693 231,933,730 3,214,292,423

2,882,906,664 363,177,400 3,246,084,064

1,170,657,842 1,170,657,842

36,416,063,823 506,780,477 17,719,263,220 4,687,777,228 59,329,884,748

53,780,559,596 400,071,152 7,763,551,737 61,944,182,485

28,054,384,857 17,719,263,220 4,687,777,228 50,461,425,305

50,974,248,343 7,763,551,737 58,737,800,080

Total Borrowings

65,184,063,850

65,158,474,908

53,707,509,369

59,908,457,922

Consolidated Baht 65,158,474,908

Company Baht 59,908,457,922

26,508,730,587 719,380,894 81,093,279 393,467,598

19,190,057,803 46,359,330 -

(23,713,250,868) (4,119,159,568) 11,466,376 143,860,644 65,184,063,850

(22,545,368,073) (2,968,902,895) 26,757,383 50,147,899 53,707,509,369

26,619,264

Movement of borrowings can be analysed as follows: Year ended 31 December 2002 Opening net book value Additional borrowings - principal - non cash finance leases - interest Acquisition of joint venture Repayment of loans - cash transactions - non cash transactions Currency translation Amortisation of debt issuance costs Closing net book value

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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-forsale 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.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 17.

Borrowings (Continued) 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.

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’s statements of income.

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 17.

Borrowings (Continued) The interest rate exposure of the borrowings of the Group is as follows:

Total borrowings - at fixed rates - at floating rates

Consolidated 2002 2001 Baht Baht 6,165,351,372 59,018,712,478 65,184,063,850

9,365,633,960 55,792,840,948 65,158,474,908

Consolidated 2002 2001 Weighted average effective interest rates: - bank overdrafts - bank and finance institution borrowings - debenture - lease liabilities - suppliers credit

8.59% 7.15% 6.55% 7.00% 1.00%

Company 2002 Baht 4,687,777,229 49,019,732,140 53,707,509,369

7,763,551,737 52,144,906,185 59,908,457,922

Company 2002

2001

5.94%

8.59% 7.15% 6.55%

9.10% 1.00%

2001 Baht

5.70% -

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 values 2002 2001 2002 2001 Baht Baht Baht Baht Non-current bank borrowings Loans from a related company (Note 9) Suppliers credit Debentures

36,416,063,823

35,087,387,004

36,750,269,210

35,705,654,215

5,997,364,304 4,687,777,228 18,082,440,620

18,693,172,592 7,763,551,737 -

6,118,710,567 4,088,793,539 18,000,423,051

18,895,679,476 7,102,289,550 -

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 2002 Baht Between 1 and 2 years Between 2 and 5 years Over 5 years

13,316,037,839 24,779,200,418 20,727,866,014 58,823,104,271

Company 2001 Baht

3,915,836,852 25,414,166,830 32,214,107,651 61,544,111,333

2002 Baht 6,022,285,218 23,928,124,073 20,511,016,014 50,461,425,305

2001 Baht 3,320,282,394 23,586,010,035 31,831,507,651 58,737,800,080

100

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 17.

Borrowings (Continued) Finance lease liabilities-minimum lease payments: Consolidated

Not later than 1 year Later than 1 year and not later than 5 years Future finance charges on finance leases Present value of finance lease liabilities Representing lease liabilities: - current - non-current

2002 Baht

2001 Baht

572,877,504 536,132,937

265,177,858 361,795,037

1,109,010,441 (88,203,635) 1,020,806,806

626,972,895 5,031,983 632,004,878

514,026,329 506,780,477 1,020,806,806

231,933,726 400,071,152 632,004,878

The present value of finance lease liabilities is as follows: Consolidated 2002 Baht Not later than 1 year Later than 1 year and not later than 5 years

2001 Baht

514,026,329 506,780,477 1,020,806,806

231,933,726 400,071,152 632,004,878

Facilities: The Group has the following undrawn committed borrowing facilities: Consolidated 2002 2001 Baht Baht Floating rate - expiring within one year - expiring beyond one year Fixed rate - expiring within one year - expiring beyond one year

Company 2002 Baht

2001 Baht

159,465,000

120,000,000

159,465,000

120,000,000

101

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 from the 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 in accounting estimate in accordance with TAS 39, Net Profit and Loss for the Period, Fundamental Errors and Accounting Changes. During 2002, the methodology for computing rental charges for conduits has been informally concluded. As a result, the amount of conduit rental for the periods 1992 - 2001 increased by Baht 277.86 million and was recognised 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

As at 31 December Other payables Output VAT pending tax invoice Unearned income Others Total

Consolidated 2002 2001 Baht Baht 2,173,291,071 1,383,910,561 195,003,421 231,377,049 230,510,516 227,978,608 438,156,907 300,704,243 3,036,961,915 2,143,970,461

Company 2002 2001 Baht Baht 1,885,126,064 1,093,943,913 115,833,379 176,577,602 130,593,148 166,339,153 102,545,548 158,119,151 2,234,098,139 1,594,979,819

102

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 Foreign Currency Interest rate Million Current (included in trade accounts payable) Average MLR USD JLTPR + 0.5% & 2.0% JPY 407.45 Average MLR Baht 35.27 Non-Current Average MLR JLTPR + 0.5% & 2.0% Average MLR

USD JPY 18,063.22 Baht 1,471.83

Total

2001 Baht Million 147.54 35.27 182.81 6,540.75 1,471.83 8,012.58 8,195.39

Foreign Currency Million

Baht Million

USD 0.63 JPY 407.45 Baht 10.48

28.10 138.15 10.48 176.73

USD 23.92 JPY 19,167.82 Baht 739.31

1,060.90 6,499.22 739.31 8,299.43 8,476.16

Movement of long-term trade accounts payable can be analysed as follows: Year ended 31 December 2002

Consolidated Baht Million 8,476.16 (675.60) 394.83 8,195.39

Opening net book value Repayment Currency translation Closing net book value

The interest rate exposure and fair values of debt under restructuring agreements as at 31 December are as follows: 2002 2001 Baht Million Baht Million Total debt under restructuring exposure from 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 - Denominated in U.S. Dollars - Denominated in Thai Baht

7,100.78 867.69 605.62 8,574.09

7,033.37 1,042.98 717.28 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. 103

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001

21. Other non-current liabilities Consolidated 2002 2001 Baht Baht

As at 31 December Valued added tax pending receipt of tax invoice related to debt restructuring Withholding tax related to debt restructuring Unbilled mobile network construction costs Deposit received from customers Total

Company 2002 Baht

2001 Baht

239,418,614

287,984,062

239,418,614

287,984,062

115,360,058

226,138,677

115,360,058

226,138,677

3,951,067,892 4,479,516 4,310,326,080

220,503,235 5,434,422 740,060,396

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

At 31 December 2001 - Conversion of preferred shares - Issue of shares At 31 December 2002

Number of Shares Million 3,232.50 462.00 3,694.50

Common Shares Baht Million 25,305.00

Preferred Shares Baht Million 7,020.00

Share Premium (Discount) Baht Million 9,616.93

Baht Million 41,941.93

22.46 4,619.97 29,947.43

(22.46) 6,997.54

(1,621.84) 7,995.09

2,998.13 44,940.06

Total

The total authorised number of shares is 4,446.12 million shares (2001: 3,390.65 million shares) with a par value of 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. 104

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 thousand 158,150 37,132 (21,155) 174,127

At beginning of year Granted Exercised Cancelled Lapsed At end of year

2001 In thousand 58,150 100,000 158,150

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 Baht Expiry date 31 October 2003 21 February 2007 30 June 2010 31 December 2010

32.00 10.60 10.60 10.60

2002 In thousand 100,000 37,132 27,720 9,275 174,127

2001 In thousand 100,000 39,600 18,550 158,150 105

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 : Million For the year ended 31 December 2002 Revenues Segment result Unallocated costs Operating results Finance cost Share of associates Loss on impairment investment Gain on sale investment Other income and other non operating expenses Loss before tax Income tax Loss from ordinary activities Extraordinary item Loss before minority interest Minority interest Net loss for the year

Wireline

DDN

Wireless Multimedia Internet Other

Group

16,125

1,199

6,096

954

198

1,203

25,775

4,807

738

(3,959)

167

1,813 (3,173) (1,360) (4,247) 1,844 (5,722) 943 3,196 (5,346) (144) (5,490) 95 (5,395) 1 (5,394)

Segment assets Investment in joint venture, associates and other Unallocated assets Consolidated total assets

44,914

1,474

30,850

3,571

111

3,407

84,327

Segment liabilities Unallocated liabilities Consolidated total liabilities

56,608

175

22,368

602

2,392

82,201 3,848 86,049

Capital expenditure Unallocated capital expenditure Consolidated total capital expenditure

2,238

6,584

160

735

9,731 115

Depreciation and amortisation Unallocated depreciation and amortisation Consolidated total depreciation and amortisation

(5,739)

4,354 4,566 93,247

9,846 (153)

(1,811)

(499)

(5)

(406)

(8,613) (173) (8,786)

106

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 24.

Consolidated segment information (Continued) Primary reporting format - business segments Baht : Million For the year ended 31 December 2001 Revenues

Wireline

DDN

Wireless Multimedia Internet Other

Group

15,618

503

3,072

894

154

395

20,636

Segment result Unallocated costs Operating profit Finance cost Share of associates Other income and other non operating expenses Loss before tax Income tax Loss before minority interest Minority interest Net loss for the year

4,866

238

(1,195)

(106)

3,831 (2,882) 949 (3,721) (601)

Segment assets Investment in joint venture, associates and other Unallocated assets Consolidated total assets

48,291

Segment liabilities Unallocated liabilities Consolidated total liabilities

62,335

11,634

571

1,625

76,281 5,296 81,577

Capital expenditure Unallocated capital expenditure Consolidated total capital expenditure

1,450

545

4,573

158

748

7,480 246

Depreciation and amortisation Unallocated depreciation and amortisation Consolidated total depreciation and amortisation

(5,498)

(27) (3,400) (69) (3,469) 44 (3,425) 1,245

18,982

4,069

3,059

75,714 5,581 5,177 86,472

7,726 (120)

(1,318)

(595)

(4)

(288)

(7,823) (181) (8,004)

107

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 31 December 31 December 2002 2001 Baht Million Baht Million Cost of services: Depreciation and amortisation Revenue sharing Network operating expenses Total

31 December 2002 Baht Million

Company 31 December 2001 Baht Million

8,772.28 4,290.50 4,588.75

7,784.28 3,227.36 3,229.84

6,548.93 5,227.99 2,864.55

6,109.87 4,719.78 2,742.59

17,651.53

14,241.48

14,641.47

13,572.24

108

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 26.

Operating results The following items have been included in arriving at operating profit:

For the year ended 31 December Depreciation on property, plant and equipment (Note 14) - owned assets - owned assets (vehicles) leased out under operating leases - leased assets under finance leases

Consolidated 2002 2001 Baht Baht

Company 2002 Baht

2001 Baht

8,373,830,621

7,691,373,562

31,203,800 257,652,266

81,997,971 63,956,346

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 expenditure on property, plant and equipment

855,124,701

877,910,200

623,049,463

801,275,628

Amortisation of intangible assets (included in “selling and administration expenses and cost of services”) (Note 15)

122,865,519

69,949,973

88,466,092

40,769,131

Operating lease rentals - building - vehicles

202,893,123 65,635,250

98,294,563 40,419,464

396,332,143 165,994,341

388,041,577 152,357,093

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

2,676,013,280 57,384,301 82,999,901 101,623,828

2,083,134,671 30,161,691 100,608,171

1,638,769,724 49,430,640 56,046,345 75,700,350

1,452,214,195 21,923,418 93,620,794

Impairment (included in “Other expenses”) - Property, plant and equipment (Note 14)

Staff cost - Wages and salaries - Social security cost - Provident fund - Other benefits

6,273,873,951

6,144,973,374

The number of persons employed by the Group at the end of year are as follows: Consolidated 2002 2001 Full time Part time

Company 2002

2001

6,723 1,683

7,438 1,174

4,011 779

4,062 696

8,406

8,612

4,790

4,758

109

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 Cumulative dividend of preferred shares Net loss used to determine basic loss per share Weighted average number of common shares in issue (million shares) Basic loss per share (Baht per share)

2002 Baht Million (5,394.45) (698.44) (6,092.89) 2,609 (2.34)

2001 Baht Million (3,425.13) (702.00) (4,127.13) 2,274 (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 asif-converted method. The results of their inclusion is antidilutive. Therefore, the basic loss per share and diluted loss per share are presented in the same amount. Supplementary earnings per share data excluding the extraordinary item (for this purpose the weighted average shares number is not changed).

Net loss attributable to shareholder Cumulative dividend of preferred shares Extraordinary item (Note 17) Net loss used to determine basic loss per share Weighted average number of common shares in issue (million shares) Basic loss per share excluding extraordinary item (Baht per share)

2002 Baht Million (5,394.45) (698.44) (95.45) (6,188.34) 2,609 (2.37)

2001 Baht Million (3,425.13) (702.00) (4,127.13) 2,274 (1.81)

110

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 28.

Cash flows from operating activities Reconciliation of loss before minority interest to cash flows from operating activities:

Notes Loss before minority interest Add: Interest expense Income tax Profit (loss) before interest and tax Adjustments for: Depreciation and amortisation (Gain) loss on disposal of property, plant and equipment Doubtful accounts Loss on impairment of investment 7 Net loss on impairment of fixed assets and intangible assets 26 Obsolete inventories Other operating assets and liabilities written-off Gain on sale of available-for-sale securities 17 Unrealised (gain) loss on foreign exchange Gain on repayment of borrowing 17 Gain from forgiveness Share of loss (profit) in subsidiaries, joint venture and associates Changes in operating assets and liabilities (excluding the effects of acquisition of joint venture) - Trade accounts receivable - Inventories - Other current assets - Other non-current assets - Trade accounts payable - Accrued expenses and other current liabilities - Other non-current liabilities Cash generated from operations Less:Interest paid Income tax paid Net cash from operating activities

Consolidated 2002 2001 Baht Baht (5,395,581,988) (3,469,417,559) 3,899,940,673 4,718,426,956 143,683,537 68,933,164

2002 Baht (5,394,449,478) 2,912,208,760 -

2001 Baht (3,425,126,882) 3,718,396,991 -

(1,351,957,778)

1,317,942,561

(2,482,240,718)

293,270,109

9,276,717,335

8,004,148,666

6,754,039,318

6,271,532,549

20,680,448 828,512,307 5,721,988,062

(101,751,164) 166,698,861 -

75,476,159 455,623,727 -

7,619,003 130,625,657 -

1,613,414,101 180,418,008

192,804,209 30,631,533

1,598,252,736 65,204,908

201,614,198 30,132,937

2,967,910

(13,995,918)

(943,248,540)

Company

394,880,591 (3,291,682,916) (27,698)

(944,939,754) (348,058)

41,203,525 (3,087,826,418) (27,698)

(71,454,366) (348,058)

(1,844,460,287)

628,472,598

6,529,318,873

1,874,652,529

(2,352,323,716) (552,798,265) (127,172,116) (131,082,210) (373,584,632)

61,698,976 (1,499,311,282) (590,371,410) (20,031,494) 524,363,886

(1,149,640,882) (256,799,525) 527,121,243 66,522,669 (403,723,846)

111,271,488 (1,399,950,623) (648,480,715) (1,573,687) (119,492,583)

874,240,817 560,355,323 8,505,836,744 (3,543,297,594) (507,093,521) 4,455,445,629

1,535,614,647 (195,111) 9,291,431,746 (4,481,730,402) (330,670,087) 4,479,031,257

778,538,817 (75,346,482) 9,435,696,406 (2,608,942,590) (286,137,016) 6,540,616,800

369,035,051 7,048,453,489 (3,610,557,207) (155,971,133) 3,281,925,149

111

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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: Consolidated 2002 2001 Currency Currency Million Million Assets US dollars GBP Liabilities US dollars Japanese Yen GBP EUR SGD

3.14 0.09

23.87 0.08

144.45 32,343.49 1.85 0.58 0.01

601.37 43,230.84 2.75 0.17 -

Company 2002 2001 Currency Currency Million Million -

77.77 12,945.98 -

547.73 22,896.67 -

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: Consolidated 2002 2001 Baht 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

112

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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: Consolidated 2002 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 2.6 million lines Telephone Services with TOT and other supplements to the Agreement for the following services: -

Wireline Services Value Added Services Personal Communication Telephone Services Public Telephone Services Receiving telephone service orders, and receiving payment for installation charges, deposits and monthly usage Fault notification and dropwire maintenance TOT lease of fibre optic network from a subsidiary in order to sublease to the Company Personal Communication Telephone Service for TOT subscribers

113

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 Concession Agreement”) between the Company and TOT to jointly operate and invest in the expansion of basic telephone services, including a personal communication telephone system in the telephone areas of Bangkok using the same long-distance telephone area code (the “Territory”), the Company is obliged to 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 in accordance with the PCT Contract (the “Contract”). In July 2001, the Company entered into the Contract with AWC, which became effective on 25 July 2001. The principal terms and conditions include the following.

30.3

AWC is responsible, at its own cost and expense, to procure, purchase, install, operate and maintain a personal communication telephone system in the Territory, all of which are to be performed in accordance with the requirements of the Concession Agreement; and

In consideration of the foregoing, AWC is entitled to receive a portion of the revenue generated by the PCT services in accordance with the calculation methodology set out in the Contract.

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.

114

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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 December Consolidated Company Mortgaged Value 2002 2001 2002 2001 2002 2001 Baht Baht Baht Baht Baht Baht Million Million Million Million Million Million Fixed and savings deposits Investment in available-for-sale securities Investment in shares of subsidiaries, associates and joint venture (excluding investment in shares of certain subsidiaries pledged as collateral, which have been eliminated in the consolidated financial statements) Land, building and machinery

4,482.28 -

4,006.23 880.51

4,576.45

1,036.27

4,488.91 943.76

1,000.00

3,626.16

4,018.29

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).

115

TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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:

Cash and restrict cash Current assets Non-current assets Property, plant and equipment Intangible assets, net

2002 BITCO Baht 2,211,012,127 1,865,821,222 84,757,914 13,343,948,218 114,203,998

Total assets

17,619,743,479

110,651,111

6,596,376,911

68,283,424

Current liabilities Non-current liabilities

(2,656,755,852) (10,694,494,986)

(55,528,503) (741,314)

(2,163,355,083) (232,468,305)

(39,828,008) (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

Operating results Financial income Income tax

(2,683,183,818) 19,927,920 -

(805,208) 58,850 (5,683,139)

(1,263,928,340) 8,843,781 -

19,393,187 44,485 -

Net profit (loss)

(2,663,255,898)

(6,429,497)

(1,255,084,559)

19,437,672

679,328,078

4,847,189

13,858,669

3,570,433

Depreciation and amortisation

AI Baht 36,903,351 43,736,746 8,583,670 21,427,344 -

2001 BITCO Baht 1,676,062,157 637,024,059 22,733,750 4,147,631,458 112,925,487

AI Baht 13,531,605 27,069,517 9,077,456 18,604,846 -

153,837,901

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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TELECOMASIA CORPORATION PUBLIC COMPANY LIMITED Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2002 and 2001 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.

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.

117