TNM Ar 2009

Telekom Networks Malawi Limited Directors report Report Of Directors
The Directors have pleasure in presenting their report and the audited nancial statements of Telekom Networks Malawi Limited for the year ended 31 December 2009.
Nature Of Business
The company is engaged in providing telecommunication services in accordance with its licence issued by Malawi Communications Regulatory Authority (MACRA).
Registered Office
Telekom Networks Malawi Limited is a company incorporated in Malawi under the Malawi Companies Act, 1984. It was listed on the Malawi Stock Exchange in November 2008. The address of its registered ofce is, Livingstone Towers, Fifth Floor, Glyn Jones Road, P. O Box 3039, Blantyre, Malawi.
Financial Performance
The results and state of affairs of the company are set out in the accompanying statement of nancial position, statement of comprehensive income, statement of changes in equity, statement of cash ows and notes to the nancial statements which includes a summary of signicant accounting policies.
Directorate And Secretariat

Directors and Company Secretary who served during the year are listed below: Prof. Dr. Matthews Chikaonda Mr. Hitesh Anadkat Dr. Harry Gombachika Dr. Stephanus Minaar Mr. Ken Mthuzi Mr. Pius P. Mulipa Mr. John M. ONeill Mr. James Regout Mr. Jonathan Larcombe Mrs. Hilda Singo Mrs. Christina Mwansa Chairman Vice Chairman Director Director Director Director Director Director Alternate to Mr. James Regout Alternate to Mr. Ken Mthuzi Company Secretary
Corporate Governance
The company continues to embrace and abide by the main principles of modern corporate governance as contained in the Cadbury and the King Reports. In this regard, the company has at Board level, a Board Audit Committee and a Board Appointments and Remuneration Committee. The Committees comprise NonExecutive Directors.
Dividends
During the year a total dividend of K602.4 million was declared. K200.8 million was paid in July 2009 and K200.8 million was paid in October 2009. The balance of K200.8 million which was declared in December 2009 was paid in January 2010.
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Telekom Networks Malawi Limited
Directors Report Auditors
(Contd)
Deloitte, Certied Public Accountants, P O Box 187, Blantyre, have signied their willingness to continue in ofce and a resolution is to be proposed at the forthcoming Annual General Meeting in relation to their appointment as auditors in respect of the year ending 31 December 2010. BY ORDER OF THE BOARD
_________________________ DIRECTOR
_________________________ DIRECTOR
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Statement Of Directors Responsibilities

The Companies Act, 1984, requires the directors to prepare nancial statements for each nancial period which give a true and fair view of the state of affairs of the company as at the end of the nancial period and of the operating results for that period. The Act also requires the directors to ensure the company keeps proper accounting records which disclose with reasonable accuracy the nancial position of the company and enable them to ensure that the nancial statements comply with the Companies Act, 1984. In preparing the nancial statements the directors accept responsibility for the following: Maintenance of proper accounting records; Selection of suitable accounting policies and consistent application thereof; Making judgements and estimates that are reasonable and consistently applied; Compliance with applicable accounting standards when preparing nancial statements; and Preparation of nancial statements on a going concern basis unless it is inappropriate to presume that the company will continue in business in the foreseeable future.
The directors also accept responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to maintain adequate systems of internal control to prevent and detect fraud and other irregularities. The directors are of the opinion that the nancial statements give a true and fair view of the state of the nancial affairs of the company and of its operating results, so far as concerns the members of the company.
DIRECTOR:
________________________________________
DIRECTOR:
________________________________________
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Statement Of Comprehensive Income

31 December 2009
Note Revenue Direct operational costs Gross prot Other income Selling and administrative expenses Results from operating activities Finance income Finance expenses Net nance (expense)/income Prot before income tax Income tax expense Prot for the year Other comprehensive income Total comprehensive income for the year Earnings per share Basic earnings per share (MK) 13 12 11 11 9 10 7 8
2009 K000 8,205,000 (3,918,473) 4,286,527 74,299 (2,481,630) 1,879,196 59,082 (180,802) (121,720) 1,757,476 (542,689) 1,214,787 1,214,787 0.12
2008 K000 6,701,931 (2,788,062) 3,913,869 92,615 (1,822,951) 2,183,533 42,201 (3,473) 38,728 2,222,261 (692,296) 1,529,965 1,529,965 0.17
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Statement Of Financial Position 31 December 2009 Assets Non-current Assets

Note 14 15
2009 K000 9,231,585 98,890 9,330,475
2008 K000 5,798,154 35,756 5,833,910 179,218 1,073,998 7,112 1,534,366 2,794,694 8,628,604
Property, plant and equipment Intangible assets Total non-current assets
Current Assets
Inventories Trade and other receivables Amount due from related companies Bank and cash balances Total current assets
16 17 18 19
181,956 1,565,062 8,216 642,042 2,397,276 11,727,751
Total Assets Capital And Liabilities Equity

Share capital Share premium Retained earnings Total equity
20
401,618 2,346,921 4,069,674 6,818,213 434,456 427,523 106,892 968,871
401,618 2,346,921 3,457,314 6,205,853 284,892 70,118 355,010 200,809 213,436 1,337,362 316,134 2,067,741 2,422,751 8,628,604
Non-current Liabilities
Deferred tax 21 Long-term portion of interest bearing loans22 Employee bene t liabilities 23 Total non-current liabilities
Current Liabilities
Bank overdraft Current portion of interest bearing loans Dividend payable Deferred income Trade and other payables Income tax liabilities Total current liabilities Total liabilities
9 22 24 25 26
1,703,085 14,742 200,809 260,850 1,682,157 79,024 3,940,667 4,909,538 11,727,751
Total Equity And Liabilities
The nancial statements were approved and authorised for issue by the Board of Directors on 19 March 2010 and were signed on its behalf by: Director .... Director
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Statement Of Changes In Equity 31 December 2009

Share Capital K000 350,000 51,618 401,618 Share premium K000 2,346,921 2,346,921 Retained earnings K000 2,808,158 1,529,965 (880,809) 3,457,314
2008
Balance at 1 January 2008 Prot for the year Issue of share capital Dividend declared Balance at 31 December 2008
Total K000 3,158,158 1,529,965 2,398,539 (880,809) 6,205,853
2009
Balance at 1 January 2009 Prot for the year Dividend declared Balance at 31 December 2009 401,618 401,618 2,346,921 2,346,921 3,457,314 1,214,787 (602,427) 4,069,674 6,205,853 1,214,787 (602,427) 6,818,213
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Statement Of Cashflows for the year ended 31 December 2009 Cash ows from operating activities
Cash receipts from customers Cash payments to suppliers and employees Net cash generated from operations Interest paid Income tax paid
Note
2009 K000 7,786,733 (4,998,190) 2,788,543
2008 K000 6,541,323 (3,684,702) 2,856,621 (884) (618,383) 2,237,354
11
(115,678) (630,235) 2,042,630
Net cash generated by operating activities Cashows to investing activities

Interest received Acquisition of property, plant and equipment Purchase of software Proceeds from sale of property, plant and equipment 11 14 15
59,082 (4,459,951) (77,990) 982 (4,477,877) (602,427) 442,265 (160,162) (2,595,409) 1,534,366
42,201 (3,300,033) (5,396) 9,563 (3,253,665) 2,398,539 (680,000) 1,718,539 702,228 832,138 1,534,366 468,009
Net cash used in investing activities Cash ows (to) /from nancing activities
Proceeds from issue of share capital Dividend paid Proceeds from loans 24
Net cash (used in)/ generated from nancing activities Net (decrease) /increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year Additional statutory requirement

(Decrease) /increase in net working capital
19
(1,061,043) (2,270,344)
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Notes To The Financial Statements For The Year Ended 31 December 2009 1. General Information
Telekom Networks Malawi Limited (TNM) is a company domiciled in Malawi and incorporated under the Malawi Companies Act, 1984 Cap.46:03. The address of the companys registered ofce is Livingstone Towers, Fifth oor, Glyn Jones Road, P O Box 3039, Blantyre. The company was listed on the Malawi Stock Exchange on 3 November 2008. The company primarily is involved in the provision of telecommunication services in accordance with its licence issued by Malawi Communications Regulatory Authority (MACRA). 2.
Adoption Of New And Revised International Financial Reporting Standards

In the current year, the company has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB) and the International Financial Reporting Interpretations Committee (the IFRIC) of the IASB that are relevant to its operations and effective for annual reporting periods beginning on or after 1 January 2009. The following new and revised standards and interpretations have been adopted in the current period: IAS 1 Presentation of nancial statements has been substantially rewritten, with many changes in terminology, including changes to the titles of individual nancial statements and is effective for periods beginning on or after 1 January 2009; The amendments to IFRS 7 expand the disclosures required in respect of fair value measurements and liquidity risk. Revised IAS 23 Borrowing Costs removes the option to expense borrowing costs on qualifying assets during the period of construction and is effective for nancial statements for periods beginning on or after 1 January 2009. IFRS 2 Share-based Payments has been amended to clarify the denition of vesting conditions and the accounting treatment of cancellation by the counterparty to a share-based arrangement and is effective for periods beginning on or after 1 January 2009. IFRS 8 is a disclosure standard that has resulted in a redesignation of the companys reportable segments. Disclosures in these nancial statements have been reviewed to reect the IASBs clarication (as part of improvements to IFRSs (2009)) that the disclosure requirements in standards other than IFRS 5 do not generally apply to non-current assets classied as held for sale and discontinued operations.
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Notes To The Financial Statements for the year ended 31st December 2009
2.
Adoption of new and revised International Financial Reporting Standards (Contd)

The amendments (part of improvements to IFRSs (2009)) specify that only expenditure that result in a recognised asset in the statement of nancial position can be classied as investing activities in the statement of cash ows. Consequently, cash ows in respect of development costs that do not meet the criteria in IAS 38 intangible asset for capitalisation as part of internally generated intangible asset (and, therefore, are recognised in prot or loss as incurred) are reclassied from investing to operating activities in the statement of cash ows. As part of Improvements to IFRS (2008) , IAS 38 has been amended to state that an entity is permitted to recognise a prepayment asset for advertising or promotional expenditure only up to the point at which the entity has the right to access the goods purchased or up to the point of receipt of services. Mail order catalogues have been specically identied as a form of advertising and promotional activities. IFRIC 13 Consumer Loyalty Programmesaddresses the accounting by entities that operate, or otherwise participate in, customer loyalty programmes for their customers and is effective for periods beginning on or after 1 January 2009; and There have also been terminology changes and clarications as part of the IASB annual improvements project, to: IAS 7, IAS 8, IAS 10, IAS 16, IAS 18, IAS 19, IAS 20, IAS 23, IAS 27, IAS 28, IAS 31, IAS 32, IAS 36, IAS 38, IAS 39, IAS 40, IFRS 3, IFRS 5 and IFRS 7, and are effective for periods beginning on or after 1 January 2009. Apart from the changes to IAS 1 Presentation of nancial statements and IFRS 7 Financial Instruments Disclosures, all the above amendments did not have any impact on the companys nancial statements. At the date of authorisation of these nancial statements, the following relevant Standards and Interpretations were in issue but not yet effective: IFRS 9 Financial Instruments: Classication and Measurement.This Standard introduces new requirements for the classication and measurement of nancial assets and is effective for periods beginning on or after 1 January 2013. Key features are as follows: Financial assets are required to be classied into two measurement categories; those to be measured subsequently at fair value, and those to be measured subsequently at amortised cost. The decision is to be made at initial recognition. This standard is effective for periods on or after 1 January 2013. This amendment is expected to have a signicant impact on the nancial statements; IFRIC 17 Distributions of Non-cash Assets to Owners provides guidance on the appropriate accounting treatment when an entity distributes assets other than cash as dividends to its shareholders and is effective for periods beginning on or after 1 January 2010. This amendment will not have any impact on the companys nancial statements; and
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(Contd)
IFRIC 18 Transfers of Assets from Customers addresses the accounting by recipients for transfers of property, plant and equipment from customers. The recipient should recognise the asset at its fair value on the date of the transfer, with the credit recognised as revenue in accordance with IAS 18 Revenue and is e ective to transfers of assets from customers received on or after 1 July 2009. This amendment will not impact on the companys nancial statements.
3.
Signicant accounting policies
Statement of compliance
The nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and the provisions of the Malawi Companies Act, 1984.
Basis of preparation
The nancial statements are prepared in terms of the historical cost convention. No other procedures have been adopted to reect the impact on the nancial statements of specic price changes or changes in the general level of prices. The principal accounting policies are set out below.
3.1 Functional and presentation currency

These nancial statements are presented in Malawi Kwacha, which is the companys functional currency. All nancial information presented in Malawi Kwacha has been rounded to the nearest thousand.
3.2 Use of estimates and judgements

The preparation of nancial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Judgements made by management in the application of IFRSs that have signicant effect on the amounts recognised in the nancial statements are discussed in note 4.2 to these nancial statements.
3.3 Foreign currency

Transactions in foreign currencies are converted to Malawi Kwacha at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are converted to Malawi Kwacha at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in prot or loss, except for those capitalized into property, plant and equipment under policy note 3.4 (vi). Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are converted using the exchange rate at the date of the transaction. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are converted to Malawi Kwacha at foreign exchange rates ruling at the dates the fair value was determined.
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Notes To The Financial Statements for the year ended 31st December 2009 3. Signicant accounting policies (Contd)
3.4 Property, plant and equipment
(i) Recognition and measurements

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. The cost of self-constructed assets includes the cost of material and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment. When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.
(ii) Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benet embodied within the part will ow to the company and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in prot or loss as incurred.
(iii) Depreciation
No depreciation is provided for land. Depreciation is recognised in the prot or loss on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. The estimated useful lives of assets for current and comparative periods are as follows: Buildings 20 years Equipment and machinery 8-15 years Furniture & ttings 5 years Other equipment 5 years Motor vehicles 5 years
(iv) Determination of residual values and useful lives

The assets residual values useful lives and depreciation method are reviewed and adjusted, if appropriate, at each reporting date. Where the carr ying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
(v) Gains and losses on disposal

Gains and losses on disposals of an item of property, plant and equipment are determined by comparing the proceeds with the carrying amount of the item and are recognised net within other income in the statement of comprehensive income.
(vi) Interest and exchange losses on loans

Interest and exchange losses on loans which are utilised for the construction of qualifying property, plant and equipment are capitalised until the commissioning of the related asset after which they are dealt with in prot or loss. Qualifying assets are those that necessarily take a substantial period of time to get ready for their intended use or sale.
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Notes To The Financial Statements for the year ended 31st December 2009 3. Signicant accounting policies (Contd) 3.4 Property, plant and equipment (vii) Capital work in progress
(Contd)
Capital work in progress is an integral part of property, plant and equipment and measured at cost. Cost includes all expenditures directly attributable to the asset under construction. Capital work in progress is not depreciated until it is available for use upon which it is capitalized to its relevant class of property, plant and equipment.
3.5 Intangible assets

Computer software acquired by the company is recognised initially at cost. Cost includes all directly attributable costs in order to bring the asset into a state for its intended use. Computer software is measured at cost less accumulated amortization and accumulated impairment losses. Subsequent expenditure is capitalised only when it increases the future economic benets embodied in the specic asset to which it related. Amortisation is recognised in the prot or loss on a straight-line basis over the estimated useful lives of intangible assets from the date they are available for use. The estimated useful life for current and comparative periods for acquired computer software is 5 years.
3.6 Impairment of non-nancial assets

At each nancial position date, the company reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs. Where a reasonable and consistent basis of allocation can be identied, corporate assets are also allocated to individual cash-generating units, or they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identied. Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash ows are discounted to their present value using a pre-tax discount rate that reects current market assessments of the time value of money and the risks specic to the asset for which the estimates of future cash ows have not been adjusted. If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the statement of comprehensive income. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the statement of comprehensive income.
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Notes To The Financial Statements for the year ended 31st December 2009 3. Signicant accounting policies (Contd) 3.7 Inventories
(Contd)
Inventories are measured at the lower of cost and net realisable value.The cost of inventories is based on the average cost principle and includes expenditure incurred in acquiring the inventories, conversion costs and other costs incurred in bringing them to their existing location and condition. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
3.8 Trade receivables
Receivables are measured at amortized cost using the e ective interest method less any allowance made for impairment of these receivables. Allowance for impairment of trade receivables is established when there is objective evidence that the company will not be able to collect all amounts due according to the original terms of contracts. Cash and cash equivalents includes cash on hand, call deposits with banks, other short-term highly liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are disclosed as current liabilities on the statement of nancial position. Current and deferred tax are recognised as an expense or income in pro t or loss, except when they relate to items that are recognised outside pro t or loss (whether in other comprehensive income or directly in equity), in which case the tax is also recognised outside pro t or loss, or where they arise from the initial accounting for a business combination.
3.9 Cash and cash equivalents
3.10 Income tax
Current tax
Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Taxable income di ers from pro t as reported in the statement of comprehensive income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. Deferred tax is provided using the liability method, providing for temporary di erences between the carrying amounts of assets and liabilities for nancial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary di erences the initial recognition of assets or liabilities that is not a business combination a ect neither accounting nor taxable pro t.The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. A deferred tax asset is recognised only to the extent that it is probable that future taxable pro ts will be available against which the asset can be utilized. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the related tax bene t will be realised.
Deferred tax
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(Contd)
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis.
3.11 Provisions
A provision is recognised in the statement of nancial position when the company has a present legal or constructive obligation as a result of a past event, and it is probable that an outow of economic benets will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash ows at a pre-tax rate that reects current market assessments of the time value of money and, where appropriate, the risks speci c to the liability. When some or all of the economic benets required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Restructuring
A provision for restructuring is recognised when the company has approved a detailed and formal restructuring plan, and the restructuring has either commenced or has been announced publicly. Costs relating to the ongoing activities of the company are not provided for.
Onerous contracts
A provision for onerous contracts is recognised when the expected benets to be derived by the company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the company recognises any impairment loss on the assets associated with the contract.
Warranties
A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.
3.12 Earnings per share

The calculation of basic earnings per share is based on the prot for the period attributable to ordinary shareholders and the weighted average number of shares in issue during the period. Where new equity shares have been issued by way of capitalization or subdivision, the prot is apportioned over the shares in issue after the capitalization or subdivision and the corresponding gures for all earlier periods are adjusted accordingly.
3.13 Revenue recognition

Revenue, which excludes value added tax, represents the fair value of the consideration received or receivable for services provided and accessories sold. The main categories of revenue and bases of recognition are: Air time usage Revenue from prepaid, postpaid and international roaming telephone service is recognised when airtime is used by the customer.
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3.
(Contd)
Signicant accounting policies
(Contd)
3.13 Revenue rocognition(Contd) Starter packs, sim cards and other

Revenue on starter packs, sim cards and other sales is recognised on the date all risks and rewards associated with the sale are transferred to the purchaser. Revenue on other services is recognised upon the performance of the contractual obligation.
Deferred income
Deferred income consists of the value of unused airtime on prepaid service recharge vouchers sold to customers.
3.14 Employee benets Pension obligations - Dened Contribution Plan

The company contributes to an independently managed dened contribution pension plan. Obligations for contributions to dened contribution plans are recognised as an expense in the statement of comprehensive income as incurred. Once the contributions have been made, the company has no further payment obligations.
Short-term benets
Short-term employee benet obligations are measured on an undiscounted basis and are expensed as the related service is provided.
3.15 Financial instruments 3.15.1 Financial assets

Investments are recognised and derecognised on trade date where the purchase or sale of an investment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those nancial assets classied as at fair value through prot or loss, which are initially measured at fair value. Financial assets are classied into the following specied categories: nancial assets at fair value through prot or loss (FVTPL), held-to-maturity investments, available-for-sale (AFS) nancial assets and loans and receivables. The classication depends on the nature and purpose of the nancial assets and is determined at the time of initial recognition. The effective interest method is a method of calculating the amortised cost of a nancial asset and of allocating interest income over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts through the expected life of the nancial asset, or, where appropriate, a shorter period. Income is recognised on an effective interest basis for debt instruments other than those nancial assets designated as at FVTPL.
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Notes To The Financial Statements for the year ended 31st December 2009 3. Signicant accounting policies (Contd) 3.15 Financial instruments 3.15.2Loans and receivables
(Contd)
Trade receivables, loans, and other receivables that have xed or determinable payments that are not quoted in an active market are classied as loans and receivables. Loans and receivables are measured at amortised cost using the effective interest method, less any impairment. Interest income is recognised by applying the effective interest rate, except for short-term receivables where the recognition of interest would be immaterial.
3.15.3Impairment of nancial assets

Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each nancial position date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the nancial asset, the estimated future cash ows of the investment have been impacted. For nancial assets carried at amortised cost, the amount of the impairment is the difference between the assets carrying amount and the present value of estimated future cash ows, discounted at the nancial assets original effective interest rate. The carrying amount of the nancial asset is reduced by the impairment loss directly for all nancial assets with the exception of trade receivables, where the carrying amount is reduced through the use of an allowance account. When a trade receivable is considered uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited against the allowance account. Changes in the carrying amount of the allowance account are recognised in the statement of comprehensive income. With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed through the statement of comprehensive income to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortised cost would have been had the impairment not been recognised.
3.16 Financial liabilities and equity instruments 3.16.1Classication as debt or equity

Debt and equity instruments are classied as either nancial liabilities or as equity in accordance with the substance of the contractual arrangement.
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Notes To The Financial Statements for the year ended 31st December 2009 3. Signicant accounting policies (Contd) 3.16 Financial liabilities and equity instruments 3.16.2Equity instruments
(Contd)
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments are recorded at the proceeds received, net of direct issue costs.
3.16.3Financial liabilities
Financial liabilities are classied as either nancial liabilities at FVTPL or other nancial liabilities.
3.16.4Financial liabilities at Fair Value Through Prot or Loss

Financial liabilities are classied as at FVTPL where the nancial liability is either held for trading or it is designated as at FVTPL. A nancial liability is classied as held for trading if: it has been incurred principally for the purpose of repurchasing in the near future; or it is a part of an identied portfolio of nancial instruments that the company manages together and has a recent: (i) Actual pattern of short-term prot-taking; or (ii) It is a derivative that is not designated and effective as a hedging instrument.
A nancial liability other than a nancial liability held for trading may be designated as at FVTPL upon initial recognition if: such designation eliminates or signicantly reduces a measurement or recognition inconsistency that would otherwise arise; or the nancial liability forms part of a company of nancial assets or nancial liabilities or both, which is managed and its performance is evaluated on a fair value basis, in accordance with the companys documented risk management or investment strategy, and information about the company is provided internally on that basis; or it forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instruments: Recognition and Measurement permits the entire combined contract (asset or liability) to be designated as at FVTPL.
Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in prot or loss. The net gain or loss recognised in prot or loss incorporates any interest paid on the nancial liability.
3.16.5Other nancial liabilities

Other nancial liabilities, including borrowings, are initially measured at fair value, net of transaction costs.
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(Contd)
Other nancial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The effective interest method is a method of calculating the amortised cost of a nancial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the nancial liability, or, where appropriate, a shorter period.
3.17 Segment reporting

A segment is a distinguishable component of the company that is engaged either in providing products or service (business segment), or in providing products or services within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. The company does not, at present, have distinguishable business segments.
3.18 Leased assets - lessee

Rentals payable under operating leases are charged to statement of comprehensive income on a straight-line basis over the term of the relevant lease. Benets received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.
4.
Critical accounting judgments and key sources of estimation un certainty 4.1 Critical judgements in applying the companys accounting policies
In the application of the companys accounting policies, which are described in note 3, management are required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
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NOTES TO THE FINANCIAL STATEMENTS (Contd) for the year ended 31st December 2009 4. Critical accounting judgments and key sources of estimation uncertainty (Contd) 4.2 Key sources of estimation uncertainty 4.2.1 Provision for doubtful debts
The company provides post paid services mainly on credit terms and management is aware that certain debts due to the company may not be recoverable either in part or in full. Estimates, based on historical experience, are used in determining the level of debts that management believes will not be collected. When deriving these estimates, factors such as the current state of the Malawi economy, nancial difculties of the debtors, or nancial reorganisation and delinquency in paying, amongst others, are taken into account.
4.2.2 Property, plant and equipment

The residual values and useful lives of property, plant and equipment are reviewed and adjusted, if appropriate, at each nancial position date to reect current thinking on their remaining lives in the light of technological change, prospective economic utilisation and physical conditions of the assets concerned.
4.2.3 Interconnection income and payments to other operators

The company relies in most cases on other operators to measure the trafc ows interconnecting with its network. Estimates are used in these cases to determine the amount payable to these other operators.
4.2.4 Severance allowance provision

The company has estimated severance allowance provision as at 31 December 2009. The actual liability to be incurred will depend on a number of factors including rates of death, retirement resignation and dismissal. The amount provided is subject to review annually.
5.
Comparatives
Where necessary, comparative gures are adjusted to conform with changes in presentation in the current period.
6.
Financial risk management Overview

The Company has exposure to the following risks from its use of nancial instruments: credit risk liquidity risk market risk.
This note presents information about the companys exposure to each of the above risks, the companys objectives, policies and processes for measuring and managing risk, and the companys management of capital. Further quantitative disclosures are included throughout these nancial statements.
44
Notes To The Financial Statements for the year ended 31st December 2009 6. Financial risk management (Contd)
(Contd)
The Board of Directors has overall responsibility for the establishment and oversight of the companys risk management framework. The Board is responsible for developing and monitoring the companys risk management policies. The companys risk management policies are established to identify and analyse the risks faced by the company, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reect changes in market conditions and the companys activities. The company, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations. The Audit Committee of the Board of Directors oversees how management monitors compliance with the companys risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Company. The Audit Committee is assisted in its oversight role by the Press Corporation Group Internal Audit department which undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.
6.1 Credit risk

Credit risk is the risk of nancial loss to the company if a customer or counter-party to a nancial instrument fails to meet its contractual obligations, and arises principally from the companys receivables from customers, bank balances and other cash and cash equivalents. Telekom Networks Malawi Limited deposits cash with major banks with high quality credit standing and limits exposure to any one counter-party.
a) Trade and other receivables

The companys exposure to credit risk is inuenced mainly by the individual characteristics of each customer. Over 75% of the companys revenue arises from cash sales. The company has established a credit policy under which the credit quality of each new customer is assessed and appropriate individual credit limits are set. The company establishes specic allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.
b) Cash and cash equivalents

The company limits its exposure to credit risk by depositing its cash and cash equivalents with reputable nancial institutions.
6.2 Liquidity risk

Liquidity risk is the risk that the company will not be able to meet its nancial obligations as they fall due. The companys approach to managing liquidity is to ensure, as far as possible, that it will always have sufcient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the companys reputation.
45
Notes To The Financial Statements for the year ended 31st December 2009 6. Financial risk management (Contd) 6.3 Market risk
(Contd)
Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity and commodity prices will affect the companys income or the value of its holdings of nancial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.
Currency risk
The company transacts the majority of its sales, non-capital expenditure purchases and borrowings in its functional currency Malawi Kwacha (MK). The company is exposed to currency risk where these transactions are denominated in currencies other than functional currency. Purchases in currencies other than the functional currency are carried out by opening letters of credit. The companys capital expenditure requirements are in currencies other than the functional currency and whilst these liabilities are settled by way of short-term letters of credit, the company is exposed to currency risk. The company mitigates currency risk by utilizing borrowing facilities from local banks and minimizing foreign supplier credit. Purchases in currencies other than the functional currency are carried out by opening letters of credit.
6.4 Capital management

The companys policy is to maintain a strong capital base so as to maintain investor, creditor and market condence and to sustain future development of the business. The companys objectives when managing capital are to safeguard the companys ability to continue as a going concern in order to provide returns for shareholders and to maintain an optimal capital structure. 2009 K000 2008 K000
7.
Revenue
Revenue is derived from the following revenue streams Post-paid Prepaid International roaming Interconnect revenue 779,211 6,449,370 178,960 797,459 8,205,000 796,609 5,157,251 109,068 639,003 6,701,931
46
NOTES TO THE FINANCIAL STATEMENTS for the year ended 31st December 2009 8. Direct operational costs
Depreciation Dealers commission Marketing development expenses Interconnect charges MACRA annual levy Network repairs and maintenance Cost of recharge vouchers IDD call charges Power and electricity International roaming charges Lease circuit charges Site and space rental Frequency channels licences Cost of starter packs RBT text and content Data network leased lines Cost of sim cards sold
(Contd)
2009 K000 860,453 610,178 577,407 390,713 318,190 298,477 189,914 163,607 136,900 112,596 108,788 57,309 33,600 24,464 22,843 13,034 3,918,473 2008 K000 465,275 475,458 382,724 344,938 259,393 215,871 118,210 150,072 44,164 108,657 104,217 55,404 33,600 19,497 9,640 942 2,788,062
9.
Other income
Prot on disposal of property, plant and equipment Sundry income 398 73,901 74,299 4,855 87,760 92,615
10. Selling and administrative expenses

Licences, marketing and other expenses Staff costs and allowances Depreciation and amortization Ofce rentals and security expenses Motor vehicle running expenses Management fees Insurance Impairment losses on receivables Audit fees Directors fees and expenses 1,006,627 776,034 180,339 151,927 125,322 118,257 67,129 39,857 8,250 7,888 2,481,630 832,957 549,356 135,068 98,336 71,295 72,960 34,453 17,146 4,500 6,880 1,822,951
47
Notes To The Financial Statements for the year ended 31st December 2009 11. Finance income and expenses
Interest on bank deposits Interest on staff loan and other receivables Total nance income Interest expenses Net foreign exchange loss Total nance expense Net nance (expense)/ income
(Contd) 2009 K000 44,272 14,810 59,082 (115,678) (65,124) (180,802) (121,720) 2008 K000 39,292 2,909 42,201 (884) (2,589) (3,473) 38,728
12. Income tax expenses Current tax expense

Current tax year Adjustment for prior periods 393,125 393,125 588,548 12,271 600,819 103,748 (12,271) 91,477 692,296 1,529,965 692,296 2,222,261 2008 666,678 15,892 (2,545) 12,271 692,296
Deferred tax expense

Origination and reversal of temporaly difference Adjustment for prior periods 149,564 149,564 Total income tax expense 542,689 1,214,787 542,689 1,757,476 2009 Income tax using domestic rate Non-deductible expenses Taxation incentives Under provided in prior periods 30% 1% (0.12%) 30.88% 2009 527,243 17,531 (2,085) 542,689 2008 30% 0.72% (0.11%) 0.55% 31.6%
Reconciliation of effective tax rate

Prot for the year Total income tax expenses Prot excluding income tax
48
Notes To The Financial Statements for the year ended 31st December 2009 13. Earnings per share
The calculation of basic earnings per share at 31 December 2009 was based on the prot attributable to ordinary shareholders of K1, 214 million (2008: K1, 530 million) and the weighted average number of ordinary share in issue for the year ended 31 December 2009. Prot attributable to ordinary shareholder for the year (K000) Weighted average number of shares (000) Basic earnings per share (MK) Weighted average number of shares (000)
(Contd)
2009 K000 2008 K000
1,214,787 10,040,450 0.12
1,529,965 8,958,023 0.17
Issued ordinary shares as at beginning of year 10,040,450 Effect of shares issued on 3 November 2008 Weighted average number of ordinary shares at end of year 10,040,450 There are no dilutive potential ordinary shares.
8,750,000 208,023 8,958,023
49
Notes To The Financial Statements for the year ended 31st December 2009 14. Property, plant and equipment
Land buildings K000 502,931 7,249 114,129 624,309 624,309 17,752 699,366 1,341,427 Equipment and machinery K000 3,573,045 1,611,602 5,184,647 5,184,647 193,885 2,890,132 8,268,664
(Contd)
Cost At 1 January 2008 Additions Transfers Disposals At 31 December 2008 At 1 January 2009 Additions Transfers Disposals At 31 December 2009 Depreciation and impairment losses At 1 January 2008 Charge for the year Disposals At 31 December 2008 At 1 January 2009 Charge for the year Disposals At 31 December 2009 Carrying amount At 31 December 2009 At 31 December 2008
Motor Ofce vehicles equipment K000 K000 195,326 192,572 (12,526) 375,372 375,372 145,312 (2,613) 518,071
Capital work in progress K000
Total K000 4,741,847 3,300,033 (12,526) 8,029,354 8,029,354 4,459,951 (3,276)
251,880 218,665 249,197 2,851,015 - (1,725,731) 501,077 1,343,949
501,077 1,343,949 214,536 3,888,466 - (3,589,498) (663) 714,950
1,642,917 12,486,029
54,473 26,364 80,837 80,837 32,577 113,414 1,228,013 543,472
1,426,497 441,313 1,867,810 1,867,810 842,883 2,710,693 5,557,971 3,316,837
63,370 49,224 (7,818) 104,776 104,776 67,250 (2,613) 169,413 348,658 270,596
104,558 73,219 177,777 177,777 83,226 (79) 260,924 454,026 323,300 1,642,917 1,343,949
1,648,898 590,120 (7,818) 2,231,200 2,231,200 1,025,936 (2,692) 3,254,444 9,231,585 5,798,154
50
Notes To The Financial Statements for the year ended 31st December 2009 14. Property, plant and equipment (Contd)
(Contd)
A register of land and buildings giving details required under the Malawi Companies Act 1984, Schedule 3, Section 16 is maintained at the registered ofce of the company and is open for inspection by members or their duly authorised agents. Property, plant and equipment were free of any charge and were not pledged as security for any borrowings or facilities during the year. No interest expense was capitalised during the year (in 2008, interest totaling K79,104,307 was capitalised) Capital work in progress represents land and buildings and equipment and machinery still under construction and installation.
15. Intangible assets

Computer software 2009 2008 K000 K000 52,254 77,990 130,244 16,498 14,856 31,354 98,890 46,858 5,396 52,254 6,275 10,223 16,498 35,756
Cost
At beginning of year Additions during the year Balance at end of year
Amortisation
At beginning of year Amortisation for the year At end of year Carrying amounts At end of year
16. Inventories
Goods held for resale 181,956 179,218
51
Notes To The Financial Statements for the year ended 31st December 2009 17. Trade receivables
(Contd)
2009 K000 873,126 (75,453) 797,673 2008 K000 430,037 (35,596) 394,441 225,931 448,857 4,769 679,557 1,073,998
Trade receivables Allowance for impairment losses
Other receivables Staff advances Deposits and prepayments Other receivables
258,119 501,385 7,885 767,389
Total trade and other receivables
1,565,062
Movement in the allowance for impairment in respect of trade receivables during the year was as follows:Balance at beginning of year Provision previously recognised in statement of comprehensive income written off Impairment loss recognised Balance at end of year 35,596 39,857 75,453 88,977 (70,527) 17,146 35,596
The impairment loss recognised of K39, 857,000 (2008:K17, 146,000) relates to post paid air time receivables and amounts due from dealers and distributors. The ageing of trade receivables at the reporting date was: Gross Impairment 2009 2009 Not past due Past due 0-30 days Past due 30-120 days Past due 121-360 days More than one year 126,043 124,349 425,327 107,731 89,676 873,126 9,857 65,596 75,453 Gross 2008 102,592 102,208 96,036 94,825 34,376 430,037 Impairment 2008 1,594 7,504 26,498 35,596
Substantial amounts in the receivables between 0 360 days are due from Zain Malawi (K241 million), Emperion (K94 million) and Gateway (K80 million). Under payables there are also amounts owed to Zain (K258 million) and Emprion (K70 million) for similar transactions which may be offset against receivables.
52
Notes To The Financial Statements for the year ended 31st December 2009 18a. Amount due from related party
Due from Malawi Telecommunications Limited
(Contd)
2009 K000 2008 K000
8,216
7,112
b.
Related party disclosures

The company transacts part of its business with shareholders and parties related to or under the control of its shareholders. Details of such related party transactions of the company are set out below:
Malawi Telecommunications Limited

Interconnection income (325,991) Interconnection charges 53,638 Leased circuit rentals (58,533) Leased circuit, co-sitting and data line charges 121,822 Net income (209,064) 26,496 45,344 (392,122) 149,673 (79,521) 105,390 (216,580) 23,615 40,106
Livingstone Exports Limited

Premises rental
Old Mutual Life Assurance Company Limited

Pension contributions and group life insurance In addition, related parties, including shareholders, directors and parties related thereto are subscribers to the companys phone network for which they are charged on an arms-length basis.
National Bank of Malawi

Banking facilities with this fellow subsidiary of Press Corporation Limited are disclosed in note 19.
Compensation of directors and key management

personnel Directors fees Senior management salaries and other short-term benets Greenhurst (Anguilla, British West Indies) 7,888 31,895 118,257 6,880 29,471 72,960
With effect from January 2008, the Company contracted Greenhurst (Anguilla, British West Indies) to provide management services for a period of three years.
53
Notes To The Financial Statements for the year ended 31st December 2009 19.Cash and cash equivalents
Bank and cash balances Short-term investments Bank overdraft
(Contd) 2009 K000 425,073 216,969 642,042 (1,703,085) 2008 K000 247,119 1,287,247 1,534,366 1,534,366
Cash and cash equivalents in the statement of cash ows (1,061,043)
Bank facilities
The company has the following facilities: First Merchant Bank Limited Banking facilities including overdraft K997 million K500 million
From the K997 million banking facilities, US3 million was availed as a loan. The balance will be utilised for overdraft and letters of credit. These facilities are unsecured. National Bank of Malawi Overdraft facility The bank overdraft facility is unsecured. Note that the National Bank of Malawi overdraft facility expired on 31 October 2009 and the facility has been renewed to K1,500 million after year end. Standard Bank Limited General short - term banking facility The banking facility is unsecured. K1,500 million K800 million K850 million K850 million
54
Notes To The Financial Statements for the year ended 31st December 2009 20.
(Contd) 2009 K000 2008 K000
Authorised and issued ordinary share capital

Number (thousand) Nominal value per share (Malawi Kwacha) Nominal value (thousand Malawi Kwacha)
10,040,450 10,040,450 0.04 401,618 0.04 401,618
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share on a poll at meetings of the company.
21.
Deferred tax (assets)/liabilities

Deferred tax assets and liabilities are attributable to the following items:
Asset Liabilities Net
2009 Severance pay provision 32,068 Exchange difference 7,444 Excess capital allowance 39,512
2008
2009
2008
2009
2008
21,035 32,068 21,035 7,444 - 473,968 305,927 (473,968) (305,927) 21,035 473,968 305,927 (434,456) (284,892)
22.
Interest bearing loans

Long term portion of loans Short term portion of loans
2009 K000 427,523 14,742 442,265
2008 K000 -
During the year 2009 the company obtained a loan of US$3,000,000 From First Merchant Bank Limited as part of the banking facilities of up to K997 million. The loan is repayable over 60 months in equal principal installments of US$50,000 per month. Repayment will commence after one year from the date of the draw down. The rate of interest on the loan is 9.5% per annum. The loan is unsecured.
55
Notes To The Financial Statements for the year ended 31st December 2009 23. Employee benets liabilities
Severance pay provisions Balance at beginning of year Charge for the year Balance at end of year
(Contd)
2009 K000 2008 K000
70,118 36,774 106,892
40,903 29,215 70,118
24.
Dividend liability
At beginning of year Dividend declared Dividend paid At end of year 200,809 602,427 (602,427) 200,809 880,809 (680,000) 200,809
25.
Deferred income
Deferred income consists of the value of unused prepaid airtime sold to customers as at 31 December 2009.
26.
Trade and other payables

Other payables Accrued expenses VAT and excise duty Customer deposits Total trade and other payables 527,333 1,026,044 92,949 35,831 1,682,157 572,661 578,839 155,641 30,221 1,337,362
27.
Capital commitments
Authorised and contracted for Authorised but not contracted for 2,698,000 2,556,000 568,000 497,000
56
Notes To The Financial Statements
(Contd)
for the year ended 31st December 2009 28. Financial instruments-exposure to currency risk
TNMs exposure to foreign currency risk was as follows based on notional amounts: 2009 2008 K000 K000 104,916 51,272 (68,234) (154,981) (67,027) 472 (6,625) (430,076) (436,229) (503,256)
US Dollar
Bank balances 153,356 Trade receivables-International roaming 97,125 Trade receivables-International incoming trafc 173,287 Trade payables-International roaming (77,979) Interest bearing loans (442,265) Other foreign liabilities (436,774) Statement of nancial position exposure (533,250) 1,873 (87,282) (85,409) (618,659)
Euro
Bank balances Trade payables-International roaming Other foreign liabilities Statement of nancial position exposure Gross currency risk statement of nancial position exposure
29.
Sensitivity analysis
Foreign currency sensitivity analysis Transaction losses arising on a 10 percent strengthening of the United States Dollar and Euro against the Malawi Kwacha as at 31 December would result in a decrease in equity and prot for the year as shown below: Equity and prot for the year
31 December 2009
US Dollar Euro
(37,328) (5,979) (4,692) (30,536)
31 December 2008
US Dollar Euro
A 10 percent weakening of the United States Dollar and the Euro against the functional currency as at 31 December would have had an equal but opposite effect.
57
Notes To The Financial Statements for the year ended 31st December 2009 29. Sensitivity analysis (Contd) Interest rate sensitivity analysis
(Contd)
The sensitivity analysis below has been determined based on the exposure to interest rates for the bank overdraft as at 31 December 2009. The analysis is prepared assuming the amount of the bank overdraft outstanding at 31 December 2009 was outstanding for the whole year. A 5% increase or decrease is used when reporting interest rate risk internally to key management personnel and represents managements assessment of the reasonably possible change in interest rates. If interest rates had been increased by 5% for all bank borrowings and all other variables were held constant, the companys: Prot for the year ended 31 December 2009 would decrease by MK 85,154,250 (2008: nil). This is mainly attributable to the companys exposure to interest rates on its bank overdraft;
The interest rate on the First Merchant Bank Limited loan is xed. 2009 K000 2008 K000
30.
Financial instruments-exposure to credit risk

The carrying amount of nancial assets represents the maximum credit exposure. The maximum credit exposure to credit risk at the reporting date was as follows:Trade and other receivables (note 17) Amount due from related parties (note 18)
1,565,062 8,216 1,573,278
1,073,998 7,112 1,081,110
31.
Financial instruments-exposure to liquidity risk

The following are the contractual obligations due within 1 year which may affect the liquidity of the company. Financial assets Trade and other receivables (note 17) Amount due from related parties (note 18) Bank and cash balances (note 19) 1,565,062 8,216 642,042 2,115,320 1,703,085 1,682,157 (1,269,922) 1,073,998 7,112 1,534,366 2,615,476 1,337,362 1,278,114
Total nancial assets Financial liabilities

Bank overdraft Trade and other payables (note 26) Net liquidity (exposure) /cover
58
Notes To The Financial Statements for the year ended 31st December 2009 32. Operating segments 32.1
(Contd)
Adoption of IFRS 8 Operating Segments

The company has adopted IFRS 8 Operating Segments with effect from 1 January 2009. IFRS 8 requires operating segments to be identied on the basis of internal reports about components of the company that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess their performance. In contrast, the predecessor Standard (IAS 14 Segment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks and returns approach, with the entitys system of internal nancial reporting to key management personnel serving only as the starting point for the identication of such segments.
32.2
Products and services from which reportable segments derive their revenues
The companys principal line of business is the provision of telecommunication services. Information reported to and used by the Chief Executive Ofcer for decision making for the purposes of resource allocation and assessment of segment performance is more specically focused on the companyss products or services. The principal categories of products and services are air time post and prepaid, interconnection, international roaming, and short messaging. The companys reportable segments under IFRS 8 are therefore as follows: Air time post paid; Air time prepaid; Interconnection; and Roaming.
The split of revenue into these streams is disclosed in note 7.
32.3
Geographical information
The companys operations are conducted throughout the country with ofces in the major cities and towns in the country. The international roaming revenue disclosed in note 7 is the amount earned from subscribers when they use the companys services whilst out of Malawi and also includes the amount earned from subscribers of networks from other countries who use the companys services whilst in Malawi. The company operates an international gateway for both incoming and outgoing trafc and the revenue earned from such services is included in interconnection revenue. Direct operating costs cannot be split geographically and are aggregated and disclosed in note 8.
32.4
Information about major customers

The companys customers are many and there is no single customer that individually contributes more than ve percent of the companys total revenues.
59
(Contd) 2009 K000 (a) (b) 10,050 151,603 161,653 2008 K000 12,450 12,450
33.
Contingent liabilities
Legal claims Malawi Telecommunications Limited claim for US$ 1.028 million Total contingent liabilities (a)
These represent legal claims made against the company in the ordinary course of business, the outcome of which is uncertain. The amount disclosed represents an estimate of the cost to the company in the event that legal proceedings nd the company to be in the wrong. In the opinion of the directors the claims are not expected to give rise to a cost to the company. This represent a claim made by Malawi Telecommunications Limited (MTL) for loss of revenue when lightning struck their transmission station equipment on 27 February 2009. MTL is alleging that lightning strike damaged their equipment due to the fact that a contractor employed by TNM excavated and damaged the stations earthing installation which protects the stations equipment from lightning. The company is contesting the matter and the claim.
(b)
34.
Exchange rates and ination

The average of selling and buying exchange rates at year end of major foreign currencies affecting the performance of the company are stated below, together with the increase in the National Consumer Price Index which represents an ofcial measure of ination. 2009 Kwacha/GBP Kwacha/Euro Kwacha/Rand Kwacha/US Dollar Ination rate 237.03 211.80 20.06 146 7.6% 2008 217.13 211.40 16.11 140.60 9.9%
As at 8 March 2010 the above rates had moved as follows: Kwacha/GBP Kwacha/Euro Kwacha/Rand Kwacha/US Dollar Ination rate (February 2010) 231.87 207.35 21.45 150.8 8.2%
35.
Events after reporting date

Subsequent to the reporting date no events have occurred which require adjustment to or disclosure in the nancial statements.
60
We promised expansion and growth. We delivered.
TNM Annual Report

for the year ended 31 December 2009
TNM is a licensed mobile telecommunications operator in Malawi enjoying 62% and 33% market share in post-paid and pre-paid sector respectively. TNMs brand always with you is clearly identified as Malawian and portrays best customer value and service availability. TNMs principal colour green, is fresh and synonymous with Malawis prosperity derived from agriculture and the environment. TNM offers services and products designed to meet the needs and desires of its subscriber base in Malawi which is primarily divided into price-conscious pre-paid and premiumpaying post-paid subscribers Key achievements > 77 new base stations commissioned > New products and services were introduced > More focused corporate social responsibility Financial highlights > 60% growth in subscribers to 828,000 > 22% growth in revenues > 6% growth in EBITDA > 21% decline in net profit
Revenues EBITDA Profit after tax ARPU ARPU Shareholders funds Long-term debt Market capitalisation Shares in issue at year end Earnings per share Market price per share (as at year end) Return on equity EBITDA margin
MK MK MK MK US$ MK MK MK
8.2bn 2.8bn 1.2bn 1,014 6.9 6.8bn 428m 33.1bn 10,040,450,000 0.12 3.30 18 35
MK MK % %
Contents 1 Our statement of vision 2 Letter of the Chairman of the board 4 Your directors 6 Management Letter 17 Corporate Social Responsibility & the Environment
22 Executive management 25 Director Annual Report 28 Annual Financial Statement ?? Notice Annual General Meeting ?? Form of Proxy
Our statement of vision Vision Always with you Mission

Our mission is to be "Malawis premier mobile company of choice, offering best in class mobile telecommunication services to people everywhere." Premier means best in terms of: > Customer value > Customer service > Employee talent > Consistent and predictable growth As Malawis Premier mobile company we will enable people and businesses to realise their full potential. In doing so, our mobile services will contribute to the growth and development of the Malawi economy.
Values
Customers We value all our customers and treat them with respect, providing friendly, courteous, knowledgeable and prompt service at all touch points. We never forget that they come to us by choice. We seek and are driven by our customers' feedback. We are committed to direct relationships and outperforming the competition with value and a superior customer experience. Integrity We operate with unyielding integrity, obeying all laws and adhering to a stringent code of business conduct. We will not tolerate unethical business conduct by our team members. We will act with integrity and respect towards all. Excellence We continually raise our performance to exceed customer and shareholder expectations. We strive to be the best in quality and in everything we do. People We are an equal opportunity employer and we value, respect and empower our people. Providing an environment where diverse individuals can develop and are expected to perform to their full potential. Teamwork is key; respecting new viewpoints, diversity, building trust, enhancing communications, and sharing best practices to deliver world-class products and services. Malawian Identity We are committed to our roots and our corporate social responsibility, Green or otherwise. We share an infectious sense of mission to make an impact on society and community at large. We reach out to and empower our customers in ways never before possible. Our goal is to develop mobile telecommunication services and offerings that are accessible and within reach of every Malawian. In so doing giving every Malawian the means and ability to reach their full potential and allow them to play a full role in the development of Malawi.
Letter of the Chairman of the Board
Overview The past year saw an aggressive rollout of new and innovative products and services. TNM also continues to prioritize the expansion of coverage and capacity with an emphasis on quality, reliability, and efficiency. Despite the worldwide economic downturn and a range of outside factors, including limitations on availability of foreign exchange and fuel shortages, TNM was able to achieve key milestones. In 2009, we were the leader in implementing cutting-edge data services, including GPRS, Edge, and 3.5G. This was a first for TNM and a first for Malawi. TNM built 77 BTS sites, increasing connectivity and mobile phone penetration. We guaranteed a completely redundant core network which improved TNM's accessibility, dependability, and quality. The newly completed Lilongwe technical centre assures absolute geographic redundancy and will serve both the central and northern regions. These redundancy efforts are a part of TNM's comprehensive business continuity plan. TNM undertook a complete and thorough audit to identify areas of needed improvement. We were able to prioritize actions that emphasized quality and reliability.This resulted in TNM proactively identifying and solving problems before they could impact or inconvenience customers. 2009 was an important year in terms of major upgrades and capacity expansions. TNM developed its core network capacity to serve a base of two million subscribers, allowing for substantial future growth with minimum capital outlay. Looking ahead, our focus will be a continued aggressive rollout of coverage and capacity expansion, while at the same time, looking to enhance efficiencies from a cost perspective. The result will be further improvement in availability, reliability, and quality. In the coming year, TNM is looking forward to expanding its commitment to the environment and clean energy with the introduction of hybrid electric power supplies in rural areas. This will result in less reliance on generators and diesel fuel. We continue to value our Malawian identity. As a Malawian company that is successful and capable of delivering services of an internationally competitive standard, we are creating a new model and becoming an industry leader. TNM understands Malawi and the market because we are a part of it. We are making decisions as Malawians, which allows us to better serve our clients.
Dividends Total dividends of MK 602.4 million (MK0.06 per share) will have been declared and paid for the year ended 31 December 2009 as follows:MK 200.8 million 2t per share was declared and paid in October 2009 MK 200.8 million 2t per share was declared in December 2009 and was paid in January 2010. MK 200.8 million 2t to be declared at the upcoming AGM Subscribers and Summary Financial Results The program of network expansion continued through 2009 with an expenditure of MK4.4billion on new network elements. This included acquisition of a new switch to provide enhanced capacity and redundancy, commissioning of a further 77 BTS sites, roll out of GPRS/Edge, first to launch 3.5G services in the major cities of Blantyre and Lilongwe, electronic voucher distribution and several new value added offerings. Investment in the network and related marketing initiatives has seen a 60% growth in subscriber base from 517,000 (end 2008), representing a 29% market share, to 828,000 (end 2009), representing a 33% market share based on active customer definition of chargeable outgoing call activity within 90 days. This translated into a 22% increase in revenues as, not unexpectedly, ARPU declined from US$8.2 to US$6.9 which remains healthy in comparison to peer markets.. This translated into a 22% increase in revenues as, not unexpectedly, ARPU declined from US$8.2 to US$6.9 which remains healthy in comparison to peer markets. Revenue, EBITDA and ARPU EBITDA margin was also negatively impacted by the cost of mitigating persistent outages of power supply and a 50% increase in the cost of subsidizing low cost handsets to increase market penetration. Nevertheless, in absolute monetary terms, 2009 EBITDA was 6% higher than that achieved in 2008. However, an increase of MK440million in depreciation charge on the company's greatly enhanced fixed asset base and finance charges of MK115 million on local borrowings has seen net profit decline from MK1.5billion in 2008 to MK1.2billion in 2009. Prospects and Forecast 2010 Moving into 2010, TNM continues to invest in network quality, capacity and coverage, positioning itself to further grow its subscriber base. In line with our mission statement, we remain committed to connecting the country and will continue to roll out coverage network to more areas. The 3.5G layer will be made available in more centres, thus providing subscribers with higher speed data transfer and internet access. We remain focused on increasing the subscriber base, customer retention, and revenue maximization while maintaining strategic cost control. Despite many challenges, principal among which is limited access to foreign exchange, the company is confident of delivering real growth in line with expected overall economic growth, and an increase in national telephone penetration levels.
Matthews Chikaonda 3 April 2009 3
Your directors
Dr. Matthews Aurelious Padzuwa Chikaonda, 56, Chairman and nonexecutive Director BA (Hons), Dip. Business, MBA, Ph. D. Dr Chikaonda served as Assistant and Associate Professor of Finance (1988-1991 and 199294, respectively) at Memorial University of Newfoundland in Canada. In addition to executive management and corporate restructuring experience, Dr. Chikaonda has over 14 years experience in economic management, policy formulation and implementation at national level. Dr Chikaonda served as Deputy Governor (1994-1995) and later as Governor (19952000) of the Reserve Bank of Malawi. In March 2000, he was appointed to the Cabinet and served in the Government of Malawi as Minister of Finance and Economic Planning until January 2002. Dr. Chikaonda has been Chairman of the TNM Board since his appointment thereto on 5th April 2007. In April 2002, Dr Chikaonda was appointed to his present position of Group Chief Executive of PCL.
Mr. Hitesh Natwarlal Anadkat, 49, Vice Chairman and nonexecutive Director Masters of Business Administration, Bachelor of Science Economics (Hons). Prior to returning to Malawi to establish First Merchant Bank, Mr Anadkat worked in a corporate finance house in USA specialising in mergers, acquisitions and valuations. Mr. Anadkat holds chairmanships and Directorates and business interests in a number of other sectors of the Malawian economy, principally banking, manufacturing and property development.
Mr. Kenneth Hudson Peter Mthuzi, 48, nonexecutive Director Bachelor of Commerce, Diploma Business Administration, Fellow Chartered Certified Accountant. Mr. Mthuzi currently serves as Chief Corporate Affairs Officer of MTL prior to which he served as MTLsInterim Director of Finance. He has previously worked for Deloitte and Touche and Press Corporation as Head Group Internal Audit.
Mr. Pius Percy Mulipa, 56, non-executive Director Bachelor of Arts, Diploma (Mgt.), MSc (Mgt.) Mr. Mulipa is Group Operations Executive in Press Corporation and is responsible for the operations of seven of the Press Groups subsidiary and associate companies. He has held various senior management positions within the Press Corporation Group over the previous 17 years.
Mr. John M. ONeill, 55, non-executive Director BSc in Mathematics and Management Sciences, FCA. Mr. ONeill is an Executive Director of First Merchant Bank and his previous experience includes a career of 17 years with international accountancy firm Deloitte, in the UK and Malawi, including six years as a partner in its Malawi practice. He holds numerous other Directorships in companies in various sectors of the economy.
Dr Stephanus Johannes Minnar 42 Steve holds a PhD in Engineering from Stellenbosch University, where he also completed his B.Eng and M.Eng degrees in industrial/ Mechanical Engineering. He also holds a B.Com (honours) degree in Finance from the University of Cape Town and is a CFA charter holder. He serves on the advisory committee of the Engineering faculty of the University of Stellenbosch.
Dr Harry Sam Harrisson Gombachika 45 , BSc EEng, Dip Eng, MSc EEng, PhD (Telecommunication). Dr Gombachika is a senior Lecturer in Telecommunication Engineering at the Malawi Polytechnic, University of Malawi.He is currently the Dean of Postgraduate Studies and Research at the Polytechnic. He has served in various University of Malawi Committees. Currently he is a Senate Representative of the University Council. In addition he is an external examiner for Masters Degree (Telecommunication Major) thesis at the University of Botswana. He has conducted research and published on various issues of wireless networking both fixed and mobile.
Mr. James Adhemar Regout, 59 , non-executive Director Masters of Business Administration in Economics. Mr. Regout is an experienced portfolio manager currently serves as External Investments Manager for Old Mutual Investment Group (SA) with executive responsibility for Old Mutual Malawis asset management operations, regional listed equity portfolios and a global private equity fund of funds. Mr. Regout also holds Directorates in a number of prominent companies in the Malawi economy.
Management Letter
Highlights The considerable subscriber growth in 2009 is a clear indication of the potential of mobile telephony in Malawi. More importantly, it demonstrates the confidence these new customers have in TNM. This growth has been driven by intense programs on network coverage and quality, introduction of innovative products and services, further expansion of our distribution network with the highest service/availability levels possible and, above all, the dedicated staff. For all the achievements during the year I would like to thank you all at TNM, it would not have been possible without you.
TNM's strongest resource is the dedication and talent of its staff. The members of the TNM team make this company what it is and allow us to grow, mature, and become an industry leader.
Our People "TNM's corporate culture is a feeling of personal empowerment within the company. This is true in terms of ownership, in terms of decision making, in terms of engagement, and perhaps most importantly, in terms of mutual respect. TNM has been identified as one of, if not the top place to work in Malawi. We are proud that with the exception of two expatriate executives, Malawians run this company." David Chetty, Chief Technical Officer. As stated above TNMs strongest resource is the talent and dedication of its staff. The members of the TNM team make this company what it is and allow us to grow, mature and become an industry leader.
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The Executive Management team prides itself on effective leadership. When an issue arises the team works together to solve problems harmoniously and by prioritizing the needs of the company. There is intense staff engagement at all levels, which results in a strong work ethic and feeling of being part of a team. TNM has a clear open-door policy, a receptive forum for ideas, and an intentional lack of bureaucracy. We focus on development and training, enabling all of our staff to expand skills and fostering initiative. This year we have prioritized investing in staff capacity and in building knowledge expertise both at home and abroad.
"Being a team means you have a common purpose, common values, that you have cohesion and are all moving in the same direction. It means that success in business is shared - no one here feels that one person is responsible - success is achieved and enjoyed as a team."
This included a staff fact-finding missions to both France and China. Extensive training from foreign specialists maximizes knowledge transfer and results in superior competence in new technologies and equipment. TNM's Human Resource Department is mid-way through a two year strategic initiative focusing on three areas: talent management, staff engagement, and the creation of an enabling environment. Our entire staff participated in an employee satisfaction survey and we achieved an outstanding 65% satisfaction level, clearly demonstrating that employee satisfaction is at a record high. We also implemented the Paterson Based Grading System, which allowed us to take an over-arching, comprehensive look at each position description and evaluate and improve each one. The new system has resulted in greater staff engagement and retention. We have also rolled out a Balanced Scorecard which allows each staff member to evaluate his/her contribution to the company's mission. This is one of the most prominent systems in the world, and because it is not yet common among other Malawian companies, it makes TNM an industry leader in performance management. Finally, one of the most exciting initiatives undertaken this year is the Staff Wellness programme. Activities range from HIV/AIDS counseling to stress management and healthy eating. This is just one more innovative way that we encouraged healthy living amongst the TNM family. "Being a team means you have a common purpose, common values, that you have cohesion and are all moving in the same direction. It means that success in business is shared - no one here feels that one person is
"TNM's corporate culture is a feeling of personal empowerment within the company. This is true in terms of ownership, in terms of decision making, in terms of engagement, and perhaps most importantly, in terms of mutual respect." David Chetty, Chief Technical Officer
responsible - success is achieved and enjoyed as a team." Charles Kamoto, Head of Commercial Products and Services "It is important that TNM is a Malawian company; it means that we know the country, know the people, and know the market. It means that we can develop products tailor made for Malawi. It allows us to be more innovative and deliver products that our customers need and want." - Reuben Kocherani, Regional Distribution Manager
Developing products and services with Integrity means promising something and being able to deliver
The key focus in 2009 was in data services. In a rapidly changing world and competitive industry, significant investment has been placed into ensuring high quality services and up to date technologies. In the first part of 2009 TNM launched GPRS services, which enabled it to develop solutions for Corporate and individual needs giving TNM opportunity to grow. The launch of GPRS made the access of internet easier as it has enabled customers to use their handsets to connect to the world. This is especially true with the youth, who are now able to access popular social websites such as facebook, with ease and at affordable rates. The youth has been an important consideration in the launch of products launched in 2009. This led TNM to launch such services as SMS fun and caller tunes. On the Corporate front the launch of GPRS allowed TNM to launch windows mobile in November 2009. This is the ideal solution for many corporate executives who are always on the go. Through Windows Exchange Server, users are able to connect and synchronise with their Windows based mail, calendar and Office pragrams As TNM aims to be the leader in broad band connectivity services and in December 2009, TNM became the first mobile operator to launch 3g services. The launch means TNM can now offer cutting edge services such as video calls, video and music streaming, high speed wireless internet access services 4-5 times faster than 2.5g and any other ISP provider on the market. With a maximum connection speed of 3.6 megabits per second TNMs internet connection will transform the data service market in Malawi as well as contribute to the development of the country. "Developing products and services with Integrity means promising something and being able to deliver." Daniel Makata, Strategy and Planning Manager.
We are proud that with the exception of two senior executives, Malawians run this company.
Network (Technical) Our technical achievements for 2009 were truly outstanding as we successfully completed major upgrades and capacity expansions. We introduced a new multivendor strategy that includes Alcatel as well as Huawei. The Legacy Alcatel network was fully replaced with NGN and further capacity upgrades for Huawei NGN are planned. Huawei Call Server and Media Gateway were commissioned and there was a Huawei OCS trial. Through Huawei, we were able to introduce 3.5G. Phase 1 of 40 Node B's will be completed in early 2010 and this past year saw the completion of the Lilongwe Technical Centre. We also established Optima, Connect and Asset from AirCom and completed Phase 2 of Swap out. There are a total of 77 new BTS sites and 50 Capacity Upgrades. New SMSC resulted in value added services platforms and there was full redundancy of both the core and the transmission networks. We are also proud to have introduced a real time network performance monitoring system. In terms of connectivity, we strengthened our quality and reliability through the International Satellite Gateway and now offer higher bandwidth and internet speed through our connection to the SEACOM Cable running via Mozambique. "TNM is unique in that all of our technicians are TNM employees. We don't outsource. This means we are always on call; it means that we are efficient and that we can immediately respond to problems and find effective solutions." - Fyness Zulumbi, NSS Senior Technician
Sales and Services "Let me tell you what it means to be customer-centric: all of our decisions are driven by the customer. New products, new pricing, new networking - all of it is first put to a customer focus group. When we have something new, we offer it because we know firsthand that there is demand for it, not because it might be the new hot technology." - Daniel Makata, Strategy and Planning Manager TNM promised growth and expansion and we delivered. TNM maintained above 60% market share on Post Paid (handset based long term contracts) through a successful, proactive, major account approach. In the past year, we tripled the number of Points of Sale, achieving a 95% service level. TNM also took the lead in third party distribution and we maintain a hugely competitive position within the corporate and high-end segment of the mobile market, as well as the mixed and low-end segment.
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"It is important that TNM is a Malawian company; it means that we know the country, know the people, and know the market. It means that we can develop products tailor made for Malawi. It allows us to be more innovative and deliver products that our customers need and want."
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"TNM is unique in that all of our technicians are TNM employees. We don't outsource. This means we are always on call; it means that we are efficient and that we can immediately respond to problems and find effective solutions." Fyness Zulumbi, NSS Senior Technician
This year also saw the introduction of voucher-less recharge facilities, including ATM, Points of Sale devices, and mobile to mobile top up. This is an exciting new venture that increases ease of service for customers and promotes positive mobile practices. Promotions and Marketing Two key promotions stand out in 2009 the first being the "Pompo -pompo". In this promotion Subscribers received a bonus of 10 percent when they recharged their airtime.
We are very proud of our Loyalty bonus Program. Its simple to use, efficient, and it gives back to our devoted customers. This adds value to everyday communication. We pride ourselves on doing that little bit extra.
Today we take pride that Pompo Pompo has become a household name. We also held a CONCAF SMS promotion where subscribers were automatically entered to win tickets to the CONCAF games in South Africa.
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Our loyalty bonus program continues to lead in the industry. Its ease of use allows clients to benefit from their bonuses without restriction. Customers are automatically credited every sixteenth day. This programme benefits customers and will further ensure customer retention. Distribution "I always strive for excellence. I am results driven. To achieve excellence in distribution, our strategy is 'everywhere all the time.' That is excellence." - Tom Kaponda, Distribution Manager Strengthening market position and increasing area coverage in 2009 meant a close analysis of our distribution strategy. This resulted in many innovative improvements and fine-tuning our distribution policies and procedures. In particular, we decentralized our distribution management systems. The introduction of three regional managers has resulted in increased output, improved responsiveness, and enhanced overall management. In 2009, we increased our number of distributors to 30, from 22 in 2008. We also increased our retail dealers from 5,000 in 2008 to over 12,000 in 2009. Another outstanding development was the introduction of the wholesale channel, which fills the gaps between sales visits in rural areas. With a total of 168 wholesalers, TNM increases its availability of services and can truly be everywhere all the time. This new programme allowed for an automatic penetration of TNM airtime in the wholesale market. Finally, we were able to introduce EVD and bank ATMs, including NB, Standard Bank, NBS, IndeBank, EcoBank, and FMB. This results in greater access to TNM products and ease of use for customers. "I know all of our Distributers. I know their names. I know their cell phone numbers. They call me anytime they need something, any time of day, even on the weekends. We make sure that we mean 'TNM, always with you.' Thanks to our team and our distributers, we are always with you." - Reuben Kocherani, Regional Distribution Manager Research and Development (PP - IT, Customer Operations) "I have a passion for customer service. When customers call, I put myself in their shoes. I understand where they are coming from and then work to find a solution. TNM is a pioneer in quality customer service and I love being a part of that." - Maggie Bisani, Team Leader, Call Center TNM understands that when products and services are similar, it is the customer service that sets us apart from the competition. Exceptional customer service delivery gives us a competitive edge and differentiates us from the competition. Excellent customer service is paramount to our success. One of the most important developments this year has been the deployment of our new Customer Relationship Management tool, Maximizer.
Wilma Chalulu, Public Relations and Sponsorship Manager
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"I am very proud to be a TNM Wholesale Distributer. Whenever we are selling TNM products, we feel like we are selling our own products.It makes me happy to be a part of the TNM family."
The key function of Maximizer is the creation of a customer database that will automatically track and follow-up on all customer concerns. This technology is completely unique to TNM and will allow cutting-edge, customized customer service. This year saw the development of SIM card swap, enabling customers who lose their handset or SIM card to replace it without the hassle of changing phone numbers. We are also in the process of updating our call centre with a new Asterisk communications platform, which will result in better tools and a greater ability to monitor call traffic. Asterisk provides voice recording technology that will allow staff to perform quality assurance evaluation. It can also generate a diverse range of statistics that will help direct future improvement activities. TNM continues to embark on aggressive research initiatives that uncover customer needs and wants, market trends, and competitive positioning through customer and market surveys. This research is an important tool for discovering potential areas for subscriber growth and market penetration. "There are so many examples of our excellent customer service but a recent one stands out. One of our customers has been with us for several years. We have seen his business grow and expand and have been with him every step of the way. A few months ago, he switched from prepaid to post paid and was out in the field meeting with suppliers. Suddenly he found his service cut off as he had used all of his credit for the month. He used a colleague's phone to call us and within minutes, literally minutes, his credit had been extended and he was back in business." - Daniel Chidzanja, Customer Relations
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Competition Throughout 2009, the telecommunications industry undertook great transformations. Fixed line operators that have traditionally focused on data and telephony started moving towards greater mobility. At the same time, the mobile phone industry ventured into data services with the launch of high speed mobile broadband data services. While this past year was characterized by growth driven by low-cost handsets in rural areas, there was an introduction of value added services (VAS) ranging from high speed mobile internet to caller tunes. This shift is changing the industry landscape as VAS are becoming integral business tools. In terms of market competition, the third largest mobile operator did not roll out its network by the established deadline. This limited competition to two mobile operators. The fourth and fifth largest operators had their licenses revoked, leaving room for further market growth. TNM is proud to have gained significant market share in the past year, owed in great part to increased network coverage, attractive tariffs, and a focus on portfolio quality and reliability.
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"TNM has been with us through thick and thin. It is an amazing gift to have such a true friend to the sport. TNM is unique in this sponsorship as they committed generously when other companies shied away. They saw the wisdom in investing in football and we have not disappointed them. TNM is football in this country."
Walter Nyamilandu Manda, President of the Football Associate of Malawi
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Corporate Social Responsibility and the Sponsorship
Our staff is so committed to our corporate and social responsibility projects that they actually fight over who gets to participate. Everyone wants to be associated with our various programmes.
The most exciting element of the project is that we are imparting values and helping Malawian youth acquire habits that will lead to a healthier and more beautiful country. The programme was successful and TNM will continue to support such initiatives helping to keep Malawi forever green. Our second environmental CSR programme was to create environmental awareness within the city of Blantyre. At the end of a month long Sanitation awareness campaign, TNM donated dustbins to the city, hoping to encourage a promotion of environmental issues. The dustbins were placed strategically around the city in an effort to keep Blantyre clean. TNM hopes to build on this programme, create Clean Campaigns and further beautify Blantyre. TNM Super League TNM is the proud sponsor of the largest Football League in Malawi. TNM began its relationship with Malawian football in 2005 when we signed an unprecedented MK150 million three year contract. TNM was able to come in at a time when Malawian football was really in need and Malawians were unable to support the game they love most. Without TNM's commitment, there was a chance that on a Corporate Sponsorship level, the sport would become extinct. The sponsorship has been incredibly successful and fruitful and this year, we signed an additional three year contract worth
TNM and the Environment TNM has always emphasized being "green", believing that while Malawi is one of the most beautiful countries in the world, we are suffering from environmental degradation. This year, TNM demonstrated its commitment to environmental responsibility through two CSR programmes. The first is a tree planting initiative, Every Child Plant a Tree Programme, in partnership with Heritage Environmental Trust. Sixteen schools were selected in Zomba for the pilot programme and TNM provided trees for every child in these schools. Together with the youth, TNM staff helped plant the thousands of trees, giving us an opportunity to teach these children about grassroots development, sustainable growth, and Malawi's inherent beauty.
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Malawi is passionate about football and TNM's sponsorship is a way to give back to the people who make us successful.
Football in this country is moving forward and we are getting recognition on an international level. This year, Malawi qualified for the Africa Cup of Nations for the first time in twenty-five years. The Super League provides a platform from which talented players can excel and be recognized internationally. This League is a chance to thank our supporters and give back to our fellow country men and women. "TNM has been with us through thick and thin. It is an amazing gift to have such a true friend to the sport. TNM is unique in this sponsorship as they committed generously when other companies shied away. They saw the wisdom in investing in football and we have not disappointed them. TNM is synonymous with football. TNM is football in this country." - Walter Nyamilandu Manda, President of the Football Associate of Malawi Golf TNM has been a friend to golf for many years. In 2009 we were again proud to be associated with the prestigious Malawi Open the biggest golf tournament in Malawi. The quarterly mug sponsorships also continued in Blantyre and Lilongwe Golf Clubs. We believe these Sponsorships will strengthen the brand and foster loyalty. Earthquake Victims TNM is part of a larger community. When we see our fellow Malawians in trouble, it is our duty to contribute and to help in any way we can. When the earthquake hit Karonga in December, TNM was there, on the ground, assessing needs and distributing goods. As the biggest need was for shelter, TNM donated large family tents and also contributed airtime so that both community members and emergency workers could easily communicate. In total, TNM contributed MK 1.5 million worth of goods and services to those in need. This was a short term project but one that made a difference and emphasized TNM's commitment to the larger Malawian family. "The TNM staff are exceptional in their commitment and
MK180 million. Through a careful and responsible sponsorship, TNM has helped football grow and develop in healthy ways, ensuring that the sport is played with honor and integrity. We believe that football brings people together; it cuts across the fabric of our society, and unites Malawi.
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YONECO has a real partnership with TNM. When we see a social problem arise, we approach TNM and work out solutions together. YONECO is supported on every level by TNM's staff, all the way to the CEO who makes personal appearances at YONECO events and programmes.
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The TNM staff are exceptional in their commitment and excitement. Everyone is passionate about being Malawian. TNM is a truly Malawian company, not only looking at Malawi today, but Malawi in the future.
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excitement. I think it comes back to being Malawian. Everyone here is so passionate about being Malawian and TNM being a Malawian company and they are ready to give back." Mpezenji Gonani, Human Resources Officer. YONECO YONECO, or Youth Net and Counseling, is a national non-profit, non-governmental organization created in 1997. Its vision is a self-reliant HIV/AIDS free society that respects democratic values and principles. YONECO focuses on several areas, including Youth Development, which includes economic development, youth leadership, health, and education. The Care and Support programme offers innovative initiatives that promote self-reliance through material and psychological support. YONECO has also developed a Human Rights and Democracy programme intended to promote public service and accountability, civic education, political participation and human rights monitoring.YONECO's Women and Children programme promotes women's education, economic empowerment, and health. Within this programme, YONECO has partnered with TNM to establish the first national Tithandizane Helpline, a free phone line that connects youth to professional counselors who can provide information on sexual and reproductive health, human rights, HIV/AIDS, and respond to reports of child abuse.
TNM is a profit driven company but they realize that they owe their success to the Malawian people and they are eager to invest their profits back into the community into the future of the country, and the future is young people.
The Helpline receives more than two hundred calls every day. TNM provides the airtime, allowing the helpline to remain free for callers. TNM further demonstrated its commitment to this issue by sponsoring the Fifth Africa Regional Child Helpline Consultation Conference in September of 2009. YONECO has a real partnership with TNM. When we see a social problem arise, YONECO can approach TNM and work out solutions together. We work together to support initiatives on the ground and react quickly. YONECO is supported by every level of TNM's staff, all the way to the CEO who makes personal appearances at YONECO events and programmes - Macbain Mkandawire, Executive Director, YONECO. As stated on the cover of this 2009 Annual Report: We promised expansion and growth. We delivered. I can guarantee you that all at TNM will continue to do so in the years to come. On behalf of the team,
Werner Schrijver Chief Executive Officer
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Executive management
Mr. Werner Schrijver, 58, Chief Executive Officer Mr. Werner Schrijver holds a Bachelor of Arts in Business Administration and has been commercially responsible for three international mobile telecommunications start-ups having worked for such companies as T-Mobile International,Tele Denmark International and KPN Telecom International. In both the B2B and B2C markets, Mr. Schrijver has had more than 20 years experience managing large units (1,000 employees plus) at board level. Mr. David Chetty, 45, Chief Technical Officer Mr. David Chetty holds a National Telecommunications Diploma and a National Higher Diploma in Post-School Education and since 1984 has experience in start up telecommunications companies and has worked in senior management positions with MTN, Celtel, Swedtel and Nokia in Africa and the Middle East Mr. Macleod Duncan Matandika, 40, Chief Financial Officer Mr. Macleod Matandika holds a Masters in Business Administration and is an accountant from the Polytechnic. He joined the company at its commencement as the Operations Accountant up to 1998. He has wide experience in the mobile industry and has been part of the growth of the company. Prior to his appointment as Chief Financial Officer in April 2008 he worked as a Management Accountant. Mr. Charles Kamoto, 35, Head -Commercial Mr. Charles Kamoto holds a Bachelor of Business Administration and currently undertaking an MBA program. Mr. Kamoto has over 9 years experience in the Telecommunications arena. Having joined the Company as Branch Executive in 2000.He has held a range of positions during his tenure 6 of which has been in excecutive management. Mrs. Christina Mwansa, 36, Head- Legal & Corporate Affairs Mrs. Christina Mwansa holds a Bachelor of Laws Honours Degree from Chancellor College, University of Malawi. She joined the Company in 2000 as Legal Officer and later the same year was appointed Company Secretary. She has been a licensed legal practitioner for over 10 years. Mr. Patrick Mtamba, 36, Head - Human Resources & Administration Mr. Patrick Mtamba hold a Bachelor of Business Administration. He joined TNM in 2009 and has extensive experience in Human Resource Management & Administration.
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Our management team implements the long term strategy and vision of the company to generate shareholder value and positive relations with stakeholders
Mr. Charles Kamoto, Mr. Patrick Mtamba, Mrs. Christina Mwansa, Mr. Werner Schrijver, Mr. Macleod Duncan Matandika, Mr. David Chetty
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Notice of Annual General Meeting Notice Is Hereby Given That The 14Th Annual General Meeting Of The Shareholders Of Telekom Networks Malawi Limited Will Be Held At Mount Soche Hotel, Njamba Room, Blantyre On Thursday, The 18Th June, 2009 At 14:00Hrs At Which The Following Business Shall Be Transacted:
1. FInancial statements To receive and consider for adoption the report of the Directors, the report of the Auditors and the Annual Financial Statements for the year ended 31st December, 2008. 2. Directors Re-election And Appointment To re-elect Messrs Pius Percy Mulipa and John Michael ONeill who retire in terms of the Articles of Association, by rotation but are eligible for re-election. To confirm the appointments of Dr. Harry Sam Harrison Gombachika and Dr. Stephanus Johannes Minnaar who were co-opted during the year to fill casual vacancies. 3. Ordinary Business To consider and, if deemed fit, to pass with or without modification the following ordinary resolutions: 3.1 That unless otherwise determined by the Company in a general meeting, the Chairman and each Director shall be entitled to remuneration for his/her services at the following rates per annum respectively, payable quarterly in arrears with effect from 1st January, 2009. 3.1.1 Directors Fees: Chairman: MK 900, 000.00 per annum Directors: MK 750, 000.00 per annum 3.1.2 Sitting Allowances Chairman: MK 37, 500.00 per sitting Directors: MK37, 500.00 per sitting 3.2 That audit fees of MK4.5 Million payable to KPMG in respect of the audit of the Financial Statements for the year ended 31st December, 2008 be approved. 3.3 That Deloitte & Touche be appointed as Auditors for the 2009 financial year and to authorise the Directors to fix their remuneration. 3.4 That a final dividend of MK201 Million or 2 tambala per share for the year ended 31st December, 2008 recommended by the Directors be declared and be paid on 23rd July, 2009 to all shareholders registered in the books of the company at the close of business on 14th July, 2009. The register of members will be closed from 9th July, 2009 to 14th July, 2009 both dates inclusive and no transfers will be registered during this time. 4. Other Business To transact such other business as may be transacted at an Annual General Meeting of members of which prior notice should have been given to the Company Secretary not less than 21 days before the date of the Annual General Meeting. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend, speak and vote in his/her stead. The proxy need not be a member of the company. Proxy forms should be forwarded to reach the Companys registered office or the Transfer Secretaries, not later than forty eight (48) hours before the time of holding the meeting and in default the instrument of proxy shall not be treated as valid. Dated: 26th May 2009. BY ORDER OF THE BOARD
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Form of Proxy: TNM 15th Annual General Meeting Please read the Notes overleaf before completing this form. This form is for use only by registered or certified shareholders. Form of Proxy for the 14th Annual General Meeting [AGM] of Telekom Networks Malawi Limited. I/We . [name(s) in block letters] of ... [address] being a shareholder / member of the above-named company and entitled to do hereby appoint 1. ... of. [or failing him/her]
Number of votes
[ 1 Share = 1 vote]
2..of. [or failing him/her] 3. the Chairperson of the meeting as my/our proxy to attend, speak and vote for me/us or on my/our behalf at the Annual General Meeting of the company to be held at the Njamba Room, Mount Soche Hotel on 18th June, 2009 at 2-00pm and at any adjournment thereof as follows:
Agenda item 1. Approval of minutes of previous AGM 2. Adoption of the 2008 annual financial statements 3. Re-election and appointment of the following directors 3.1 To re-elect Mr Pius Percy Mulipa 3.2 To re-elect Mr John Michael ONeil
Mark with X where applicable

In favour Against Abstain
3.3 To confirm Dr. Harry Sam Harrison Gombachikas appointment 3.4 To confirm Dr. Stephanus Johannes Minaars appointment 4. Approval of directors remuneration 5. Approval of audit fees 6. Appoint Deloitte & Touche as Auditors for the 2009 financial year 7. Declaration of final dividend
62
Signed at on this ... day of .. 2009
Signature Assisted by me [where applicable] [see Note 3] ............. Assisted by me [where applicable] [see Note 3] ............. Full name(s) of signatory(ies) if signing in a representative capacity [see Note 4] Notes: A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend, speak and vote in his/her/its stead. A proxy need not be a member of the company. If this proxy form is returned without any indication as to how the proxy should vote, the proxy will be entitled to vote or abstain from voting as he/she thinks fit. A minor must be assisted by his/her guardian. The authority of a person signing a proxy in a representative capacity must be attached to the proxy unless the company has already recorded that authority. In order to be effective, proxy forms must reach the registered office of the Company;, Livingstone Towers, Fifth Floor, Glyn Jones P.O. Box 3039, Blantyre, Malawi or the transfer secretaries; FMB Transfer Secretaries, Livingstone Towers,2nd Floor Glyn Jones Road, Private Bag 122, Blantyre, Malawi by no later than forty eight (48) hours before the time of holding the meeting. The delivery of a duly completed proxy form shall not preclude any member or his/her/its duly authorised representative from attending the meeting, speaking and voting instead of such duly appointed proxy. If two or more proxies attend the meeting, then that person attending the meeting whose name appears first on the proxy form, and whose name is not deleted, shall be regarded as the validly appointed proxy.
63
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Telekom Networks Malawi Limited Directors report Report Of Directors

Directorate And Secretariat

Telekom Networks Malawi Limited

Directors Report Auditors

Telekom Networks Malawi Limited

Statement Of Directors Responsibilities

Telekom Networks Malawi Limited

Statement Of Comprehensive Income

Telekom Networks Malawi Limited

Statement Of Financial Position 31 December 2009 Assets Non-current Assets

2009 K000 9,231,585 98,890 9,330,475

Property, plant and equipment Intangible assets Total non-current assets

181,956 1,565,062 8,216 642,042 2,397,276 11,727,751

Total Assets Capital And Liabilities Equity

401,618 2,346,921 4,069,674 6,818,213 434,456 427,523 106,892 968,871

1,703,085 14,742 200,809 260,850 1,682,157 79,024 3,940,667 4,909,538 11,727,751

Total Equity And Liabilities

Telekom Networks Malawi Limited

Statement Of Changes In Equity 31 December 2009

Total K000 3,158,158 1,529,965 2,398,539 (880,809) 6,205,853

Telekom Networks Malawi Limited

2009 K000 7,786,733 (4,998,190) 2,788,543

2008 K000 6,541,323 (3,684,702) 2,856,621 (884) (618,383) 2,237,354

(115,678) (630,235) 2,042,630

Net cash generated by operating activities Cashows to investing activities

Cash and cash equivalents at end of year Additional statutory requirement

Telekom Networks Malawi Limited

Adoption Of New And Revised International Financial Reporting Standards

Telekom Networks Malawi Limited

Adoption of new and revised International Financial Reporting Standards (Contd)

Telekom Networks Malawi Limited

Signicant accounting policies

3.1 Functional and presentation currency

3.2 Use of estimates and judgements

3.3 Foreign currency

Telekom Networks Malawi Limited

(i) Recognition and measurements

(ii) Subsequent costs

(iv) Determination of residual values and useful lives

(v) Gains and losses on disposal

(vi) Interest and exchange losses on loans

Telekom Networks Malawi Limited

3.5 Intangible assets

3.6 Impairment of non-nancial assets

Telekom Networks Malawi Limited

3.8 Trade receivables

3.9 Cash and cash equivalents

3.10 Income tax

Telekom Networks Malawi Limited

3.12 Earnings per share

3.13 Revenue recognition

Telekom Networks Malawi Limited

Signicant accounting policies

3.13 Revenue rocognition(Contd) Starter packs, sim cards and other

3.14 Employee benets Pension obligations - Dened Contribution Plan

3.15 Financial instruments 3.15.1 Financial assets

Telekom Networks Malawi Limited

3.15.3Impairment of nancial assets

3.16 Financial liabilities and equity instruments 3.16.1Classication as debt or equity

Telekom Networks Malawi Limited

3.16.4Financial liabilities at Fair Value Through Prot or Loss

3.16.5Other nancial liabilities

Telekom Networks Malawi Limited