Vision 2008: To be a global leader in broadband satellite communications and a regional leader in satellite TV broadcasting
Consolidated Financial Statement In million Baht, except per share values in Baht Operating result Total Revenue Service and Sales Revenue Gross Profit Operating Profit Net Profit EBITDA Financial Position Total Assets Total Liabilities Shares' holder equity Financial Ratio Current Ratio Debt to Equity Ratio Gross Profit Margin Operating Profit Margin EBITDA Margin Net Profit Margin Return on Asset Return on Shareholder's Equity Earning per share Book Value per Share As of December 31st, 2007
2007
2006
2005
2005
2006
2007
12,799 6,435 843 (560) 3,040 2,197
8,973 6,846 925 (330) (46) 2,654
6,876 5,589 1,689 679 1,337 2,288
6,876 5,589 1,689 679 1,337 2,288
8,973 6,846 925 (330) (46) 2,654
12,799 6,435 843 (560) 3,040 2,197
30,101 13,417 16,684
32,834 19,256 13,578
33,983 20,177 13,805
33,983 20,177 13,805
32,834 19,256 13,578
30,101 13,417 16,684
0.93 0.59 13% (9%) 34% 24% 10% 20% 2.78 15.24
0.39 1.17 14% (5%) 39% (1%) (0%) (0%) (0.04) 12.39
0.58 1.24 30% 12% 41% 19% 4% 12% 1.34 12.60
0.58 1.24 30% 12% 41% 19% 4% 12% 1.34 12.60
0.39 1.17 14% (5%) 39% (1%) (0%) (0%) (0.04) 12.39
0.93 0.59 13% (9%) 34% 24% 10% 20% 2.78 15.24
Total Assets
Million Baht
EBITDA
Million Baht
3,000
35,000
2,654
33,983 34,000
2,500
2,288
2,197
32,834
33,000
2,000
32,000 1,500 31,000
30,101
1,000
30,000 500
29,000
0
28,000 2005
2006
2007
2005
2006
2007
Book Value per Share
Million Baht 15.24
16 14
12.60
12.39
2005
2006
12 10 8 6 4 2 0 2007
Chairman’s Report
Dear Shareholders,
The year 2007 has been a busy yet exciting and the challenging year for Shin Satellite as we continue to aggressively expand our satellite and mobile services across the region.
Empowering Asia-Pacific The IPSTAR broadband satellite has seen significant progress since its launch two and a half year ago. We have commenced commercial services in seven countries throughout the Asia-Pacific region, namely: Australia, Cambodia, China, Myanmar, New Zealand, Thailand and Vietnam. IPSTAR has empowered the people in these countries to utilize the broadband services wherever they are. For example, over 15,000 rural schools throughout Thailand now have access to a wealth of information through the internet from IPSTAR, something that would not have been possible a few years ago.
In 2007, we reached a major milestone of delivering 104,067 IPSTAR User Terminals. This is a significant endorsement of our products and services in the region. We have also signed major contracts to expand our services in Indonesia, Malaysia and The Philippines. In Australia, IPSTAR services have seen continuous success and, as a consequence, we secured a major National Satellite Operator contract in late 2007.
Not only has IPSTAR seen major activities, but our Thaicom business has also been expanding through our THAICOM-5 video platform. In 2007, we launched a satellite free-to-air TV platform in Thailand via THAICOM-5 together with a significant product named “DTV”, which is a low-cost Ku-band satellite dish and receiver, through our subsidiary, Shin Broadband Internet (Thailand) Co., Ltd. Due to its low cost, high picture quality and absence of monthly service fees, the DTV products were well received in the market with sales reaching 101,167 units in the first six months alone. We plan to expand such services to our neighboring countries in 2008.
Empowering our neighbors In June 2007, Shin Satellite sold a 49 percent stake in Shenington Investments Pte Ltd to Asia Mobile Holdings Pte. Limited (“AMH”) for US$200 million. Shin Satellite remains the controlling shareholder with a 51 percent stake. This strategic partnership combines our deep market experiences with AMH’s technical knowhow as we continue to grow our mobile businesses in Cambodia and Laos. At the end of 2007, Cambodia Shinawatra Co., Ltd. also launched its 3G mobile services named “MFone3G”.
Financial Performance In 2007, Shin Satellite had total revenue of Baht 12,799 million, or a 43% increase from 2006 mainly due to the gain of Baht 5,127 million on the sales of 49% shares of Shenington Investments. The increase in the revenue of IPSTAR in 2007 mainly resulted from the continued successful deployment of IPSTAR services in Australia serving the rural area. While in Thailand, our partner has continued to deploy IPSTAR User Terminals to supplement it existing telephone line network and internet broadband services nationwide. Revenues from the telephone businesses in Cambodia and Laos also increased.
Both
Cambodia
Shinawatra
(“CamShin”)
and
Lao
Telecommunications (“LTC”) demonstrated an increase of their mobile subscribers with total of 1,261,510 subscribers in 2007, a 39% increase from 2006. According to their performances in 2007, LTC declared a dividend to the shareholders in the total amount of USD 12 million of which 24.99% or US$3 million will be paid to the Company, while CS Loxinfo (“CSL”) declared a dividend at the rate of Baht 0.40 per share. Finally, I would like to sincerely thank you, our shareholders, customers and partners, for having trust and confidence in our management team and staff as we strive to become a global leader in the broadband satellite industry and a regional leader in satellite TV broadcasting.
Paron Israsena Chairman of the Board
Report of the Audit Committee Dear Shareholders of Shin Satellite Plc. The Audit Committee established by a resolution from the Board of Directors was composed of three independent directors. Professor Hiran Radeesri was appointed as the chairman on March 20, 2001. Mrs. Charintorn Vongspootorn was appointed as committee member on December 8, 1999. Ms. Peangpanor Boonklum was appointed as committee member on January 24, 2006. Mr. Sivaraks Phinicharomana, the Vice President - Internal Auditing of Shin Satellite was the secretary to Audit Committee. Ms. Paengpanor Boonklum had resigned from committee members on May 11, 2007 due to the increasing of responsibilities regarding her regular job and the Board of Directors appointed Mr. Samrieng Mekkriengkrai as a new committee member as of August 10, 2007. In 2007, the Audit Committee met 13 times to consider the following issues. 1. Reviewed quarterly and yearly financial statements before proceeding to the Board of Directors to insure conformity with generally accepted accounting principles as well as disclosure properly of related parties and connected transactions including transactions that might have conflict of interests in nature. And, there was a meeting between Audit Committee and auditor without management attending, therefore; the Audit Committee could rest assure on independence and audit performance. 2. Reviewed internal control systems and followed up corrective actions through the Office of Internal Auditing and found that management had taken action in accordance with audit recommendations. Thus, the Audit Committee could assure that the company had sufficient internal control systems. In addition, the Audit Committee overviewed auditing activities to assure its performing in according with risk based audit plan and developing its activities on the continuous basis. 3. Reviewed the result of risk management from Risk Management Committee and it was confirmed that the process was sufficient and improved continuously. 4. Reviewed whether the Company had followed the best practices of corporate governance issued by the Stock Exchange of Thailand, and complied with other official rules and regulations. 5. Reviewed and provided opinions on connected transactions and those that might have conflict of interests with regarded to its correctness and adequate disclosure. 6. Reviewed auditor independence and recommended annual appointment as well as compensation. 7. The Audit Committee had conducted self-evaluation on performance for the year 2006. They were satisfied with the result and reported it to the Board of Directors. The Audit Committee had unlimited access to the company information. They could request advices and discussed matters with management, internal and external auditor and outside consultant without restriction. The Audit Committee had opinion that the internal control systems of the company were sufficient for the operation systems that had been evaluated in term of its effectiveness. Besides,
the company had continuous development on the good corporate governance as well. In 2007, the Audit Committee had satisfied with result of independent evaluation of the auditor but KPMG Phoomchai Audit Co., Ltd., offered same audit quality with lower fee, therefore; the Audit Committee recommended the Board of Directors to appoint Mr. Supot Singhasaneh, Certified Public Accountant No. 2826 or Mr. Winid Silamongkol, Certified Public Accountant No. 3378 or Ms. Somboon Supasiripinyo, Certified Public Accountant No 3731 and Mr. Charoen Phosamritlert, Certified Public Accountant No. 4068 from KPMG Phoomchai Audit Co., Ltd., to be the company’s auditors for 2008. The appointment has been preceded to the shareholders’ meeting for approval.
(Prof. Hiran Radeesri) Chairman of the Audit Committee 20 February 2008
INVESTMENT STRUCTURE OF SHIN GROUP (As of February 4, 2008) Shin Corporation Plc. 1), 2)
Advanced Info Service Plc. 2)
98.55%
ITV Plc. 2)
Shin Satellite Plc. 2)
Digital Phone Co., Ltd.
51%
60.00% 100%
99.99%
99.99%
99.99%
99.93%
49.00%
99.93%
99.99%
I.T. Applications and Services Co., Ltd.
Cambodia Shinawatra Co., Ltd.
Artware Media Co., Ltd.
99.99%
Payment Solution Co., Ltd.
Media Connex Co., Ltd.
CS LoxInfo Plc. 2)
Advanced Datanetwork Communications Co., Ltd.
49.00%
99.99%
99.99%
Shenington Investments Pte Ltd. 1)
Wireless Device Supply Co., Ltd. 39.89%
51.00%
99.99%
99.99%
Shin Broadband Internet (Thailand) Co., Ltd. 99.99%
52.92%
41.28%
42.71%
99.14%
99.86%
Advanced MPay Co., Ltd.
Loxley Information Services Co., Ltd. AD Venture Co., Ltd.
99.99%
99.99%
AIN GlobalComm Co., Ltd.
Super Broadband Network Co., Ltd.
99.99%
Advanced Wireless Network Co., Ltd.
60.00%
Hunsa Dot Com Co., Ltd.
Sodamag Corp Co., Ltd.
Watta Classifieds Co., Ltd.
Mobile from Advance Co., Ltd. 71.85%
N.T.U. (Thailand) Ltd.
IPSTAR Australia Pty Ltd.
1)
Shineedotcom Co., Ltd.
99.99%
Data Network Solutions Co., Ltd.
Matchbox Co., Ltd.
IPSTAR Co., Ltd. 100%
Advanced Magic Card Co., Ltd.
99.96%
Teleinfo Media Plc.
99.99%
Advanced Contact Center Co., Ltd.
Lao Telecommunications Co., Ltd.
100%
IPSTAR New Zealand Ltd.
100%
IPSTAR DO BRASIL 3)
70.00%
Star Nucleus Co., Ltd.
70.00%
Spacecode LLC
100%
IPSTAR International Pte. Ltd.
100%
IPSTAR Global Services Ltd.
Remark – Data Line Thai Co., Ltd. ,which is a subsidiary of Advanced Info Service PLC, registered of its cessation with the MOC on November 29, 2007, currently on process of liquidation. – Com Chat Co., Ltd., Idea Maker Co., Ltd. and Decode Co., Ltd., which are subsidiaries of Watta Classifieds Co., Ltd., registered of its cessation with the MOC on November 30, 2007, currently on process of liquidation.
1) Holding Company 2) Listed Company on the Stock Exchange of Thailand 3) On process of set up and register the Company
General Background and Major Developments Satellite Concession
The Company was founded on November 7th, 1991 by Shin Corporation Plc. ("SHIN"), which was granted a 30-year Build-Transfer-Operate concession from the Ministry of Transport and Communications (currently transferred to the Ministry of Information and Communication Technology – the “MICT”) to operate the national satellite project. The concession expires in 2021. The Company has the right to build, launch and operate the Thaicom satellite project throughout the concession period. Under the concession, the Company is required to pay the Ministry of Information and Communication Technology an agreed percentage of the Company's annual gross revenue earned from the transponder business, or a minimum remuneration, whichever is higher. Moreover, the Company must transfer to MICT the ownership of the satellites, satellite control station (Telemetry, Tracking, Command & Monitoring - TTC&M), and all related operational equipment once the construction and installations are complete.
His Majesty the King Bhumibol Adulyadej has officially given a name to the satellites of this project, "THAICOM," as a symbol of the linkage between Thailand and modern communications technology.
Shin Satellite became a listed company on the Stock Exchange of Thailand on January 18th, 1994 under the Tigger name “SATTEL”. Moreover, the Company expanded to internet and telephone businesses in 1997 and 2000 respectively. As of December 31, 2007, Shin Corporation Plc., which is the Company's major shareholder, holds 41.28% of shares in the Company.
Progress and Major Developments during the Past Five Years
2003
March
CSL
merged
its
internet
service
business
with
Loxley
Information Services Co., Ltd. ("Loxserve"), which provides LoxInfo Internet services, under a 10 year concession (to expire in 2006) from CAT. SBI holds 94.19% of the shares.
CSL issued additional ordinary shares to increase authorized share capital, following the shareholders' resolution passed at the extraordinary meeting in December 2002. As a result, Shin Broadband Internet (Thailand) Co., Ltd. (“SBI”)'s percentage of shareholding in CSL decreased from 98.07% to 50.02%.
SBI purchased 39.99 million shares of C.S. Satellite Phone Co., Ltd., ("CSP") from CSL, allowing SBI to own 80% of CSP shares.
December
CSP registered its dissolution.
2004 April
CSL initially offered additional ordinary shares to the public (IPO) and became a listed company on the Stock Exchange of Thailand on April 8th, 2004.
May
On May 17th, 2004, the Company changed the par value per share from ten (10) Baht to five (5) Baht.
October
On October 27th, 2004, Shin Corporation Plc. and the Ministry of Information and Communication Technology amended the concession contract regarding the proportion of shareholding in the Company by Shin Corporation Plc., from a previous minimum of 51% to a current minimum of 40%.
2005 March
At a CSC Extraordinary Shareholders’ Meeting, a resolution was passed to approve CSP’s liquidation. After the liquidation, CSP
had Baht 103,827,823 cash on hand. The money was divided and paid back to shareholders at 2.07 Baht/ share. On March 25th, 2005, the registration of CSP’s dissolution was approved by the Ministry of Commerce. On March 31st, 2005, CSP paid Baht 83 million back to the group and Baht 21 million to other CSP shareholders, meaning that the liquidation of CSP was complete according to the Civil and Commercial Code.
June
The Company successfully raised more than Baht 3,182 million from a public offering of 208 million new shares to institutional and retail investors. The Company offered the new shares at Baht 15.30 per share. Institutional investors were allocated 110 million shares with 98 million shares for retail investors. After the PO process, SATTEL increased its paid-up capital from Baht 4,387 million to Baht 5,427 million. The total number of ordinary shares offered to the public accounted for 19% of the new amount of total paid up capital.
July
Shenington Investments Pte (“SHEN”) increased its registered capital, with 2,200,000 shares at USD 1 per share, or 2.2 million USD paid by shareholders, to Cambodia Shinawatra Co., Ltd. (“CamShin”). CamShin now has 19.2 million USD of registered and paid up capital.
August
On August 11th, THAICOM 4 (IPSTAR), the world’s largest commercial broadband satellite and the first broadband satellite in Asia-Pacific, was launched successfully from the Spaceport at Kourou, French Guiana, in South America.
October-November Six IPSTAR second generation gateways in Thailand, Vietnam, Australia, New Zealand and Myanmar were officially inaugurated.
December
The Company has commenced the IPSTAR service to TOT Public Company Limited (“TOT”), which is appointed to be the National Service Operator (NSO) of IPSTAR in Thailand.
2006 April
The Company has reached an agreement with China Satellite Communications Corporation (“China Satcom”) to cooperate in launching IPSTAR broadband services in China.
May
The Company successfully launched the THAICOM 5 satellite. THAICOM 5 has a global beam footprint covering Asia, Australia, Europe and Africa and it is mainly used for broadcasting services such as Direct-to-Home (“DTH”) and High Definition Television (“HDTV”), and other telecommunication services.
May
The Company inaugurated the IPSTAR Gateway in Beijing, China. Beijing gateway, the first true broadband satellite gateway in the country is able to provide IPSTAR services to the northern part of China.
October
THAICOM 3 Satellite was deorbited from 50.5 degrees East as the satellite experienced a power loss to such an extent that it could not provide further service. The deorbit of the THAICOM 3 Satellite, however, has no adverse effect on the customers because the Company has transferred all THAICOM 3’s customers to the THAICOM 5 Satellite since July 2006.
December
The Company completed the construction of the other two IPSTAR China gateways, in Shanghai and Guangzhou, after the first gateway in Beijing was inaugurated in May 2006. With the completion of these three gateways, IPSTAR service is now available nationwide in China.
2007 February
CSL acquired additional 0.5 million ordinary shares in LoxServ from CAT (480,000 shares) and its employees (3,600 shares) at Baht 12.90 per share, representing a total price of Baht 6.2 million or 1.86% of the paid-up share capital of LoxServ.
March
The Company has signed an exclusive contract with BayCity Communications Limited as the IPSTAR National Service Operator (NSO) for the continued growth and expansion of IPSTAR services in New Zealand.
April
The 2007 general shareholders’ meeting of CSL approved the increase of its registered capital from 649,020,074 shares, at par value of 1 Baht per share to 660,849,474, reserved for its ESOP Grant I to IV programs, and ESOP Grant V program. CSL acquired 0.12 million common shares of Watta Classifieds Company Limited (“Watta”), a Print Classifies Directories Business, equivalent to 60% of share capital of Watta at the total price of Baht 88 million.
May
CSL acquired additional 991,593 ordinary shares in LoxServ from Point Asia Dot Com (Thailand) Company Limited at Baht 2.02 per share, representing a total price of Baht 2 million or 3.8% of paid-up capital of LoxServ. After this acquisition, the Company held 99.86% of the paid-up capital of LoxServ.
June
SBI acquired a common share of N.T.U. Company Limited (“NTU”) on June 22, 2007, from the previous shareholders at Baht 62.50 per share for the total of 25,020 shares or 20.85% of the paid-up capital, representing a total price of Baht 1.56 million. After this acquisition, SBI held 71.85% of the share capital of NTU.
July
The Company sold a 49 percent stake in Shenington Investments Pte Ltd (“Shenington”) to Asia Mobile Holdings Pte Ltd (“AMH”) for consideration value of US$ 200 million. This transaction was completed on July 25th, 2007.
August
The CSL Board of Directors’ meeting passed a resolution to approve the shares repurchase program for financial management purpose (Treasury Stock Program) at the maximum amount not exceeding Baht 225 million.
September
The Company has signed a Cooperation Agreement with TIME dotcom Berhad (“TIME”), Malaysia’s leading Telecom solutions
provider, to deploy IPSTAR broadband satellite services in Malaysia and to operate the IPSTAR Malaysian gateway. The Company has singed a Contract with TNR TELECOMS to operate the IPSTAR gateway in the Philippines and to provide IPSTAR services. November
The Board of Directors’ meeting approved the establishment of a new subsidiary, CAM DTV Network Co., Ltd. (“CAM DTV”) in Cambodia on November 14, 2007. CSL repurchased its shares in the total of 51.7 million shares (at a par value of 1 Baht per share) or equal to 8.3% of total paid-up capital of the Company at the amount of Baht 222.1 million. After this share repurchase program, CSL shares increase from 40.02% to 43.48%. The Company has signed an Agreement with FirstAsia Group of Indonesia to provide IPSTAR gateway operations and services. The Company has entered into a 12 year definitive Agreement with ETT Limited (ASX: ETT) as the exclusive National Service Operator (NSO) for IPSTAR broadband satellite services in Australia.
Income Structure Income Structure of Shin Satellite and Subsidiaries from 2005-2007.
Unit: Million Baht % held by SATTEL -
Revenue
%
Revenue
%
Revenue
%
3,523
51.24
4,360
55.17
4,360
55.17
99.99
65
0.95
80
1.01
80
1.01
2,001
29.10
2,406
30.45
2,406
30.45
74
1.08
86
1.09
86
1.09
40
0.59
832
10.53
832
10.53
1,083
15.75
-
-
-
-
Other revenue
89
1.29
138
1.75
138
1.75
Total revenue
6,875
100.00
7,902
100.00
7,902
100.00
Type of Business
Operating Company
Satellite and related services
Shin Satellite
Internet related services
Shin Broadband Internet Shenington Investments N.T.U. Shenington Investments
Telephone related service
2006
2007
100.00
100.00
Share of net results from investments - equity method Gain from foreign exchange Revenue from insurance compensation
2005
Note: 1. In 2005-2007, the number represented a new adopted income structure according to the implementation of the Corporate Tax under Accounting Policy. 2. After the second quarter of 2004, SATTEL’ s year end revenue from sale and services did not include the revenue from the internet business of CSL and the revenue from the Telephone directory printing and distributing services of TMC. This was resulted by the change in the operating results method of CSL to revision on the equity methods after SATTEL reduced its shares on CSL to 40.02%. The satellite transponder leasing and related services, which are the core business of the Company, comprise of two major groups of customers at year end 2007 as follows: Broadcasters
65.77%
Telecommunication service providers 34.23%
Broadcasters, representing 65.77% - Television 45.30% - Digital Ku-band Direct-to-Home (DTH) 18.39% - Educational TV 1.58% - Other broadcasting services 0.50% Telecommunication service providers, representing 34.23% - VSAT 21.33% - Rural telephony service 2.63% - Internet service 5.90% - Cellular phone 4.37%
Income on Sale & Services can be classified into two types: the local and international customers: Unit: percentage Type of Income Domestic Customers Shin Satellite Plc. CS LoxInfo Plc. Shin Broadband Internet (Thailand) Co., Ltd. Teleinfo Media Plc. Total local customers International customers Shin Satellite Plc. Shenington Investments Pte Ltd. IPSTAR Co., Ltd. Total international customers Total service income
2005
2006
2007
43.5 0.4
42.6 0.5
42.6 0.5
43.9
43.1
43.1
18.7 36.5 0.9 56.1 100.0
13.9 35.8 7.2 56.9 100.0
13.9 35.8 7.2 56.9 100.0
Major Shareholders • List of the first top 10 major shareholders The first top 10 shareholders on the closing date of the registration book as of June 15, 2007 are as follows: No. 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Name SHIN CORPORATION PUBLIC COMPANY LIMITED THAI NVDR COMPANY LIMITED STATE STREET BANK AND TRUST COMPANY FOR AUSTRALIA GERLACH & CO-DIMENSIONAL EMERGING MARKETS VALUE FUND, INC MORGAN STANLEY & CO. INTERNATIONAL PLC MR. UMNUAY PICHITRAPONGCHAI MR. KATAPOL KANOKPRUK TFB FOR MFC-THAI FUND INVESTMENT PLAN MRS. RANEE AUETHAVEEKUL MR. DUMRONG KASEMSET Total
No. of Shares
Percentage of Investment
450,870,934 84,836,366 37,276,800
41.32 7.78 3.42
11,230,400
1.03
10,674,500 9,800,000 9,400,000 7,737,800 7,600,000 7,357,497
0.98 0.90 0.86 0.71 0.70 0.67
636,784,297
58.37
Source: Major Shareholders as of June 15, 2007 prepared by Thailand Securities Depository Co., Ltd. The investors can find for more information in website: www.set.or.th before Annual General Shareholders Meeting for the year 2008 date. NOTE : Shin Corporation Plc. comprises of two major shareholders: 1. Cedar Holdings Limited – The registered company in Thailand which is 5.8% held by the Siam Commercial Bank of Thailand; 45.2% held by Kularp Kaew Co., Ltd. (“Kularp kaew”); and 49% held by Cypress Holdings Ltd. (“Cypress”), the indirect subsidiary of Temasek Holdings (Pte) Ltd. 2. Aspen Holdings Limited – The registered company in Thailand and the indirect subsidiary of Temasek Holdings (Pte) Ltd.
• The major shareholders whose behaviors have had a significant influence on the operational policies or management of the company. Shin Satellite Public Company Limited held by Shin Corporation Public Company Limited in the amount of 450,870,934 shares, or 41.28 percent of the paid-up capital.
The shareholding structure of Shin Corporation Public Company Limited is as follows:
As of December 31, 2007
•
Industry Outlook & Competition Conventional Satellite Transponders In 2007, the Company is still able to maintain the existing customers, and capitalize the opportunities in the high growth markets in Indochina and South Asia. The demand for transponder is growing in Indochina and South Asia corresponding to the high economic growths in these regions. Although there has been high competition among satellite operators from China, Malaysia, Europe and America. However, the Company has been successful in acquiring competitive advantage by offering Value Added Service such as Video Broadcasting, Teleport and System Integration to customers. In 2008, the Company will consistently emphasis on the Video Broadcasting Applications. The Company will cooperate with the teleport partners in Europe and South Asia regions to package a competitive end-to-end transmission solution for customers acquiring satellite distribution using C-band for service areas throughout Asia, Africa, Australia, and Europe regions. Also the Company will cooperate with existing customers to plan for their network expansion. Broadcasting THAICOM satellite positions itself as having the prime orbital slot at 78.5 degrees East a “Hot Bird” and strategically places itself as the key player for broadcasting businesses in Asia in terms of both the number of viewer bases and the number of video channels on THAICOM satellites. In 2007, the Company focused on its broadcasting business in both domestic and international markets. As a result, the Company’s broadcasting business has grown dramatically. The number of satellite TV channels on THAICOM satellites at 78.5 degrees East has increased to 243 channels in 2007. This makes THAICOM’s prime orbital slot of 78.5 degrees East the number one ranking in Asia-Pacific in terms of the number of carried satellite TV channels. In 2007, the Company’s key customers in the broadcasting business are still the domestic broadcasters and channel/content operators, both Free-to-Air (“FTA”) and Pay TV. For Thai market, the Company emphasized on the Ku-band Direct-to-Home (“DTH”) segment, which end-users can use small antennas (60-90 cm.) to receive satellite TV channels directly from THAICOM satellites. The Company also emphasized its efforts on the C-band Channel Distribution segment in Indochina and South Asia regions as the Company currently has the largest market share in Indochina and is one of the top satellite operators for the South Asian market. The Company has maintained its Global Digital TV Network – a service whereby the Company arranges for satellite capacity and signal turnaround using several satellites to deliver customers’ TV channels to several regions such as North America, Europe and Australia – customers throughout the year. Moreover, the Company also provided many foreign customers its System Integration service by designing, procuring and installing equipment and transmission system for the customers in order to serve their requirements. In 2008, the Company, again, plans to emphasize on the domestic, Indochina and South Asia markets for its broadcasting business and expand to new markets in Middle East and others. In Thailand, the Company expects that as soon as the National Broadcasting Committee (“NBC”) is established, the number of Thai satellite TV operators and channels will take a big jump. For the Middle East and South Asia region, considered as the emerging markets with potentially high growth of video broadcasting business in both Direct-to-Home and C-band Channel Distribution segments. The Company expects that within 1-2 years, the satellite TV broadcasting markets will grow enormously.
Global Broadband Industry By Q2 2007, the total number of global broadband lines finally reached the 313.6 million mark. It is estimated that there will be a total of 207 million of DSL, Cable Modem and other Broadband Internet technologies, representing 27.23 percent growth from the first half of 2006. Figure 1: World broadband lines pass 313.6 million 350 DSL
300
Cable Modem
Subscribers (In millions)
FTTx
250
Total Terrestrial Broadband
200 150 100 50 0 Q105 Q205
Q305
Q405 Q106
Q206 Q306
Q406
Q107 Q207
Figure 2: Share of global broadband lines by region as of 30 June 2007
South-East-Asia, 20.73%
North America, 22.83%
Latin America, 4.99% Asia Pacific, 17.32%
Middle East & Africa, 2.37% Central & Eastern Europe , 4.18%
We stern Europe, 27.58%
A more focused breakdown shows the different percentages for each of the regions of the world. The total of Western Europe slightly surpasses North America, reporting 27.6 percent and 22.8 percent respectively, followed by South East Asia, Asia-Pacific and Latin America. However, together all of the regions in Asia accounts for 38.1 percent of the world’s broadband lines. North America and Europe together account for nearly half of all broadband access in the world at 50 percent, with almost an average growth of 27.2 percent for all broadband users. Considering Internet users in each region by technology, DSL has so far been the most widely used technology in the world with 65.9 percent market share where Cable Modem and other technologies only account for 34.1 of Internet worldwide. China has the highest number
of DSL users followed by USA, Germany, France, and Japan. However, the overall growths of DSL users in these countries have increased insignificantly. North America dominates cable modem up-take with a 32.9 million users as of Q2 2007. (Source: www.point-topic.com)
Thailand’s Internet Broadband Industry During 2007, Thailand had approximately 18 million Internet users with 2.65 million who are broadband Internet users. This figure shows an increase of approximately 50.9% from previous year and such a development is anticipated to contribute to signs of strong continuous growth. If the current trend persists, there will be 8.4 million broadband Internet users by the Year 2011. (Source: Thailand Telecommunications Report Q1 2007, page 17)
Realizing the importance of the Internet on Thai society in respects to the developmental aspect, the Thai Government has taken a keen interest to promote the use of internet and ensure ISPs to extend their broadband services nationwide. Key broadband Internet service providers include TOT Plc., True Corporation Plc., CS LOXINFO Plc., TT&T and CAT Telecom Plc. In 2005, Shin Satellite appointed TOT, the largest Telecommunication service provider in Thailand, as the National Service Operator ("NSO") for IPSTAR in Thailand. The implication of such undertaking is for TOT to be an exclusive partner with a long-term contract to lease 50% of IPSTAR bandwidth capacity over Thailand. The major service providers who resell IPSTAR services are: Acumen, CS LOXINFO, Samart Telecom and CAT Telecom. Today TOT has utilized IPSTAR technology in many governmental/USO and non-governmental vertical projects for data, voice and video transmission for projects ranging from rural telephony via satellite, SchoolNet, Ministry of Education (MOEnet) project, Internet Tambon (local government unit in Thailand an equivalent to a Municipal) to name a few. Since IPSTAR has far reaching capabilities it has very important implications for individuals and SMEs, particularly in areas that are un-served and underserved where telecommunications infrastructure is limited. Service Providers and/or resellers acting as part of the distribution for the National Service Operator can easily extend their reach without the need for an existing terrestrial infrastructure to be present. Myanmar’s Internet Broadband Industry In the latter part of 2007, Internet users increased to a total of 300,000. This figure represents approximately 0.5% of the 54.8 million population in Myanmar (Source: www.intetnetworldstats.com). As the National Service Operator (NSO) for Myanmar, Myanmar Posts and Telecommunications (MPT) is the only distribution channel engaging in providing services directly to other service partners and resellers. These local service providers play the key role as installers, systems integrator, technical support, content providers and/or applications
providers. System integrators offering IPSTAR service to the Vertical segment aim to serve customers with higher reliability and quality service which can be achieved by IPSTAR. Currently, MPT has 5 service provider partners namely GlobalNet, MMG Technologies, Myanmar World Distribution, Technology and Trust (TNT), and FISCA. In total more than 1,000 User Terminals (“UTs”) have been installed and currently in service nationwide as of Q3 of 2007. Currently, the main application subscribed is VoIP (Voice over Internet Protocol) which amounts to 700 subscribers, Internet users account for 100 and other services totaled 300 subscribers. In 2008, Shin Satellite intends to promote the importance of Internet usage and encourage the usage of high speed Internet connection particularly in the retail market. Cambodia’s Internet Broadband Industry From latest Cambodian census in 2007 the population has reached 15.5 million. From this figure, only approximately 44,000 were Internet users. Internet penetration rate is hence only a mere 0.3% in 2007. However, in terms of growth from the previous year, growth of Internet user was 500%. Such figure shows that there is a significant adoption of Internet users, which is on the rise. (Source: www.Internetworldstats.com) Since April 2007, IPSTAR Second Generation service was launched in Cambodia with Cambodia Shinawatra (CamShin) as the Gateway Operator partner. Today, a total of 1,100 IPSTAR User Terminals have been deployed nationwide. In addition, Shin Satellite has partnered with local service providers to provide IPSTAR services and solutions. Various market segments include Vertical, Universal Service Obligation (USO), and Retail Multimedia Broadband Currently, three local service providers, CamShin, Cogetel, and Telecom Cambodia, have signed agreements with Shin Satellite to be IPSTAR authorized service providers within the territory. Laos’ Internet Broadband Industry Laos has among lowest telecom penetration rates in the entire Asian region. This is primarily due to the country’s inadequate telecom infrastructure limited by the country’s economy and geographic conditions. In addition, the country’s low Personal Computer (PC) penetration rates exacerbates further to the slow development of Internet. The majority of the population is geographically centered in many villages and townships, however a large percentage of residents are scattered in mountainous and heavily forested rural areas. This condition is a limiting factor for most of the population to be connected as it takes time for terrestrial connections to be established. Thus, even basic telephone services or mobile services become a scarcity in remote or hard to reach areas of the country. (Source: www.indexmundi.com) Lao Telecommunications (LTC) is one of the key IPSTAR service providers in Laos. LTC embarked on quite an innovative project utilizing IPSTAR as a backhaul network to carry voice and data traffic from GSM networks into remote parts of the country. Such a technique provides the natural advantages of satellite technology for coverage anywhere combined with IPSTAR’ s broadband capability in order to leapfrog existing telecommunications infrastructure. Further, it is evident that IPSTAR can be utilized for further developing the communications infrastructure and be able to utilize for grassroots communications purposes in addition to providing a viable business opportunities for the likes of service providers and resellers. Vietnam’s Internet Broadband Industry Vietnam is considered as one of the fastest growing market for Internet users, with 17.5 million people. This constitutes to 20.6% of total population. (Source: www.Internetworldstats.com) However, there exists an extensive need for the telecommunication where the basic infrastructure is unavailable. The Vietnamese Government is aware of the telecommunication gap and plans to employ IPSTAR solution to alleviate the inadequacy.
Shin Satellite has partnered with Vietnam Telecom International (VTI), one of Vietnam’s largest telecommunications company, to provide IPSTAR service nationwide, with the main focus on providing connectivity to government offices and schools. China’s Broadband Internet Industry During 2007, China Internet Network Information Center (CNNIC) reported 162 million Internet users in China with Internet penetration up to 12.3%. The major method of connectivity was broadband with 122 million users. Connectivity using mobile phone devices became quite popular as a result of decreasing cost, and today, has reached 44.3 million users. The gap between urban and rural areas is still quite apparent, represented by the Digital Divide. Urban Internet penetration represents 21.6% while rural Internet penetration represents a mere 5.1%. Chinese in the rural areas do not use the Internet because roughly 40% of the people do not have access to a computer facility compared to only 27% who do not have access to Internet facility in urban areas. Due to the lack of household computers, 53.9% of rural users surf online in Internet cafés, resulting in a much higher figure that even exceeds the national average Internet café surfing rate of 37.2%. Because of insufficient Internet infrastructures in rural areas this has become the major bottleneck that is blocking the development of Internet usage in Chinese rural areas. However, the rural population represents as a huge potential market in the future as the current 37 million rural users still have huge potential for growth and development. This market can bring in vast demand and business opportunities. (Source: China Internet Network Information Center – CNNIC www.cnnic.cn) Since January 2007, IPSTAR commenced commercial services in China with a Chinese partner, China SatCom, a major satellite provider in China. For the most of 2007, trial services have been provided in order to entice the market with the strategy to incrementally commercialize services in order to pursue and develop all possible distribution channels within the Universal Service Obligation (USO), vertical and consumer markets. In addition, Shin Satellite is working with local Chinese partners in order to develop downstream channel Service Providers and Reseller partner network by developing product pricing and service offerings. India’s Broadband Internet Industry Telecom development in rural areas assumes special significance as more than 70% of India’s population lives in villages. Telecom services are important drivers for development, delivery of public services such as education, health, etc. Recognizing this, the Indian Government had announced the Universal Service Support Policy on 27th March 2002 to provide telegraph services to people in remote and rural areas. The activities being undertaken by Department of Telecom under Universal Service Obligation (USO) are geared towards augmenting the infrastructure and increasing telecom coverage in the rural and remote areas. At a time when the country is witnessing a consistently high GDP, foreign investment is increasing and domestic production is going up, the Universal Service Obligation Fund (USOF) finds itself in a unique position where technology, political will and entrepreneurship to lay a solid foundation for a modern telecom network in the rural areas exists. Realizing the importance of development of infrastructure, the Government of India has supported to lay down foundations for the telecom network. (Source: Department of Telecommunication – Government of India, www.dot.gov.in) IPSTAR, which offers nationwide coverage, is in a unique position to provide services in both the government and enterprise segments in India, especially in connecting up the rural areas. With Government support and Broadband penetration rate of 4.5%, India is considered as one of the most under explored markets in the world. In addition, the lack of bandwidth in the country at present provides an opportunity for IPSTAR.
The company has been working closely with a major Indian telecommunications company to develop and offer solutions for various government telecom development projects. Australia and New Zealand’s Internet Broadband Industry The household penetration with Internet access is relatively high in developed countries such as Australia and New Zealand. Coupled with the high rate of availability of computers among average households and the government’s policy to promote of Internet use especially in Australia these have been the driving factors for Internet use. Compared to others AsiaPacific countries, the Government has been a driving force in the promotion of the Internet due to telecommunications policy as well as subsidizations. (Source: PricewaterhourceCopers LLP, Wllkofsky Gruen Associates)
Since 2006 Australian government has a policy to promote of high speed Internet especially in the rural area. The Government launched a special program, allocating A$878 million to subsidize cost of providing broadband service to consumers in regional, rural and remote locations to remove the inadequacy of communication infrastructure, called HiBIS (High Bandwidth Incentive Scheme). According to the success of HiBIS program which is making significant inroads into improved availability of broadband services to many Australian communities. The government continues to launch more programs called “Australian Broadband Guarantee Program” in year 2007. With A$162 million Australian dollar, this program provides subsidy to service providers providing broadband Internet to rural as well as underserved areas throughout the country. (Source: www.dcita.gov.au) IPSTAR Australia Pty Ltd (IPA), a fully owned subsidiary of Shin Satellite, was set up to provide IPSTAR broadband services in Australia. At the end of year 2007, IPA appointed ETT Limited to be the National Service Provider (NSO) in Australia. Based on the extensive experiences in the market from ETT and the potential of IPSTAR products, a complete solution can be offered to Internet users in Australia nationwide. IPSTAR New Zealand Limited (IPNZ), a wholly owned subsidiary of Shin Satellite, was set up to provide IPSTAR services in New Zealand. The main target markets are the farming business as well as the rural households. In 2007, IPNZ appointed BayCity Communications Limited to be National Service Provider (NSO) in New Zealand. BayCity is an experienced Internet service provider company in New Zealand with many subsidiary companies in related business focusing on rural connectivity. For example, the Farmside project promotes broadband Internet to farmers along with applications suited to the farming business. (Source : http://www.farmside.co.nz/ )
Malaysia’s Broadband Internet Industry Malaysia has a population of 27.4 million people living in the West peninsula and in the Eastern states of Sabah and Sarawak, which has lower population and is relatively less developed. As of 2006, Internet user penetration rate is approximately 40%. Due to the government’s initiatives to become a knowledge based economy, the government has been the key driver for such high internet penetration. The Malaysian government instituted a Universal Service Provision (USP) initiative with the prime objective of minimizing the digital divide. USP is divided into three major phases. The objective of Phase 1 is to provide basic telephony services to under-served areas in all 89 districts, where there is PSTN subscriber penetration rate of 20%. In Phase 2, emphasis is placed on the provisioning of broadband connectivity to 87 districts. In Phase 3, USP will provide Internet connectivity to libraries and the creation of USP communication centers to achieve the government’s policy of a knowledge-based economy. In 2007, the Company formed a strategic partnership with Time dotCom (TdC), an established telecommunication company with mature distribution networks and market presence. IPSTAR will market to various segments such as USP based government projects, the enterprise and SME markets.
South Korea’s Broadband Internet Industry South Korea has one of the highest broadband penetration rates in the world, it has reached a household penetration rate of 90% in September 2007. In the same month, high speed broadband exceeded 30% penetration rate for the first time any where in the world. (Source: www.Korea.net) However, opportunities abound for IPSTAR in broadcast distribution services as well as enterprise customers because IPSTAR is able to deliver cost effectiveness. Shin Satellite has formed a partnership with OCL Solution of Korea a leading VSAT operator in Korea to establish the IPSTAR gateway in Seoul and to provide IPSTAR services. Shin Satellite along with OCL shall sell through multiple Service providers. Japan’s Broadband Internet Industry Japan has a very mature broadband market with high penetration and advance telecommunications infrastructure. Broadband usage rate has reached 83%, a slight decrease from 85% in 2006. However, in 2007 Internet Household penetration rate and broadband household penetration rate has achieved significant increase from 2006, 57% to 64% and 41% 51% respectively (Source: www.apira.org). Japan has one of the most FiberTo-The-Home (FTTH) connections accounting to 30% of all household Internet connection, second to ADSL connections. Such mature market allows specialized markets to exist, whereby IPSTAR is competitive such as in the areas of disaster management and corporate back-up services. Indonesia and the Philippines’s Broadband Internet Industry To date, Indonesia has approximately 20 million Internet users compared to 16 million users last year and ranked fifth in terms of Internet users in Asia, as reported by the Internet World Statistics. With a population of 224 million, the Internet penetration rate for the year 2007 was 8.9% with growth rates exceeding nine folds during the last seven years. In The Philippines, the penetration rate of Internet users is 16% this year, increasing from 9 million users in 2006 to 14 million users in 2007. However, compared with other countries in Asia, The Philippines has been moving slowly on the adoption of Internet. As a result of high cost in owning computer at home, a very small fraction of people use a broadband connection, leading to sluggish growth of broadband in the Philippines. In both countries, the majority of the Internet users are city dwellers leaving thousands of populated islands with no Internet access. It can be said that future growth in the Philippines and Indonesia will highly dependent on the provision of reliable infrastructure to connect up
the islands, especially for broadband Internet applications. The challenging topography in both countries with its thousands of islands provides a great opportunity for broadband satellite services as it is the most efficient and cost effective solution. In addition, even in urban and suburban areas, opportunities for satellite-based solutions do exist as there are still many areas that are underserved and un-served due to the poor terrestrial infrastructure. At present, there are several hundred IPSTAR User Terminals deployed in Indonesia and the Philippines using IPSTAR’s First-Generation gateway in Taiwan with a conventional satellite. However, in 2007, IPSTAR has entered into agreements and partnered with key local telecommunications partners to provide services in both countries using the IPSTAR satellite. Both IPSTAR gateways in Jakarta and Manila are being constructed and commercialization to commence within Q1’2008. The company is also expanding local distribution channels by engaging several local partners. New Products & Services The Hybrid IPSTAR-WiMAX solution, whereby IPSTAR is utilized as the backbone, will assist WiMAX operators to expand their network to remote areas where other transmissions are either available or financially attractive. IPSTAR and our product partner are currently trialing the service in Vietnam. An Outlook of the IPSTAR Ground System Expansion and Distribution IPSTAR Gateway Implementation Shin Satellite and its partners have expanded sales and services of IPSTAR in Asia-Pacific Region. In 2007, IPSTAR is fully commercialized in 7 countries using 10 gateways namely, Australia, Cambodia, China, Myanmar, New Zealand, Thailand and Vietnam. The Malaysian, Filipino and Indonesian gateways are now under construction. Shin Satellite will continue to expand its service coverage with the installation of the rest of the IPSTAR gateways in 2008.
IPSTAR User Terminal Product Development Shin Satellite developed the new cost-effective IPSTAR user terminal named “iCON” in 2006 and deployed it in 2007. The iCON represents a very significant product due to its low cost and efficient design and high performance. The iCON allows IPSTAR retail packages to be even more attractive due to its low cost and will be the key factor in significantly expanding the IPSTAR services in all markets. In 2007, the company has also launched the IPSTAR Enterprise Series along side the iCON. The Enterprise Series is a ruggedized user terminal appropriate for enterprise customers or for customers using IPSTAR in harsh environments. This product is appropriate for many areas in Asia-Pacific. Additionally, the Company has developed the new TCP Accelerator (TCP-A), “MaXX”, to increase the efficiency of the IPSTAR User Terminal and the WAN network to satisfy the commercial requirement of customers. MaXX is able to increase the TCP sessions to 1,000 from the standard 100 sessions thus allow more than 100 users to connect simultaneously using only one IPSTAR User Terminal. The product compliments existing IPSTAR User Terminal as current User Terminal cannot fully utilize the potential advantages of WiMAX Backhaul, GSM Trunking or Multi-dwelling Unit (MDU) applications.
Marketing Strategy In 2007, Shin Satellite has gained foothold in numerous Asia-Pacific markets with the deployment of the second generation IPSTAR Gateway. This deployment has been a prerequisite for delivering broadband services via satellite at much higher efficiency, thus making broadband services more affordable across the region. Each of the IPSTAR
Gateways implemented are essential for establishing necessary two-way ground communication system link to Thaicom 4 (IPSTAR) satellite and communicating to IPSTAR User Terminals on the user side. At the end of 2007, IPSTAR second generation service has been deployed over 7 countries with altogether 10 gateways deployed for Thailand, Vietnam, Myanmar, China (Beijing, Guangzhou and Shanghai), Australia (Kalgoorlie and Broken Hill, in the west and eastern part of Australia), New Zealand, and Cambodia. The remaining gateway deployments are planned for 2008. It was necessary in some of the key markets to launch more effective commercial campaigns. IPSTAR’s strategy is to work closely with our local partners to effectively launch marketing campaigns and launch new applications and services to meet the local requirement needs. Pricing From 2006 – 2007, Shin Satellite has launched consumer packages in four countries including Thailand, Australia, Laos and Vietnam that is very competitive to other offerings in the same target market. Shin Satellite has tackled the market aggressively along with its local service provider partners in order to deployed IPSTAR services competitively at a price point that is both competitive and attractive to the end user markets. In this regards, price point has room for further pricing competitiveness. In particular, the iCON user terminal in combination with the introduction of IPSTAR MaXX product in 2008 allows services to Multi- DwellingUnits (MDU). This allows IPSTAR to offer significantly lower price point due to lower average cost per unit.
Risk Factors 1. Technology and Operating Risks 1.1 In-Orbit Failure The satellite is state of the art technology and engineering. Once launched into orbit, the satellite will be under some risk such as a system failure, solar discharges or a collision with other objects in space. These damages will affect the Company’s service to the customers. It will reduce, temporarily or permanently, the satellite’s performance to uplink and downlink the signals. The Company may lose the current customers and/or may not acquire new customers while replacing the damaged satellite. However, all satellites are designed to withstand a certain amount of damages. The probability of satellites suffering a severe damage to the point of complete failure is very rare. Shin Satellite maintains a contingency plan to minimize the adverse effects to the customers in the case of a severe damage to the satellite. These include transferring the customers as many as possible to the available transponders on the remaining Thaicom satellites. The Company has also made the agreements with other satellite service providers on a temporary leasing of its transponders until the launch of the replacement satellite. Normally, the construction period of a new satellite will take not more than 18-24 months.
The Company is aware of the potential risks of satellites in geo-stationary orbit; therefore it minimizes such risks by fully insuring the Thaicom satellites. Under the Build-Transfer-Operate Concession of the national satellite, the Ministry of Information and Communication Technology (“ICT”) and Shin Satellite are cobeneficiaries. ICT is the owner of the satellite assets while the Company owns the right to operate them. The insurance policy is for full coverage with partial loss, meaning that the Company can immediately make a claim when the satellite is partially damaged. The insured value equals to the satellite’s book value on the insured date. However, the insured value does not cover a compensation for the loss of revenue, to the Company or its customers, owing to the satellite’s damage. This could possibly affect the Company’s operational performance.
Insured Value Project Satellite
Insured value
Period
(Million USD) Thaicom 1A
9.390
June 2007 - June 2008
Thaicom 2
11.996
June 2007 - June 2008
Thaicom 4 (IPSTAR)
300.00
August 2007 - August 2008
Thaicom 5
94.900
May 2007 - May 2008
However, the insurance policy shall not cover the damages to/or the loss of the satellite caused by/or resulting from: 1. War, invasion, defense, acts leading to war made by the government, or military action 2. Anti-satellite equipment, atomic-bomb, or nuclear-related equipment 3. Rebellion, uprising, riot, strike, revolution, or civil war 4. Seizure by government agencies 5. Nuclear reaction, radiation by radioactive waste, which, directly or indirectly, cause loss/damage to the satellite, but except for radiation naturally occurring in the space environment 6. Electromagnetic or radio frequency interference, except for physical damage to the Satellite directly resulting from such interference 7. Intentional or willful acts of the insured or the authorized person (s) that cause loss of or failure of the Satellite. This exclusion shall not apply to employees of the insured unless acting with the knowledge and consent of the insured.
1.2 Technological Changes Satellite broadcasting and telecommunications technologies change quickly, and often leads to reduce the investment costs. However, the conventional satellite technology has not changed that much. Therefore its changes will have less impact on the customers’ decisions to select Thaicom or other satellites. Certainly the competency of the operators is an important factor in wining the trust, and for a long term business relationship with the customers. The Company has continually developed and followed up the satellite broadcasting technology trends in order to prepare for the launch of the future satellite.
Apart from the conventional satellite technology, the Company has push efforts on the research and development of the new technologies for the communications satellite and ground system. The IPSTAR satellite is one example. It is the first broadband satellite in Asia to support the demands of telecommunications networks, especially the Internet, in the Asia-Pacific region. The Company also updates its ground equipment regularly in order to keep pace with the latest developments in satellite technology. In addition, the Company continues to constantly develop the
IPSTAR ground equipment, which includes the gateways and IPSTAR user terminals, to be more cost-effective and meet or exceed the expectations of the market.
1.3 Service Lives of Satellites Although satellites generally have 12-16 years of service life, there are some factors that will be shortened their life expectancies. This takes into account the quality of the spacecraft, the sturdiness and the durability of its components, the launch vehicle, the performance of the launch process, the satellites’ fuel consumption and the operator skills in controlling the satellites under different conditions. The Company might lose its customers and revenues if the Thaicom Satellite has shorter service lives than expected and the Company cannot launch any replacement satellite in time.
Thaicom satellite engineering team will perform a calculation process for the remaining service lives of the satellites every month. If the remaining service life of a satellite is less than 5 years, the involved departments will be informed to deliberate on such issues as the application for reservation of the satellite’s orbit, the budget for the construction of the replacement satellite, and the source of financing.
1.4 Reservation of Satellite Orbit and Frequency Coordination When the Company has a plan to launch a satellite into a new orbit, it will not be allowed to use the new orbit position until the satellite orbit reservation is filed. As the positions for satellites in geo-stationary orbit are limited, both reservation and frequency coordination are very important and come under the organization of a United Nation’s agency - the International Telecommunications Union (“ITU”), of which Thailand is a member. The Ministry of Information and Communication Technology (“ICT”) and the National Telecommunications Commission (“NTC”) are acting as an agent to negotiate and coordinate with others. Priority will be accorded to those who apply for orbit reservation first. Those Companies must launch their satellites within 7 years upon receiving approval. The limited orbital slots call for efficient use of resources through coordination of frequency. Such endeavor has become more and more complicated and time-consuming as transponder demand has risen, resulting in an increase in the number of geo-stationary satellites and their proximity of location. Therefore, the elimination or minimization of frequency disturbances may require modification to the satellite design, changes to the service region, or modification to the ground equipment. These will cause technical
limitations in some service areas or frequencies as referred to the Agreement on the Frequency Coordination.
1.5 Operating Risk The satellite operation requires technical know-how and expertise of the engineering employees. The Company provides an comprehensive training process to ensure its employee have required skills and abilities to control and operate the satellites. For example, before sending the command to the satellites, the engineers have to check and test the signals in order to prevent operational malfunction. In case there is an error when sending the command to the satellite, the Company has a procedure and contingency plan ready for any corrective action. Even though there is little chance for error in satellite operations, employees who operate can still create this risk.
2. Business Risk 2.1 Changes in laws, rules, regulations and Government policy Shin Satellite was incorporated and registered in Thailand to operate satellite telecommunications in the country under a concession. There is a business risk from the rise in competition due to the changes in the Government’s rules and regulations on satellite telecommunications license, as well as related telecommunications liberalization policies.
In addition, other changes in laws, rules, regulations and
policy of the Government can have significant impact, either directly or indirectly, on the Company’s businesses.
2.2 Legal and Regulations Risks in Countries where Shin Satellite Operates At present, the globalization trend has created a more liberalized telecommunications landscape around the world. It has enabled Shin Satellite to expand the satellite telecommunications services to many countries. The Company strictly abides by the Rules, Regulations, Government Policy, or International Agreement as well as Telecommunications Law of the countries where it operates. The satellite telecommunications business in each country is strictly controlled by its Government and any changes to its policy and regulations may affect the Company’s license standing and business strategy. In addition, the changes in the policy and regulations of the ITU International Agreement, the Agreement in Asia-Pacific and the countries where the Company serves, can significantly impact the Company’s business opportunities, financial status, and performance. These changes can increase the operating cost and limit the Company’s business activities. Whenever necessary, the
Company hires and consults law firms in those countries for proper legal process and advice.
2.3 Potential Loss of Major Customers Major source of the Company’s revenue comes from major customers who provide telecommunication services. In 2007, Company’s revenue from three major customers was 20.4% of the total revenues from the Company’s sales and services.
In case one of these major customers have cancelled their services, not renewed the Contract, or renewed the Contract with additional terms and conditions whereas suffering the Company business. For example, they may reduce the service costs in the new Contract. Major customers may have financial problem that will delay their payment to the Company. These factors will affect the Company’s business.
However, the major customer has never defaulted on payments to the Company as their television broadcasting programs must be on-air for the viewers. In addition, to change to other satellites service will bring technical hurdles as it requires to relocate or reposition the customer’s antennas from Thaicom satellites. The change to other satellites would be very cost prohibitive as well. These are important factors that the customers will not switch to use other satellites.
2.4 The Increasing Demand of Satellite Service The expansion of the Company’s conventional satellite business depends on the demand for television broadcasting services and development, which may not materialize as planned. However, the development on the television technology and high definition television services will increase demand for satellite services.
The development of IP communications services including data and multimedia is one of the Company’s strategies to expand the Thaicom 4 (IPSTAR) business. However, this development will depend on the growth of the demand of Internet Protocol (IP) communications as well as high-speed Internet access which may not materialize as forecasted. The Company may also be challenged by other terrestrial communications services.
2.5 Competition from Other Satellite Operators, Terrestrial Network Operators, and Internet Service Operators
Even though the Company is the only satellite service operator in Thailand at present, the Authority may grant the same license to other satellite operators in the future. The Company’ major international customers are from Indochina and India. In Indochina, major satellite competitors include such as AsiaSat, Intelsat, Palapa, Apstar and Measat. Some of these competitors have large footprint coverage areas and have a tremendous source of funds than the Company. In addition, some competitors are the operators in those countries, they will have the advantages on the laws and regulations and other related issues. The merger and acquisition of the satellite operators has also affected the Company. It will cause a highly competition in the market and lead to a price war of the transponder leasing services.
The Company has also competed with terrestrial network operators such as fiber optic, DSL, microwave, VHF/UHF broadcasting, digital data services, value-added broadband services, etc. Normally, the terrestrial network services have charged lower than the satellite services. The competition with these terrestrial network operators will limit the Company’s price setting. Therefore the Company may loss the existing customers to terrestrial services or it will be difficult to get new customers. However, satellite services provide low cost and quickly deployment to remote and less density areas. The satellite also enhances the terrestrial network expansion.
2.6 Risk Resulting from Allegations of Breach of the Terms of the Satellite Concession Agreement Shin Satellite provides the satellite telecommunications services under the Concession. The Satellite Concession Agreement may be terminated, if the Company breaches or violates any material Conditions of the Concession Agreement. This will incur a significant impact of the Company’s business opportunities, financial status, and performance. Presently, Shin Satellite has been accused to breach the Satellite Concession as the following issues.
The Issue of Back-up Satellite Under the Satellite Concession Agreement, Shin Satellite is required to provide a back-up satellite to each main satellite that it launched into orbit. There is a query whether or not the Thaicom 4 (IPSTAR) satellite should be considered as a backup for Thaicom 3 and/or Thaicom 5 since Thaicom 4 (IPSTAR) uses different technology and specification.
The Issue of the Shareholding Percentage
According to the necessity that the Company needed to raise its capital by Public Offering (PO), the Satellite Concession Agreement was amended in 2004 to lower the percentage shareholding in Shin Satellite Plc. that Shin Corporation was required to own from 51% to 40%. Under the Private Sector State Business Participation Act, the amendment may have to be approved by the Cabinet. Therefore this amendment may have been considered void. The Company may be accused of breaching the Satellite Concession Agreement. As of December 31, 2007, Shin Corporation owned 41.28% of Shin Satellite.
The Issue of the Thaicom 3’s Insurance Proceeds As a result of the damage of the Thaicom 3 satellite, the Company received insurance proceeds amounting of US$33.0 million which was placed in an escrow account outside Thailand. The Company subsequently used all of the insurance proceeds as partial payment for the construction and launch of Thaicom 5 and for the interim lease of transponder capacity until the launch of Thaicom 5.
Under the Budgetary Procedure Act of 1959, all money received by the government agencies shall be delivered to the Ministry of Finance. The Ministry of Information and Communication Technology is a co-beneficiary of the insurance proceeds of the satellite. Therefore the Company may be accused of breaching the Satellite Concession Agreement as placed in an escrow account outside Thailand was not abided the Budgetary Procedure Act of 1959.
The Company is unable to predict the outcome and impact from the examination of the related agencies.
2.7 Risk from the change of the Company’s status to be an alien under the Foreign Business Act The Foreign Business Act (the “FBA”) is an act to regulate the level of permitted foreign shareholdings in Thai companies. A definition of “foreigner” defined in the FBA also applies in the Telecommunications Business Act (the “TBA”) as regards qualifications of applicants for licenses under types 2 and 3. There is a provision under FBA prohibiting Thais to act as nominees for foreigner carrying on businesses which require permission. In 2006, the Ministry of Commerce investigated shareholding on behalf of foreigners in companies including major shareholders in Kularb Kaew Co., Ltd. (“Kularb Kaew”), a Thai company holding shares in Cedar Holding Co., Ltd. (“Cedar”), which holds
majority of the shares in Shin Corporation Public Co., Ltd. The issue is whether a major Thai shareholder of Kularb Kaew holds shares on behalf of foreigner. The Ministry of Commerce has summarized the case and referred to the public prosecutor for prosecution in the Criminal Court. The case is under the process by competent official. If Kularb Kaew is found under a final court decision to be a “foreigner,” then Cedar could be deemed to be a “foreigner” resulting in Shin Corporation being a foreigner under the FBA. In such case, the other foreigner shareholders of the Company can hold shares in the Company together only up to 8.72% to enable the Company to maintain its status as a Thai company an with no effect on the Concession Agreement.
2.8 Risk from the Satellite In-Orbit and Launch Insurance Policies The condition of the satellite at the time of insurance renewal (if it is partially damaged or not) and the condition of the Space Insurance Industry will limit the terms and proceeds of the Satellite Insurance Policy can increase the insured rate. Therefore the cost of the Insurance Policy to the satellite operators can be higher. Other factors include a crisis in the Space Insurance market due to frequent launch failures. In addition, future Insurance Policy may limit the qualified number of transponders that can be insured. This could significantly affect the Company’s business opportunities, financial status, and performance. The Company may have to reduce the insurance coverage of the Insurance Policy. This may be risky for the incident if the damage of the satellite occurs while in-orbit.
3. Financial Risks 3.1 Risk from Currency Exchange Rate Fluctuations Since the satellite business is directly involved in overseas technology, the Company can not avoid foreign currency expenditure.
In 2007, the proportion of revenue
based on US dollars is at 78% of revenue from sales and services. The Company manages exchange rate fluctuations by proportionately adjusting its loans to revenue ratio in US dollars and Thai Baht (natural hedge). To mitigate the effect of the exchange rate fluctuation, the Company uses widely accepted methods such as “swap” and “forward” deals in financial markets.
The Company has policies to prevent the financial risk by considering the revenue, income structure, and cash flow of each subsidiary based on US dollars. The
Company also adopts various financial methods to reduce the risk from currency exchange rate fluctuations and interest rates. As of December 31st, 2007, the Shin Satellite Group of Companies has total Assets and Debts in foreign currency of Baht 3,365 million and Baht 10,643 million respectively, after the preventive of risk.
3.2 Risk from failure by the Company to successfully negotiate the rescheduling of loan repayments or other conditions in the Loan Agreements The Company entered into the Loan Agreements to finance the Thaicom 4 (“IPSTAR”) and Thaicom 5 satellite projects. However, the delay in the launch of the Thaicom 4 (“IPSTAR”) satellite and the commencement of the Thaicom 4 (“IPSTAR”) service were much more than expected. Therefore, the Company entered into negotiation with lenders to reschedule the repayment of the loans and other conditions under the Loan Agreements for both the Thaicom 4 (“IPSTAR”) and Thaicom 5 projects. The Lenders agreed to reschedule the repayment of principal with respect to the instalments due on November 15th, 2006 up to the instalments due on February 29th, 2008. However, on July 26th, 2007, the Company repaid the loan principal for the Thaicom 4 (“IPSTAR”) and Thaicom 5 satellite projects, part of which covered the deferred principal of the loan and the remainder covered the principal of undue payment schedule. Currently, the Company is negotiating with the lenders on the terms and conditions of the new loan agreements and it may not reach an agreement with the lenders on the rescheduling of payment and other conditions under the Loan Agreements. In such case, the Company has to repay the principal of the loan in the amount and in accordance with the schedule specified in the Loan Agreements before it can recognize the income from Thaicom 4 (“IPSTAR”) and Thaicom 5 satellite services, which is likely to create a negative impact on the Company’s, cash flow, liquidity and performance.
4. Management Risk 4.1 Loss of Specialized Experts in Management Satellite technology-related operations, including telecommunications, require highly qualified personnel with thorough knowledge and good skill in high technology as one of the factors in the operations’ success. Presently, there are a limited number of people with thorough knowledge and skill, especially in telecommunications technology in Thailand, so the loss of employees working at the executive or management level, such as high-rank executives in satellite engineering division,
might adversely affect the Company’s operations. For this reason, the Company regularly sends its executives at every level to training and observation tours abroad as well as rewarding them with proper benefits.
Good Corporate Governance and Management
Management Structure and Nominating the Board of Directors
The Board of Directors
The Executive Committee
Chairman of the Executive Committee
The Audit Committee
Vice President Internal Audit Mr. Sivaraks Phinicharomana Remuneration Sub-Committee
Nomination Sub-Committee President International Business Satellite Operations Office Miss Nongluck Phinainitisart (D.Eng.)
Managing Director IPSTAR Project Mr. PaiboonPanuwattanawong
Executive Vice President Marketing & Sales Mr. Yongsit Rojsrivichaikul
Vice President Satellite Engineering & Operation Mr.Pramook Chaiwongwutthikul
Vice President Sales Asia, Eastern Europe & America Mr. Pradeep Unni
Vice President Sales Thai & Indochina & China Mr. Makin Petplai
* As of December 31, 2007
Vice President IPSTAR Terminal & Project Implementation Mr. Teerayuth Boonchote
Vice President Finance & Accounting Mr. Tanadit Charoenchan
Vice President Human Resources Mr. Somnuk Reantragoon
Vice President Legal Mr. Kamonmit Vudhijumnonk
Managing Director International Mr. Atip Rittaporn
Vice President Information System Management Mr. Teerawat Kusalangkoonwat
Corporate Governance Policy The Board of Directors believes that the Principles of Good Corporate Governance are essential factors in maximizing long-term earnings to stakeholders. The Board granted its approval to the (Revised) Policy of Good Corporate Governance on April 18th, 2007 for internal use and continued development. This Policy covers five major areas. 1. The Board of Directors 2. The Rights and Equitable Treatment of Shareholders and other Stakeholders 3. Information Disclosure and Transparency 4. Internal Control and Risk Management 5. Corporate Philosophy and Code of Conduct
1 The Board of Directors Names of Directors 1. Mr. Paron Israsena 2. Prof. Hiran Radeesri 3. Mrs. Charintorn Vongspootorn 4. Miss Peangpanor Boonklum1) 5. Mr. Samrieng Mekkriengkrai2) 6. Mr. Kraisorn Pornsuthee
7. Mr. Boonklee Plangsiri3) 8. Dr. Nongluck Phinainitisart4) 9. Dr. Dumrong Kasemset 10. Mrs. Siripen Sitasuwan5) 11. Miss Nidchanun Santhavesuk6) 12. Mr. Somprasong Boonyachai Note:
Title Chairman and Independent Director Director, Chairman of the Audit Committee and Independent Director Director, Member of Audit Committee and Independent Director Director, Member of Audit Committee and Independent Director Director, Member of Audit Committee and Independent Director Director and representative of Ministry of Information and Communication Technology Director Director and Member of Executive Committee Director and Chairman of Executive Committee Director and Member of Executive Committee Director and Member of Executive Committee Director and Member of Executive Committee
Number of Shares Held -0-0-0-0-0-0-
500 69,000 8,357,497 -0-0200
1) Resigned on May 11th, 2007 2) Appointed director to replace Miss Peangpanor Boonklum on August 10th, 2007 3) Resigned on May 4th, 2007 4) Appointed director to replace Mr. Boonklee Plangsiri on May 11th, 2007 5) Resigned on May 8th, 2007 6) Appointed director to replace Mrs. Siripen Sitasuwan on May 11th, 2007 - Dr. Nongluck Phinainitisart is the Secretary to the Board of Directors.
1.1 Composition and Independence The Company’s Board of Directors comprises nine experienced directors covering various fields of business experience. One third of the board and at least three is Independent Director. At least half of the directors are non-executive directors to balance power between oversight and management functions. The authorized directors are Dr. Dumrong Kasemset or Mr. Somprasong Boonyachai or Miss Nidchanun Santhavesuk. Two of the three directors are required to sign on behalf of the Company together with the Company’s seal affixed. The Company has a policy on segregation of duties between the Chairman of the Board, and the Chairman of the Executive Committee, that they shall not be the same person, in order to maintain a balance of power between direction and management functions. The Chairman of the Board is leader of directors and is responsible for monitoring and supervising management functions of the Executive Committee in accordance with the approved business plan. The Chairman also acts as the chairman of the Board of Directors’ and at Shareholders’ meetings. The Chairman of the Executive Committee is the head of the Company’s management team, responsible to the Board to achieve the approved business plan and reports the business performance to the Board. 1.2 Definition of Independent Director An independent director is a qualified and independent person based on the Stock Exchange of Thailand’s guidelines; 1. Holding shares not more than 0.5 percent of paid-up capital of the Company, affiliated company, associated company or related company, including shares held by persons related to the independent director. 2. Being a director who does not take part in the management of the company, affiliated company, associated company, related company or majority shareholder of the Company. 3. Being a director who has no direct or indirect benefit or interest in finance and management of the Company, affiliated company, associated company, related company, or major shareholder of the Company and one year must have passed since he ceased to have such benefit or interest unless the Board of Directors considers otherwise.
4. 5.
Being a director who is not a related person or close relative of any management member or majority shareholder of the Company. Being a director whom is not appointed as a representative to safeguard interests of the Company’s directors, majority shareholders or shareholders who are related to the Company’s majority shareholders.
In addition, an independent director shall be capable of giving opinions or reporting the results of performance of work according to the duties delegated free of any interest concerning personal benefit/position and free of the control of any party including any forced circumstance which may obscure an independent opinion. 1.3 Responsibilities The Board of Directors as representatives of the shareholders has the duty to oversee that the management will perform in accordance with company’s objectives, policies, procedures, rules, regulations and resolutions from the shareholders’ meeting with honesty, loyalty and meticulously takes care of shareholders’ interest including other stakeholders. To conduct their duties, the board participates in review process of vision, mission, strategies, target setting, business plan and budget of the Company. The Board has agreed with segregation of duties and responsibilities among The Board, the Audit Committee, the Sub- Committees and management. In addition, the board has mechanisms to oversee and follow up management operation and management control in an appropriate and timely fashion. In the Board of Directors meeting no. 3/2006 on March 21, 2006, the Directors have revised their duties and responsibilities, in writing, as follows: To establish the policies, assign the business direction for the Company and subsidiaries including exercise authority over management to assure operating efficiency and effectiveness in order to maximize benefit to shareholders and continuous improvement. To consider and decide upon significant issues on business operation of the Company and subsidiaries, such as policies, business plan, asset acquisition and disposal , project investments, level of authorities and other issues required by law. To monitor performance of management in terms of efficiency for the best interest of the Company and subsidiaries by establishing accounting systems, reliable financial reporting and auditing, including evaluation process for effectiveness and efficiency of internal control systems, risk management and appropriate follow up procedures. To ensure no conflicts of interest among stakeholders through a process review of related party transactions.
To ensure business operation is in accordance with good corporate governance and ethics. To review the corporate governance policy and evaluate compliance with corporate governance policy at least once a year. To have Board of directors conduct performance self-evaluation annually. The Board may delegate power to any individual to conduct business on specific cases or other matters. The delegation of power shall not include power to execute conflict of interest or transactions in the Company or subsidiaries as prescribed in the Company’s Articles of Association or as regulated by the Securities and Exchange Commission or the Stock Exchange of Thailand except in the cases which are in compliance with the policy or the criteria approved by the Board. The Board also prescribed the procedure for directors and management to report their stock-holding in the company including those of their spouse and minor children, in accordance with the rules and regulations of the Securities and Exchange Commission and Stock Exchange of Thailand.
The Company also has a policy to have an annual review of corporate governance policy by Directors in order to comply with the Stock Exchange of Thailand and international practice of The Organization for Economic Co-Operation and Development (OECD). 1.4 Selecting and Appointing the Board of Directors. The Company has appointed the Nomination Sub-Committee to select qualified persons who has appropriated educations and experiences. In case there is a vacancy, the Nomination SubCommittee will review qualification of the persons before nominating a number of them to the Board of Directors. The Board will review and select a nominee director to fit the vacancy and propose at the shareholders’ meeting for approval in accordance with rules and regulations specified in the Articles of Association of the Company as follows: 1. Each shareholder shall have a number of votes equal to the number of shares held. 2 Each shareholder may exercise all the votes he/she has under item 1 to elect one or several persons as director or directors. If several persons are to be elected as directors, the shareholder may not allot his/her votes to any person in any number. 3. The candidates shall be ranked in order descending from the highest number of votes received to the lowest, and shall be appointed as directors in that order until all of the director positions are filled. Where the votes cast for candidates in descending order are tied, which would otherwise cause the number of directors to be exceeded, the Chairman is entitled to a casting vote.
In the selection of an appropriate director, the Nomination Sub–Committee and the Board of Directors shall select a person who has the qualifications and who possesses no prohibited characteristics under Section 68 of Public Company Limited Act B.E.2535 and the notifications of the Securities and Exchange Commission and the Stock Exchange of Thailand. In addition, the Board also considers competence, knowledge, experience and their managerial skills to assure that the nominee shall be of the best advantage to the Company’s business. The Board should be qualified based on experience according to company requirements, having no prohibited conditions according to the Public Company Limited Act or other related laws. The Board shall have sufficient time to devote its knowledge and ability to work for the Company. The Board of Directors has assigned a nomination sub-committee that will be responsible for director selection and propose their appointment at the Shareholders’ Meeting. The Company has a policy requiring the director to hold office of director in not more than five other companies and the term of the director is three years. According to the Articles of Association, the term of one third of the directors shall end every Annual General Meeting of Shareholders. The longest serving directors shall be due first, and may be re-elected to resume duty. In case of vacancy (ies) due to other reasons, the Board, by a vote in which three fourths of its members agree, shall elect someone who has qualifications and no prohibited conditions according to clause 68 of the Public Companies Act, B.E. 2535 (1992). The Board can thereby appoint him/ her a director in the next Meeting. An exception is the case of a term with less than 2 months remaining, where the term of the newly appointed director shall expire at the same time as the preceding director. The Company has a Nominating Sub Committee to select a new director for appointment. The Company does not limit the maximum times a director may be re-elected. Neither is their age an issue, but rather their working capability. The Company has a policy of supporting the participation of directors in seminars and training courses organized by concerned bodies such as SET or IOD which are useful for the performance of duties of directors. New directors will be provided with documents and information on the Company’s business to enable the new director to perform his/her duties efficiently. 1.5 The Sub-Committee The Board of Directors has established three Sub-Committees which are the Audit Committee, the Remuneration Sub-Committee and the Nomination Sub-Committee.
1.51 Audit Committee Members 1. Prof. Hiran Radeesri
Position Chairman of the Audit Committee and Independent Director 2. Mrs. Charintorn Vongspootorn Member of Audit Committee and Independent Director 3. Miss Peangpanor Boonklum* Member of Audit Committee And Independent Director 4. Mr. Samrieng Mekkriengkrai Member of Audit Committee And Independent Director
Meeting
Participation
13
13
13
13
9
4
4
4
* Resigned from the Board and appointed Mr. Samrieng Mekkriengkrai as a replacement director on August 10th, 2007.
All three members of the Audit Committee are independent directors and one must have experience in Finance and Accounting. The Audit Committee must be independent according to the Announcement of the Stock Exchange of Thailand. The term of office is the same as that of the director which is three years and may be re-appointed but not more than two consecutive terms unless the Board of Directors considers otherwise. In 2007, the Audit Committee held 13 meetings and conducted meetings in accordance with the following duties and responsibilities: To review that the Company has accurate financial reports in accordance with generally accepted accounting principles and sufficient information disclosure. To review that the Company has appropriate and effective internal control systems and internal auditing activities. To review whether the Company has complied with the laws on securities and exchange, rules and regulations of the Stock Exchange of Thailand, including the laws relating to the Company’s business. To select, appoint and review the compensation of the external auditor and hold exclusive meeting with the external auditor at least once a year. To review and provide opinions on connected transactions and those that might have conflict of interest including to review the disclosure of information on connected transaction to ensure its correctness and adequacy. To review the result of risk management to ensure that the Company has an effective and appropriate risk management system. To review Internal Auditing Activities and approve, the appointment, the transfer, and the annual performance evaluation of the Chief of Internal Auditing.
To prepare the Corporate Governance Report of The Audit Committee and disclose it in the Company’s Annual Report. The report must be signed by the Chairman of the Audit Committee. To review and approve budget and manpower of the Office of Internal Audit. To report activities of the Audit Committee to the Board of Directors at least 4 times a year. To carry out audit committee activities, the Committee has the power to invite concerned management or employees to provide opinions, to join meetings or render necessary documents. Having power to hire independent consultants or professionals when needed. To review duties, responsibilities and conduct self-evaluation annually. To perform any assignment by the Board of Directors that has been agreed upon by the Audit Committee.
The members of the Audit Committee also holds meeting among themselves exclusively to consider important problems relating to the management of the Company and notify the Chief Executive Officer and the Board of the results of the meeting. The Audit Committee conducted self-evaluation and reported the result to the Board of Directors in the Board of Directors’ meeting no.2/2008 on February 20th, 2008. 1.52 Remuneration Sub-Committee 1. Mr. Paron Isarasena 2. Mr. Boonklee Plangsiri* 3. Mrs. Charintorn Vongspootorn 4. Mr. Somprasong Boonyachai
Chairman of the Sub-Committee Member Member Member
*Resigned and appointed Mr. Somprasong Boonyachai as a replacement member on May 11th, 2007.
The Remuneration Sub-Committee comprises of three members of which the chairman is the independent Director. The two members are one non-executive director and one independent director. The Sub-Committee’s scope of work and responsibilities are: To determine appropriate and reasonable remuneration, both monetary and non-monetary annually in order to be incentives and maintain the Board, Sub-Committees, and senior Management of the Company. To prepare policies and criteria to determine remuneration of the Board for approval by the Board and/or the Shareholders’ meeting, as the case may be.
Report to the Board, and be responsible for providing explanations and clarifications about remuneration of the Board of Directors, in Shareholders’ meetings. To perform any assignment by the Board of Directors. In 2007, the Remuneration Sub-Committee took into account the business performance of the Company and the industry-wide standard of directors’ remuneration in recommending the directors’ remuneration to the Shareholders’ meeting, which was within the total amount approved by the Annual General Meeting for the year 2007.
1.53 Nomination Sub-Committee Mr. Paron Isarasena Mr. Boonklee Plangsiri* Mrs. Charintorn Vongspootorn Mr. Somprasong Boonyachai
Chairman of the Sub-Committee Member Member Member
*Resigned and appointed Mr. Somprasong Boonyachai as a replacement member on May 11th, 2007.
The Nomination Sub-Committee comprises of three members of which the chairman is the independent director. The two members are one non-executive director and one independent director. The Sub-committee’s scope of work and responsibilities are: To determine policies and criteria for nominating the board and sub-committees of the Company. To nominate directors by considering appropriate persons for approval by the Board, and/or Shareholders’ meeting, depending on the case. To select appropriate persons to be nominated as Chairman of the Executive Committee when there is a vacancy and criteria for succeeding senior management. To perform any assignment by the Board of Directors. In 2006, the Nomination Sub-Committee selected and nominated qualified persons for the position of director and submitted to the Board for consideration and approval to recommend to the Annual General Meeting for the year 2006 for appointment as the Company’s directors. In the year 2007, the Remuneration Sub-Committee held two meetings and the Nomination Sub-Committee held three meetings. The Chairman and two members attended all the meetings. 1.6 Board Meetings Meeting schedule is determined in advance to be held six times in a year. Additional meetings may be held as required. At the meeting, the Chairman of the Board will allocate sufficient
time for management to provide document and information for discussion on significant issues. All directors are open to discuss and provide opinions including initiating meeting agenda(s). The secretary of the Board is responsible for making arrangement for the meeting, preparing adequate document and information attached to the meeting invitation and send to the directors at least seven days in advance. This will allow the director to have sufficient knowledge of the concerned agenda. The meeting normally takes three hours and it has formal minutes in writing that are always available to the directors for their review. The director who has an interest in the transactions cannot be in the meeting. In year 2007, the Board held regular meetings 6 times and special meetings 8 times, with the participation of the following directors. Directors Mr. Paron Israsena Prof. Hiran Radeesri Mrs. Charintorn Vongspootorn Miss Peangpanor Boonklum1) Mr. Samrieng Mekkriengkrai Mr. Kraisorn Pornsuthee Mr. Boonklee Plangsiri2) Dr. Nongluck Phinainitisart Dr. Dumrong Kasemset Mrs. Siripen Sitasuwan3) Miss Nidchanun Santhavesuk Mr. Somprasong Boonyachai
Regular Meetings Meeting Participation 6 6/6 6 6/6 6 6/6 5 3/5 1 1/1 6 3/6 4 3/4 2 2/2 6 6/6 4 2/4 2 2/2 6 5/6
Special Meetings Meeting Participation 8 7/8 8 6/8 8 8/8 4 2/4 4 4/4 8 0/8 2 2/2 6 4/6 8 8/8 2 2/2 6 6/6 8 5/8
Note: 1) Resigned from the Board and appointed director replaced by Mr. Samrieng Mekkriengkrai on August 10th, 2007 and the registration of change of director was made at the Ministry of Commerce on August 16th, 2007. 2) Resigned from the Board and appointed director replaced by Dr. Nongluck Phinainitisart on May 11th, 2007 and the registration of change of director was made at the Ministry of Commerce on May 16th, 2007. 3) Resigned from the Board and appointed director replaced by Miss Nidchanun Santhavesuk on May 11th, 2007 and the registration of change of director was made at the Ministry of Commerce on May 16th, 2007.
1.7 The Board of Directors’ Self-Evaluation At the meeting of Board of Directors no.2/2008 on February 20th, 2008, the Board of Directors conducted its self-evaluation using the form of the Stock Exchange of Thailand. The Board
is of the opinion that its self-evaluation is an important step in the development of good corporate governance and the result of the self-evaluation has been forwarded to the Nomination SubCommittee for use in the next selection of directors. Executive Committee 1. Mr. Dumrong Kasemset 2. Mr. Somprasong Boonyachai 3. Mrs. Siripen Sitasuwan* 4. Dr. Nongluck Phinainitisart 5. Miss Nidchanun Santhavesuk
Chairman of the Executive Committee Member Member Member Member
* Resigned from the Executive Committee on May 10th, 2007.
The Executive Committee comprises the Executive Chairman of the Satellite and International Business Line, the Executive Chairman of the Wireless Business Line, the President, and/or the appropriate person(s), as approved by the Board of Directors. The Board has agreed to their scope of duties and responsibilities in writing at its meeting no.5/2000 on November 13, 2000 amended at its meeting no.2/2005 on February 17, 2005 as follows: To establish policies, directions, strategies, and core management structure for business operations in line with economic and competitive conditions that have been defined and declared to shareholders and submitted to the Board for approval. To prepare business plans, budgets, and level of authorities and submitted to the Board for approval. To monitor policy implementation and management directions in terms of efficiency and as appropriate to business conditions. To monitor the operating performance of the Company as it is conducted according to the approved business plan. To consider any significant investment project. To prepare the Company Performance Report and submit to the Board on a monthly basis. To conduct other Board assignments The Committee may delegate power to any individual to conduct business in specific cases or other matters. The delegation shall not include the power to execute conflict of interest or transactions conducted by the Company or subsidiaries as prescribed in the Company’s Articles of Association or as regulated by the Securities and Exchange Commission or the Stock Exchange of Thailand, except in the cases which are in compliance with the policy or the criteria approved by the Board. The Executive Committee has the authority to approve financial transactions up to Baht 800 million. This includes general expenses in normal business operations, project investment, capital asset or fixed asset
investments, borrowings, lending, credit line facilities, debt instrument offerings, guarantees, loans or credit guarantees. Exceptions to this are transactions of money deposits and withdrawal, and foreign exchange and interest rate risk hedging instruments. The limits on its authority to approve these issues are set at Baht 2.5 billion and Baht 1.5 billion, respectively. However, in the acquiring or selling of asset, or any financial aids to related company, it must act as prescribed in the Announcement of the Stock Exchange of Thailand. The Executive Committee may delegate power to managerial employees to approve one or more such financial transactions according to the Executive Committee’s discretion. The delegation shall not include power to execute conflict of interest or transactions in the Company or subsidiaries as prescribed in the Company’s Articles of Association or as regulated by the Securities and Exchange Commission or the Stock Exchange of Thailand, except in the cases which are in compliance with the policy or criteria approved by the Board. Management Team 1. Dr. Dumrong Kasemset International 2. Dr. Nongluck Phinainitisart 3. Mr. Paiboon Panuwattanawong 4. Mr. Yongsit Rojsrivichaikul 5. Mr. Atip Rittaporn 6. Mr. Kamonmit Vudhijumnonk 7. Mr. Tanadit Charoenchan 8. Mr. Makin Petplai 9. Mr. Pradeep Unni America 10. Mr. Teerayuth Boonchote 11. Mr. Sivaraks Phinicharomana 12. Mr. Teerawat Kusalangkoonwat 13. Mr. Pramook Chaiwongwutthikul 14. Mr. Somnuk Reantragoon 1.8 Remuneration of Directors 1.81 Directors Remuneration
Chairman of the Executive Committee – Satellite & President Managing Director – IPSTAR Operations Executive Vice President – Marketing and Sales Managing Director – International Business Vice President - Legal Vice President – Finance & Accounting Vice President – Sales Thailand, Indochina & China Vice President – Sales Asia, Eastern Europe & Vice President – IPSTAR Operations Vice President – Internal Audit Vice President – Management Information Systems Vice President – Engineering and Space Operation Vice President – Human Resources
The Company established a compensation policy of the Board of Directors at a fair level by comparing it with the survey conducted by the Thai Institute of Directors and adjusted accordingly when there is change. Besides, the Board also considers additional compensation when directors have more duties and responsibilities at the sub committee level. The monetary remuneration of five members of the Board of Directors in year 2007 was 8,000,000 Baht, composed of monthly allowance, bonus, and meeting allowance. The directors nominated by Shin Corporation and directors who are executives are not entitled to remuneration as director/executive director. Board of Director Names of Directors
Mr. Paron Israsena Mr. Hiran Radeesri Mrs. Charintorn Vongspootorn Mr. Kraisorn Pornsuthee* Miss Peangpanor Boonklum Mr. Samrieng Mekkriengkrai
Sub-Committee Meeting Allowance Nomination Remuneration SubAudit SubCommittee Committee Committee
Total
Monthly Allowance
Bonus
Meeting allowance directors
1,800,000
350,000
-
2,150,000
-
-
-
-
2,150,000
420,000
550,000
300,000
1,270,000
325,000
-
-
325,000
1,595,000
300,000
450,000
350,000
1,100,000
350,000
75,000
50,000
475,000
1,575,000
300,000
200,000
75,000
575,000
-
-
-
-
575,000
125,000
100,000
125,000
350,000
100,000
-
-
100,000
450,000
125,000 3,070,000
250,000 1,900,000
125,000 975,000
500,000 5,945,000
100,000 875,000
75,000
50,000
100,000 1,000,000
600,000 6,945,000
Total
Total
* Monthly Allowance and Meeting Allowance paid between January - December 2007, except for Bonus paid in February 2008 (Recorded as an accrual basis)
1.82 Management Remuneration The remuneration of 14 members of the management in year 2007 was Baht 82,910,060million (excluding the remuneration of the Executive Chairman of Satellite and International Business and the remuneration in January – June 2007 paid by Shin Corporation), was composed of salary, bonus, provident fund, and other fringe benefits. Such remuneration was based on the business performance of the Company and the performance of each executive. 1.83 Other Remuneration
Remuneration *
2006
The Company has an Employee Stock Option Plan (ESOP) planned for a period of five years as a means of motivating and rewarding employees. (Please see more details under “Capital Structure� section.) Name list of Directors and Employee Who Receive Warrant Grant I Number of Issues and Offers Name 8,000,000 Units 1. Dr. Dumrong Kasemset 2. Dr. Nongluck Phinainitisart 3. Mr. Yongsit Rojsrivichaikul 4. Dr. Avudh Ploysongsang* 5. Mr. Kamonmit Vudhijumnonk 6. Mr. Tanadit Charoenchan 7. Mr. Paiboon Panuwattanawong 8. Mr. Makin Petplai 9. Mr. Pradeep Unni 10. Mr. Sivaraks Phinicharomana 11. Mr. Teerayuth Boonchote 12. Mr. Teerawat Kusalangkoonwat 13. Others Total Warrants issued
Grant II Number of Issues and Offers 4,400,100 Units
Grant III Number of Issues and Offers 5,894,200 Units
No. of Unit
Percentage
No. of Unit
Percentage
No. of Unit
Percentage
2,436,400 1,692,800 700,000 204,300 203,600 162,000 399,900 173,800 260,700 221,400 218,900
30.46 21.16 8.75 2.55 2.55 2.03 5.00 2.17 3.26 2.77 2.74
1,235,200 637,100 209,800 100,000 72,700 218,000 527,300 209,800 209,800 107,000 113,200
28.07 14.48 4.77 2.27 1.65 4.95 11.98 4.77 4.77 2.43 2.57
1,154,200 600,000 550,000 160,000 140,000 240,000 700,000 400,000 400,000 140,000 240,000
19.58 10.18 9.33 2.71 2.38 4.07 11.88 6.79 6.79 2.38 4.07
379,300 946,900 8,000,000
4.74 11.84 100.00
171,400 588,800 4,400,100
3.90 13.38 100.00
240,000 930,000 5,894,200
4.07 15.78 100.00
Note:
Proportion of warrants under Grant I and Grant II equal to 1 warrant to 2.04490 common stock. Proportion of warrant Grant III equal 1 warrant to 1.02245 common stock. *Resigned from the Company on July 1st, 2006.
The Annual General Meeting of Shareholders for the year 2005 on March 31, 2005 approved the Employees Stock Option Plan, Grant IV (ESOP; Grant IV) to the total amount of 7,562,100 units.
The list of directors and employees entitled to receive warrants under ESOP, Grant IV is given below:
Names 1. 2. 3. 4. 5. 6. 7. 8. 9. 10 11. 12. 13 14. 15. 16.
Dr. Dumrong Kasemset Dr. Nongluck Phinainitisart Mr. Yongsit Rojsrivichaikul Dr. Avudh Ploysongsang* Mr. Kamonmit Vudhijumnonk Mr. Tanadit Charoenchan Mr. Paiboon Panuwattanawong Mr. Makin Petplai Mr. Pradeep Unni Mr. Sivaraks Phinicharomana Mr. Teerayuth Boonchote Mr. Teerawat Kusalangkoonwat Mr. Atip Rittaporn Mr. Komsan Sereepapong Mr. Jiroj Srinamwong Other employees Total Warrants Issued
No. of Warrants Allocated (Units) 929,900 500,000 440,000 140,800 105,900 250,000 900,000 400,000 350,000 136,100 250,000 225,000 400,000 70,000 70,000 2,394,400 7,562,100
% (of the Program) 12.30 6.61 5.82 1.86 1.40 3.31 11.90 5.29 4.63 1.80 3.31 2.98 5.29 0.93 0.93 31.66 100
Note: Proportion of warrants under Grant IV equal to 1 warrant to 1.02245 common stocks. * Resigned from the Company on July 1st, 2006.
The Annual General Meeting of shareholders for the year 2006 held on April 24, 2006 approved the Employee Stock Option Plan, Grant V (ESOP: Grant V) in the total amount of 10,058,800 units. The list of directors and employees entitled to receive warrants under ESOP: Grant V is given below: No. of Warrants % (of the Names Allocated (Units) Program) 1. Dr. Dumrong Kasemset 1,099,800 10.93 2. Dr. Nongluck Phinainitisart 900,000 8.95 3 Mr. Paiboon Panuwattanawong 1,100,000 10.94 4 Mr. Atip Rittaporn 450,000 4.48 5. Mr. Yongsit Rojsrivichaikul 800,000 7.95 6. Mr. Pramook Chaiwongwutthikul* 170,000 1.69 7 Mr. Pradeep Unni 440,000 4.37 8 Mr. Makin Petplai 600,000 5.96
9 10 11 12 13 14 15. 16.
Mr.Teerayut Boonchote Mr.Teerawat Kusalangkoonwat Mr. Kamonmit Vudhijumnonk Mr. Sivaraks Phinicharomana Mr. Tanadit Charoenchan Dr. Avudh Ploysongsang* Mr. Jiroj Srinamwong (Director for the Board of Subsidiary) Other employees Total Warrants Issued
350,000 300,000 150,000 150,000 300,000 50,000 150,000 3,049,000 10,058,800
3.48 2.98 1.49 1.49 2.98 0.50 1.49 30.31 100
Note: Proportion of warrants under Grant V equal to 1 warrant to 1 common stock. * Resigned from the Company on July 1st, 2006.
2 The Rights and Equitable Treatment of Shareholders and Stakeholders 2.1 The Rights and Equitable Treatment of Shareholders The Company has a policy to conduct shareholders’ meetings according to the laws and guidelines prepared by regulatory authorities. In 2007, there were two shareholders’ meetings of the Company including the Annual General Meeting of Shareholders and the Extraordinary General Meeting of Shareholders. Both meetings were held at the Auditorium Meeting Room, Shinawatra Tower 3, 9th Floor, no.1010, Vipavadee Rangsit Road, Chatuchak, Bangkok. The agendas of the annual general meeting and the extraordinary general meeting of shareholders were announced in the Company’s website on the date the Board of Director approved the calling of the meeting and the agenda to enable the shareholders to know of the date and the agenda of the meeting even before the notice for the meeting was sent. The invitation letter to the meeting, together with information on the meeting agenda, was distributed to shareholders approximately 21 days before the meeting date. This meeting was attended by the Chairman of the Board of Directors, Chairman of the Audit Committee, Chairman of the Nomination Sub Committee, Chairman of the Remuneration Sub Committee, Directors, and members. In each shareholder meeting, every shareholder has rights, including equitable treatment in acknowledging the information, rendering opinions and questioning according to the meeting agenda and issues under discussion. The Chairman of the meeting shall allocate sufficient time for each matter as well as promote queries and discussion. The shareholders will receive the agenda for the meeting and other documents for the meeting in advance both by post and via the Company’s website.
In each shareholder meeting, the Company shall appoint at least one independent director to be the proxy for shareholders who cannot attend the meeting, and inform earlier on the invitation letter. The Company also educates shareholders to understand their roles and encourages them to exercise their rights to protect their interests by distributing the pamphlet from the Stock Exchange of Thailand regarding “Good Shareholder Practice”. The pamphlet contains various important topics for shareholders such as the role of shareholders in overseeing the performance of the Board and Management, approving the financial statements, the appointment of the Company’s auditors, the appointment of directors, and fixing their remuneration, approving the increase in the Company’s registered capital and connected transactions, the voting process and the questioning of directors and management, including demanding remedy in case their rights are violated and forming an association to protect shareholders’ rights. To promote the rights of the Shareholders, on December 17th, 2007, the Company has announced on the website inviting the minority shareholders to propose a qualified person to be appointed as the director of the Board of the Company and propose the meeting agenda for consideration of the annual general meeting of shareholders. 2.2 The Rights and Equitable Treatment of Stakeholders The Company is aware of the rights of stakeholders, and has a policy to ensure awareness by appropriately prioritizing stakeholders such as shareholders, employees, executives, customers, partners, creditors, society and the public. There is also cooperation between stakeholders about their roles and responsibilities in order that the Company can run its business smoothly, strongly, and fairly respond to the benefit of all stakeholders. Shareholders : the Company intends to run the business for shareholder satisfaction by maintaining the Company’s profitability, adequate information disclosure, reliability and equitability. Employees : the Company aims to develop a culture and work environment which is conducive to open-mindedness and respect for each individual’s ideas to achieve the same objective and vision, which is to create new innovations and improve existing products. Customers : the Company has acquired ISO 9000 Certification to assure customer satisfaction that products and services are of international quality. Suppliers : the Company’s business partnerships are made while considering its effect on the Company, compliance with laws and
Competitors Society
regulations, and fair trade. These relationships were made to benefit the value chain to the customers. : the Company’s policies support fair trade and free trade. The Company does not try to force a monopoly through its partners. : the Company’s objective does not only include profit-making. The Company realizes its obligation to society, thus it tries to open opportunities for everyone to participate in activities that will be beneficial to everyone concerned both here and abroad. In addition, the Company promotes the environment and natural preservation activities, and has the policy to select and promote the use of the environment friendliness products.
3 Information Disclosure and Transparency The Company values accurate, complete, thorough, and timely disclosure of financial, operational, and other relevant information for investors and concerned persons to use in investment decisions. This disclosure is made through communication channels via the Stock Exchange of Thailand (SET), the Securities and Exchange Commission (SEC), and the Company’s Internet web site. The Company has also established an Investors Relations Department to be responsible for communicating useful information to shareholders, investors, analysts, as well as preparing policies and handbooks for investor relations activities and information disclosure to the Stock Exchange in order to ensure that the Company fully complies with laws, rules and regulations. Other than information disclosure according to the law, the Company also holds quarterly Mini Info Meetings to disclose operational performance to investors, analysts, fund managers, and interested persons, by a member of the Executive Committee to give explanations and reply to queries as they arise. Interested persons can contact and request information from the Investors Relations Department, tel. 02-596-5072-3, or search the website www.thaicom.net/ir In the year 2007, the Company used such Web to notify the shareholders of the agenda of the AGM and relevant information more than one month before the actual meeting.
4 Internal Control, Internal Auditing Activities and Risk Management 4.1 Internal Control and Internal Auditing Activities The company has established Internal Control systems according to the standards set by the SET and the Committee of Sponsoring Organizations of the Treadway Commission or COSO. The Internal Control Framework consists of five components. 1. Control Environment The Company has set up internal control systems in the areas of finance, accounting, operation, organization, and human resources including power of authority and finance authority based on the Good Corporate Governance policy of Shin Corporation. 2. Risk Assessment The Company has formed a Risk Management Committee and developed a risk management system based on recommended Enterprise Risk Management activities of COSO, customized to align with the Company’s business and its continuing development. 3. Control Activities The Company has created control mechanisms for management and executives by adopting the Quality Management System of the ISO to align operations with the customer’s vision and other control activities which emphasize information reliability, asset safeguarding, and compliance with the rules and regulations of the Company and outside authorities and to strengthen information security. 4. Information and Communication The Company realizes the importance of its information system and the distribution of information to both inside and outside through its intranet and website. A culture of openness is promoted to emphasize communication between all levels. 5. Follow-up and Monitoring The Company conducts performance assessment of employees two times a year and reports financial performance quarterly through a meeting with investors and other interested parties. In the Board of Directors’ Meeting no. 2/2551 on February 20, 2008 with the Audit Committee also attending, the sufficiency of the control of important document and internal control system were evaluated with five different measures, including organizational control and environment, risk management, management control activities, information systems and communication, and monitoring systems. The evaluation concluded that the Company has sufficient control of important document and internal control system, especially management control, to enable
the Company, to safeguard assets from unauthorized persons and business transactions are conducted in accordance with approved level of authority, including being properly recorded to ensure reliability and accuracy of financial statements. The Company maintains documentary systems to make it available in a timely fashion for auditing process by external auditors and government authorities. Besides, there is a continuous development of the appropriate risk management system. The Company has an independent Internal Audit Office with approved charter from the Audit Committee and Management by reporting functionally to the Audit Committee and administratively to the CEO particularly on the day to day administrative transactions. The Internal Audit Office has unlimited access to information, personnel and all departments to achieve auditing activities and reports its result to the Audit Committee and CEO to activate corrective and preventive actions as well as continuous improvement on the timely fashion. In 2007, the Internal Audit Office adopted the results from risk management activities as information based to prepare its risk based audit plan from 2005-2007. The plan covered reliable of information on accounting and finance, efficiency and effectiveness of operation, compliance with rules and regulations, development of information technology and communication and development of quality management systems under ISO requirements. The Office also developed non-audit activities such as consulting on internal control of operation on newly business line. In addition, the Office had encouraged and trained internal auditors in modern internal auditing of the Institute of Internal Auditors for their learning and growth. The Internal Audit Office and PricewaterhouseCoopers ABAS Co., Ltd. did not find any material non-conformance of the control of important document and internal control systems in 2007. 4.2 Risk Management The Company practiced risk management in accordance with the Risk Management Handbook and Guidelines of Shin Corporation Public Co. Ltd., by educating the staff, as well as conducting workshops and established a Risk Management Committee comprised of the President and management at different levels. The Committee designed various steps of risk management concurrently with guidelines from the Stock Exchange of Thailand and typical management procedures which starts from analysis of internal and external environment, vision, mission and objective setting, strategies and measurement, risk identification and impact evaluation, prevent and lessen its impact through the
business plan and internal control activities including, regularly reporting its results to the Board of Directors. Therefore, risk management of the Company becomes a continuous process supported by all levels. In 2007, the Risk Management Committee had regularly monitored risk assessment and risk mitigation activities and reported results to the Audit Committee on quarterly basis. The Audit Committee, however, suggested that the risk management report should be improved in term of completeness. 5 Corporate Philosophy and Code of Conduct In order to maintain operational standards and business ethics, the Company has established a written philosophy and code of conduct in order to become a leading company at both local and international levels that is recognized as responsible to employees, shareholders, customers, competitors, partners, creditors, and society, including the use of information, information disclosure, conflict of interest, safeguarding of company assets, participation in political activities, legal and regulatory compliance, good corporate governance, and reliable reporting. The Company designs reporting channels for management and employees to identify transactions that may conflict with the above standards independently though an Ethical Hotline on the internal website of the Company. The Company also prepares a program to build awareness on business ethics for management and employees through various steps as follows: 1. Provide basic knowledge of Ethics such as in the orientation for new employees. 2. Provide continuous knowledge of Ethics such as presentation of motion picture and ethical information in the Company intranet. 3. Stimulate ethical behavior in practice such as questionnaire distribution to all employees, result disclosure and maintain statistical surveys for progressive analysis of the program. In 2007, the Company had offered ethic training to management and distributed questionnaires to encourage ethical practices. 5.1 Inside Information The Company is committed to ethics, integrity, and honesty in carrying out business with customers, partners, and shareholders and has Code of Conduct as a guideline for management and employees to adhere to. Disclosure of inside information by employees or management to
others or for their own interests or involvement in activities that may lead to conflict of interest is considered severe misconduct and may subject them to disciplinary action. In addition, the Company prohibits employees and management who work in the department or business unit that know inside information to buy or sell the Company’s marketable securities during a month before disclosure of financial statements to the public. The Company also notifies directors and management of their duties to report, in accordance with the format and schedule of the Securities Exchange Commission (SEC), his or her status as security holders and submit the reports on the same day to the SEC and the Company. The coverage of this requirement extends to their spouses and minor children as well. Regarding supporting data or document within the group of companies, data rules have been issued to prevent leaked information e.g. requesting letter of confidentiality and prohibiting of photo copies without permission. 5.2 Conflict of Interest Acceptance of money or other benefits The directors, executives or employees having interests which may compromise them in the performance of their duties and affects the interests of customers and the Group shall comply with the followings. 1. The directors, executives and employees shall not accept personally money, gift or other things from customers, suppliers or other persons due to the fact that he or she is acting in the name of the Company. In the case they are offered gifts, or things not in the form of cash by customers, suppliers or third parties, they may accept such gifts, interests or things if such giving are in accordance with the custom or the events provide that such gifts or things are appropriate to the occasions and have a value not exceeding Baht 5,000. In case he or she has to accept gifts or things worth more than Baht 5,000, he or she shall report to his/ her superior for consideration. 2. The directors, executives and employees shall not borrow money or ask for donation from customers or persons doing business with the Company except borrowing money from the banks or financial institutions as their customer. 3. The directors, executives and employees may accept invitation to a business party in the Company’s business interest but should avoid the invitation if such business party is inappropriate considering the relationship such person has or may have in the future with the Company. 4. The directors, executives, and employees may accept invitation for training, observation tour or seminar the expenses for which are paid by the customer/ supplier of the Company, provide
that it is strictly for the Company’s business interest and approved by the superior and there is no other money or gifts given. 5. The Company has no policy to second the executives to be director of any company outside the Group. The executives ranking PG 13 and above must receive approval from appropriate superior for becoming a director of other companies except in non-profit charitable organizations and the holding of such directorship will not constitute a breach of the Laws or Regulations concerning the Company’s business and shall not be for the purpose of using his/her position with the Company to promote other business interest. To be a director of a company outside the Group, the executives ranking PG 13-15 must receive approval from the Executive Chairman, the executives ranking UC must receive approval from the Executive Committee and the executives who are the President, the Executive Chairman or the director of the Company must receive approval from the Board of Directors.
แบบแสดงรายการขอมูลประจําป 2550
บริษัท ชินแซทเทลไลท จํากัด (มหาชน)
Related Transactions During the year 2007, the Company and its subsidiaries have the following list of related transactions, as disclosed in the Notes to the Financial Statements by the Auditor, as follows: Related Companies/ Parties
Transaction
Value of Related Transaction at
Reason
31 December 2007 (millions of Baht) Consolidated Shin Corporation Public Company Limited/ major shareholder of the Company, with joint directors.
1. Expenses and other payment. - Consultancy and Management fee. Shenington hired SHIN for consultancy and for management.
0.61
- Holding company by acquiring a controlling interest in various companies.
สวนที่ 2 หนา 120
This is a policy for overseeing subsidiaries when holding shares and for managing them. However, this contract was terminated in July 2007.
แบบแสดงรายการขอมูลประจําป 2550 Related Companies/ Parties
บริษัท ชินแซทเทลไลท จํากัด (มหาชน) Transaction
Value of Related Transaction at
Reason
31 December 2007 (millions of Baht) Advanced Info Service Public Company Limited (AIS)/ SHIN is a major shareholder holding 42.78% and joint directors.
1. Revenues from sales and services. AIS leased transponders on Thaicom. - Trade account receivable
- Engages in mobile 2. Expenses and other payments. phone service provider The Company paid money for mobile phone services business. of the executives and employees. - Trade account payable and other account payable CS LoxInfo Public 1. Revenues from sales and services. Company Limited (CSL)/ CSL leased transponders on Thaicom and purchased Subsidiary of the Company IPSTAR User terminals. is a shareholder holding 43.48% and joint directors. - Trade account receivable
Consolidated 63.25
The Company is the only service provider of transponder leasing in the country. Service fee was charged under normal contract and business conditions as with external customer.
6.60
5.10
A normal trade transaction conducted as with external customer.
0.15 7.00
0.43
สวนที่ 2 หนา 121
The Company is the only service provider of transponder leasing in the country and distributor of IPSTAR user terminal in the country. Service fee was charged under normal contract and business conditions as with external customer.
แบบแสดงรายการขอมูลประจําป 2550 Related Companies/ Parties
บริษัท ชินแซทเทลไลท จํากัด (มหาชน) Transaction
Value of Related Transaction at
Reason
31 December 2007 (millions of Baht) - Engages in internet 2. Expenses and other payments. service provider business The Company paid for uplink service and internet and uplink service. service.
SC Matchbox Company Limited (SMB)/ ITV is a major shareholder holding 99.96%. - Engages in advertising agency business, through all kind of advertisement media. I.T. Application Service Company Limited/ SHIN is a major shareholder holding 99.99%. - Provides computerized management software package, related programs and consultancy.
Consolidated 27.13
- Trade account payable and other account payable
28.93
1. Expenses and other payments. The Company hired SMB for advertisement and public relation services such as printed media, logo design.
4.95
- Trade account payable and Other account payable
2.01
1. Expenses and other payments. The Company used its accounting software programs.
4.88
- Trade account payable and Other account payable
0.50
สวนที่ 2 หนา 122
A normal trade transaction conducted under normal contract and business conditions as with external customer.
To provide publicity on the Company’s services. Service fee was charged under normal contract and business conditions as with external customer.
To be used in accounting system. The software was bought at market prices.
แบบแสดงรายการขอมูลประจําป 2550 Related Companies/ Parties
บริษัท ชินแซทเทลไลท จํากัด (มหาชน) Transaction
Value of Related Transaction at
Reason
31 December 2007 (millions of Baht) Singapore Telecom (STC)/ A major shareholder of SHIN, holding 56%.
1. Expenses and other payments. The Company leased transponder from STC.
- Trade account payable and Other account payable Codespace Inc./ The 1. Expenses and other payments. Company and Codespace The Company hired Codespace to develop products Inc. jointly hold shares at for IPSTAR project. 70%:30% in Spacecode LLC. - Trade account payable and Other account payable - Provides communication engineering and electronic technology development services.
Consolidated 4.00
0.55 19.18
2.94
สวนที่ 2 หนา 123
The Company leased transponder from STC in order to provide ProTrunk service to customers. Service fee was charged under normal contract and business conditions as with external customer. Codespace Inc. is an expert in broadband technology. The service fee was charged at an hourly rate plus actual expenses.
บริษัท ชินแซทเทลไลท จํากัด (มหาชน)
แบบแสดงรายการขอมูลประจําป 2550
Necessity and Justification of Related Transactions In 2007, the Company and its subsidiaries had related transactions as shown in note 27 of the audited financial statements for 2007. The auditor remarked that those transactions which the Company had undertaken with Shin Corporation Plc. and Temasek Group – such as its subsidiaries, associated companies, and joint venture companies; as well as with the directors and other enterprises in which Shin Corporation Plc , Temasek., or the Company had significant influence, directly or indirectly.
The Company set the sale and purchase prices for goods and services to the related parties at the same commercial rate and with the same contracts and terms as those normally set to external customers. Crucial and non-customary transactions are adhered to the rules laid down by the Securities Exchange Commission (SEC) and the Stock Exchange of Thailand (SET). These transactions had been examined and approved by the Audit Committee to ensure the necessity and justification to the Company. Methods of Related Transactions Shin Satellite Plc., a listed company on the Stock Exchange of Thailand, seeks to create maximum benefit to the shareholders. It has a policy to disclose sufficient information to investors and to abide by the rules, regulations, and laws of the country in which it conducts business. In order to undertake related transactions correctly and in accordance with good governance principles so as to provide investors with sufficient information for investment decision, the Company has formed a list of companies in the group and the related parties for consideration as the following. For related transactions between the Company and its subsidiaries and related parties, the Company applies the same business processes and practice as with outside parties (Arm’s length basis) for the maximum benefit to the Company. It must provide certain trade conditions whereas the price and terms and conditions are fair and shall not create any conflicts of interest. In case it is unclear whether or not the price of the related transactions is under Arm’s length basis, the Company must refer to the Audit Committee for examination prior to the transaction.
สวนที่ 2 หนา 124
Deleted: 49
Deleted: 6 Deleted: 9 Deleted: 6
Deleted: The Shinawatra family and its related parties ceased to be related parties of the Group from the date of the sale. However, the Company disclosed related party transaction with Shinawatra family up to 31January 2006.¶
Deleted: 49
แบบแสดงรายการขอมูลประจําป 2550
The Company has authorized executives designated and empowered to endorse up to a certain limit of budget according to their respective rank and position. However, the Company prohibits the approval authorities to those directors and management who may gain benefits from or have conflict of interest to the related transaction. In addition, these directors and management shall not attend meetings related to the transaction and are prohibited to vote. The Audit Committee is responsible for examination of related transactions between the Company and its subsidiaries and related parties to ensure the trade conditions and price are normal business practices and in accordance with the Board of Directors’ approval. The examinations of related transactions shall be disclosed in the Audit Committee Report. However, related transactions between the Company and related parties who hold shares of less than 10% shall not be examined by the Audit Committee in accordance with the Announcement of the SET on the Disclosure of Information of Related Transactions. Related transactions, commonly regarded as a normal business practice, are conducted in the same way as with external customers, with fees and remuneration set within the established rate. It must be approved according to the Company’s financial practices and regulations. The Vendor selection process must be regularly reviewed to ensure fair competition from outside vendors who may offer more advantages to the Company and who also serve as outside reference sources for price and terms comparison. The Company discloses information about related transactions in accordance with the Thai Generally Accepted Accounting Principles, Article. 47, regarding the disclosure of information about related parties, as well as in accordance with the regulations laid down by the SEC and SET. The Accounting Department lists all related transactions each quarter for the consideration of the Audit Committee to comment on the necessity and justification with regard to the Company’s best interest. The observation is then forwarded to the Board of Directors. Future Policy or Tendency of Related Transaction In the future, the Company may engage in related transactions, both through the normal trade and business transactions and non-customary transactions, as appropriated. For transaction that may require the service of specialist, the Audit Committee will, then, hire a specialized consultant to opine on such related transaction. The related transaction will be based on trade สวนที่ 2 หนา 125
Deleted: 49
แบบแสดงรายการขอมูลประจําป 2550
conditions that can be referred to from a similar transaction conducted with external customers. The Company will fully abide by the laws concerning the SEC and SET’s rules, announcements, orders, or SEC regulations, including following regulations and practices regarding disclosure of information of related transactions and acquisition of or disposal of important assets of the Company or its subsidiaries. Information of related transactions will be disclosed in the notes to the audited financial statements.
สวนที่ 2 หนา 126
Management’s Discussion and Analysis: SATTEL I. Overview Total revenues of 2007 rose 42.6%.
Shin Satellite Plc (“the Company”)’s total revenues in 2007 were Baht 12,799 million, an increase of 42.6% over 2006 due to a gain of Baht 5,127 million on the sale of 49% shares in Shenington to Asia Mobile Holdings Pte Ltd (“AMH”). This resulted in a net profit of Baht 3,040 million, up Baht 3,086 million over a net loss of Baht 46 million last year. After the completion of the investment transaction on July 25, 2007, the Company recognized revenue and expense in the decreasing proportions from 100% to 51% from Cambodia Shinawatra Company Limited (“CamShin”), and from 49% to 24.99% from Lao Telecommunications Company Limited (“LTC”). This caused decreases in its consolidated sales and service income and cost from 2006. Meanwhile, as sales volume of DTV satellite television dish sets grew significantly, the Company’s Revenue from the Internet access and media business rose by 203.8%. The Company’s total shared net income from its associate in 2007 was Baht 105 million, increased by 22.1% from 2006. CS LoxInfo Plc (“CSL”) declared a dividend for 2007 of Baht 0.40/share (par value of Baht 1 per share). Lao Telecommunications (“LTC”) announced it would pay a dividend of USD 12 million for the performance of 2007, thus the Company will receive a dividend of USD 3 million in line with its 24.99% ownership. With the adoption of a new accounting policy in Q1/2007 regarding changing the accounting methods for the investments in subsidiaries and associates from the equity method to the cost method as reported in the separate financial statement, the Company had to restate some financial figures on the balance sheets as at December 31, 2006 and on the income statement for the year of 2006, on the separate financial statement in order to be comparable to 2007.
II. Business Summary Transponder leasing and related business In the Company’s broadcasting business, Thaicom’s prime orbital slot of 78.5 degrees east currently become the number one ranking in Asia-Pacific in terms of the number of carried satellite TV channels. The Company plans to emphasize on the domestic, Indochina and South Asia markets for its broadcasting business and expand to new markets in Middle East and others. At present, the total number of satellite user terminals provided by the Company at the end of 2007 was 104,067. In 2007, the construction of four second generation IPSTAR gateways in Malaysia, Philippines, South Korea, and Indonesia were commenced. In early 2008, IPSTAR second generation service is expected to cover 11 countries; Thailand, Vietnam, Australia, New Zealand, Myanmar, China, Malaysia, Philippines, South Korea, Indonesia and Cambodia. The Company will continue the expansion plan to increase broadband satellite service coverage to the rest of Asia-Pacific region in 2008. Moreover, it continued to develop new broadband satellite products and applications, such as the introduction of the new “maXX” to efficiently satisfy the commercial requirement of customers. In addition, the Company has signed exclusive contracts to appoint the exclusive National Service Operators (NSO) for IPSTAR services in New Zealand and Australia, and Cooperation Agreements with leading Telecommunications solutions providers, to operate the IPSTAR gateways in Malaysia, Philippines, and Indonesia and to provide IPSTAR services in such countries. Telephone business Due to the sale of 49% shares in Shenington to AMH, Shenington has changed the status from subsidiary to joint venture of the Company and the Company has recognized revenue and expense in the decreasing proportions from 100% to 51% from CamShin, and from 49% to 24.99% from LTC since July 26, 2007. This resulted in decreases in revenue and expense from the telephone network business compared to 2006.
1
Management’s Discussion and Analysis: SATTEL However, because of a steady growth of telephone subscribers in both Cambodia and Lao PDR, especially mobile prepaid subscribers, as of the end of 2007, LTC and CamShin’s total subscribers increased by 24.2% and 71.7% respectively from 2006. Internet and media business In this year, the Company’s subsidiary, Shin Broadband Internet (Thailand) Co., Ltd. (“SBI”) had sales revenue from selling DTV satellite television dish sets, and the High Definition Television (HDTV) service. The new “Wiworld”, a mobile satellite antenna, was introduced to the market to meet the new generation life style. Wiworld will target individuals, families and executives who spend a significant amount of time in their vehicles. It will also target public transportation such as VIP coaches. Wiworld is a mobile satellite auto-tracking antenna used to receive digital television signals in a Thaicom 5 Ku-band spectrum such as DTV and UBC. CS Loxinfo Plc (“CSL”)’s performance in 2007 was better than the previous year due to an increase in revenue and the effectiveness of cost management. An increase of 23% in CSL’s net profit was from leased lines services. It has continuously put more effort on expanding customer base in business or corporate segments by concentrating on the quality of service and value added services, to meet customer needs. In 2007, CSL acquired the common shares of Watta Classifieds Company Limited (“Watta”), which were approximately equivalent to 60% of the registered shares of Watta, to create the largest national platform for a complete line of classified and directory services. Moreover, the Board approved Share- Repurchase Program for financial management purposes to utilize the Company’s excess liquidity and increase ROE. The cumulative number of shares repurchased up to 22 November 2007 was 51.7 million ordinary shares or 8.3% of the total number of shares or equivalent to Baht 222.1 million.
III. Consolidated Operating Results Accounting policy Following the Notification of the Federation of Accounting Professions (FAP) no.26/2006 TAS 44 (revised-2007), Consolidated Financial Statements and Separate Financial Statements, the Company is required to change the accounting methods for the investments in subsidiaries and associates from the equity method to the cost method as reported in the separate financial statement. The Company restated its financial statement by using the historical cost as the cost of the investment in a subsidiary of the separate financial statement. As a result of the adoption of this accounting policy, the Company restated some financial figures on the balance sheets as at December 31, 2006 and on the income statement for the year of 2006, of the separate financial statements as follows; Company F/S Unit: million Baht
Adjustments Investments Deferred tax assets
Before Adjust
Adjustincrease (decrease)
After Adjust
2,800
(1,786)
1,014
470
14
484
Adjustment on assets Net liabilities in subsidiaries Balance sheet
(1,772) 97
Adjustment on liabilities Unrealised cumulative gains on dilution of investment in a subsidiary Cumulative foreign currency translation adjustment Retained earnings Unappropriated
Adjustment on equity
(97)
-
Deleted: li
(97) 376
(376)
-
(311)
311
-
3,492
(1,610)
1,882
(1,675)
2
Management’s Discussion and Analysis: SATTEL Company F/S Unit: million Baht
Adjustments Dividend income
Income statement
Before Adjust
Adjustincrease (decrease)
After Adjust
-
76
76
Other income
112
48
160
Share of net results from investments -equity method
765
(765)
-
Income tax
229
14
243
Net profit
(46)
(627)
(673)
Adjustment on Income statement
(627)
The Company would like to provide additional information to better clarify the issue as follows: 1. After restating, the income statement of the separate financial statements shows net income for the one-year period ended December 31, 2007 and the comparable period in 2006 increased by Baht 967 million and decreased by Baht 627 million respectively (that is, increased by Baht 0.89/share and decreased by Baht 0.58/share respectively). This is because the separate financial statement did not include proportionately the performance of subsidiaries and associates, whereas it solely included the performance of the parent company. TAS44 allows the Company to realize gains from investments in subsidiaries and associates only when it receives dividends from such subsidiaries and associates. 2. The effect from restating other items on the balance sheets as at December 31, 2006 of the separate financial statements is as follows; • • • •
Investment in subsidiaries and associates, recorded at the historical cost, is shown in a separate financial statement to have a book value of Baht 1,014 million. Deferred tax assets increased by Baht 14 million to Baht 484 million. The separate financial statement did not include net liabilities in subsidiaries, unrealized cumulative gains on dilution of investment in a subsidiary, cumulative foreign currency translation adjustment. Retained earnings on the balance sheets decreased by Baht 1,610 million to Baht 1,882 million.
Selected financial information on SATTEL Amount (MBt)
Change YoY
2007
2006
Sales and service income
6,435
6,846
-6.0%
Gain on sales of investment
5,127
-
n.m.
105
86
22.1%
Cost of sales and services
5,592
5,921
-5.6%
SG&A expenses
1,403
1,255
11.8%
-
964
n.m.
Share of net results from associate
Loss on write-off of property and equipment under concession
(%)
3
Management’s Discussion and Analysis: SATTEL Amount (MBt) 2007
Change YoY
2006
(%)
EBIT*
(560)
(330)
n.m.
EBITDA**
2,197
2,654
-17.2%
Net profit
3,040
(46)
n.m.
EPS (Baht)
2.78
(0.04)
n.m.
* EBIT = Sales and service income – Cost of sales and service – SG&A ** EBITDA = EBIT + Depreciation and Amortization n.m. = not meaningful
Sales and service income Consolidated sales and service income in 2007 was Baht 6,435 million, a decrease of Baht 411 million or 6.0% compared to Baht 6,846 million in 2006 due to decreases in revenue from the telephone network business as a result of lower recognition of income contributed by LTC and CamShin following the sales of 49% stake in Shenington and in revenue from satellite and related services, offset by revenue growth from the Internet and media business. Sales and service income
2007
2006
%YoY
Satellite and related services
3,980
4,360
-8.7%
Telephone services
2,212
2,406
-8.1%
243
80
203.8%
6,435
6,846
-6.0%
Internet and media services Total
Satellite transponder leasing and related services Revenue from satellite transponders and related services in 2007 was Baht 3,980 million, a decrease of Baht 380 million or 8.7%, compared to Baht 4,360 million in the same period last year. Satellite and related services
2007
2006
%YoY
Thaicom 1A, 2, 3, 5 and related services
2,214
2,558
-13.4%
IPSTAR services
1,766
1,802
-2.0%
Total
3,980
4,360
-8.7%
•
Revenue from the Thaicom conventional satellite business for 2007 was Baht 2,214 million, a decrease of Baht 344 million or 13.4%, from Baht 2,558 million in 2006 due to a loss from the continued appreciation of the Thai Baht.
•
IPSTAR service revenue was Baht 1,766 million in 2007, a decrease of Baht 36 million or 2.0% compared to Baht 1,802 million in the same period last year because the Company sold 38,011 UTs in 2007, a decrease of 1,918 UTs or 4.8% from 39,929 UTs in 2006; however, revenue from transponder leasing on Thaicom 4 (IPSTAR) was higher than that in 2006.
4
Management’s Discussion and Analysis: SATTEL Two major projects responsible for the increase in UTs sales this year were from the Australian Government and TOT. The Australian Government launched a special program to subsidize cost of providing broadband service to consumers in regional, rural and remote locations to remove the inadequacy of communication infrastructure. Meanwhile, in Thailand TOT increased the sale of UTs by using the iPSTAR system to supplement its existing telephone network. Telephone services 2007 revenue from telephone business reduced 8.1% due to sale of investment.
2007 revenue from Internet and media services rose 203.8% from 2006.
The Company’s revenue from the telephone service business in 2007 was Baht 2,212 million, a decrease of Baht 194 million, or 8.1% compared to Baht 2,406 million in 2006 due to a reduction in recognition of revenue of LTC and CamShin following the sale of 49% shares in Shenington to AMH. However, the growth of telephone subscribers in both Cambodia and Lao PDR, especially a significant growth rate of prepaid mobile phone subscribers, led to an increase in revenues generated from LTC and CamShin. As at the end of 2007, LTC and CamShin had 786,075 and 475,435 subscribers respectively, increases of 24.2% and 71.7% from 632,829 and 276,925 subscribers at the end of 2006. Internet and media services Revenue from the Internet access and media business in 2007 was Baht 243 million, an increase of Baht 163 million or 203.8% from Baht 80 million in 2006 due to increases in revenue from DTV sales, HDTV service, and Wiworld sales, all first incurred in 2007. As at the end of 2007, DTV sales volume was 101,167 sets.
Cost of sales and service The Company reported total cost for 2007 of Baht 5,592 million, a decrease of Baht 329 million or 5.6% compared to Baht 5,921 million in 2006 due to a reduction in cost of sales and services from the satellite business and the telephone business. The cost accounted for 86.7% of sales and service income, slightly going up from 86.5% in 2006. Cost of sales and services
2007
2006
%YoY
Satellite and related services
4,338
4,708
-7.9%
Telephone services
1,097
1,133
-3.2%
157
80
96.3%
5,592
5,921
-5.6%
Internet and media services Total
Cost of satellite transponder leasing and related services Cost relating to transponder leasing and related services in 2007 was Baht 4,338 million, a decrease of Baht 370 million or 7.9% from Baht 4,708 million in the same period last year. In 2007, cost associated with satellite and related services accounted for 108.5% of its revenue, insignificantly going up from 108.0% in 2006. Satellite and related services
2007
Thaicom 1A, 2, 3, 5 and related services IPSTAR services Total
2006
%YoY
1,389
1,635
-15.0%
2,949
3,073
-4.0%
4,338
4,708
-7.9%
5
Management’s Discussion and Analysis: SATTEL
Cost relating to the Thaicom conventional satellite and related business was Baht 1,389 million, a decrease of Baht 246 million or 15.0% from 2006, because of a reduction in cost of Turnkey service and no amortization and cost of in-orbit insurance of the unutilized Thaicom 3 satellite which has not been utilized since July 13, 2006, offset by a rise in amortization and cost of in-orbit insurance of the Thaicom 5 satellite. As a result, the cost of the Thaicom conventional satellite business to its revenue was 62.7%, falling from 63.9% in 2005.
Cost of providing IPSTAR services was Baht 2,949 million, a decrease of Baht 124 million or 4.0% from 2006 due to a decrease in cost of UT sales corresponding to a decrease in the sales volume, offset by a rise in cost relating to the Thaicom 4 satellite; for instance, concession fee to MICT and the amortization of the Thaicom 4 satellite and its ground equipment. The cost of IPSTAR service to its revenue was 165.3% in 2007, decreasing from 170.5% in 2006.
Cost of telephone services Cost relating to the telephone business for 2007 amounted to Baht 1,097 million, a decrease of Baht 36 million or 3.2% from Baht 1,133 million in 2006. This was because the Company recognizes cost incurred by CamShin and LTC corresponding to the new investment proportion, following the sale of 49% shares in Shenington to AMH. However, both LTC and CamShin’s cost of sales and services increased from 2006. There was a rise in LTC’s amortization of expanded telephone network in Lao PDR. Increases in revenue sharing to the Ministry of Post and Telecommunications in Cambodia from 7% to 10% of revenue before expenses in 2007, cost of electricity, cost of international calling (VoIP) service introduced in October 2006, depreciation of increasing equipment used in telephone network stations since the end of 2006, and Interconnection Charge from a promotion for calling to all networks that led to a rise in outgoing calls across networks. Cost of Internet access and media services Cost relating to the Internet access and media business in 2007 was Baht 157 million, an increase of Baht 77 million or 96.3% from Baht 80 million in 2006, because of increases in the cost of DTV and Wiworld sales, and High-definition television (HDTV) service, offset by a decrease in cost of Internet service of LTC and CamShin which was recorded according to new investment proportion. Selling and administrative expenses SG&A expenses, including directors’ remuneration, were Baht 1,403 million in 2007, an increase of Baht 148 million, or 11.8%, compared to Baht 1,255 million in 2006. This was due to a Baht 109 million rise in marketing expenses arising from promotions in the satellite and telephone businesses, and a Baht 101 million increase in staff cost, offset by a decrease in recognized expense from CamShin and LTC corresponding to the new investment proportion. Interest expense decreased by 15.2% from 2006.
Interest expense Interest expense was Baht 809 million, a decrease of Baht 145 million, or 15.2%, compared to Baht 954 million in 2006 due to loan repayment for the Thaicom 4 and Thaicom 5 projects in this year. Gain on sales of investment Gain on sales of investment was Baht 5,127 million due to the sale of 49% shares in Shenington to AMH.
6
Management’s Discussion and Analysis: SATTEL Gain on exchange rate As the Thai Baht appreciated by approximately Baht 3.34 against the USD in 2007, the Company reported a gain of Baht 1,050 million from foreign exchange for 2007, a decrease of Baht 853 million or 44.8% from Baht 1,903 million in 2006 due to the strengthening of the Thai Baht, and a decrease in loans in USD resulting from loan repayment for the Thaicom 4 and Thaicom 5 projects. Share of net results from investment – equity method The share of net results from investment in 2007 was Baht 105 million, increased by Baht 19 million or 22.1% from Baht 86 million in 2006 due to a 22.5% increase in CSL’s net profit especially from leased line services, and decreases in cost of Internet services resulting from efficient network rental cost management and in marketing expense. Income tax expense The Company’s income tax expense in 2007 was Baht 1,952 million mainly caused by the gain on sale of investment while the Thaicom 3 satellite has not been utilized since Q3/2006 so that the Company recognized the future benefit arising from losses carried forward that reduced the future tax base as an income tax receivable of Baht 80 million in 2006. IV. Financial Position At the end of 2007, the Company reported total assets of Baht 30,101 million, a decrease of Baht 2,733 million or 8.3% from Baht 32,834 million at the end of 2006. This was mainly because the Company recorded assets of CamShin and LTC in decreasing proportion following the sales of 49% shares of Shenington to AMH. Property, plant and equipment item was significantly dropped by this transaction. SATTEL’s asset components Assets
December 31, 2007
December 31, 2006
Amount
% of
Amount
% of
(Bt mn)
Total assets
(Bt mn)
Total assets
4,313
14.3
2,479
7.6
676
2.2
686
2.1
PP&E, net
4,505
14.9
6,822
20.8
PP&E under the concession agreement, net
18,777
62.3
20,489
62.4
Intangible assets
1,302
4.3
1,389
4.2
Current assets Investment in associates
Liquidity At the end of 2007, the Company had a current ratio of 0.93 times, up from 0.39 at the end of 2006. This was because of a decrease of Baht 2,170 million in the current portion of long-term loans according to a new loan repayment schedule of the Thaicom 4 and Thaicom 5 projects. Investments Investment in CSL was presented as an “investment in an associate” item. At the end of 2007 the Company’s “investment in an associate” was Baht 676 million, a decrease of Baht 10 million or 1.5% from Baht 686 million at the end of 2006, reflecting a proportionate recognition of CSL’s net profit for 2007 amounted to Baht 105 million, offset by a dividend paid of Baht 85 million and an unrealized loss of Baht 30 million from an increase in shareholding from 40.02% to 43.48% in CSL resulting from Treasury Shares Program of CSL.
7
Management’s Discussion and Analysis: SATTEL Property, plant and equipment Property, Plant and Equipment (PP&E) at the end of 2007 was Baht 4,505 million, a decrease of Baht 2,317 million from Baht 6,822 million at the end of last year. This was mainly due to a sale of 49% shares in Shenington to AMH leading to a reduction of Baht 2,291 million in recognition of PPE of CamShin and LTC. PP&E at the end of 2007 also included the assets under concession agreements of Camshin of approximately Baht 1,611 million, dropped by Baht 1,117 million from Baht 2,728 million at the end of 2006. PP&E under concession agreements PP&E under concession agreements at the end of 2007 was Baht 18,777 million, a decrease of Baht 1,712 million from Baht 20,489 million at the end of 2006 totally due to an amortization in 2006. Intangible assets Intangible assets at the end of 2007 were Baht 1,302 million, a decrease of Baht 87 million compared to Baht 1,389 million at the end of 2006 due to its depreciation and amortization offset by increased intangible assets arising from the development of UT. Borrowings and Shareholders’ equity The Company’s net borrowings at the end of 2007 were Baht 9,845 million, a decrease of Baht 6,101 million from Baht 15,946 million at the end of 2006. This was mainly due to long-term loan repayment for the Thaicom 4 and Thaicom 5 projects of USD 141 million or Baht 4,776 million resulting in a decrease in long-term loans from financial institutions. The Company’s shareholders’ equity at the end of 2007 was Baht 16,684 million, an increase of Baht 3,106 million from 13,578 million at the end of 2006, reflecting net profit of Baht 3,040 million for 2007 offset by a gain of Baht 104 million from foreign currency translation adjustment. Net borrowings to equity at the end of 2007 were 0.59 times, down from 1.17 times at the end of 2006, due to loan repayment for the Thaicom 4 and Thaicom 5 projects so that it can strengthen overall financial status. Cash flow The Company’s cash flows from operating activities for 2007 were Baht 1,734 million. Net cash inflows provided by investing activities were Baht 5,298 million, mainly due to proceeds from sale of long term investment of USD 200 million in July 2007 offset by payments for property and equipment for the expansion of telephone network. The Company had net cash outflow from financing activities in 2007 of Baht 4,962 million mainly due to long-term loan repayment for the Thaicom 4 and Thaicom 5 projects of USD 141 million by using the proceeds from the sale of Shenington. The Company had ending cash of Baht 2,429 million on December 31, 2007.
This document contains certain forward-looking statements. They refer to future events and to the future financial performance of the Companies. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe” or “continue.” Although the Companies believe that the expectations reflected in such forward-looking statements are reasonable at this time, it can give no assurance that such expectations will prove to be correct. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements.
8
AUDITOR’S REPORT
To the Shareholders of Shin Satellite Public Company Limited
I have audited the accompanying consolidated and company balance sheets as at 31 December 2007, and the related consolidated and company statements of income, changes in shareholders’ equity, and cash flows for the year then ended of Shin Satellite Public Company Limited and its subsidiaries, and of Shin Satellite Public Company Limited, respectively. The Company’s management is responsible for the correctness and completeness of information in these financial statements. My responsibility is to express an opinion on these financial statements based on my audit. The consolidated and company financial statements (before restatement), for the year ended 31 December 2006 of Shin Satellite Public Company Limited and its subsidiaries and of Shin Satellite Public Company Limited were audited by the another auditor from the same firm as myself, whose report dated 23 February 2007 expressed an unqualified opinion on those statements.
I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the consolidated and company financial statements referred to above present fairly, in all material respects, the consolidated and company financial position as at 31 December 2007, and the consolidated and company results of operations, and cash flows for the year then ended of Shin Satellite Public Company Limited and its subsidiaries, and of Shin Satellite Public Company Limited, respectively, in accordance with generally accepted accounting principles.
Suchart Luengsuraswat Certified Public Accountant (Thailand) No. 2807 PricewaterhouseCoopers ABAS Limited Bangkok 20 February 2008
Shin Satellite Public Company Limited Balance Sheets As at 31 December 2007 and 2006 Consolidated 2007
2006
Company 2007
Baht
Baht
Baht
2006 Restated Baht
4
2,428,508,905
362,692,529
2,087,156,864
108,971,410
5, 27 27
931,406,951 16,575,277
1,346,443,417 1,174,655
782,528,140 78,200,291
1,082,806,851 10,802,069
27 6
531,457,853 150,985,691 254,524,458
18,843 334,828,718 215,926,648 218,189,290
200,254,967 368,180,154 149,082,238 214,901,334
18,843 254,037,564 213,023,853 137,210,009
4,313,459,135
2,479,274,100
3,880,303,988
1,806,870,599
8
676,231,444
686,049,505
-
-
8 9 10
13,845,347 4,504,867,545
19,104,044 6,821,666,498
882,059,138 13,845,347 1,595,752,099
1,014,300,289 19,104,044 1,974,113,834
11 11 11 12 13
18,776,989,358 51,068,408 1,302,194,005 83,658,860 379,163,969
20,489,154,055 90,903,958 1,388,826,909 505,300,301 353,532,946
18,776,989,358 16,619,657 1,160,299,355 34,497,228 357,266,754
20,489,154,055 18,440,938 1,226,869,205 483,565,266 331,708,010
Total non-current assets
25,788,018,936
30,354,538,216
22,837,328,936
25,557,255,641
Total assets
30,101,478,071
32,833,812,316
26,717,632,924
27,364,126,240
Notes Assets Current assets Cash and cash equivalents Trade accounts receivable and accrued income, net Amounts due from related parties Short-term loans and advance to a subsidiary and an associate Inventories, net Prepaid insurance Other current assets, net
7, 27
Total current assets Non-current assets Investments in an associate - equity method Investments in subsidiaries and joint ventures - cost method, net Long-term loan to another company Property and equipment, net Property and equipment under concession agreements, net Deferred charges, net Intangible assets, net Deferred tax assets Other non-current assets, net
Director Date
. Director
.
.
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 2
Shin Satellite Public Company Limited Balance Sheets (Cont'd) As at 31 December 2007 and 2006 Consolidated 2007
2006
Company 2007
Baht
Baht
Baht
2006 Restated Baht
14 27
344,833,098 513,889,212
306,078,278 552,211,251
350,616,848
337,784,954
27
141,159,097 13,739,726
815,269,909 28,905,346
19,811,572 20,567,552
195,776,388 28,148,278
1,139,221,122 177,737,816 529,795,081 226,222,746 1,338,377,947 194,994,531
3,308,893,446 264,116,905 541,915,913 232,955,513 53,770,569 292,596,306
542,989,056 95,713,984 456,360,170 164,003,424 1,289,998,110 128,009,063
3,044,630,028 172,802,574 461,922,509 170,375,797 141,199,943
4,619,970,376
6,396,713,436
3,068,069,779
4,552,640,471
293,499,612 8,360,572,981 57,815,620 85,446,676
277,618,527 12,331,322,512 99,425,534 151,063,047
7,711,065,392 78,064,301
10,817,047,016 148,175,432
8,797,334,889
12,859,429,620
7,789,129,693
10,965,222,448
13,417,305,265
19,256,143,056
10,857,199,472
15,517,862,919
Notes Liabilities and shareholders’ equity Current liabilities Short-term loans from financial institutions Trade accounts payable Accounts payable - property and equipment Amounts due to related parties Current portion of long-term borrowings, net Advance receipts from customers Accrued concession fee Accrued expenses Accrued income tax Other current liabilities
14 27 27 15
Total current liabilities Non-current liabilities Long-term accounts payable - property and equipment Long-term borrowings, net Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities
14 12 27
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 3
Shin Satellite Public Company Limited Balance Sheets (Cont'd) As at 31 December 2007 and 2006 Consolidated 2007
2006
Company 2007
Baht
Baht
Baht
2006 Restated Baht
5,660,411,500
5,660,411,500
5,660,411,500
5,660,411,500
5,461,094,470 4,297,233,530
5,455,346,265 4,295,763,142
5,461,094,470 4,297,233,530
5,455,346,265 4,295,763,142
346,224,720
376,224,720
-
-
(207,203,715)
(310,912,580)
-
-
413,853,344 6,331,201,641
213,505,767 3,491,818,951
413,853,344 5,688,252,108
213,505,767 1,881,648,147
Total parent’s shareholders’ equity Minority interests
16,642,403,990 41,768,816
13,521,746,265 55,922,995
15,860,433,452 -
11,846,263,321 -
Total shareholder’s equity
16,684,172,806
13,577,669,260
15,860,433,452
11,846,263,321
Total liabilities and shareholders’ equity
30,101,478,071
32,833,812,316
26,717,632,924
27,364,126,240
Notes Shareholders’ equity Share capital Authorised share capital ordinary shares Issued and paid-up share capital ordinary shares Premium on share capital Unrealised profit on changes on shareholding in a subsidiary and an associate Foreign currency translation adjustment Retained earnings Appropriated Legal reserve Unappropriated
16
16
17
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 4
Shin Satellite Public Company Limited Statements of Income For the years ended 31 December 2007 and 2006 Consolidated 2007
2006
Company 2007
Baht
Baht
Baht
2006 Restated Baht
6,435,085,790 5,126,732,155 81,757,253 1,050,119,963
6,845,912,519 137,746,409 1,902,701,044
3,771,116,634 6,541,165,760 138,072,420 179,926,019 985,275,990
4,298,840,902 76,399,200 159,775,528 1,828,359,133
105,215,936
86,198,090
-
-
12,798,911,097
8,972,558,062
11,615,556,823
6,363,374,763
Cost of sales and services Concession fee Selling and administrative expenses Loss on write-off property and equipment under concession agreements Directors’ remuneration
5,115,344,488 476,568,113 1,395,613,319
5,450,700,671 469,926,881 1,248,744,921
3,796,393,693 395,444,875 924,764,249
4,258,562,044 395,483,254 830,454,923
7,522,185
964,030,593 6,692,945
6,945,000
964,030,593 6,000,000
Total expenses
6,995,048,105
8,140,096,011
5,123,547,817
6,454,530,814
5,803,862,992 (808,926,938) (1,951,529,789)
832,462,051 (953,943,012) 80,136,914
6,492,009,006 (686,256,121) (1,798,801,347)
(91,156,051) (825,012,467) 243,435,074
Profit (loss) before minorities Profit attributable to minorities, net
3,043,406,265 (3,675,998)
(41,344,047) (4,209,324)
4,006,951,538 -
(672,733,444) -
Net profit (loss) for the year
3,039,730,267
(45,553,371)
4,006,951,538
(672,733,444)
Notes Revenues Revenues from sales and services Gain on sales of investment Dividend income Other income Gain on foreign exchange Share of net results from investmentsequity method
27
18 8
Total revenues Expenses
Profit (loss) before interest expense and income tax Interest expense Income tax
27
22
Basic earnings (loss) per share (Baht)
20
2.78
(0.04)
3.67
(0.62)
Diluted earnings (loss) per share (Baht)
20
2.78
(0.04)
3.67
(0.62)
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 5
Shin Satellite Public Company Limited Statements of Changes in Shareholders’ Equity For the years ended 31 December 2007 and 2006 Consolidated (Baht) Issued and paid-up share capital (Note 16)
Premium on share capital (Note 16)
Unrealised profit on changes on shareholdings in a subsidiary and an associate
Foreign currency translation adjustments
Legal reserve (Note 17)
Retained earnings
Minority interests
Total
Opening balance at 1 January 2006 Increase in share capital during the year Foreign currency translation Net loss for the year Decrease in minority interests during the year
5,453,789,085 1,557,180 -
4,295,364,819 398,323 -
376,224,720 -
(128,855,134) (182,057,446) -
213,505,767 -
3,537,372,322 (45,553,371) -
57,887,080 (1,964,085)
13,805,288,659 1,955,503 (182,057,446) (45,553,371) (1,964,085)
Closing balance as at 31 December 2006
5,455,346,265
4,295,763,142
376,224,720
(310,912,580)
213,505,767
3,491,818,951
55,922,995
13,577,669,260
5,455,346,265 5,748,205 -
4,295,763,142 1,470,388 -
376,224,720 (30,000,000) -
(310,912,580) 151,270,988 (47,562,123) --
213,505,767 200,347,577 -
3,491,818,951 (200,347,577) 3,039,730,267 -
55,922,995 (14,154,179)
13,577,669,260 7,218,593 151,270,988 (30,000,000) (47,562,123) 3,039,730,267 (14,154,179)
5,461,094,470
4,297,233,530
346,224,720
(207,203,715)
413,853,344
6,331,201,641
41,768,816
16,684,172,806
Notes
Opening balance at 1 January 2007 Increase in share capital during the year Sale of investment in a subsidiary Loss from increase in shareholding in an associate Foreign currency translation Legal reserve Net profit for the year Decrease in minority interests during the year Closing balance as at 31 December 2007
16 8e 8e 17
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 6
Shin Satellite Public Company Limited Statements of Changes in Shareholders’ Equity (Cont'd) For the years ended 31 December 2007 and 2006 Company (Baht)
Notes
Issued and paid-up share capital (Note 16)
Premium on share capital (Note 16)
Unrealised profit on changes on shareholdings in a subsidiary and an associate (Restated)
3
5,453,789,085 -
4,295,364,819 -
376,224,720 (376,224,720)
(128,855,134) 128,855,134
213,505,767 -
3,537,372,322 (982,990,731)
-
13,747,401,579 (1,230,360,317)
Opening balance at 1 January 2006 - as restated Increase in share capital during the year Net loss for the year
5,453,789,085 1,557,180 -
4,295,364,819 398,323 -
-
-
213,505,767 -
2,554,381,591 (672,733,444)
-
12,517,041,262 1,955,503 (672,733,444)
Closing balance as at 31 December 2006
5,455,346,265
4,295,763,142
-
-
213,505,767
1,881,648,147
-
11,846,263,321
5,455,346,265 -
4,295,763,142 -
376,224,720 (376,224,720)
(310,912,580) 310,912,580
213,505,767 -
3,491,818,951 (1,610,170,804)
-
13,521,746,265 (1,675,482,944)
5,455,346,265 5,748,205 -
4,295,763,142 1,470,388 -
-
-
213,505,767 200,347,577 -
1,881,648,147 (200,347,577) 4,006,951,538
-
11,846,263,321 7,218,593 4,006,951,538
5,461,094,470
4,297,233,530
-
-
413,853,344
5,688,252,108
-
15,860,433,452
Opening balance at 1 January 2006 - as previously reported Prior year adjustment
Opening balance at 1 January 2007 - as previously reported Prior year adjustment Opening balance at 1 January 2007 - as restated Increase in share capital during the year Legal reserve Net profit for the year Closing balance as at 31 December 2007
3 16 17
Foreign currency translation adjustments (Restated)
Legal reserve (Note 17)
Retained earnings (Restated)
Minority interests (Restated)
Total (Restated)
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 7
Shin Satellite Public Company Limited Statements of Cash Flows For the years ended 31 December 2007 and 2006 Consolidated 2007
2006
Company 2007
Baht
Baht
Baht
2006 Restated Baht
21
1,734,471,926
2,793,558,326
314,625,569
1,792,659,540
8e
(1,563,750) 6,613,904,296
(3,216,753) -
6,673,406,911
-
27d
18,843 (1,360,295,908)
(4,073,947,095)
(203,230,820) (292,781,649)
2,314,324 117,709,023 (2,921,189,674)
(10,630,698) (33,118,528)
(5,427,918) (41,011,452) (32,483,996)
(26,023,944)
(5,427,918) (5,139,918) (32,483,996)
85,033,997 4,636,868
232,592,991 57,509,326
138,072,420 142,044,039
76,399,200 57,509,326
5,297,985,120
(3,865,984,897)
6,431,486,957
(2,710,309,633)
16 14
7,218,596 570,786,289
1,955,503 322,485,804
7,218,593 -
1,955,503 -
14 14 14
6,580,692 (521,891,984) (5,024,888,896)
2,976,688,374 (172,500,000) (2,370,038,906)
6,580,692 (4,777,280,990)
2,416,899,808 (1,800,700,893)
(4,962,195,303)
758,590,775
(4,763,481,705)
618,154,418
2,070,261,743 362,692,529 (4,445,367)
(313,835,796) 677,138,099 (609,774)
1,982,630,821 108,971,410 (4,445,367)
(299,495,675) 409,076,859 (609,774)
2,428,508,905
362,692,529
2,087,156,864
108,971,410
Notes Cash flows from operating activities Cash flows from investing activities Acquisition of a subsidiary, net of cash acquired Receipts from sale of long-term investment Short-term loans and advance to a subsidiary and an associate Long-term loans to a subsidiary Payments for property and equipment Payments for property and equipment under concession agreements Payments for deferred charges Payments for intangible assets Dividends received from an associate and a subsidiary Proceeds from sales of property and equipment
8b
Net cash receipts (payments) from investing activities Cash flows from financing activities Proceeds from increase in share capital Proceeds from short-term borrowings Proceeds from long-term borrowings, net of financial expenses Repayments of short-term borrowings Repayments of long-term borrowings Net cash receipts (payments) from financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, opening balance Effects of exchange rate changes Cash and cash equivalents, closing balance
4
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 8
Shin Satellite Public Company Limited Statements of Cash Flows (Continued) For the years ended 31 December 2007 and 2006 Consolidated 2007
2006
Company 2007
Baht
Baht
Baht
2006 Restated Baht
818,434,690 252,872,472
937,167,807 257,729,844
693,572,675 67,550,232
814,129,351 89,332,821
82,612,463
141,246,975
9,381,445
35,915,854
-
318,728,285
-
-
Supplementary information for cash flows: Interest paid Withholding tax and Income tax paid Non-cash transactions Acquisition of property and equipment by debt Transfers of property and equipment by borrowings
The notes to the consolidated and company financial statements on pages 10 to 61 are an integral part of these financial statements. 9
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
1
General information
Shin Satellite Public Company Limited (“the Company”) is a public limited company, incorporated and domiciled in Thailand. The registered office of the Company is 414 Phaholyotin Road, Samsen Nai, Phayathai, Bangkok 10400. The Company is listed on the Stock Exchange of Thailand. The Company, its subsidiaries, associate, and joint ventures (Collectively referred to as “the Group”) are primarily involved in transponder services for domestic and international communications, sale of user terminal of iPSTAR, broadband content services, sale of direct television equipment, Internet data center services, Internet services, satellite uplink-downlink services, printing and publishing of business telephone directories, banner advertising, telephone network services, mobile contents, and engineering and development services on communication technology and electronics, which are mainly operated under concession agreements. The Group has operations in 8 countries; Thailand, Singapore, Cambodia, Laos PDR, Australia, New Zealand, the United States of America, and the British Virgin Islands, and employs over 808 people (2006: 1,591 people). The Company obtained concessions from the Ministry of Transport and Communications for a period of 30 years to operate and administer satellite projects and to render transponder services for domestic and international communications as well as the right to collect, for a 30-year period, service charges from users of the transponders. These concession agreements have been transferred to the Ministry of Information Communication and Technology (Note 25a) and will be expired in 2021. These consolidated and company financial statements have been approved by the Board of Directors on 20 February 2008.
2
Accounting policies
The principal accounting policies adopted in the preparation of these consolidated and company financial statements are set out below:
2.1
Basis of preparation The consolidated and company financial statements have been prepared in accordance with Thai generally accepted accounting principles under the Accounting Act B.E. 2543, being those Thai Accounting Standards issued under the Accounting Profession Act B.E. 2547, and the financial reporting requirements of the Securities and Exchange Commission under the Securities and Exchange Act B.E. 2535. The accounting principles applied may differ from generally accepted accounting principles adopted in other countries and jurisdictions. The accompanying consolidated and company financial statements are therefore not intended to present the financial position and results of operations and cash flows in accordance with jurisdictions other than Thailand. Consequently, these 10
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 consolidated and company financial statements are only addressed to those who are informed about Thai generally accepted accounting principles and practices. The consolidated and company financial statements have been prepared under the historical cost convention. The preparation of financial statements in conformity with Thai generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the amounts of revenues and expenses in the reported years. Although these estimates are based on management’s best knowledge of current events and actions, actual results may differ from those estimates.
11
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
2
Accounting policies (Cont’d)
2.1
Basis of preparation (Cont’d) Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. An English version of the consolidated and company financial statements has been prepared from the statutory financial statements that are in the Thai language. In the event of a conflict or a difference in interpretation between the two languages, the Thai language statutory financial statements shall prevail.
2.2
New Accounting Standards and Amendments to Accounting Standards with the effective date in 2008 The following new accounting standards and amendments to accounting standards are revised and are mandatory for accounting periods beginning on or after 1 January 2008. Amendments to Accounting Standards TAS No. 25 TAS No. 29 TAS No. 31 TAS No. 33 TAS No. 35 TAS No. 39 TAS No. 41 TAS No. 43 TAS No. 49
“Cash Flow Statements” “Leases” “Inventory” “Borrowing Costs” “Presentation of Financial Statements” “Accounting Policies, Changes in Accounting Estimates and Errors” “Interim Financial Reporting” “Business Combinations” “Construction Contracts”
New Accounting Standards TAS No. 51 “Intangible Assets” The Group will apply these standards and amendments from 1 January 2008. However, the management determines that the application of these standards will not have significant impact on the consolidated and company financial statements as of 31 December 2007 being presented, except the revised TAS 35 "Presentation of Financial Statements" which requires the additional disclosures on critical judgement and estimates made by the management and the revised TAS 43 “Business Combinations” which requires intangible assets with indefinite useful life will no longer be amortised but be tested for impairment annually.
12
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 2.3
Group accounting - investment in subsidiaries, associates and joint ventures Subsidiary undertakings Subsidiaries are all entities over which the Group has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised as negative goodwill. See Note 2.16 for the accounting policy on goodwill. Intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated; unrealised losses are also eliminated unless costs cannot be recovered. Where necessary, accounting policies of subsidiaries have been changed to ensure consistency with the policies adopted by the Company.
13
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
2
Accounting policies (Cont’d)
2.3
Group accounting - investment in subsidiaries, associates and joint ventures (Cont’d) Subsidiary undertakings (Cont’d) In the Company’s separate financial statements, investments in subsidiaries are reported using the cost method of accounting. A list of the Group’s principal subsidiaries is set out in Note 8. Associated undertakings Associates are all entities over which the Group has significant influence but not control, generally accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associated undertakings are accounted for using the equity method of accounting in the consolidated financial statements. Under this method, the Company’s share of the post-acquisition profits or losses of associates is recognised in the income statement. The cumulative post-acquisition movements are adjusted against the cost of the investment. Unrealised gains or losses on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The Group’s investment in associates includes goodwill (net of accumulated amortisation of goodwill) on acquisition. When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate. Unrealised gain or loss arising from changes in percentages of shareholding in associate is presented under shareholders’ equity. A list of the Group’s principal associates is set out in Note 8.
Joint venture undertakings A jointly controlled entity is a joint venture that involves the establishment of a corporation, partnership or other entity in which each venturer has an interest under a contractual arrangement between the venturers, which establishes joint control over the economic activity of the entity. The Group’s interest in jointly controlled entity is accounted for by proportionate consolidation in the consolidated financial statements. The Group combines its share of the joint ventures’ individual income and expenses, assets and liabilities and cash flows on a line-by-line basis with similar items in the Group’s financial statements. The Group recognises the portion of gains or losses on the sale of assets by the Group to the joint venture that it is attributable to the other ventures. The Group does not recognise its share of profits or losses from the joint venture that result from the purchase of assets by the Group from the joint venture until it resells the assets to an independent party. However, if a loss on the transaction provides evidence of a reduction in the net realisable value of current assets or an impairment loss, the loss is recognised immediately.
14
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 In the Company’s separate financial statements, the cost method of accounting is applied to account for interests in joint ventures. A list of the Group’s principal joint ventures is set out in Note 8.
2.4
Related parties Enterprises and individuals that directly, or indirectly through one or more intermediaries, control, or are controlled by, or are under common control with, the Company, including holding companies, subsidiaries and fellow subsidiaries are related parties of the Company. Associates and individuals owning, directly or indirectly, an interest in the voting power of the Company that gives them significant influence over the enterprise, key management personnel, including directors and officers of the Company and close members of the family of these individuals, and companies associated with these individuals also constitute related parties. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form.
2
Accounting policies (Cont’d)
2.4
Related parties (Cont’d) Sales and service transactions with related parties were conducted under normal commercial terms and conditions, which were the same as for other customers. Consulting and management services were charged at an agreed percentage of assets. Transactions between the Company and Codespace, Inc. were conducted based on hourly rates plus reimbursement of actual expenses.
2.5
Foreign currency translation Items included in the financial statements of each entity in the Group are measured using Thai Baht. The consolidated and company financial statements are presented in Thai Baht. Transactions denominated in foreign currencies are translated into Thai Baht at the rate of exchange prevailing on the transaction dates. Monetary assets and liabilities at the balance sheet date denominated in foreign currencies are translated into Thai Baht at the rate of exchange prevailing at the balance sheet date. Gains and losses resulting from the settlement of foreign currency transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statements. Statements of income and cash flows of foreign entities are translated into the Group’s reporting currency at the weighted average exchange rates for the year and balance sheets are translated at the exchange rates ruling on the balance sheet date. Currency translation differences arising from the retranslation of the net investment in foreign entities are taken to shareholders’equity. On disposal of a foreign entity, accumulated currency translation differences are recognised as part of the gain or loss on sale.
15
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 2.6
Cash and cash equivalents Cash and cash equivalents are carried in the balance sheet at cost. Cash and cash equivalents comprise cash on hand and deposits held at banks, and other short-term highly liquid investments with original maturities of three months from acquisition date.
2.7
Trade accounts receivable Trade accounts receivable are carried at the original invoice amount and subsequently measured at the remaining amount less allowance for doubtful receivables based on a review of all outstanding amounts at the year end. The amount of the allowance is the difference between the carrying amount of the receivable and the amount expected to be collectible. Bad debts are recognised in the income statement as selling and administrative expenses.
2.8
Inventories Inventories are stated at the lower of cost or net realisable value. Cost is determined by the weighted average method. The cost of purchase comprises both the purchase price and costs directly attributable to the acquisition of the inventory, such as taxes and transportation charges, less all attributable discounts, allowances or rebates. The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity), but excludes borrowing costs. Net realisable value is the estimate of the selling price in the ordinary course of business, less the costs of completion and selling expenses. Allowance is made, where necessary, for obsolete, slow-moving and defective inventories.
16
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
2
Accounting policies (Cont’d)
2.9
Investments Investments with fixed maturity that management has the intention and ability to hold to maturity are classified as held-to-maturity and are included as non-current assets, except for those with maturity within 12 months from the balance sheet date, which are classified as short-term investment in other current assets. A test for impairment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statements. On disposal of an investment, the difference between the net disposal proceeds and the carrying amount is charged or credited to the income statements.
2.10
Property and equipment All property and equipment is initially recorded at cost, and subsequently stated at historical cost less accumulated depreciation. Depreciation is calculated using the straight-line method to write off the cost of each asset to its residual values over its estimated useful life as follows: Leasehold land Buildings and improvements Equipment Furniture and fixtures Office equipment Computer equipment Motor vehicles
30 years 5 - 10 years 5 - 10 years 5 years 5 years 3 - 5 years 5 years
Borrowing costs to finance the construction of property and equipment are capitalised during the period of time that is required to complete and prepare the property and equipment for its intended use as part of the cost of the asset. The borrowing cost includes interest on bank overdrafts, short-term and long-term borrowings, amortisation of discounted bills of exchange, amortisation of deferred financial expenses and related taxes. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The estimated recoverable amount is the higher of the anticipated, discounted cash flows from the continuing use of the asset and the amount obtainable from the sale of the asset, less any cost of disposal. Gains and losses on disposal of property and equipment are determined by reference to their carrying amount and are taken into account in determining in operating profit.
17
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Repair and maintenance expenses are charged to the income statements during the financial year in which they are incurred. The cost of major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over the remaining useful life of the related assets.
18
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
2
Accounting policies (Cont’d)
2.11
Leases - where the Group is the lessee Leases of property and equipment where the Group assumes substantially all the benefits and risks of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased assets or the present value of the minimum lease payments. Each lease payment is allocated to the principal and to the finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other payables. The interest element of the finance charge is charged to the income statements over the lease period. The property and equipment acquired under finance leasing contracts are depreciated over the shorter of the estimated useful life of the assets or the lease term. However, if there is reasonable certainty that the lessee will obtain ownership by the end of the lease term, depreciation is calculated over the estimated useful life of the assets. Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statements on a straight-line basis over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which the termination takes place.
2.12
Leases - where the Group is the lessor Assets leased out under operating leases are included in property and equipment in the balance sheet. They are depreciated over their expected useful lives on a basis consistent with similar fixed assets. Rental income is recognised on a straight-line basis over the lease term.
2.13
Property and equipment under concession agreements Property and equipment under concession agreements comprises satellites, commanding and monitoring stations, and other operational equipment, where title has been transferred to the Government agency. They are amortised using the straight-line method over the shorter of the estimated useful lives of satellites and other related assets, or the concession period, ranging from 5 to 27.5 years. Property and equipment under concession agreement is not revalued. Its carrying amount is reviewed annually and adjusted for impairment where it is considered necessary. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. The estimated recoverable amount is the higher of the anticipated, discounted cash flows from the continuing use of the asset and the amount obtainable from the sale of the asset, less any cost of disposal. 19
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 2.14
Impairment of assets Property and equipment, property and equipment under concession agreements and other non-financial assets, including goodwill, deferred charges and intangible assets are reviewed for impairment losses whenever events or changes in circumstances indicate that the carrying amount may not exceed its recoverable amount. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use. For the purposes of assessing impairment, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash-generating units).
20
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
2
Accounting policies (Cont’d)
2.15
Deferred charges Deferred charges principally represent rights to the use of equipment and costs of equipment provided to certain overseas customers in connection with the utilisation of transponder services. The rights to the use of the equipment is amortised using the straight-line method over 5 years. The cost of equipment provided to certain overseas customers in connection with the utilisation of transponder services, which is a transfer of equipment to customers at the end of the service agreement, is amortised on the straightline basis over the period of each service agreement.
2.16
Intangible assets Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of identifiable assets and liabilities of the acquired subsidiary, associate or joint venture undertaking at the date of acquisition. Goodwill on acquisitions of subsidiaries and joint ventures is reported in the consolidated financial statement as goodwill. Goodwill on acquisitions of associates is included in investments - equity method in the consolidated financial statements. Goodwill is amortised using the straight-line method over its estimated useful life. Management determines the estimated useful life of goodwill based on its evaluation of the respective companies at the time of the acquisition, considering factors such as existing market shares, potential growth and other factors inherent in the acquired subsidiary, associate or joint venture. Goodwill is amortised over a period of 4 - 12 years. Negative goodwill represents the excess of the fair value of the Group’s share of the net assets acquired over the cost of acquisition. Negative goodwill is presented under the same balance sheet classifications as goodwill. Any remaining negative goodwill, not exceeding the fair values of the non-monetary assets acquired, is recognised in the statement of income over the remaining weighted average useful life of those assets; negative goodwill in excess of the fair values of those assets is recognised in the statement of income immediately. Negative goodwill arising on acquisitions is recognised over a period of two years. Intangible assets - other The cost of other intangible assets comprises the development of IPSTAR technology, expenditure on acquired software, patents, trademarks and licenses and is amortised using the straight-line method over their period of their benefits of related assets for a period of 5 to 15.75 years.
21
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Specific software is recognised as assets when acquired and operate to intended purposes and is amortised using the straight-line method over their expected benefits for a period of 3 - 10 years. Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a success considering its commercial and technological feasibility, and only if the cost can be measured reliably. Other development expenditure is recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. Development costs that have been capitalised are amortised from the commencement of the commercial production of the product on a straight-line method over the period of their expected benefit, not exceeding 20 years.
22
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
2
Accounting policies (Cont’d)
2.17
Deferred tax The Group recognised deferred income tax in full, using the liability method, on temporary differences arising from differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is provided on temporary differences arising from investments in subsidiaries, associates and joint ventures, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. The tax rate at the balance sheet date was used to calculate the deferred income tax.
2.18
Financial instruments Financial instruments carried on the balance sheet include cash and cash equivalents, short-term investments, trade receivables, amounts due from related parties, short-term loans and advances to related parties, deposits, long-term loan to another company, trade creditors, accounts payable-property and equipment, amounts due to related parties, and borrowings. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item. The Group is party to financial instruments that reduce exposure to fluctuations in foreign currency exchange rate. These instruments mainly comprise foreign currency forward contracts and foreign currency option contracts. Derivative instruments Derivative instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The changes in the fair value are recognised immediately in the statement of income. Fair value estimation The fair values of foreign currency forward contracts and foreign currency option contracts are determined using forward exchange market rates at the balance sheet date.
2.19
Employee benefits The Group operates a provident fund, which is a defined contribution plan. The assets of which are held in a separate trust fund which is managed by external fund manager. The provident fund is funded by payments from employees and by the relevant Group companies. Contributions to the provident fund are charged to the statements of income in the year to which they relate. However, the Group does not provide for employment benefits payable to employees under the Thai Labour Law. 23
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Warrants granted to directors and employees of the Group are recognised when they are exercised.
24
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
2
Accounting policies (Cont’d)
2.20
Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Where the Group expects an expenditure is to be reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expenses.
2.21
Revenue recognition Revenue from sales is recognised upon delivery of products and customer acceptance, if any, net of taxes and discounts. Revenue and cost of sales of gateway equipment with installation are recognised using the percentage of completion method. The stage of completion is measured by reference to the related contract costs incurred for work performed to date compared with the estimated total costs for the contract. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately. Revenue from rendering transponder services and services related to the satellite business, Internet services, and other business related to the Internet business, and telephone services is recognised when the said services are provided to customers. Revenue from leases on equipment is recognised over the period and at the rate of the leasing contract. Revenue arising from royalties is recognised on an accrual basis in accordance with the substance of the relevant agreements. Interest income is recognised on a time proportion basis, taking account of the principal outstanding and the effective rate over the period to maturity, when it is determined that such income will accrue to the Group. Dividend income is recognised when the shareholder’s right to receive payment is established.
2.22
Segment reporting Segment information is prepared based on internal report of the Group which presented by business segment and geographical segment of the Group’s operations. 25
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
26
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
3
Change in significant accounting policies
Change in accounting policy - investments in subsidiaries and associates, presented in the company financial statements The announcement of Federation of Accounting Professions on 2 May 2007 relating to amendments to TAS 44 “Consolidated and Separate Financial Statements”, TAS 45 “Investments in Associates” and TAS 46 “Interests in Joint Ventures” requires the change from the equity method to cost method of accounting for investments in subsidiaries, associates and interests in joint ventures, presented in the company financial statements. Under the cost method, income from investment will be recorded when dividends are declared. The notification is mandatory from 1 January 2007. The change in the accounting policy has an impact to the company financial statements only and does not have an impact to the consolidated financial statements. The Group has adopted the cost method commencing from 1 January 2007 by applying retrospective adjustments. The effects of the change on the company financial statements for the year ended 31 December 2006 are as follows: Company Restated Baht ’000 Balance sheet as of 31 December 2006 Investment in subsidiaries and an associate net of provision for liabilities - Decrease - equity method (Note 8) - Increase - cost method, net (Note 8)
(2,702,849) 1,014,300
Decrease in deferred tax assets (Note 12) Decrease in deferred tax liabilities (Note 12)
(1,083) 14,149
Total increase in deferred tax assets
13,066
Shareholders’ equity Decrease in unrealised cumulative gains on dilution of investment in a subsidiary Increase in cumulative foreign currency translation adjustment Decrease in closing balance of retained earnings Decrease in opening balance of retained earnings
(376,225) 310,913 (1,610,171) (982,991)
Statement of income for the year ended 31 December 2006 Decrease in share of net results from investments - equity method Increase in dividend income Increase in other income Decrease in income tax
(765,504) 76,399 47,599 14,326
Decrease in net profit (Note 20)
(627,180) 27
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Decrease in basic earnings per share (Baht) Decrease in diluted earnings per share (Baht)
(0.57) (0.57)
28
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
4
Cash and cash equivalents Consolidated
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Cash in hand Current accounts and saving deposits held at call with banks Fixed deposits
72,002
35,718
57,925
21,087
472,342 1,884,165
313,815 13,159
146,136 1,883,096
87,884 -
Total
2,428,509
362,692
2,087,157
108,971
The weighted average interest rate of deposits held with banks and fixed deposits was 3.48% per annum (2006: 1.10% per annum).
5
Trade accounts receivable and accrued income, net Consolidated
Trade accounts receivable -Third parties -Related parties (Note 27) Accrued income -Third parties -Related parties (Note 27)
Total trade accounts receivable and accrued income Less Allowance for doubtful accounts Total
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
1,250,474 25,483 1,275,957
1,687,787 14,171 1,701,958
748,361 146,860 895,221
947,621 209,919 1,157,540
40,835 23,916 64,751
146,032 8,510 154,542
47,939 93,755 141,694
145,380 27,776 173,156
1,340,708 (409,301)
1,856,500 (510,057)
1,036,915 (254,387)
1,330,696 (247,889)
931,407
1,346,443
782,528
1,082,807
Outstanding trade accounts receivable as at 31 December 2007 and 2006 can be analysed as follows:
29
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Consolidated
Current Over-due less than 3 months Over-due 3 - 6 months Over-due 6 - 12 months Over-due over 12 months
Less Allowance for doubtful accounts Total
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
235,800 304,261 149,597 104,374 481,925
293,040 564,094 85,750 85,028 674,046
137,932 180,488 98,883 105,714 372,204
149,118 442,167 95,214 67,160 403,881
1,275,957 (409,301)
1,701,958 (510,057)
895,221 (254,387)
1,157,540 (247,889)
866,656
1,191,901
640,834
909,651
30
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
6
Inventories, net Consolidated
7
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Raw material and supplies Work in process Finished goods Goods in transit
124,898 45 421,916 22,944
116,116 9,986 314,285 25,469
53,389 45 321,065 22,941
106,747 9,986 246,612 13,867
Less Allowance for obsolete inventories
569,803 (38,345)
465,856 (131,027)
397,440 (29,260)
377,212 (123,175)
Total
531,458
334,829
368,180
254,037
Other current assets, net Consolidated
8
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
VAT receivable Prepaid expenses Advance payments Deposits Others
18,637 40,164 120,803 28,926 52,908
34,406 38,417 81,355 38,087 32,258
30,610 103,986 24,023 56,282
22,961 50,243 22,608 41,398
Less Impairment of assets
261,438 (6,914)
224,523 (6,334)
214,901 -
137,210 -
Total
254,524
218,189
214,901
137,210
Investments in subsidiaries, an associate and joint ventures
a)
Investments in subsidiaries, an associate and joint ventures as at 31 December 2007 and 2006 comprise: 31
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Consolidated
Company
2007
2006
2007
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
Investment - at equity method Investments in an associate
676,232
686,050
-
-
Total investments - at equity method
676,232
686,050
-
-
Investment - at cost method Investments in subsidiaries and joint ventures Less Impairment loss of investment
-
-
1,282,059 (400,000)
1,414,300 (400,000)
Total investments - at cost method, net
-
-
882,059
1,014,300
32
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
b)
Movements in investments in subsidiaries, an associate and joint ventures for the years ended 31 December 2007 and 2006 are as follows: Consolidated (Equity method)
For the year ended 31 December Opening net book value - As previously reported - Adjustment from change in accounting policy from equity method to cost method (Note 3)
Company (Equity method)
2007
2006
2007
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
686,050
832,445
2,702,849
2,243,401
-
-
(2,702,849)
(2,243,401)
Opening net book value - restated Loss from increase in shares holding in an associate (Note 8e(3)) Share of net results from investments Dividend receipt (Note 8e)
686,050
832,445
-
-
(30,000) 105,216 (85,034)
86,198 (232,593)
-
-
Closing net book value
676,232
686,050
-
-
Consolidated (Cost method)
For the year ended 31 December Opening net book value - As previously reported - Adjustment from change in accounting policy from equity method to cost method (Note 3)
Company (Cost method)
2007
2006
2007
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
-
-
-
-
-
-
1,014,300
1,014,300 33
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Opening net book value - restated Sales of investment in a subsidiary Closing net book value
c)
-
-
1,014,300 (132,241)
1,014,300 -
-
-
882,059
1,014,300
The detail of subsidiaries, an associate and joint ventures can be summarised as follows: Name Subsidiaries of the Company
Business
Country
Currency
Shin Broadband Internet (Thailand) Company Limited
Providing meeting center via Internet Thailand and broadband content services and sale of direct television equipment
THB
iPSTAR Company Limited
Providing iPSTAR transponder The British services Virgin Islands
USD
34
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
c)
The detail of subsidiaries, an associate and joint ventures can be summarised as follows (Cont’d) : Name
Business
Country
Currency
Subsidiaries of the Company Star Nucleus Company Limited
Providing broadband The British technological services via Virgin iPSTAR satellite Islands
USD
Spacecode LLC
Providing engineering development services, technology electronics
and The United States of and America
USD
IPSTAR International Pte Limited
Providing iPSTAR transponder services (not yet commenced business operations)
Singapore
SGD
IPSTAR Global Services Company Limited
Providing iPSTAR transponder services (not yet commenced business operations)
Mauritius
USD
CAM DTV Network Limited
Sale of direct television equipment (not yet commenced business operations)
Cambodia
USD
Holding company for Singapore investment in international telecommunications
SGD
Joint venture of the Company Shenington Investments Pte Limited
Subsidiary of Shin Broadband Internet (Thailand) Company Limited NTU (Thailand) Company Limited
Manufacture communication equipment and toll media for transmission by cable or radio frequency
Thailand
THB
Australia
AUD
Subsidiaries of iPSTAR Company Limited IPSTAR Australia Pty Limited
Sale of user terminal of iPSTAR and providing iPSTAR transponder services in Australia
IPSTAR New Zealand Company Limited
Sale of user terminal of iPSTAT and providing New Zealand iPSTAR transponder services in New Zealand
NZD
Subsidiary of Shenington Investments Pte Limited Cambodia Shinawatra Company Limited
Providing fixed line, mobile phone and Internet services
Cambodia
USD 35
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Associate of Shin Broadband Internet (Thailand) Company Limited CS Loxinfo Public Company Limited
Providing Internet data center services, Internet and satellite uplink -downlink services
Thailand
THB
Subsidiary of CS Loxinfo Public Company Limited Loxley Information Services Company Limited
Providing Internet services
Thailand
THB
Teleinfo Media Public Company Limited
Publishing telephone directories and advertising
Thailand
THB
AD Venture Company Limited
Holding company for investment in mobile contents
Thailand
THB
Watta Classified Company Limited
Conducting classified print directories business
Thailand
THB
36
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
c)
The detail of subsidiaries, an associate and joint ventures can be summarised as follows (Cont’d) : Name
Business
Country
Currency
Associate of CS Loxinfo Public Company Limited CS Loxinfo Solutions Company Limited
Liquidation
Thailand
THB
Mobile contents Banner advertising
Thailand Thailand
THB THB
Banner advertising
Thailand
THB
Thailand Thailand Thailand
THB THB THB
Laos
KIP
Subsidiaries of AD Venture Company Limited Shineedotcom Company Limited Hunsa Dot Com Company Limited Sodamag Corp Company Limited
Subsidiaries of Watta Classified Company Limited Comchat Company Limited Decode Company Limited Idea Maker Company Limited
In process of liquidation In process of liquidation In process of liquidation
Joint venture of Shenington Investments Pte Company Limited Lao Telecommunications Company Limited
Providing fixed line phone, mobile phone, public phone, public international facilities and Internet services
On 12 and 30 November 2007, the extraordianary shareholders’ meeting of Comchat Company Limited, Decode Company Limited and Idea Maker Company Limited, passed resolutions to approve their liquidation. These companies were registered for liquidation with the Ministry of Commerce on 30 November 2007. As at 31 December 2007, IPSTAR International Pte Limited, IPSTAR Global Services Company Limited and CAM DTV Network Limited had not yet commenced business operations. 37
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
d)
The carrying value of investments in subsidiaries, an associate and joint ventures can be summarised as follows: Consolidated - 31 December 2007 (Baht Million) (Equity method)
Associated company CS Loxinfo Public Company Limited
Paid-up capital
Investment portion (%)
At cost
At equity
Baht Million 627.00
43.48
1,669.10
676.23
Consolidated - 31 December 2006 (Baht Million) (Equity method)
Associated company CS Loxinfo Public Company Limited
Paid-up capital
Investment portion (%)
At cost
At equity
Baht Million 625.00
40.02
1,669.10
686.05
38
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
d)
The carrying value of investments in subsidiaries, an associate and joint ventures can be summarised as follows: (Cont’d) Company - 31 December 2007 (Baht Million) (Cost method)
Subsidiaries Shin Broadband Internet (Thailand) Company Limited
Spacecode LLC
iPSTAR Company Limited
Star Nucleus Company Limited
IPSTAR International Pte Limited
Paid-up capital
Investment portion (%)
Investment at cost
Impairment loss of investment
Investment in subsidiaries and joint ventures, net
Baht Million 947.29
100.00
947.29
(400.00)
547.29
USD Million 4.29
70.00
118.65
-
118.65
USD Million 2.00
99.24
78.48
-
78.48
USD Million -
70.00
-
-
-
SGD Million -
100.00
-
-
39
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 IPSTAR Global Services Company Limited Joint Venture Shenington Investments Pte Limited
Total investments in subsidiaries and joint ventures
USD Million -
100.00
-
-
-
SGD Million 14.66
51.00
137.64
-
137.64
1,282.06
(400.00)
882.06
40
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
d)
The carrying value of investments in subsidiaries, an associate and joint ventures can be summarised as follows: (Cont’d) Company - 31 December 2006 (Baht Million) (Cost method)
Subsidiaries Shin Broadband Internet (Thailand) Company Limited
Shenington Investments Pte Limited
Spacecode LLC
iPSTAR Company Limited
Star Nucleus Company Limited
Paid-up capital
Investment portion (%)
Investment at cost
Impairment loss of investment
Investment in subsidiaries and joint ventures, net
Baht Million 947.29
100.00
947.29
(400.00)
547.29
SGD Million 14.66
100.00
269.88
-
269.88
USD Million 4.29
70.00
118.65
-
118.65
USD Million 2.00
99.14
78.48
-
78.48
USD Million -
70.00
-
-
41
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 IPSTAR International Pte Limited
IPSTAR Global Services Company Limited
Total investments in subsidiaries
SGD Million -
100.00
-
-
-
USD Million -
100.00
-
-
-
1,414.30
(400.00)
1,014.30
42
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
e)
Significant movements in investments in subsidiaries, an associate and joint ventures for the year ended 31 December 2007 were as follows: Subsidiaries 1)
Shin Broadband Internet (Thailand) Company Limited Impairment loss for investment in Shin Broadband Internet (Thailand) Company Limited The Company has changed its accounting policies for investment in subsidiaries, associates and joint ventures in the company financial statements effective from 1 January 2007 as discussed in Note 3. The Company applied retrospective adjustments. Therefore, the 2006 comparative figures are prepared on the assumption that the new accounting policy had always been applied. The Company has assessed the impairment of the investments presented at cost and found that the expected recoverable amount of the investment in Shin Broadband Internet (Thailand) Company Limited (“SBI”) is less than its carrying value, which indicated the impairment loss. In determining the expected recoverable amount of the investment, the Company discounted the anticipated future cash flows with a discount rate of 8% per annum. The Company recognised the impairment loss of Baht 400 million in the company financial statements by adjusting the retained earnings as at 1 January 2006. Acquisition of NTU (Thailand) Company Limited On 22 June 2007, SBI acquired 25,020 ordinary shares in NTU (Thailand) Company Limited (“NTU”) from shareholders at Baht 62.50 per share, representing 20.85% of paid-up share capital, at a total price Baht 1.56 million. As a result of this acquisition, SBI owns 71.85% of NTU’s registered shares capital. The fair value of net assets at the acquisition date was equal to net liabilities of Baht 0.3 million. Goodwill recognised from the acquisition of these ordinary shares in NTU of Baht 1.64 million is presented as goodwill in the consolidated balance sheet of the Group and is amortised using the straight-line method over its estimated future benefit of five years.
2)
CAM DTV Network Limited On 14 November 2007, at the board of directors’ meeting of the Company, the board of directors passed a resolution to approve the incorporation of CAM DTV Network Limited (“CAM DTV”) in Cambodia. On 30 January 2008, CAM DTV registered with the Ministry of Commerce of Cambodia with registered capital of Cambodian Riel 4 million.
43
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
Associate 3)
CS Loxinfo Public Company Limited Allocation of warrants and increase in registered share capital of CS Loxinfo Public Company Limited At the annual ordinary shareholders’ meeting of CS Loxinfo Public Company Limited (“CSL”) held on 23 April 2007, the shareholders passed a resolution to approve the allocation of 8,354,400 ordinary shares, equivalent to 1.34% of CSL’s total issued and paid-up share capital as at the date on which the warrant allocation was approved, under an ESOP scheme (Grant V), by granting warrants to directors and employees of CSL and its subsidiary. The exercise ratio is one warrant per one ordinary share. The warrants are in registered form and are non-transferable. The term of the warrants does not exceed five years from the date on which they were granted, and the warrants have no offering price. The exercise price is the weighted-average closing price of CSL’s shares traded on the Stock Exchange of Thailand during the period of 30 days prior to the annual ordinary shareholders’ meeting on 23 April 2007. One-third of the allocated warrants may be exercised to purchase ordinary shares, one year from the grant date for the first exercise, and two years and three years from the grant date for the second and third exercises, respectively. On 24 May 2007, the Securities and Exchange Commission approved CSL’s ESOP scheme (Grant V). The issue and allocation of these warrants on 30 May 2007 was subsequently ratified by the Executive Committee of CSL on 22 June 2007. In addition, the meeting of CSL also passed a resolution to approve an increase in CSL’s registered share capital from 649,020,074 ordinary shares at a par value of Baht 1 each to 660,849,474 ordinary shares at a par value of Baht 1 each, by issuing 11,829,400 additional ordinary shares. These additional 3,475,000 shares are to support the additional units of warrants due to the change in exercise ratios under ESOP Grants I to V and 8,354,400 shares are to support warrants to be issued to its directors and employees under ESOP Grant V. CSL registered the increase in registered share capital with the Ministry of Commerce on 28 June 2007. The offset of legal reserve and premium on share capital with deficit of CSL At the annual ordinary shareholders’ meeting of CSL held on 23 April 2007, the shareholders passed a resolution to approve the offset of legal reserve of Baht 45.6 million and premium on share capital of Baht 574.5 million, totaling Baht 620.1 million, with deficit. The offset is allowed under the Public Limited Companies Act section 119, which states “Where approval of the shareholders’ meeting has been obtained, CSL may transfer the reserve fund referred to premium on share capital, the reserve fund referred to legal reserve or other reserves to compensate for the deficit of the company”. Dividend payment of CSL On 23 April 2007, at the annual ordinary shareholders’ meeting of CSL, the shareholders passed a resolution to approve the annual 2006 dividend payment of Baht 0.14 per share totalling Baht 87.50 million of which Baht 35 million was received by the Group. The dividend was paid on 4 May 2007. 44
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 On 9 August 2007, at the Board of Directors’ meeting of CSL, the board of directors passed a resolution to approve the interim dividend payment of Baht 0.20 per share totalling Baht 125 million. of which Baht 50 million was received by the Group. The dividend was paid on 5 September 2007.
45
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
Associate (Cont’d) 3)
CS Loxinfo Public Company Limited (Cont’d) Treasury Shares Program of CSL As at 22 November 2007, CSL has repurchased its 51.7 million ordinary shares (par value of Baht 1 each), as approved by its Board of Directors or 8.3% of the total number of shares in issue, for a total of Baht 222.1 million. As a result of this, the Group’s percentage of shareholding in CSL has increased from 40.02% to 43.48% with unrealised loss of Baht 30 million. The unrealised loss is presented under shareholders’ equity. Acquisition of Watta Classified Company Limited On 27 April 2007, CSL acquired 120,000 ordinary shares of Watta Classified Company Limited (“Watta”) at Baht 733.34 per share, equivalent to 60% of the share capital of Watta, at a total price of approximately Baht 89.7 million. As a result, Watta and its subsidiaries changed their status to become CSL’s subsidiaries from the date on which control was transferred to CSL. Goodwill recognised from the acquisition of Watta of Baht 80.9 million is amortised using the straight-line method over its estimated future benefits of nine years. Acquisition of Loxley Information Services Company Limited On 2 February 2007, CSL acquired 480,000 ordinary shares and 3,600 ordinary shares in Loxley Information Services Company Limited (“Loxserv”) from CAT Telecom Public Company Limited and its employees respectively, at Baht 12.90 per share, representing 1.86% of the paid-up share capital of Loxserv, at a total price of Baht 6.2 million. On 10 May 2007, CSL acquired an additional 991,593 ordinary shares in Loxserv from Point Asia Dot Com (Thailand) Company Limited at Baht 2.02 per share (the price is in line with the condition stated in shares purchase agreement entered in 2002 between Point Asia Dot Com (Thailand) Company Limited and the Company), totalling Baht 2 million or equivalent to 3.81% of the paid-up share capital of Loxserv. As a result of this acquisition, CSL owns 99.86% of Loxserv. Negative goodwill recognised from the acquisition of these ordinary shares in Loxserv of Baht 12.7 million is amortised using the straight-line method of four years, which is consistent with the amortisation period applicable to the remaining goodwill of Loxserv. The following amounts represent 43.48% share of the assets, liabilities, revenues and net profit of the CSL group. Consolidated 2007 43.48% 46
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Baht ’000 Balance sheet as at 31 December Current assets Non-current assets Current liabilities Non-current liabilities Net assets Income statement for the year ended 31 December Total revenues Net profit
525,505 504,229 (317,090) (6,040) 706,604
1,130,365 105,216
47
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
Joint Venture 4)
Shenington Investments Pte Limited Dividend payment from Shenington Investments Pte Limited On 25 May 2007, the annual ordinary shareholders’ meeting of Shenington Investments Pte Limited (“Shenington”) passed a resolution to approve the exempt one-tier dividend payment to shareholders of SGD 0.42 per share, totalling SGD 6.15 million (approximately Baht 138.07 million). Sale of investments in Shenington At the extraordinary shareholders meeting of the Company no. 1/2007 on 4 July 2007, a resolution was passed to approve the sale of 7,182,420 shares in Shenington to Asia Mobile Holdings Pte Limited (“AMH”), equivalent to 49% of Shenington’s total issued shares at the price of approximate USD 27.85 per share, totaling USD 200 million (approximately Baht 6,709 million). The Company sold the shares in Shenington and received cash from AMH on 25 July 2007. This transaction represents a related party transaction. Gain on sale of investment amounting to Baht 6,541 million and Baht 5,126 million has been recognised as other income in the company and consolidated income statements, respectively. Gain on disposals of investment presented in the company financial statements is different from the consolidated financial statements because of difference in book value of investment. The book value of investment in the company financial statements is presented according to the cost method, while the book value of investment in the consolidated financial statements included the share of net result from Shenington group. According to the Shareholders’ Agreement, Shenington is a jointly controlled entity between the Company and AMH therefore, Shenington has changed the status from a subsidiary to a joint venture of the Company. The effect of sales of investment in Shenington on the consolidated financial statement at the disposal date can be summarised as follows: Consolidated Baht ’000 Balance sheet as at 31 July 2007 Decrease in net total assets Decrease in net total liabilities Increase in shareholders’ equity
(3,656,755) 2,261,351 (151,271)
48
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Decrease in net assets
(1,546,675)
The following amounts represent 51% share of the assets, liabilities, revenues and net profit of the Shenington group which include share of CAM and LTC of 51% and 24.99%, respectively (2006: 100% and 49%) which have been included in the consolidated financial statements for the year ended 31 December 2007.
49
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
8
Investments in subsidiaries, an associate and joint ventures (Cont’d)
Joint Venture (Cont’d) 4)
Shenington Investments Pte Limited (Cont’d) Sale of investments in Shenington (Cont’d) Consolidated 2007 51% Baht ’000 Balance sheet as at 31 December Current assets Non-current assets Current liabilities Non-current liabilities Shareholders’ equity
264,211 2,806,091 (762,220) (636,510) 198,558
Net assets
1,870,130 Consolidated 2007 Baht ’000
Income statement for the period from 1 August to 31 December Total revenues
667,429
Net profit
204,716
Commitments According to the joint venture agreement between the Group and the Government of the Lao PDR, the Group must transfer all of its shares in LTC to the Government of the Lao PDR, without any charges or compensation, on the expiration date of the joint venture agreement in 2021. Capital expenditure commitments 50
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 As at 31 December 2007, the Group’s share of Shenington group’s capital expenditure contracted but not recognised in the financial statements was USD 35.8 million (approximately Baht 1,213 million).
9
Long-term loan to another company
The long-term loan to another company is unsecured and bears fixed interest rate; however the accumulated interest amount charged on this loan cannot exceed the amount specified in the agreement. The Company has already stopped charging the interest and recognising interest income because the accumulated interest charge reached the maximum interest charge as specified in the agreement. The loan will be settled by offsetting with the royalty fees that the Company is required to pay to the other company until the principal and interest of the loan is fully repaid.
51
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
10
Property and equipment, net
Property and equipment comprise: Consolidated (Baht ’000) Leasehold land & buildings
Equipment
Motor vehicles & office equipment
As at 31 December 2006 Cost Less Accumulated depreciation Less Accumulated impairment loss
222,098 (67,106) -
8,944,465 (2,936,072) (53,321)
376,540 (228,253) -
563,315 -
10,106,418 (3,231,431) (53,321)
Net book value
154,992
5,955,072
148,287
563,315
6,821,666
154,992 159,593
5,955,072 60,275
148,287 108,784
563,315 796,291
6,821,666 1,124,943
(21,808) (143) 1,200 (27,613) -
(2,105,771) (5,153) (454) 1,127,602 (732,634) (1,398)
(50,758) (80) (367) 43 (57,830) -
(112,312) (350) (1,132,381) -
(2,290,649) (5,376) (1,171) (3,536) (818,077) (1,398)
(1,269)
(287,461)
(4,338)
(28,466)
(321,534)
Closing net book value
264,952
4,010,078
143,741
86,097
4,504,868
As at 31 December 2007 Cost Less Accumulated depreciation Less Accumulated impairment loss
347,712 (82,760) -
6,564,161 (2,525,492) (28,591)
367,023 (223,282) -
86,097 -
7,364,993 (2,831,534) (28,591)
Net book value
264,952
4,010,078
143,741
86,097
4,504,868
Transactions during the year ended 31 December 2007 Opening net book value Additions Decrease from change status from subsidiary to joint venture - net (Note 8e (4)) Disposals, net Write-offs, net Transfers, net Depreciation charges (Note 19) Impairment loss Foreign currency translation adjustment
Assets under construction
Total
52
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 As at 31 December 2007, the accumulated impairment loss of Baht 28.6 million comprises an impairment loss for analogue mobile telephone network of a joint venture which has been ceased its operation in 2005 amounting to Baht 16.2 million and an impairment loss for rural telephone network of a joint venture amounting to Baht 12.4 million as described in the above.
53
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
10
Property and equipment, net (Cont’d)
Property and equipment includes property and equipment under concession agreement of a joint venture, Cambodia Shinawatra Company Limited (“CAM”), of approximately Baht 1,611 million (31 December 2006: Baht 2,728 million). According to the concession agreement, CAM must transfer its ownership of this related property and equipment to the government of Cambodia on the expiration date of the concession agreement, 4 March 2028 (Note 25b). Company (Baht ’000) Leasehold land & buildings
Equipment
Motor vehicles & office equipment
58,232 (31,176)
3,284,729 (1,398,672)
174,032 (119,399)
6,368 -
3,523,361 (1,549,247)
Net book value
27,056
1,886,057
54,633
6,368
1,974,114
Transactions during the year ended 31 December 2007 Opening net book value Additions Disposals, net Write-offs, net Transfers, net Depreciation charges (Note 19)
27,056 3,901 1,200 (4,453)
1,886,057 85,094 (102,133) (454) 1,239 (357,572)
54,633 25,877 (16) (314) 43 (25,239)
6,368 832 (350) (6,017) -
1,974,114 115,704 (102,149) (1,118) (3,535) (387,264)
Closing net book value
27,704
1,512,231
54,984
833
1,595,752
63,334 (35,630)
3171,410 (1,659,179)
189,902 (134,918)
833 -
3,425,479 (1,829,727)
27,704
1,512,231
54,984
833
1,595,752
As at 31 December 2006 Cost Less Accumulated depreciation
As at 31 December 2007 Cost Less Accumulated depreciation Net book value
Assets under construction
Total
54
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
55
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
10
Property and equipment, net (Cont’d)
Capital commitments Capital expenditure contracted for at the balance sheet date is presented as follows: Consolidated 2007 Thousand
2006 Thousand
2007 Thousand
2006 Thousand
USD NOK NZD AUD USD
844 2 35,818
101 1,900 986 16,374
844 -
101 1,900 -
USD NOK NZD AUD
36,662 2
16,475 1,900 986 -
844 -
101 1,900 -
1,242,286
633,247
28,611
14,648
Currency IPSTAR Project
Telephone network Total
Total in Thai Baht
11
Company
Property and equipment under concession agreements, Deferred charges and Intangible assets, net Consolidated (Baht ’000) Property and equipment under concession agreements
Deferred charges
Intangible assets
As at 31 December 2006 Cost Less Accumulated amortisation
26,561,990 (6,072,836)
146,838 (55,934)
1,524,973 (136,146)
Net book value
20,489,154
90,904
1,388,827
Transactions during the year ended 56
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 31 December 2007 Opening net book value Additions Decrease from change status from subsidiary to joint venture-net (Note 8e (4)) Transfers, net Amortisation charges (Note 19) Foreign currency translation adjustment
20,489,154 -
90,904 10,963
1,388,827 34,387
(1,712,165) -
(40,828) (5,138) (4,833)
(7,178) 4,676 (108,008) (10,510)
Closing net book value
18,776,989
51,068
1,302,194
As at 31 December 2007 Cost Less Accumulated amortisation
26,561,990 (7,785,001)
612,620 (561,552)
1,525,577 (223,383)
Net book value
18,776,989
51,068
1,302,194
57
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
11
Property and equipment under concession agreements, Deferred charges and Intangible assets, net (Cont’d) Company (Baht ’000)
12
Property and equipment under concession agreements
Deferred charges
Intangible assets
As at 31 December 2006 Cost Less Accumulated amortisation
26,561,990 (6,072,836)
21,828 (3,387)
1,337,071 (110,202)
Net book value
20,489,154
18,441
1,226,869
Transactions during the year ended 31 December 2007 Opening net book value Additions Transfers, net Amortisation charges (Note 19)
20,489,154 (1,712,165)
18,441 333 (2,154)
1,226,869 26,803 4,675 (98,048)
Closing net book value
18,776,989
16,620
1,160,299
As at 31 December 2007 Cost Less Accumulated amortisation
26,561,990 (7,785,001)
22,161 (5,541)
1,368,549 (208,250)
Net book value
18,776,989
16,620
1,160,299
Deferred income tax
Deferred income taxes are calculated in full on temporary differences based on the liability method using a principal tax rate of 30% for the company financial statements (2006: 30%) and 20% - 30% for the consolidated financial statement (2006: 20% - 30%). Deferred tax assets for tax loss carried forward are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised The subsidiaries have tax loss carried forward to offset future taxable income, which is not recognised in the consolidated financial statements as follows: 58
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Year Expired
2007 Baht ’000
2006 Baht ’000
2007 2008 2009 2010 2011 2012 No expiry date
78,142 87,767 42,007 62,064 43,629 75,531
9,153 78,142 87,767 42,007 62,064 122,015
Total
389,140
401,148
59
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006
12
Deferred income tax (Cont’d)
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset the income taxes levied by the same taxation authority. The following amounts, determined after appropriate offsetting, are shown in the consolidated and the company balance sheets as at 31 December 2007 and 2006: Consolidated
Deferred tax assets Deferred tax liabilities
Company
2007
2006
2007
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
83,659 (57,816)
505,300 (99,426)
34,497 -
483,565 -
25,843
405,874
34,497
483,565
The movement in deferred tax is as follows: Consolidated For the years ended 31 December
Deferred tax Balance brought forward Prior year adjustment Deferred tax assets (Note 3) Deferred tax liabilities (Note 3) Balance brought forward - restated Increase from change status from subsidiary to joint venture-net (Note 8e (4)) Charged to statement of income (Note 22) Recognised in the shareholders’ equity Balance carried forward
Company
2007
2006
2007
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
405,874
168,398
470,500
242,714
-
-
(1,083) 14,149
(1,259) -
405,874
168,398
483,566
241,455
32,237 (400,167) (12,101)
226,080 11,396
(449,069) -
242,110 -
25,843
405,874
34,497
483,565
60
Shin Satellite Public Company Limited Notes to the consolidated and company financial statements For the years ended 31 December 2007 and 2006 Deferred income tax recognised in shareholders’ equity arises from the translation of deferred tax assets and deferred tax liabilities in foreign entities. Currency translation differences are recognised in the statement of changes in shareholders’ equity as part of the cumulative foreign currency translation adjustment.
61
Shin Satellite Public Company Limited Notes to the Consolidated Company Financial Statements For the years ended 31 December 2007 and 2006
12
Deferred income tax (Cont’d)
The movement in deferred tax assets and liabilities during the year ended 31 December 2007, without taking into consideration the offset of balances within the same tax jurisdiction, is as follows: Consolidated (Baht ’000) For the year ended 31 December 2007
Deferred tax assets Balance brought forward Charged to statement of income Recognised in the shareholders’ equity Decrease from change status from subsidiary to joint venture – net (Note 8e (4)) Balance carried forward
Loss carried forward
Allowance for doubtful accounts
Allowance for obsolete inventory
Deposits
Interest expense
Advance receipts from customers
Depreciation
Others
Total
430,220 (430,653)
3,791 17,347
38,447 (27,939)
19,595 14,183
20,227 1,025
9,114 8,924
10,605 8,430
1,081 19,533
533,080 (389,150)
433
(63)
(40)
(110)
-
(87)
656
597
1,386
-
(2,505)
(692)
(13,068)
-
(7,413)
(5,986)
-
(29,664)
-
18,570
9,776
20,600
21,252
10,538
13,705
21,211
115,652
Consolidated (Baht ’000) For the year ended 31 December 2007 Amortisation
Gain on 62
Shin Satellite Public Company Limited Notes to the Consolidated Company Financial Statements For the years ended 31 December 2007 and 2006
Deferred tax liabilities Balance brought forward Charged to statement of income Recognised in the shareholders’ equity Decrease from change status from subsidiary to joint venture – net (Note 8e (4)) Balance carried forward
Deferred expenses
assets under concession
Depreciation/ amortisation
Investment
foreign exchange
Others
Total
645 (43) -
109,224 39,102 (7,013)
3,188 (217) -
14,149 (28,297) 14,148
6,638 167
(6,166) 6,185
127,206 11,017 13,487
-
(61,541)
-
-
(360)
-
(61,901)
602
79,772
2,971
-
6,445
19
89,809
63
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
12
Deferred income tax (Cont’d)
The movement in deferred tax assets and liabilities during the year ended 31 December 2007, without taking into consideration the offset of balances within the same tax jurisdiction, is as follows (Cont’d): Company (Baht ’000) For the year ended 31 December 2007
Deferred tax assets Balance brought forward Prior year adjustment Balance brought forward - restated Charged to statement of income Balance carried forward
Loss carried forward
Allowance for obsolete inventory
Deposits
Others
Total
430,220 -
36,953 -
20,226 -
1,083 (1,083)
488,482 (1,083)
430,220 (430,220)
36,953 (28,175)
20,226 1,026
8,040
487,399 (449,329)
-
8,778
21,252
8,040
38,070
Company (Baht ’000) For the year ended 31 December 2007
13
Deferred expenses
Depreciation/ Amortisation
Investment
Total
Deferred tax liabilities Balance brought forward Prior year adjustment
645 -
3,188 -
14,149 (14,149)
17,982 (14,149)
Balance brought forward - restated Charged to statement of income
645 (43)
3,188 (217)
-
3,833 (260)
Balance carried forward
602
2,971
-
3,573
Other non-current assets, net Consolidated
Company
64
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Withholding taxes receivable Tax assessment’s deposits (Note 24b) Accounts receivable - others
147,888 232,213 37,992
144,108 205,271 43,083
146,497 232,213 17,486
142,956 205,271 22,410
Less Accumulated impairment loss
418,093 (38,929)
392,462 (38,929)
396,196 (38,929)
370,637 (38,929)
Total
379,164
353,533
357,267
331,708
65
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
14
Borrowings
Net borrowings from financial expenses comprise: Company
Consolidated 2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Short-term borrowings Loans from financial institutions Trust Receipt
285,252 59,581
306,078 -
-
-
Total short-term borrowings
344,833
306,078
-
-
Current portion of long-term borrowings Loans from financial institutions Loans from others
1,095,322 43,899
3,294,015 14,878
541,139 1,850
3,044,070 560
Total current portion of long-term borrowings
1,139,221
3,308,893
542,989
3,044,630
Long-term borrowings Loans from financial institutions Loans from others
8,235,665 124,908
12,234,728 96,595
7,704,836 6,229
10,814,544 2,503
Total long-term borrowings
8,360,573
12,331,323
7,711,065
10,817,047
Total borrowings
9,844,627
15,946,294
8,254,054
13,861,677
The short-term borrowings are borrowings of subsidiaries from a commercial bank of USD 8.5 million, bearing interest based on margins over the Singapore Inter-Bank Offer Rate (“SIBOR”) per annum. The principal will be repayable within six months. The Company had issued a letter of comfort to the bank to provide financial support (Note 25d). The long-term borrowings from financial insituitions are secured as discussed in the facility agreements in relation to the financing of the iPSTAR satellite and the Thaicom 5 satellite projects below. Loans from others are unsecured. As at 31 December 2007, the Company had outstanding guarantees relating to long-term loans from financial institution of its subsidiary amounting to Baht 807 million (2006: Baht 807 million) (Note 25d).
66
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
14
Borrowings (Cont’d)
The movements in the borrowings can be analysed as follows: Company
Consolidated For the years ended 31 December
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Opening net book value Proceeds from short-term borrowings Proceeds from finance leases Proceeds from long-term borrowings, net of financial expenses Repayment of short-term borrowings Repayment of long-term borrowings Amotisation of finance costs (Note 19) Increase from change in status from accounts payable - property and equipment Transfer of long term borrowings to accounts payable - property and equipment Decrease from change status from subsidiary to joint venture-net (Note 8e (4)) Realised gain on exchange rate Unrealised gain on exchange rate Foreign currency translation adjustment
15,946,294 570,786 6,581
17,255,467 322,486 1,676
13,861,677 6,581
15,083,556 1,676
(521,892) (5,024,889) 114,033
2,934,616 (172,500) (2,370,039) 137,120
(4,777,281) 114,033
2,422,692 (1,800,701) 137,120
169,614
318,728
-
-
-
(342,905)
-
-
(381,809) (338,342) (612,614) (83,135)
(179,442) (1,803,224) (155,689)
(338,342) (612,614) -
(179,442) (1,803,224) -
9,844,627
15,946,294
8,254,054
13,861,677
Closing net book value
The interest rate exposure of the borrowings of the Group and the Company is as follows: Consolidated
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Total borrowings: - at fixed rates - at floating rates
4,030,269 5,814,358
5,021,501 10,924,793
3,661,978 4,592,076
4,785,897 9,075,780
Total
9,844,627
15,946,294
8,254,054
13,861,677 67
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Weighted average interest rates: - Loans from financial institutions
5.77%
5.83%
5.44%
5.62%
As at 31 December 2007, the carrying amounts and fair value of long-term loans is as follows: Consolidated
Long-term loans
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
9,844,627
8,788,224
8,254,054
7,677,587
The fair value of non-current borrowings is estimated using discounted cash flows based on the Group’s incremental borrowing rates for similar types of borrowings.
68
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
14
Borrowings (Cont’d)
Maturity of non-current borrowings net of financial expense is as follows: Company
Consolidated 2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Later than 1 year but not later than 2 years Later than 2 years but not later than 5 years Later than 5 years
1,584,415 4,122,196 2,653,962
3,414,280 6,193,705 2,723,338
1,092,223 3,999,149 2,619,693
2,639,231 5,561,515 2,616,301
Total
8,360,573
12,331,323
7,711,065
10,817,047
Credit facilities As at 31 December 2007, available credit facilities for loans from local and overseas banks are Baht 1,199 million and USD 6.5 million (2006: Baht 1,530 million and USD 3.5 million). Facility agreements in relation to the financing of the iPSTAR satellite project On 7 November 2002, the Company entered into a USD 389.3 million credit agreement, which comprises three agreements as follows: A. Loan credit agreement for USD 184.5 million. The guarantor is the Export-Import Bank of the United States. B. Loan credit agreement for USD 79.8 million. The guarantor is a French export and import bank (Compagnie Francaise d’Assurance pour le Commerce Exterieur). C. Loan credit agreement from another group of commercial banks for USD 125 million. This has no guarantor.
The loans under each loan credit agreement bear interest at various rates. These are based on margins over the London Inter-Bank Offer Rate (“LIBOR”) for a period of six months and fixed rates. The Company is required to pay a commitment fee in respect of the unused portion of the facilities. In addition, under the aforementioned credit agreements, the Company must comply with the conditions in the credit agreements concerning maintaining certain financial ratios, dividend payment policy, guarantee, sale or transfer of assets and investment. The repayment of principal and interest was changed from semi-annually to monthly. The monthly repayments of loans principals and interest as secured by the Export-Import Bank of the United States and Compagnie Francaise d’Assurance pour le Commerce Exterieur are from November 2005 to May 2013 and other loans from another group of commercial banks are from November 2005 to November 2009.
69
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Facility agreement in relation to the financing of the Thaicom 5 satellite project The Company entered into credit agreements guaranteed by the French export and import bank for the purpose of the Thaicom 5 satellite project on 8 August 2005 and 13 October 2005 amounting to USD 33.01 million with 8.75 years and USD 38.36 million with 8.58 years, respectively. These credit agreements bear interest at fixed rates. The Company must comply with the conditions in the aforesaid credit agreements with regards to maintaining certain financial ratios, dividend payment policy, guarantees, and sale or transfer of assets. The initial repayment of principal will be six-month after the In - Orbit Acceptance of the Thaicom 5 satellite.
70
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
14
Borrowings (Cont’d)
The negotiation on the rescheduling of loan repayments on long-term loans for the iPSTAR satellite and Thaicom 5 satellite projects In the fourth quarter of 2006, the Company issued a letter to the group of lenders for the iPSTAR satellite and Thaicom 5 satellite projects requesting for negotiations on the rescheduling of loan repayments on the long-term loans for the iPSTAR satellite and Thaicom 5 satellite projects. During the fourth quarter of 2007, the Company was still engaged in the negotiation process. The Company has received the latest forbearance letter from the group of lenders, which allowed the Company to defer the payment which was due for repayment from 15 November 2006 to 15 February 2008 of the principal amount of USD 31.75 million, USD 26.74 million and USD 32.95 to 14 November 2007, 31 January 2008 and 29 February 2008, respectively. Subsequently, on 26 July 2007, the Company repaid the loan principal for the iPSTAR satellite and Thaicom 5 satellite projects amounting to USD 141.15 million (approximately Baht 4,776 million) to cover the principal amount of USD 79.02 million (Baht 2,717 million) as mentioned above. The remainder covering the principal of undue payment schedule, which was in accordance with the terms specified in the “Distribution Agreement” between the Company and the group of lenders. The outstanding long-term loan balance after this repayment is USD 261.15 million (approximately Baht 8,849 million). The Company and the group of lenders are currently in the process of reviewing the new loan agreements. As at 31 December 2007, the Company presented long-term loans (before offsetting with financial expenses in these financial statements) as a current liability of Baht 651 million and a non-current liability of Baht 8,199 million (31 December 2006: Baht 3,161 million and Baht 11,414 million, respectively), in accordance with the agreements on repayment reschedule.
15
Other current liabilities Company
Consolidated
Deposits from customers Unearned income Other taxes Other payables Total
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
55,472 31,394 30,742 77,387
60,005 55,458 37,788 139,345
44,367 19,313 64,329
33,979 21,122 86,099
194,995
292,596
128,009
141,200
71
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
16
Share capital and premium on share capital For the year ended 31 December 2007 Number of shares Thousand shares
Ordinary shares Baht ’000
Share premium Baht ’000
Total Baht ’000
Issued and paid-up share capital Opening balance Increase during the year
1,091,069 1,150
5,455,346 5,748
4,295,763 1,471
9,751,109 7,219
Closing balance
1,092,219
5,461,094
4,297,234
9,758,328
The Company’s registered share capital as at 31 December 2007 comprised 1,132.1 million ordinary shares (2006: 1,132.1 million shares) of Baht 5 each (2006: Baht 5 each), 1,092.2 million ordinary shares are issued and fully paid-up (2006: 1,091.1 million shares). On 29 June 2007, the Company received cash proceeds from the issuance of 947,605 ordinary shares at a price of Baht 6.279 per share, being the par value of the ordinary shares of Baht 4,738,025 and share premium of Baht 1,211,987. This issuance of the ordinary shares was the exercise of 463,400 ESOP units. On 3 July 2007, these shares were registered an increase in issued and paid-up share capital with the Ministry of Commerce. These shares were registered on the Stock Exchange of Thailand on 5 July 2007. On 31 October 2007, the Company received cash proceeds from the issuance of 143,143 ordinary shares at a price of Baht 6.279 per share, being the par value of the ordinary shares of Baht 715,715 and share premium of Baht 183,080. This issuance of the ordinary shares was the exercise of 70,000 ESOP units. On 2 November 2007, these shares were registered an increase in issued and paid-up share capital with the Ministry of Commerce. These shares were registered on the Stock Exchange of Thailand on 6 November 2007. On 30 November 2007, the Company received cash proceeds from the issuance of 58,893 ordinary shares at a price of Baht 6.279 per share, being the par value of the ordinary shares of Baht 294,465 and share premium of Baht 75,324. This issuance of the ordinary shares was the exercise of 28,800 ESOP units. On 4 December 2007, these shares were registered an increase in issued and paid-up share capital with the Ministry of Commerce. These shares were registered on the Stock Exchange of Thailand on 7 December 2007. As at 31 December 2007, the Company has five ESOP schemes for directors and employees of the Company and its subsidiaries. The warrants are in registered form and are non-transferable. The term of the warrants is not exceeding five years and there is no offering price. The exercise price and period are detailed below:
Issued date
Issued million units
Exercise ratio unit : share
Exercise price Baht/share
Exercise period First
Last
72
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 ESOP - Grant I ESOP - Grant II ESOP - Grant III ESOP - Grant IV ESOP - Grant V
27 March 2002 30 May 2003 31 May 2004 31 May 2005 31 May 2006
8.00 4.40 5.89 7.56 10.03
1 : 2.04490 1 : 2.04490 1 : 1.02245 1 : 1.02245 1 : 1.00000
13.081 6.279 13.913 16.441 11.870
Expired on 26 March 2007 30 May 2004 30 May 2008 31 May 2005 31 May 2009 31 May 2006 31 May 2010 31 May 2007 31 May 2011
73
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
16
Share capital and premium on share capital (Cont’d)
Movements in the number of warrants outstanding for the year ended 31 December 2007 (thousand units) are as follows:
Opening balance
Issued during the year
Exercised during the year
Expired During the year
Closing balance
ESOP - Grant I Directors Employees
2,559 3,369
-
-
(2,559) (3,369)
-
Total
5,928
-
-
(5,928)
-
ESOP - Grant II Directors Employees
1,967 514
-
(412) (150)
-
1,555 364
Total
2,481
-
(562)
-
1,919
ESOP - Grant III Directors Employees
1,754 4,140
-
-
-
1,754 4,140
Total
5,894
-
-
-
5,894
ESOP - Grant IV Directors Employees
2,967 4,595
-
-
-
2,967 4,595
Total
7,562
-
-
-
7,562
ESOP - Grant V Directors Employees
1,099 8,934
-
-
-
1,099 8,934
Total
10,033
-
-
-
10,033
Grand Total
31,898
-
(562)
(5,928)
25,408 74
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Compensation costs related to the warrants are not recognised in these financial statements for the fair value of the non-exercised warrants granted.
17
Legal reserve Company
Consolidated For the years ended 31 December
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Opening balances Reserve increase during the year
213,506 200,347
213,506 -
213,506 200,347
213,506 -
Closing balances
413,853
213,506
413,853
213,506
Under the Public Company Limited Act B.E. 2535, the Company is required to set aside a statutory reserve of at least 5 percent of its net profit after the accumulated deficit brought forward (if any) until the reserve is not less than 10 percent of the registered capital. The reserve is non-distributable.
75
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
18
Other income Company
Consolidated
19
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Consulting and management fees Interest income Income from Escrow account Reversal of tax accrual Gain on sale of equipment Profit remittance from investment in a subsidiary Others
58,818 4,899
6,182 37,692 77,465 3,512
34,874 57,858 39,332
55,057 7,159 37,692 50,254
18,040
12,895
33,069 14,793
9,614
Total
81,757
137,746
179,926
159,776
Operating profit (loss)
The following expenditures, classified by nature, have been credited/(charged) to arrive at operating profit (loss): Consolidated
Depreciation of property and equipment (Note 10) Amortisation of property and equipment under the concession agreements, deferred charges and intangible assets (Note 11) Amortisation of finance costs (Note 14) Staff costs Unrealised gain on exchange rate
20
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
(818,077)
(823,957)
(387,264)
(375,224)
(1,825,311) (114,033) (560,504) 371,436
(2,023,319) (137,120) (485,555) 1,632,856
(1,812,367) (114,033) (394,889) 604,031
(2,003,284) (137,120) (333,805) 1,678,247
Basic and diluted earnings (loss) per share
76
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
Basic earnings (loss) per share are calculated by dividing the net income (loss) for the year attributable to shareholders by the weighted average number of ordinary shares in issue during the year. For diluted earnings (loss) per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary shares, which is the weighted average number of ordinary shares, which would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares. The assumed proceeds from exercise of ESOP should be considered to have been received from the issue of shares at fair value. These represent share options where the exercise price is less than the average market price of the Company’s shares during the year ended 31 December 2007.
77
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
20
Basic and diluted earnings (loss) per share (Cont’d)
The basic earnings (loss) per share and the diluted earnings (loss) per share are as follows: Company
Consolidated 2007
2006
2007
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
3,039,730 -
(45,553) -
4,006,952 -
(45,553) (627,180)
3,039,730
(45,553)
4,006,952
(672,733)
Weighted average number of shares (’000 shares) The effect of dilutive potential ordinary shares (ESOP)
1,091,570
1,090,925
1,091,570
1,090,925
1,245
-
1,245
-
Dilutive potential ordinary shares (’000 shares)
1,092,815
1,090,925
1,092,815
1,090,925
Basic earnings (loss) per share (Baht) The effect of dilutive potential ordinary shares (ESOP)
2.78
(0.04)
3.67
(0.62)
-
-
-
-
Diluted earnings (loss) per share (Baht)
2.78
(0.04)
3.67
(0.62)
For the year ended 31 December Net profit (loss) for the year (Baht ’000) - As previously reported - Prior period adjustment (Note 3) - As restated
21
Cash flows from operating activities Reconciliation of net profit (loss) to cash flows from operating activities for the years ended 31 December 2007 and 2006: Consolidated Company 2007 2006 2007 Notes Net profit (loss) for the year Adjustments for: Allowance for doubtful accounts Write-off of doubtful accounts Write-off withholding tax Reversal of allowance for obsolete inventory Gain on sales of investment in a
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
3,039,730
(45,553)
4,006,952
(672,733)
44,752 6,042 -
22,656 1,802
22,004 6,042 -
9,439 1,802
(8,549)
(16,380)
(9,958)
(12,274) 78
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 subsidiary Write-off of property and equipment Depreciation of property and equipment Loss (gain) on sales of property and equipment Impairment loss of property and equipment Write-off of property and equipment under concession agreements Amortisation of property and equipment under concession agreements Amortisation of deferred charges Amortisation of intangible assets Write-off goodwill Amortisation of finance costs Equipment transfer to cost Deferred tax Unrealised gain on exchange rate Realised gain on exchange rate Minority interests Share of net results from investments - equity method
8e (4), 27 10 10
11 11 11 14 22
8b
(5,126,732) 1,171 818,077
547 823,957
(6,541,166) 1,118 387,264
248 375,224
738
(49,887)
(39,895)
(49,007)
1,398
21,481
-
-
-
958,052
-
958,052
1,712,165 5,138 108,008 114,033 400,167 (471,843) (338,342) 3,676
1,913,437 9,613 100,269 2,789 137,120 853 (226,080) (1,632,856) (179,442) 4,209
1,712,165 2,154 98,048 114,033 449,069 (604,031) (338,342) -
1,913,437 1,236 88,611 137,120 853 (242,110) (1,678,247) (168,300) -
(105,216)
(86,198)
-
-
79
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
21
Cash flows from operating activities (Cont’d)
Reconciliation of net profit (loss) to cash flows from operating activities for the years ended 31 December 2007 and 2006 (Cont’d): Company
Consolidated
22
2007
2006
2007
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
Changes in operating assets and liabilities - trade accounts receivable and accrued income - amounts due from related parties - inventories - insurance compensation receivable - prepaid insurance - dividend receivable - other current assets - other non-current assets - trade accounts payable - amounts due to related parties - advances receipts from customers - accrued concession fee - accrued expenses - income tax payable - other current liabilities - other non-current liabilities
332,519 (15,635) (211,415) 62,529 (79,099) (34,939) 234,230 (15,073) (22,481) 45,298 31,882 1,302,081 (37,778) (62,060)
(126,930) (584) 278,040 52,337 (14,821) 24,565 215,015 (31,703) 11,673 107,347 378,153 124,704 14,832 (86,569) 87,110
272,233 (67,398) (105,324) 63,942 (138,072) (77,691) (25,559) 12,832 (7,581) (77,089) (5,562) (2,257) 1,289,998 (13,192) (70,111)
(1,397) 4,521 287,960 52,337 (14,236) (76,399) 5,716 221,480 (7,860) 11,370 107,607 359,483 127,312 (34,301) 85,716
Cash generated from operating activities
1,734,472
2,793,558
314,626
1,792,660
Income tax expense Consolidated
Company
2007
2006
2007
For the years ended 31 December
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
Current tax
1,551,363
145,943
1,349,732
(1,325) 80
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Deferred tax
400,167
(226,080)
449,069
(242,110)
1,951,530
(80,137)
1,798,801
(243,435)
81
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
22
Income tax expense (Cont’d)
Reconciliation of income tax expense and the result of the accounting profit multiplied by the income tax rate are presented as follows: Company
Consolidated 2007
2006
2007
For the years ended 31 December
Baht ’000
Baht ’000
Baht ’000
2006 Restated Baht ’000
Profit (loss) before tax Tax rate
4,994,936 30%
(121,481) 25%
5,805,753 30%
(916,169) 25%
1,498,481
(30,370)
1,741,726
(229,042)
(31,565)
(25,523)
-
-
-
(71,779)
-
(71,780)
(97,041)
(39,998)
-
-
21,305
22,671
-
-
424,764 51,343
(3,439) -
-
-
30,107
9,773
1,532
(26,202)
54,136
58,528
55,543
83,589
1,951,530
(80,137)
1,798,801
(243,435)
The result of the accounting profit (loss) multiplied by the income tax rate Share of net results from investments - equity method Effect of discounted tax rates to the deferred tax Effect of the different basis of income tax calculation or tax rates in other countries Tax losses not recognised as deferred tax asset Use of tax losses not recognised as deferred tax asset in the prior year Tax on sale of investment in a subsidiary Tax on dividend received from a subsidiary Effect of the income recognised in different periods for accounting and tax purposes Effect of the non-deductible tax expense and expense recognised in different periods for accounting and tax purposes Tax charge
82
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
23
Financial instruments
The principal financial risks faced by the Group are interest rate and exchange rate risks. The Group borrows at fixed and floating rates of interest and denominated in US Dollar to finance its capital expenditures. Revenue from sales and services are mainly denominated in US Dollar. Trading for speculative purposes is prohibited. All derivative transactions are subject to approval by management before execution. Foreign currency risk As at 31 December 2007 and 2006, the Group had outstanding foreign currency assets and liabilities after foreign currency forward contracts and foreign currency options as follows: Consolidated 2007
Assets US Dollars Australian Dollars KIP New Zealand Dollars Singapore Dollars
Foreign currency (Unit: Million)
Baht Million
Foreign Currency (Unit: Million)
Baht Million
84.29 12.39 33.94 1.51 0.20
2,836.21 363.46 121.37 38.91 5.19
32.48 11.48 12,479.76 0.33 1.50
1,167.96 325.02 45.71 8.35 34.88
Total Liabilities US Dollars New Zealand Dollars KIP Australian Dollars Singapore Dollars Norwegian Kroner (NOK) Total
2006
3,365.14
306.26 5.48 26,131.00 0.74 0.22 -
10,377.52 143.96 94.37 21.82 5.07 10,642.74
1,581.92
504.43 2.76 53,859.66 1.30 3.41
18,275.81 70.95 197.29 37.51 19.71 18,601.27
Foreign currency assets mainly represent cash and accounts receivable. Foreign currency liabilities mainly represent trade accounts payable, accounts payable - property and equipment and borrowings. 83
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
Credit risk The Group has no significant concentrations of credit risks. The Group has policies in place to ensure that sales of products and services are made to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high quality financial institutions. Fair value of other financial instruments The carrying amount of cash and cash equivalents, short-term investments, trade receivables, amounts due from related parties, short-term loans and advances to related parties, trade creditors, accounts payable-property and equipment, amounts due to related parties, and borrowings are assumed to approximate their fair value due to the short maturities of these instruments. The fair values of long-term borrowings are provided in Note 14.
84
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
24
Contingencies
a)
Bank guarantees and letters of credit The Group had contingencies with banks, whereby the banks issued letters of guarantee, letters of credit and other guarantees in respect of business contracts as at 31 December, for the following amounts: Company
Consolidated Currency Minimum concession fee payable to Ministry of Information Communication and Technology IPSTAR equipment sales Satellite space leasing by customers
IPSTAR Gateway Standby letters of credit Letters of credit Others
b)
THB THB USD THB PKR USD USD USD THB AUD
2007 ’000
2006 ’000
2007 ’000
2006 ’000
102,000 39,799 300 487,000 5,000 379 43,000 250 4,048 29
98,000 65,360 317 487,000 1,115 43,000 1,283 3,302 29
102,000 39,799 300 487,000 5,000 379 43,000 3,322 -
98,000 65,360 317 487,000 1,115 43,000 1,283 2,934 -
Assessment for income tax in India The Income Tax Authority of India (“Tax Authority”) has raised a tax assessment, penalty and interest in amount of Rupees 1,058 million (approximately Baht 961 million) against the Company for the assessment years 1998/99 to 2005/06 (equivalent to the financial years from 1 April 1997 to 31 March 2005) in respect of revenues received from the provision of satellite transponder capacity to Indian customers, both residents and non-residents. As at 31 December 2007, the Company deposited for the income tax and penalty for the assessment years 1998/99 to 2004/05 totally Rupees 293 million (approximately Baht 232 million). The Company did not agree with the tax assessments of the Tax Authority and filed appeals against these assessments. The Company’s tax advisor in India was of the opinion that the outcome would be in favour of the Company. Therefore, the Company presented all amounts paid as other non-current assets in the balance sheet and did not recognise provision for liabilities of Rupees 765 million (approximately Baht 695 million) in respect of the tax assessment that in excess of the amount paid. If the outcome is that the Company is not liable to these tax assessments, it will be eligible to refund all deposits together with interest. - Tax assessment for the assessment years 1998/99 to 2001/02
85
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 On 22 March 2004, the Commissioner of Income Tax Appeals (“CIT (A)”) passed a partially favourable order for the assessment in respect of the assessment years 1998/99 to 2001/02 stating that revenues from Indian residents are subject to Indian income tax. Furthermore, CIT (A) passed an appellate order in favour of the Company for the assessment on revenues from Indian non-residents for the same assessment years. The Company has filed an appeal with the Income-Tax Appellate Tribunal (“ITAT”) with respect to this matter and it is in the process of hearing by ITAT. The Company also filed an application for a refund of Rupees 72 million (approximately Baht 60 million) with the Tax Authority. The Tax Authority has agreed to give credit for this amount, which will be adjusted against the Company’s future tax liabilities due to the Tax Authority.
86
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
24
Contingencies (Cont’d)
b)
Assessment for income tax in India (Cont’d) - Tax assessment for the assessment years 1998/99 to 2001/02 (Cont’d) On 28 March 2005, the Tax Authority assessed the penalty for those assessment years for concealment of income at a total amount of Rupees 325 million (approximately Baht 295 million). The Company filed an appeal against this assessment of penalty with the CIT(A) and filed a letter with the Tax Authority requesting that the penalty assessment be suspended until the case is finalised by the CIT(A). The CIT(A) decided in favour of the Tax Authority, the Company deposited some of penalty for those assessment in the amount of Rupees 15 million (approximately Baht 12 million) and filed an appeal against the assessment of CIT(A) with ITAT in the first quarter of 2006. In the third quarter of 2007, the Tax Authority raised an order for the rectification levying interest in amount of Rupees 20 million (approximately Baht 18 million). The Company filed an appeal against the assessment with the Commissioner of Income-tax (Appeals), (“CIT(A)”) and the Income-tax Appellate Tribunal, (“ITAT”). ITAT has dismissed the appeal. Consequently, the Company filed an appeal with the High Court in October 2007. - Tax assessment for the assessment year 2002/03 On 30 October 2004, the Tax Authority refunded an amount of Rupee 56 million (approximately Baht 48.0 million) for the assessment year 2002/03. The Company filed an application requesting an additional refund in the amount of Rupees 2 million (approximately Baht 1.6 million) in respect of the withholding tax paid by the Indian resident customers during such assessment year. The Tax Authority has agreed to give credit for this amount, which will be adjusted against the Company’s future tax liabilities due to the Tax Authority. On 16 March 2005, the Tax Authority raised an assessment for the assessment year 2002/2003 in the amount of Rupees 106 million (approximately Baht 96 million). The Company had deposited Rupees 49 million (approximately Baht 40 million) in 2004 and has already filed an appeal against this assessment with CIT(A). On 2 November 2005, CIT(A) ruled in favour of the Tax Authority and the Company filed an appeal against CIT(A)’s decision with ITAT. In the first quarter of 2007, the Tax Authority raised a penalty assessment in amount of Rupees 83.26 million (approximately Baht 76 million). The Company has not yet deposited for the aforementioned penalty and has already filed an appeal against the penalty assessment with CIT(A) in April 2007. Subsequently, on 31 December 2007, CTI (A) repealed the penalty assessment in amount of Rupees 83.26 million (approximately Baht 76 million). - Tax assessment for the assessment year 2003/04 The Tax Authority refunded an amount of Rupees 15 million (approximately Baht 11.7 million) for the assessment year 2003/04 in respect of the withholding tax paid by the Indian resident customers during such assessment year. 87
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 On 31 January 2006, the Tax Authority raised an assessment for the assessment year 2003/2004 against the Company in the amount of Rupees 106 million (approximately Baht 96 million), excluding penalty. The Company deposited some of the income tax for this assessment in the third quarter of 2004 in the amount of Rupees 20 million (approximately Baht 16 million). In the first quarter of 2006, the Company deposited some of the tax in the amount of Rupees 65 million (approximately Baht 53 million) and recorded as other non-current assets in the balance sheet. The Company filed an appeal against the assessment with CIT(A) and submitted a request to the Tax Authority asking it to refrain from enforcing the tax demand. At present, the Company is waiting for the decision of CIT(A).
88
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
24
Contingencies (Cont’d)
b)
Assessment for income tax in India (Cont’d) - Tax assessment for the assessment year 2004/05 In the forth quarter of 2006, the Tax Authority raised an additional tax assessment together with interest for the assessment year 2004/2005 against the Company in the amount of Rupees 103 million (approximately Baht 94 million). During the first quarter of 2007, the Company had deposited Rupees 30 million (approximately Baht 24 million) and presented the amount paid as other non-current assets. The remaining unpaid tax assessment and interest balance is Rupees 73 million (approximately Baht 66 million). The Company filed an appeal against the assessment with CIT(A). - Tax assessment for the assessment year 2005/06 On 27 December 2007, the Tax Authority raised tax assessment together with interest for the assessment year 2005/06 against the Company in the amount of Rupees 36 million (approximately Baht 33 million). The Company filed an appeal against the assessment with CIT(A).
25
Commitments
a)
Agreement for operation of domestic communication satellite The Company was permitted by the Ministry of Transport and Communications, under an agreement dated 11 September 1991 and an amendment thereto dated 22 March 1992, to operate and administer certain satellite projects and to render transponder services for domestic and international communications as well as the right to collect, for a thirty-year period, service charges from users of the transponders. The concession agreement has been transferred to the Ministry of Information Communication and Technology (“MICT”). Under the aforementioned agreement, the Company must pay an annual fee to MICT based on a percentage of certain service incomes or at the minimum level specified in the agreement, whichever is higher. In addition, the Company, according to the aforementioned agreement, must transfer its ownership of all satellites, and monitoring stations and other operating equipments to MICT on the date of completion of construction and installation.
b)
Assets transfer commitment under telephone network agreement in Cambodia Cambodia Shinawatra Company Limited, a joint venture in Cambodia, has obtained a concession from the Directorate of Posts and Telecommunications of Cambodia to operate a domestic telephone network under an agreement dated 4 March 1993 and an 89
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 amendment thereto dated 4 March 1997, for a period of 35 years. Under the agreement, Cambodia Shinawatra Company Limited will transfer its ownership of all fixed assets to the Government of Cambodia on the expiration date of the agreement, in 2028 (Note 10).
90
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
25
Commitments (Cont’d)
c)
Shareholder agreement Lao Telecommunications Company Limited (“LTC”) is a joint venture, which was established under the terms of a Joint Venture Contract dated 8 October 1996, signed by the Government of the Lao People’s Democratic Republic and Shinawatra Computer and Communications Public Company Limited, the former name of Shin Corporation Public Company Limited. According to the aforementioned Joint Venture Contract, LTC has the right to provide telecommunication services - fixed line phone, mobile phone, international facilities, Internet and paging - within the Laos PDR for 25 years. Currently, Shenington Investments Pte Company Limited, which is a joint venture of the Company, owns 49% of LTC’s registered shares. At the end of the 25th year, in 2021, the Group has to transfer all of LTC’s shares to the Government of the Lao People’s Democratic Republic without any charges (Note 8e). According to the shareholder agreement, LTC is required to invest at least USD 400 million in the projects specified in the agreement within 25 years. As at 31 December 2007, LTC has remaining additional investment of approximately USD 191 million.
d)
Commitments with related parties As at 31 December 2007, the Company had provided guarantees relating to the borrowings of Shin Broadband Internet (Thailand) Company Limited amounting to Baht 807 million (31 December 2006: Baht 807 million) (Note 27g). In addition, the Company had issued letters of comfort to the bankers of subsidiaries. Under the terms of the letters of comfort, the Company must hold its interests in its subsidiaries at the ratio as specified in the letters. The Company also confirms to the banks that the Company will provide necessary financial support to these subsidiaries to ensure that these subsidiaries will be able to meet their repayment obligations under their related loan agreements.
e)
Concession contracts of a subsidiary company and associated companies for the satellite uplink-downlink and Internet services and Internet services in Thailand CS Loxinfo Public Company Limited (“CSL”), which is an associate of the Company entered into concession agreements with CAT Telecom Public Company Limited (“CAT”) for a period of 22 years from 9 August 1994 to 8 August 2016 to provide satellite uplink-downlink and internet services, and to provide internet services in Thailand for a period of ten years from 16 April 1997 to 15 April 2007. Currently, the National Telecommunications Commission (“NTC”) is responsible for granting licenses to provide internet access services in Thailand. Shin Broadband Internet (Thailand) Company Limited (a subsidiary company) CSL and its subsidiary operate the business to provide internet and telecommunication services under licenses granted by NTC as follow: Type of license
Issued Date
Period
License of Shin Broadband Internet (Thailand) Company 91
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Limited Internet Operation License Type I
18 October 2007
1 year
26 April 2007 8 September 2007 11 October 2007 20 December 2007
5 years 1 year 1 year 15 years
29 June 2007
1 year
Licenses of CSL International Internet License Type II Internet Operation License Type I Telecom Operation License Type I Telecom Operation License Type III License of CSL’s subsidiary Internet Operation License Type I
92
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
25
Commitments (Cont’d)
f)
Obligation under “Financing and Project Agreement” Lao Telecommunications Company Limited (“LTC”) entered into a “Financing and Project Agreement” with the government of the Lao People’s Democratic Republic (“government”) and an organisation in Germany (KfW, Frankfurt am Main) on 25 October 2004 of an amount not exceeding Euro 6.5 million (approximately Baht 322.5 million) for the procurement and installation of Phase VI of a rural telecommunication network. Under the agreement, the ownership of network assets will be transferred to LTC through loan at 30% of the network assets’ value excluding consulting services project. However, LTC has not yet recognised the network assets relating to Phase VI and the related portion of the loan in these financial statements because the project has not commenced yet.
g)
Obligation from shares buy back options On 23 October 2003, the Company and Codespace Inc. entered into a “Memorandum of Agreement”, which provides Codespace Inc. an option to sell 2.2 million shares of iPSTAR Co., Ltd. to the Company, with the condition that the Company has the first option to purchase these shares. If the offered price per share is greater than the higher of USD 1 or fair market value at offering date, the Company has the right to refuse. If the offered price per share is equal to the higher of USD 1 or fair market value at offering date, the Company has to purchase those shares from Codespace Inc. The Company believes that Codespace Inc. will not exercise the option because according to the result of the financial analysis of the Company, the value per share of iPSTAR Co., Ltd.’s shares is higher than USD 1. Therefore, the Company does not recognise this obligation as its liabilities in these financial statements. As of 31 December 2007, the remaining share option was 1.49 (2006 : 1.73 million shares).
h)
Operating lease commitments As at 31 December 2007 and 2006, the Group has future aggregate minimum lease payments under non-cancellable operating leases are as follows: As at 31 December
Within 1 year
Total Baht
Company
Consolidated Currency
2007 ’000
2006 ’000
2007 ’000
2006 ’000
THB USD NZD AUD
36,557 4,090 -
39,323 3,697 265 53
36,557 3,318 -
39,323 2,649 -
175,146
181,604
148,975
135,282 93
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Later than 1 year but not later than 5 years
THB USD NZD AUD
Total Baht Later than 5 years
Total Baht Grand total Baht
THB USD
43,161 8,579 -
76,450 12,922 426 2
43,161 5,466 -
76,450 5,073 -
333,845
555,649
228,373
260,234
25,858 1,805
28,895 1,866
25,858 -
28,895 -
87,022
96,498
25,858
28,895
596,013
833,751
403,206
424,411
94
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
26
Segment information
Financial information by business segment Consolidated for the year ended 31 December 2007 (Baht ’000)
Revenues Shares of net results from associate Allocated costs and expenses Segment results Gain on sales of investment Other income Gain on foreign exchange
Satellite business services
Internet services
Telephone network
4,188,435
254,845
-
Others
Consolidation eliminations
Group
2,211,875
-
(220,070)
6,435,085
105,216
-
-
-
105,216
(5,640,249)
(246,607)
(1,434,620)
(15,644)
342,072
(6,995,048)
(1,451,814)
113,454
777,255
(15,644)
122,002
(454,747) 5,126,732 81,757 1,050,120
Gain before interest expense and income tax Interest expense
5,803,862 (808,926)
Operating gain Income tax Minority interests
4,994,936 (1,951,530) (3,676)
Net profit Segment assets Associate
3,039,730 27,538,054
246,204
3,023,344
18,713
(1,401,068)
Total assets Segment liabilities Borrowings
29,425,247 676,231 30,101,478
2,977,273
46,491
933,327
14,111
(398,524)
3,572,678 9,844,627
95
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Total liabilities
13,417,305
Depreciation (Note 19) Amortisation (Note 19)
422,597 1,933,760
13,459 1,774
382,021 3,810
-
-
818,077 1,939,344
Total depreciation and amortisation
2,356,357
15,233
385,831
-
-
2,757,421
96
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
26
Segment information (Cont’d)
Financial information by business segment (Cont’d) Consolidated for the year ended 31 December 2006 (Baht ’000)
Revenues Shares of net results from associate Allocated costs and expenses Segment results Loss on write off Thaicom 3 Other income Gain on foreign exchange
Satellite business services
Internet services
Telephone network
4,443,659
114,834
-
Others
Consolidation eliminations
Group
2,405,655
-
(118,235)
6,845,913
86,198
-
-
-
86,198
(5,618,025)
(121,041)
(1,576,087)
(1,212)
140,300
(7,176,065)
(1,174,366)
79,991
829,568
(1,212)
22,065
(243,954)
(964,031)
-
-
-
-
(964,031) 137,746 1,902,701
Gain before interest expense and income tax Interest expense
832,462 (953,943)
Operating loss Income tax Minority interests
(121,481) 80,137 (4,209)
Net loss Segment assets Associate
(45,553) 27,220,047
176,864
5,173,413
35,172
(457,734)
Total assets Segment liabilities Borrowings
32,147,762 686,050 32,833,812
2,118,461
23,443
1,301,646
667
(477,273)
2,966,944 16,289,199
97
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Total liabilities
19,256,143
Depreciation (Note 19) Amortisation (Note 19)
395,654 2,150,804
8,730 -
419,573 9,635
-
-
823,957 2,160,439
Total depreciation and amortisation
2,546,458
8,730
429,208
-
-
2,984,396
The Group is organised into the following business segments: • Services relating to the satellite business and the transponder services segment • Sales and services relating to the Internet business • Sales and services relating to the telephone network business in Cambodia and the Laos People’s Democratic Republic. Unallocated costs and expenses mainly represent corporate expenses. Segment assets consist primarily of property and equipment, intangible assets, inventories, accounts receivable and operating cash, excluding investments.
98
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
26
Segment information (Cont’d)
Financial information by business geographical areas The group is organised into geographical areas based on customers’ countries in which the Group provided the services to. The areas of operation in Thailand are principally satellite business services and intenet services. Cambodia and Laos PDRs’ main activities are sales and services relating to telephone network business and satellite business services. Revenue
Thailand Cambodia Lao PDR Others
Segment results
Fixed assets
2007 Baht‘000
2006 Baht‘000
2007 Baht‘000
2006 Baht‘000
2007 Baht‘000
2006 Baht‘000
2,313,018 1,363,843 1,035,403 1,722,821
2,950,218 1,468,866 1,114,686 1,312,143
(844,845) 232,911 515,365 (358,178)
(664,235) 534,616 265,122 (379,457)
20,704,114 1,750,423 1,014,039 1,166,543
22,549,369 2,859,819 1,997,448 1,383,916
6,435,085
6,845,913
(454,747)
(243,954)
24,635,119
28,790,552
Revenue and segment results organised into each country based on customers’ locations. Fixed assets shown in each business geographical areas are categorised based on assets’ locations. Costs and expenses at entity level which is not directly attributable to reportable segment of the Group, is allocated to the reportable segment by incurred revenue of each geographical segment.
27
Related party transactions
The Company is controlled by Shin Corporation Public Company Limited (“Shin”) (incorporated in Thailand), which owns 41.28 % (31 December 2006: 41.32%) of the Company’s shares. Transactions with Shin Group, Cedar Group, Aspen Group, and Temasek Group are recognised as related party transactions of the Group. Sales and service transactions with related parties were conducted under normal commercial terms and conditions, which were the same as for other customers. Consulting and management services were charged at an agreed percentage of assets. Transactions between the Company and Codespace, Inc. were conducted based on hourly rates plus reimbursement of actual expenses. The Group had transactions with related parties as follows: 99
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
a)
Revenues Consolidated 2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Sales and services income Subsidiaries Associate Joint ventures Related parties under common control
6,998 20,424 63,254
22,815 13,088 117,980
718,410 6,277 64,857 53,702
421,122 21,919 25,664 102,650
Gain on sales of investment Related parties under common control
5,126,732
-
6,541,166
-
Other operating income Subsidiaries Associate Joint ventures Related parties under common control
2 434 -
621
73,260 2 33,853 -
59,526 209
5,217,844
154,504
7,491,527
631,090
Total revenue 27
Company
Related party transactions (Cont’d)
b)
Expenses Company
Consolidated
Purchases of goods and services Subsidiaries Associate Joint ventures Related parties under common control Other related party Selling and administrative expenses Parent company Subsidiaries
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
22,917 21 4,052 19,177
31,729 1,793 17,686
48,366 17,504 102 4,052 19,177
39,116 20,001 1,793 17,686
613 -
22,055 -
831
20,929 613 100
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006 Associate Joint ventures Related parties under common control Total expenses
c)
4,211 6,308 15,410
7,403 9,679
4,171 12,878 10,586
7,258 9,642
72,709
90,345
117,667
117,038
Outstanding balances arising from sales/purchases of goods/services/and expenses Consolidated
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
430 20,725 4,328
6,346 438 7,387
110,041 397 36,422 -
208,737 323 859 -
Total trade accounts receivable - related parties
25,483
14,171
146,860
209,919
Accrued income - related parties Subsidiaries Associate Joint ventures Related parties under common control
10,346 11,175 2,395
4,209 1,010 3,291
64,915 10,346 18,494 -
18,328 4,207 1,980 3,261
Total accrued income - related parties
23,916
8,510
93,755
27,776
Total trade accounts receivable and accrued income - related parties
49,399
22,681
240,615
237,695
Trade accounts receivable and accrued income - related parties Trade accounts receivable - related parties Subsidiaries Associate Joint ventures Related parties under common control
101
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
27
Related party transactions (Cont’d)
c)
Outstanding balances arising from sales/purchases of goods/services/and expenses (Cont’d) Consolidated
Company
2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Amounts due from related parties Subsidiaries Associate Joint ventures Related parties under common control Other related party
16,550 22 3
1,073 102 -
44,648 33,549 3
9,608 1,073 121 -
Total amounts due from related parties
16,575
1,175
78,200
10,802
Other current assets - related parties Subsidiaries Related parties under common control Other related party
281 -
281 4,303
4,079 281 -
281 -
Total other current assets- related parties
281
4,584
4,360
281
Trade accounts payable - related parties Subsidiaries Associate Joint ventures Related parties under common control
26,896 249 649
29,157 889
30,379 22,821 332 551
45,270 27,115 882
27,794
30,046
54,083
73,267
2,029 6,223 2,546 2,942
13,635 10,178 3,770 1,322
2,434 1,957 12,699 536 2,942
13,095 189 9,993 3,549 1,322
Total trade accounts payable - related parties Amounts due to related parties Parent company Subsidiaries Associate Joint Ventures Related parties under common control Other related party
102
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
Total amounts due to related parties
13,740
28,905
20,568
28,148
Advances receipts from customers - related parties Subsidiaries Related parties under common control
59,825
60,010
57,569
77,220 57,569
59,825
60,010
57,569
134,789
Accrued expenses - related parties Related parties under common control
2,157
258
1,080
258
Total accrued expenses - related parties
2,157
258
1,080
258
40 27,345
27 84,913
54 27,345
54 84,913
27,385
84,940
27,399
84,967
Total advances receipts from customers - related parties
Other non-current liabilities - related parties Joint ventures Related parties under common control Total other non-current liabilities - related parties
103
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
27
Related party transactions (Cont’d)
d)
Short-term loans and advance to a subsidiary and an assosiate Company
Consolidated 2007 Baht ’000
2006 Baht ’000
2007 Baht ’000
2006 Baht ’000
Short-term loans and advance to a subsidiary and an assosiate Subsidiary Associate
-
19
200,255 -
19
Total short-term loans and advance to a subsidiary and an assosiate
-
19
200,255
19
As at 31 December 2007, the short-term loan to a subsidiary bears interest at the rate of 6.52-6.58% per annum and is repayable within three months. As at 31 December 2006, the advance to an associate bears no interest and has no fixed term of repayment. The movements of short-term loans and advance to a subsidiary and an assosiate can be analysed as follows:
For the year ended 31 December 2007 Opening balance Loans during the year Advance repayment during the period Unrealised loss on exchange rate Closing balance
e)
Consolidated Baht ’000
Company Baht ’000
19 (19) -
19 203,250 (19) (2,995)
-
200,255
Warrants of Shin Corporation Public Company Limited granted to an executive director of the Company Shin Corporation Public Company Limited, a parent company, issued warrants which are in registered form and non-transferable, to directors who are management of the Company. The term of the warrant is not exceeding five years and there is no offering price. As at 31 December 2007, the details follow: 104
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
Issued date ESOP - Grant I ESOP - Grant II ESOP - Grant III ESOP - Grant IV ESOP - Grant V
g)
27 March 2002 30 May 2003 31 May 2004 31 May 2005 31 July 2006
Issued units 18,336,300 12,222,100 8,823,100 8,329,800 7,823,000
Exercise ratio unit : share
Exercise price Baht/share
1 : 1.06942 1 : 1.11410 1 : 1.11410 1 : 1.09950 1 : 1.06582
16.645 12.269 32.681 37.981 35.353
Exercise period First
Last
Expired on 26 March 2007 31 May 2004 30 May 2008 31 May 2005 30 May 2009 31 May 2006 30 May 2010 31 July 2007 30 July 2011
Directors’ remuneration In 2007, directors’ remuneration of the Group was Baht 7.5 million (2006: Baht 6.7 million). The directors’ remuneration represents monthly compensation, annual remuneration, and meeting fees as approved by the shareholders of the Company at their Annual General Meetings.
h)
Commitments with related parties The details of commitments with related parties are disclosed in Note 25d.
105
Shin Satellite Public Company Limited Notes to the Consolidated and Company Financial Statements For the years ended 31 December 2007 and 2006
28
Promotional privileges
The Company was granted promotional privileges under the Investment Promotion Act (B.E. 2520) by the Board of Investment (BOI) in respect of earnings derived from rendering telecommunication services of Thaicom 3 satellite project to customers outside Thailand. Promotional privileges include exemption from corporate income tax for a period of 8 years commencing from December 1997, when its revenue was first earned from the promoted business. The Company must comply with certain terms and conditions required for the promoted industries. On 19 November 2004, the Company was granted promotional privileges under the Investment Promotion Act (B.E. 2520) as amended by the Investment Promotion Act (No. 3) B.E. 2544 by the BOI in respect of earnings derived from rendering telecommunication services of iPSTAR satellite project to customers outside Thailand. Promotion privileges include exemption from corporate income tax for a period of 8 year, when its revenue was first earned from the promoted business. The Company must comply with certain terms and conditions required for the promoted industries. In 2007, the Company’s total revenue derived from BOI-promoted activities amounted to Baht 142 million (2006: Baht 21 million).
29
Subsequent events
a)
Acquisition of ordinary shares in Shineedotcom Company Limited On 31 January 2008, AD Venture Company Limited (“ADV”) acquired 2.4 million ordinary shares in Shineedotcom Company Limited (“Shinee”) at Baht 6.29 per share, equivalent to 30% of the paid-up share capital of Shinee, at a total price of Baht 15.1 million. As a result of this acquisition, ADV owns 100% share capital of Shinee.
b)
Dividend payment of Lao Telecommunications Company Limited (“LTC”) At the ordinary shareholders’ meeting of LTC on 19 February 2008, the shareholders passed a resolution to approve a dividend payment of USD 12 million to shareholders in respect of the operations of LTC in 2007.
c)
Proposed dividend payment of CSL At the Board of Directors’ meeting of CSL on 20 February 2008, the Board of Directors passed a resolution to recommend to the annual general meeting of shareholders for the payment of dividends for the year 2007, at the rate of 0.20 Baht per share. The proposed dividends must be approved by the shareholders at their meeting.
106
SHIN SATELLITE PUBLIC COMPANY LIMITED
CONSOLIDATED AND COMPANY FINANCIAL STATEMENTS
31 DECEMBER 2007
General Information of the Company Subsidiaries and Associated Companies Shin Satellite Public Company Limited (“SATTEL”) Head Office : 414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Tel : (662) 299 5000 Fax : (662) 299 5252
Type of Business
Providing satellite transponders services for telecommunications and broadcasting Registered Capital 1,132.08 Million Shares Par Value 5 Baht Paid Up Capital 5,461.09 Million Baht
Branch 1 : 41/103 Rattanathibet Road, Muang, Nonthaburi 11000 Tel : (662) 591 0736 Fax : (662) 591 0705 Branch 2 : 50 Moo 1 Bor-ngern, Ladlumkaew, Phathumthani 12140 Tel : (662) 599 3000 Fax : (662) 599 3000 Ext. 712 Website : www.thaicom.net
Shin Broadband Internet (Thailand) Company Limited (“SBI”) 41/103 Rattanathibet Road, Muang, Nonthaburi 11000 Tel : (662) 591 0736 Fax : (662) 591 0705
Type of Business
Registered Capital Par Value Paid Up Capital % of Investment
Providing internet, mobile satellite phone, and related telecommunication services 94.7285 Million Shares 10 Baht 947.285 Million Baht 99.99%
Shenington Investments Pte Limited (“SHEN”) 1 Temasek Ave., # 27-01 Millenia Tower, Singapore 039192 Tel : (65) 6338 1888 Fax : (65) 6337 5100
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
Holding Company 15 Million Shares 1 SGD 14.66 MSGD 100%
Cambodia Shinawatra Company Limited 1) (“CamShin”) 66 Mao Tse Toung Boulevard, Sangkat Bengtrabek, District of Chamcar Mon, Phnom Penh, Kingdom of Cambodia Tel : (855) 23 360 0015 Fax : (855) 23 361 1234
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
Providing fixed phone and mobile phone services in Cambodia 19.2 Million Shares 1 USD 19.2 MUSD 100%
Lao Telecommunications Company Limited 1) (“LTC”) Lanexang Avenue 0100, Vientiane, Lao People’s Democratic Republic Tel : (856) 21 216 465-6 Fax : (856) 21 219 690
Type of Business
Registered Capital Par Value Paid Up Capital % of Investment
Providing fixed phone, mobile phone services, international facilities, internet, and paging services in Lao 96.84 Million Shares 1 USD 96.84 MUSD 49.00%
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
Provider of IPSTAR capacity 200 Million Shares 0.01 USD 2 MUSD 98.89%
Type of Business
Providing IPSTAR services in Australia 0.1 Million Shares 1 AUD 0.1 MAUD 100%
IPSTAR Company Limited (“IPSTAR”) Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands
IPSTAR Australia Pty Limited 2) Unit 13, Artarmon Central, 12-18 Clarendon Street, Artarmon, NSW 2113, Australia
Registered Capital Par Value Paid Up Capital % of Investment
IPSTAR New Zealand Limited 2) 13/22-24 Caloola Road, Wentworthville NSW 2145, New Zealand
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
Providing IPSTAR services in New Zealand 2.5 Million Shares 1 NZD 1.88 MNZD 100%
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
0.1 Million Shares 1 USD 100%
IPSTAR DO BRASIL 2) (In the process of setting up the company)
Star Nucleus Company Limited (“STAR”) Trident Chambers, P.O. Box 146, Road Town, Tortola, British Virgin Islands
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
Licensor of IPSTAR technology 0.05 Million Shares 1 USD 10 USD 70.00%
Type of Business
Research and development of IPSTAR technology 4.29 MUSD 70.00%
Spacecode LLC (“SPACE”) 8695 Zumwalt Road, Monmouth, OR 97365 U.S.A.
Registered Capital Par Value Paid Up Capital % of Investment
IPSTAR International Pte Limited 1 Temasek Avenue # 27-01, Millenia Tower, Singapore 039192 Tel : (65) 338 1888 Fax : (65) 337 5100
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
Providing IPSTAR broadband services 0.02 Million Shares 1 SGD 100%
IPSTAR Global Services Limited Intercontinental Trust Limited Suite 802, St. James Court, St. Denis Street, Port Louis, Mauritius Tel : (230) 213 9800 Fax : (230) 210 9168
Type of Business Registered Capital Par Value Paid Up Capital % of Investment
Providing IPSTAR broadband services 0.02 Million Shares 1 USD 100%
CS LoxInfo Public Company Limited 3) (“CSL”) Head Office :
Type of Business
414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400 Branch : 971, 973 President Tower, 11th Floor, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Tel : (662) 263 8000 Fax : (662) 263 8132 Website : www.csloxinfo.com
Registered Capital Par Value Paid Up Capital % of Investment
Internet data center services, Internet access and satellite uplinkdownlink service for domestic and international communications 649.02 Million Shares 1 Baht 625 Million Baht 39.89%
Teleinfo Media Public Company Limited 4) (“TMC�) Type of Business
Publishing telephone directories and advertising
Head Office :
414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400
Branch 1 :
273 Soi Sang U-thai, 50 Sukkhumvit Road, Phakhanong, Klongtoey, Bangkok
Branch 2 :
25th- 28th Floor, Vanit Bldg. 2, 1126/2 New Phetchaburi Road, Makkasan, Ratchathewi, Bangkok 10400
Telephone
(662) 262 8888
Fax
(662) 262 8899
Website
www.teleinfomedia.net
Registered Capital
17.35 million shares
Par Value
Baht 10
Paid-up Capital
Baht 173.53 million
Percent of Investment
99.99%
Loxley Information Services Company Limited 4) Type of Business
Providing internet services
Head Office
414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400
Branch Office
971, 973 President Tower, 12th Floor, Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330
Telephone
(662) 263 8000
Fax
(662) 263 8102
Registered Capital
26.01 million shares
Par Value
Baht 10
Paid-up Capital
Baht 260.10 million
Percent of Investment
99.86%
AD Venture Company Limited 4) Type of Business
ADV derives all of its profits from the operational performance of SHINEE
Head Office
414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400
Branch Office
Room 2101, 2104, 21st Floor, 1126/2 Vanit Bldg. 2, New Phetchaburi Road, Makkasan, Ratchathewi, Bangkok 10400
Telephone
(662) 619 1123
Fax
(662) 619 0311
Registered Capital
55.00 million shares
Par Value
Baht 10
Paid-up Capital
Baht 550.00 million
Percent of Investment
99.99%
Shineedotcom Company Limited 5) Type of Business
Provider of mobile contents, community portal services, and other internet – related businesses
Head Office
414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400
Branch Office
Room 2101, 2104, 21st Floor, 1126/2 Vanit Bldg. 2, New Phetchaburi Road, Makkasan, Ratchathewi, Bangkok 10400
Telephone
(662) 207 6800
Fax
(662) 207 6899
Website
www.shinee.com
Registered Capital
8.00 million shares
Par Value
Baht 10
Paid-up Capital
Baht 80.00 million
Percent of Investment
99.99%
Hunsa Dot Com Company Limited 6) Type of Business
Provider of mobile contents and other internet program development
Head Office
414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400
Branch Office
Room 2101, 2104, 21st Floor, 1126/2 Vanit Bldg. 2, New Phetchaburi Road, Makkasan, Ratchathewi, Bangkok 10400
Telephone
(662) 207 6800
Fax
(662) 207 6898
Website
www.hunsa.com
Registered Capital
0.8 million shares
Par Value
Baht 10
Paid-up Capital
Baht 8.00 million
Percent of Investment
99.99%
Sodamag Corp Company Limited 6) Type of Business
Provider of mobile contents and other internet program development
Head Office
414 Phaholyothin Road, Samsennai, Phayathai, Bangkok 10400
Branch Office
Room 2101, 2104, 21st Floor, 1126/2 Vanit Bldg. 2, New Phetchaburi Road, Makkasan, Ratchathewi, Bangkok 10400
Telephone
(662) 207 6800
Fax
(662) 207 6899
Website
www.sodamag.net
Registered Capital
2.17 million shares
Par Value
Baht 5
Paid-up Capital
Baht 10.90 million
Percent of Investment
99.99%
Watta Classifieds Company Limited 4) Type of Business
Providing classified print directories services
Head Office
71/30 Boromraj Chonnee Road, Arun-Amarin, Bangkoknoi, Bangkok 10700
Telephone
(662) 422 8011
Fax
(662) 884 7575
Website
www.watta.co.th
Registered Capital
2.0 million shares
Par Value
Baht 10
Paid-up Capital
Baht 20.00 million
Percent of Investment
60.00%
N.T.U. (Thailand) Company Limited 3) Type of Business
Providing training network services
Head Office
1010 Shinawatra Tower III, 3 rd Floor, Viphavadi Rangsit Rd., Chatuchak, Bangkok, Thailand 10900
Telephone
(662) 949 2646-8
Fax
(662) 949 2650-1
Website
www.ntuthailand.com
Registered Capital
1.20 million shares
Par Value
Baht 10
Paid-up Capital
Baht 12.00 million
Percent of Investment
71.85%
As of February 4, 2008 1) Holds shares through Shenington Investments Pte Limited 2) Holds shares through IPSTAR Company Limited 3) Holds shares through Shin Broadbrand Internet (Thailand) Company Limited 4) Holds shares through CS LoxInfo Public Company Limited 5) Holds shares through AD Venture Company Limited 6) Holds shares through Shineedotcom Company Limited Other Reference Persons Security Registrar Thailand Securities Depository Company Limited 62 The Stock Exchange of Thailand Building, Ratchadapisek Road, Kloangtoey, Bangkok 10110 Tel : (662) 229 2800 Fax : (662) 359 1259 Capital Market Academy Building, The Stock Exchange of Thailand 2/7 Moo 4, (North Park Project) Vibhavadi-Rangsit Road, Km. 27, Tung Song Hong, Laksi, Bangkok 10210 Tel : (662) 596 9000 Fax : (662) 832 4994-6 Website : www.tsd.co.th Auditor Mr. Suchart Luengsurasawat Certified Public Accountant Registration Number 2807 PricewaterhouseCoopers ABAS Limited 179/74-80 Bangkok City Tower,15th Floor South Sathorn Road, Tungmahamek, Sathorn, Bangkok 10120 Tel : (662) 286 9999, (662) 344 1000 Fax : (662) 286 5050 Website : www.pwc.com/thailand
Directors’ Shareholding in the Company and its Subsidiaries of the Year 2007 Directors
Mr. Paron
Israsena
Position
Shin Satellite Plc.
Shin Broadband Internet (Thailand) Co., Ltd.
Shenington Investments Pte Ltd.
IPSTAR Co., Ltd.
Ordinary Shares 4) 2007 2006
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
Chairman of the Board of Directors Prof. Hiran Radeesri Independent Director and Chairman of the Audit Committee Mrs. Charintorn Vongspootorn Independent Director and Member of the Audit Committee 1) Assoc. Prof. Samrieng Mekkrienngkrai Independent Director and Member of the Audit Committee Mr. Kraisorn Pornsuthee Director Dr. Dumrong Kasemset Director 8,357,497 7,357,497 1 1 Mr. Somprasong Boonyachai Director 200 200 Dr. Nongluck Phinainitisart 2) Director 69,000 69,000 1 1 Ms. Nidchanun Santhavesuk 3) Director Note 1) Became a director in substitution of Ms. Peangpanor Boonklum, as of August 10, 2007. 2) Became a director in substitution of Mr. Boonklee Plangsiri, as of May 11, 2007. 3) Became a director in substitution of Mrs. Siripen Sitasuwan, as of May 11, 2007. 4) Shareholding includes that of spouse and children who have not yet reached majority, as of December 31, 2007
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Directors
Mr. Paron
Israsena
Prof. Hiran
Radeesri
Mrs. Charintorn
Vongspootorn
Assoc. Prof. Samrieng
Mekkrienngkrai 1)
Mr. Kraisorn Dr. Dumrong Mr. Somprasong Dr. Nongluck Ms. Nidchanun
Pornsutee Kasemset Boonyachai Phinainitisart 2) Santhavesuk 3)
Position
Chairman of the Board of Directors Independent Director and Chairman of the Audit Committee Independent Director and Member of the Audit Committee Independent Director and Member of the Audit Committee Director Director Director Director Director
Star Nucleus Co., Ltd.
Spacecode LLC
IPSTAR International Pte Ltd.
IPSTAR Global Services Ltd.
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
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Mr. Paron
Israsena
Prof. Hiran
Radeesri
Mrs. Charintorn
Vongspootorn
Assoc. Prof. Samrieng
Mekkrienngkrai 1)
Mr. Kraisorn Dr. Dumrong Mr. Somprasong Dr. Nongluck Ms. Nidchanun
Pornsutee Kasemset Boonyachai Phinainitisart 2) Santhavesuk 3)
Position
Chairman of the Board of Directors Independent Director and Chairman of the Audit Committee Independent Director and Member of the Audit Committee Independent Director and Member of the Audit Committee Director Director Director Director Director
Cambodia Shinawatra Co., Ltd.
IPSTAR Australia Pty Ltd.
IPSTAR New Zealand Ltd.
IPSTAR DO BRASIL
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
Ordinary Shares 2007 2006
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Social Contributions Shin Satellite believes that, as a socially responsible corporation, it should encourage the development of society and play an active role in the development. The Company’s social contributions theme is “education”. That is, the Company aims to contribute to society by helping to further the development of education. Promotion of Science Education To promote science education, especially in satellite telecommunications, to children and youths, Shin Satellite has provided satellite models and information on satellites to the Science Centre for Education for exhibition. Moreover, the Company also founded the Satellite Museum at the Thaicom Satellite Station in Nonthaburi to disseminate knowledge on the history and development of satellite telecommunications. Every year, Thaicom Satellite station receives to more than 30 groups of the visitors (ranging from 10-150 persons per group) from schools, universities, educational institutes, Government Agencies, Military, private companies, etc. from Bangkok, other provinces and overseas. The Company provides a satellite station facilities tour and gives information on satellites and related fields by experts from Thaicom satellite engineers. These team activities are free of charge. Our intention has always been to provide knowledge regarding the satellite field. The Company has produced a booked named “Knowledge about the Satellite” to give away to children and general public free of charge. This book contains information such as explaining what a satellite is, how satellites works, how to control satellites and about satellite launchers with graphics to help explain. Supporting Children’s Day During the Children’s Day every year, Shin Satellite has distributed many gift items such as books, pencils, pencil cases, or bags to students in many schools in Bangkok, Nonthaburi, Pathumthani, and other provinces. These gifts are used for the Children’s Day activities in those schools. Science Book Corner in School Library Project This social contribution project by Shin Satellite is established to donate a variety of science books along with a well designed-shelf to many school libraries across the country. The project is named “The Miracle in our Universe Corner”. The project was kicked off by the end of December 2007 and it will carry on for many years to come. The main objective of the project is to promote and urge the Thai students to self-learn about space, satellites, and new science and technologies
outside their classrooms. The school’s library is the nearest and cheapest source of information to students. In addition, we found that many schools, even in the greater Bangkok area, still lack these science books. The Company gathered many interest science books for different age groups and placed them in a specifically designed shelf called “The Miracle in our universe” Corner. Together with “The Miracle in our universe” book shelf, we also donate our DTV satellite dish with set-top-box and a television set which can view Distance Learning Education Channels. Our aim is for students to become interested in science and technology and be an important part of technological development in Thailand. Social Assistance in Lao PDR Lao Telecommunications Co., Ltd. (“LTC”), of which Shenington Investments holds 49%, contributes to the society on a regular basis. In 2007, LTC provided donations and support including 1) Donation to a Poverty Clearing Fund in the amount of Kip 20 million and supported the telephone infrastructure in the Poverty Fund Raising Gala Dinner; 2) Sponsored Kip 50 million to the 13th South East Asian Junior Table Tennis Championship 2007 hosted by Lao P.D.R., and provided exclusive telephone and internet services during the competition period; 3) Donation in the amount of Kip 30 million to “Cholera” Fund for patients in Sakong Province, Southern part of Laos.
Social Contribution in Cambodia Cambodia Shinawatra Co., Ltd. (“CamShin”), a subsidiary of Shin Satellite, donated IPSTAR user terminals to a charity called Japan Relief for Cambodia. Camshin has been supporting the construction of IPSTAR Internet networks for telemedicine and education in many remote schools of Cambodia. This communications link also allows local hospitals to contact the capital city, Phnom Penh, for advice. In 2007, CamShin donated IPSTAR user terminals and SIM cards to the government agencies at the Municipal Hall and Police Station Sihanouk Ville Province and donated only IPSTAR user terminals to Presh Vihear and Oddor Meanchey Municipal Halls. In addition, CamShin also supported sport competitions such as Siem Reap Boats Racing and Special Olympics Cambodia.
Investor Information Investors should contact the Investor and Public Relations Department to request information about Shin Satellite or its subsidiaries and associate companies: Investor Relations, Corporate Communications Department Shin Satellite Plc. 41/103 Rattanathibet Road, Nonthaburi 11000 Tel: Fax: E-mail: Website:
(66) 02 596 5072–3 (66) 02 591 0705, (662) 591 0724 ir@thaicom.net, tanyapasc@thaicom.net, tisakorny@thaicom.net www.thaicom.net/ir
Shin Satellite is listed on the Stock Exchange of Thailand (“SET”) SET ticker Reuters Bloomberg
SATTEL SATT.BK SATTEL TB
Foreign limit: 40% Fiscal year ends: December 31 External Auditor: PricewaterhouseCoopers ABAS Limited The Company and its subsidiaries have a policy to issue a dividend of not less than 40% and not more than 60% of net profit after tax if the funds are not required elsewhere or when the payment would have no significant effect on the running of the Company or its subsidiaries.
GLOSSARY Analog
A variable signal continuous in both time and amplitude
ADSL
Asymmetric Digital Subscriber Line (“ADSL”) is a form of DSL, a data communications technology that enables fast data transmission over copper telephone lines. The volume of data flow is greater in the "download" direction than the “upload” direction.
ASIC (Application Specific An Integrated Circuit (“IC”) is designed for a particular application. Integrated Circuit) For example, the ASIC chip built by connecting existing circuit building blocks in new ways that is designed to decode digital signals. Asymmetric
A type of data transmission that has a different (or asymmetric) downstream and upstream rate.
Bandwidth
A range of frequencies occupied by an electronic signal. Bandwidth also refers to data (information) transmission rates when communicating over certain media or devices. Any digital or analog signal has a bandwidth. Bandwidth is measured in Megabits per second.
Bit
A binary digit. The smallest unit of information that can take on one of two values, such as true or false or zero or one. A type of high-speed data transmission through Internet Protocol (“IP”).
Broadband
Broadcast Beam
A group of transponders aimed at the Earth's surface as a result of combining of a number of SPOT Beams. The level of combining may vary according to the service area. It is mostly used in one-way communication.
Byte C-band
The unit of digital storage that is larger than a “bit�, typically consists of eight bits. The frequency range from 4-8 GHz, cover large footprint. C-band needs a large dish to receive signal. It is suitable for general telecommunications services such as audio, video or data transmission.
Cable Modem
A type of modem that provides access to a data signal sent over the cable television infrastructure. It can achieve up to 4 Mbps. Everyone in the neighborhood shares the bandwidth therefore, the more people using the Internet, the slower it becomes.
Compression
A way of squeezing more data through a transponder.
Compressed Video
A digital transmission process used to transmit a video signal. When the vast amount of information in a video transmission is compressed into a fraction of its former bandwidth by a codec, the resulting compressed video can be transmitted more economically and through existing phone lines. While compressed video requires less bandwidth, signal quality may be reduced. For Example, picture quality is generally not as good as full-motion video. Quick motions often appear somewhat blurred. This quality issue is becoming less of a concern as more and more playback systems for compressed video.
Digital
A type of data stored in two statuses (i.e., opened or closed status, or number 0 or 1).
Digital Broadcasting
Converting TV pictures to numbers when transmitting and reconverting them to pictures when they are received.
Digital Direct-to-Home (DTH)
Digital signals transmitted directly to the customer's home.
Digital Subscriber Line (DSL)
A technology that provides digital data transmission over the wires of a local telephone network. Typically, the download speed of consumer DSL services ranges from 256 kilobits per second (Kbps) to 24,000 Kbps, depending on DSL technology, line conditions and service level implemented. Customers must be within 5 kilometers from the telephone exchanges. DSL is suitable for densely populated towns.
Digital Video Broadcast (DVB)
A suite of internationally accepted, open standards for digital television.
Dish
An earthbound dish-shaped antenna used for receiving satellite signals. Also referred to as downlink dish and ground receiving dish.
Downlink
After a ground station send the signal to the satellite, the antenna on the spacecraft will transmit data and voice signals and repeat to the desired location on Earth within the footprint coverage, called “Downlink�.
Downloading
A procedure for transferring or retrieving a file from a distant computer.
Encryption
The process of obscuring information to make it unreadable without special knowledge or proper equipment sometimes referred to as scrambling.
Fiber Optics
A technology that uses glass (or plastic) threads (fibers) to transmit data. Fiber optic cables are high-cost to install and more fragile than wire and difficult to splice.
Free-to-Air
A term used to describe television (TV) and radio broadcasts which are broadcast unencrypted and may therefore be picked up via any suitable receiver.
Frequency
The rate of change of phase of a sinusoidal waveform.
Gateway
Two meanings: 1) In Networking: a gateway is a medium of data transmission from one network to other networks. 2) In a satellite system (including IPSTAR): a gateway is a main earth station that links the satellite system to the ground system (i.e. the Internet).
Geostationary Earth Orbit (GEO)
A geosynchronous orbit mostly used for communication purposes, directly above the Earth's equator (0ยบ latitude), at an altitude of approximately 35,786 km above ground. In geostationary orbits, a satellite rotates around the world with an angular velocity equal to the Earth's rotation so that the satellite appears stationary with respect to a fixed point on the rotating Earth. It takes only three or four satellites to cover the Earth's surface (except the area around the North and South Pole).
Hertz (Hz)
A unit of frequency, equal to one cycle per second of a sound wave or electromagnetic wave. 1 Gigahertz (GHz) = 1,000,000,000 Hertz 1 Megahertz (MHz) = 1,000,000 Hertz
Inter Broadcast
International television broadcaster.
Integrated Services Digital A circuit-switched telephone network system, designed to allow digital transmission of voice and data over ordinary telephone copper wires, Network (ISDN) resulting in better quality and higher speeds than that available with the PSTN system. Data travels at 64 - 128K bits per second. IPSTAR-1 Satellite
The Thaicom 4 satellite.
Ka-band
The frequency range from 18-31 GHz covers small foot print. Small dishes are enough to receive signal from satellite for home users. It is normally used in communication satellite, such as transmissions from the IPSTAR gateway to the IPSTAR satellite.
Ku-band
The frequency range from 12-18 GHz, suitable for DTH video broadcasting services. Ku-band is also ideal for satellite broadband Internet applications, allowing users to access web pages, video and other multimedia data at high speed, direct from the satellite network to internet users.
Leased Line
A symmetric telecommunications line connecting two locations together.
Local Multipoint Distribution Service (LMDS)
A broadband wireless access technology that uses microwave signals operating between the 26GHz and 29GHz bands. LMDS is a point-to-multipoint, fixed wireless technology for the last mile.
Low Earth Orbit (LEO)
An orbit within the locus extending from the Earth’s surface up to an altitude of 2,000 km. The commonly accepted definition for LEO is between 200 – 2,000 km above the Earth's surface. LEO satellite can circle the Earth in about an hour and a half but require at least 32 satellites to cover the Earth.
Medium Earth Orbit (MEO) The region of space around the Earth above low Earth orbit (2,000 km) and below geostationary orbit (35,786 km), requiring 10-20 satellites to cover the Earth. Microwave
Electromagnetic waves with wavelengths approximately in the range of 30 cm (frequency = 1 GHz) to 1 mm (300 GHz).
Modulate
To transform data to the suitable format before sending to any communication mean such as modulating a digital signal to be transmitted to a satellite.
Multi-Channel Multipoint Distribution Service (MMDS)
A wireless telecommunications technology, used for general-purpose broadband networking or, more commonly, as an alternative method of cable television programming reception. The MMDS band uses microwave frequencies from 2 GHz to 3 GHz in range.
Multi-Channel Per Carrier (MCPC)
A type of data transmission by blending multiple channels into a common carrier, as in blending television signals into a common carrier to be transmitted to a satellite.
Multimedia
Systems that support the interactive use of text, audio, still images, video, and graphics. Each of these elements must be converted in some way from analog to digital before they can be used in a computer application. Thus, the distinction of multimedia is the convergence of previously diverse systems.
Point-to-Multipoint
A specific type of multipoint link which consists of a central connection endpoint (CE) that is connected to multiple peripheral CEs. Any transmission of data that originates from the central CE is received by all of the peripheral CEs while any transmission of data that originates from any of the peripheral CEs is only received by the central CE.
Point-to-Point Quarter TV
A dedicated link that connects exactly two communications facilities. Broadcasts of approximately one quarter of the normal quality. Most often used by customers for in-house training courses.
Radio Frequency (RF)
Frequencies between 100 KHz and 20 GHz
Shaped Beam
A satellite signal that is modified to have a suitable shape for different geographical area coverage. Mostly used in two-way communication service in an opened and less populated area.
Spot Beam
A satellite signal that is specially concentrated in power so that it will cover only a limited geographic area. When seen from the satellite, the Spot Beam covers the service areas in multiple, narrowed, circular-shaped footprints connected in the shape of a cellular network. It is a suitable beam type for two-way communications services over a densely populated area.
Streaming
Playing video or sound in real time as it is downloaded over the Internet. Data is decompressed and played (by use of a web browser plug-in) as it is transferred to your computer over the World Wide Web. Streaming requires a powerful computer and fast connection since the file is not stored on your computer.
Teleport
A teleport (telecommunications port) is an earth station providing a comprehensive range of television and radio broadcasting and telecommunications services, including networking service and high quality internet service to user in remote area.
Terminal
The end point of a network. In IPSTAR project, it refers to the satellite modem (internal unit) and the satellite dish, including cables (external unit).
Transponder
An electronic device, inside a satellite, that uses the satellite dish to receive signals from the teleport, lower the signals' frequency, amplifies them, then retransmits them to a ground teleport. Two or three transponders aimed at a target area are called a beam, hence "India Beam" for a group of transponders that cover India.
Turnaround Service
The act of receiving signals from other satellites and re-sending them to a Thaicom satellite.
Turnkey Service
An integrated service that is readily usable by buyer.
TTC & M
The abbreviation of Telemetry, Tracking, Commanding and Monitoring, which is an operation system for satellite control.
Uplink
The act of transmitting a signal up to a satellite. The communications satellite is act as a repeater to a ground station. The ground station will sent a signal through the microwave up to the satellite. The link from a satellite to a ground station is called “Uplink�.
Uploading
A transfer of copies of files from one computer to a remote database or another computer. It is a reverse of downloading.
Very Small Aperture Terminal (VSAT)
A system that provides sound, data and pictures by sending and receiving computer data and other telecommunication data via satellite.