IFRS 12 para B12, B13, 21-23,disclosures for material and immaterial joint ventures

Singapore Telecommunications Limited – Annual report – 31 March 2018

Industry: telecoms

[Note – the joint ventures have no discontinued operations]

42.5 Joint ventures of the Group

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Notes:

(1) The place of business of the joint ventures are the same as their country of incorporation, unless otherwise specified.

(2) The Group holds substantive participating rights over the significant financial and operating decisions of the above joint ventures, which enables the Group to exercise joint control with the other shareholders.

(3) The company has been equity accounted for in the consolidated financial statements based on the results ended, or as at, 31 December 2017, the financial year-end of the company.

(4) Audited by Deloitte Touche Tohmatsu Jaiyos Audit Co. Ltd, Bangkok.

(5) This represents the Group’s direct interest in AIS.

(6) Audited by Deloitte Haskins & Sells LLP, New Delhi. The company has operations in India, Sri Lanka, and 14 countries across Africa.

(7) Audited by Navarro Amper & Co. (a member firm of Deloitte Touche Tohmatsu Limited).

(8) The Group has a 47.1% effective economic interest in Globe.

(9) The Southern Cross Cable Consortium operates through two separate companies. Southern Cross Cables Holdings Limited owns a cable network between Australia and the USA, with operations outside the USA. Pacific Carriage Holdings Limited has operations within the USA.

(10) Audited by Purwantono, Sungkoro & Surja (a member firm of Ernst & Young).

(11) Audited by KPMG, Bermuda.

  1. JOINT VENTURES

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As at 31 March 2018,

(i) The market value of the quoted equity shares in joint ventures held by the Group was S$21.29 billion (31 March 2017: S$19.55 billion).

(ii) The Group’s proportionate interest in the capital commitments of joint ventures was S$2.14 billion (31 March 2017: S$1.80 billion).

The details of joint ventures are set out in Note 42.5.

Optus has an interest in an unincorporated joint operation to share certain 4G network sites and radio infrastructure across Australia whereby it holds an interest of 50% (31 March 2017: 50%) in the assets, with access to the shared network and shares 50% (31 March 2017: 50%) of the cost of building and operating the network.

The Group’s property, plant and equipment included the Group’s interest in the property, plant and equipment employed in the unincorporated joint operation was S$1.08 billion (31 March 2017: S$1.03 billion).

The summarised financial information of the Group’s significant joint ventures namely Bharti Airtel Limited (“Airtel”), PT Telekomunikasi Selular (“Telkomsel”), Globe Telecom, Inc. (“Globe”) and Advanced Info Service Public Company Limited (“AIS”), based on their financial statements and a reconciliation with the carrying amounts of the investments in the consolidated financial statements were as follows –

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‘‘NA’’ denotes Not Applicable.

Notes:

(1) Based on the Group’s direct equity interest in AIS.

(2) Others include adjustments to align the respective local accounting standards to FRS.

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‘‘NA’’ denotes Not Applicable.

Notes:

(1) Based on the Group’s direct equity interest in AIS.

(2) Others include adjustments to align the respective local accounting standards to FRS.

The aggregate information of the Group’s investments in joint ventures which are not individually significant were as follows –

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“*” denotes amount of less than S$50,000

  1. SIGNIFICANT CONTINGENT LIABILITIES OF ASSOCIATE AND JOINT VENTURES

(a) Airtel, a joint venture of the Group, has disputes with various government authorities in the respective jurisdictions where its operations are based, as well as with third parties regarding certain transactions entered into in the ordinary course of business.

On 8 January 2013, the local regulator, Department of Telecommunications (“DOT”) issued a demand on Airtel Group for Rs. 52.01 billion (S$1.05 billion) towards levy of one time spectrum charge.

In the opinion of Airtel, inter-alia, the above demand amounts to alteration of the terms of the licences issued in the past. Airtel believes, based on independent legal opinion and its evaluation, that it is not probable that any material part of the claim will be awarded against Airtel and therefore, pending outcome of this matter, no provision has been recognised

As at 31 March 2018, other taxes, custom duties and demands under adjudication, appeal or disputes amounted to approximately Rs.126 billion (S$2.54 billion). In respect of some of the tax issues, pending final decisions, Airtel had deposited amounts with statutory authorities.

(b) AIS, a joint venture of the Group, has various commercial disputes and significant litigations.

In 2008, CAT Telecom Public Company Limited (“CAT”) demanded that AIS’ subsidiary, Digital Phone Company Limited (“DPC”) pay additional revenue share of THB 3.4 billion (S$143 million) arising from the abolishment of excise tax. CAT’s claim is still pending appeal before the Supreme Administrative Court.

In 2015, TOT Public Company Limited (“TOT”) demanded that AIS pays additional revenue share of THB 62.8 billion (S$2.64 billion) arising from what TOT claims to be an illegality of two amendments made to the Concession Agreement, namely, Amendment 6 (regarding reduction in prepaid revenue share rate) made in 2001 and Amendment 7 (regarding deduction of roaming expense from revenue share) made in 2002, which have resulted in lower revenue share. This case is pending arbitration.

Between 2011 and 2016, TOT demanded that AIS pays additional revenue share based on gross interconnection income from 2007 to 2015 amounting to THB 36.2 billion (S$1.52 billion) plus interest. The claims are pending arbitration.

Between 2014 and 2016, TOT demanded that AIS pays THB 41.1 billion (S$1.73 billion) plus interest for the porting of subscribers from 900 MHz to 2100 MHz network. This case is pending arbitration.

In March 2018, CAT demanded DPC to transfer the telecommunications systems which would have been supplied under the Concession Agreement between CAT and DPC of THB 13.4 billion (S$564 million) or to pay the same amount plus interest. This case is pending arbitration.

As at 31 March 2018, there are a number of other claims against AIS and its subsidiaries amounting to THB 28.3 billion (S$1.19 billion) which are pending adjudication.

AIS believes that the above claims will be settled in favour of AIS and will have no material impact to its financial statements.

(c) In October 2017, Intouch and its subsidiary, Thaicom Public Company Limited (“Thaicom”) received letters from the Ministry of Digital Economy and Society (the “Ministry”) stating that Thaicom 7 and Thaicom 8 satellites (the “Satellites”) are governed under the terms of a 1991 satellite operating agreement between Intouch and the Ministry which entails the transfer of asset ownership, procurement of backup satellites, payment of revenue share, and procurement of property insurance. Intouch and Thaicom have obtained legal advice and are of the opinion that the Satellites are not covered under the Agreement but instead under the licence from the National Broadcasting and Telecommunications Commission. This case is pending arbitration.

(d) Globe, a joint venture of the Group, is contingently liable for various claims arising in the ordinary conduct of business and certain tax assessments which are either pending decision by the Courts or are being contested, the outcome of which are not presently determinable. In the opinion of Globe’s management and legal counsel, the eventual liability under these claims, if any, will not have a material or adverse effect on Globe’s financial position and results of operations.

In June 2016, the Philippine Competition Commission (“PCC”) claimed that the Joint Notice of Acquisition filed by Globe, PLDT Inc. (“PLDT”) and San Miguel Corporation (“SMC”) on the acquisition of SMC’s telecommunications business was deficient and cannot be claimed to be deemed approved. In July 2016, Globe filed a petition with the Court of Appeals of the Philippines (“CA”) to stop the PCC from reviewing the acquisition. In October 2017, the CA ruled in favour of Globe and PLDT, and declared the acquisition as valid and deemed approved. PCC subsequently elevated the case to the Supreme Court to review the CA’s rulings.

(e) As at 31 March 2018, Telkomsel, a joint venture of the Group, has filed appeals and cross-appeals amounting to approximately IDR 180 billion (S$17 million) for various tax claims arising in certain tax assessments which are pending final decisions, the outcome of which is not presently determinable.

 

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