Hutchison Telecommunications
(Australia) Limited
ABN 15 003 677 227
A member of the
Hutchison Telecommunications Group
Building A, 207 Pacific Highway
St Leonards NSW 2065
(02) 9964 4646
Tel:
Fax:
(02) 9964 4668
www.hutchison.com.au
Companies Announcements Office
Australian Securities Exchange
Date: 30 March 2011
Subject: Annual Report 2010
The Company’s 2010 Annual Report incorporating the full year accounts for the period
ended 31 December 2010 is attached.
Yours faithfully
Louise Sexton
Company Secretary
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AnnuAl RepoRt 2010
HutCHISon
teleCoMS 2010
aNNual
rePort
Contents
2
REVIEW4
Hutchison
CHAIRMAN’S
REPORT
VHA
CEO’s
9 VHA executive team
10 Community Investment at VHA
11 Sustainability and Corporate Responsibility at VHA
12 Hutchison Board of Directors
14 Corporate Governance
18 Directors’ Report
26 Auditor’s Independence Declaration
27 Financial Report
32 notes to the Financial Statements
60 Directors’ Declaration
61 Independent Auditor’s Report
63 Shareholder Information
aGM Details
the Annual General Meeting of Hutchison will be held at:
40 Mount Street, north Sydney nSW 2060
Date: Wednesday 4 May 2011
Time: 10.00 am
Hutchison telecommunications (Australia) limited
(ASX: HtA) is a listed company which has a 50% interest
in Vodafone Hutchison Australia pty limited (VHA). VHA
offers mobile telecommunications under the Vodafone, 3
and Crazy John’s brands.
Hutchison telecoms was listed on the ASX in 1999 and
in 2003 launched Australia’s first 3G service, under the
3 brand.
VHA awarded 2010
Frost & Sullivan Australian Wireless
Service provider of the Year
VHA awarded 2010 Syndicated
loan of the Year by Insto Magazine
Australian Financial Markets
introduction
1
Chairman’s Report
2800
2300
1800
1300
800
300
2300
1800
1300
800
300
htal’s Share of Vha’s total revenue
2,800
2,300
1,800
1,300
9
.
0
1
4
,
2
$
n
o
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l
i
m
$
1
.
0
4
0
,
2
$
Hutchison achieved a full year profit of
Many merger integration milestones were
$73.4 million in 2010, the first full year of
reached during 2010, and the benefits of
financial results for VHA since the merger
scale from combining the two businesses
of 3 and Vodafone in 2009. this was a
are now apparent in the financial results.
$193.0 million improvement year-on-year,
Integration will continue into 2011 and
excluding Hutchison’s gain on disposal
beyond, delivering further financial benefits.
arising from the merger in 2009. Hutchison
accounts for its investment in VHA as an
equity investment, therefore revenue from
VHA’s ordinary activities is not included
in Hutchison’s consolidated revenues from
ordinary activities.
Hutchison has confidence in the prospects
for its investment in VHA, and expects
VHA to remain profitable in 2011, and to
continue to generate positive free cash flows
while remaining on track to achieve merger
synergies with a net present value of
800
In a competitive market, improvements in
$2 billion. Hutchison is supportive of
2009
2010
300
VHA’s key financial results were driven by
the work underway with the national
customer growth, strong revenue generation,
Broadband network (nBn), in particular
margin improvement and the realisation of
the potential mutual benefits created
integration savings.
total VHA revenue attributable to
Hutchison was $2,410.9 million, an
increase of 18.2% for the year. operating
margin and eBItDA grew strongly
reflecting growth in postpaid customers
and the benefits of scale and cost reduction
delivered through the integration of the
Vodafone and 3 businesses.
eBItDA attributable to Hutchison improved
171.6% year-on-year to $475.8 million,
reflecting this good performance. Hutchison
remained free cash flow positive for the year.
by a significant backhaul relationship.
Hutchison also welcomes the opportunity
for VHA to be amongst the first to trial nBn
services and is optimistic that VHA will be
in a position to expand the scope of its
communication products and services to
customers in Australia.
Fok Kin-ning, Canning
Chairman
18.2%
Total revenue
2
hutchison Chairman’s report
500
400
300
200
100
0
2300
1800
1300
800
300
htal’s Share of Vha ebitDa
.
8
5
7
4
$
500
400
300
200
100
n
o
i
l
l
i
m
$
.
2
5
7
1
$
2009
2010
0
Strengthening profitability
with EBITDA attributable to
Hutchison improving
171.6%
ownership Structure
#87.87%
HUTcHiSON wHAmPOA
LimiTED
#10%
TELEcOm cORPORATiON
OF NEw ZEALAND LimiTED
2.13%
PUbLic SHAREHOLDERS
Hutchison owns 50% of VHA (formerly named Hutchison 3G
Australia). Vodafone Group plc owns the remaining 50%. VHA
owns the Vodafone companies in Australia. VHA has exclusive
licences to use the Vodafone and 3 brands in Australia. Hutchison
Whampoa limited remains the majority shareholder of Hutchison,
with an 87.87% stake.
HUTcHiSON TELEcOmmUNicATiONS
(AUSTRALiA) LimiTED
VODAFONE GROUP PLc
#
50%
# 5 0 %
# Indirect ownership
hutchison Chairman’s report
3
Vodafone Hutchison Australia
CEO’s Review
Growing profitability with
eBItDA 21.6% of service
revenue, up from 9.3%
in 2009.
operating expenditure
per customer $371,
down by 16.3%.
Strong postpaid customer
growth. postpaid
customer base now
59.4%, up from 56.8%.
Customer acquisition cost
per connection $145,
down by 12%.
Profitable Growth
VHA delivered good growth in customer
numbers, revenue and profitability in 2010.
consolidation of customer service centres,
renegotiation of supplier agreements and the
full year benefit of corporate restructuring.
Growth in customer numbers, particularly
eBItDA as a percentage of service revenue
postpaid customers, improved revenues
was up 12.3 percentage points, from 9.3%
while the benefits of our integration activities
to 21.6%, and Hutchison’s share of eBItDA
clearly increased the profitability of the
increased by 171.6% to $475.8 million.
business. Capital spending increased as
planned throughout the year, and VHA
delivered positive operating free cash flow.
In June 2010, we completed a $3 billion
refinancing through a syndicate of 12
domestic and international banks. the
total revenue attributable to Hutchison was
refinancing package is for a three year
$2,410.9 million, an increase of 18.2% for
period and has been used to repay
the year. Service revenue grew by 16.8%
shareholder loans.
to $2,201.4 million, with operating margin
up 22.0% reflecting lower domestic roaming
costs through the utilisation of VHA’s network
assets and growth in non-voice revenue.
this first step in externally financing the
business illustrated our strength and
performance within just 12 months, and
has subsequently allowed the business to
Average Revenue per user (ARpu) for the
establish a good credit position that will
year was stable at $54 despite extremely
help us in the future.
competitive market conditions, while
acquisition costs reduced to $145 per
new customer. operating expenditure per
customer has also fallen to $371 for 2010.
the reduction was largely driven by the
realisation of integration savings including
the rationalisation of the retail store footprint,
4
Vha Ceo’s review
8000
6400
4800
3200
1600
0
2300
1800
1300
800
300
7.576
MILLION CUSTOMERS
681,000 customers added during the year
Strong growth in the number of customers using 3G
services to over 3 million customers, up 116%.
Vha Mobile Customer base
5
9
8
,
6
0
0
0
‘
s
r
e
m
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t
s
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C
6
7
5
7,
8,000
6,400
4,800
3,200
1,600
2009
2010
0
Customer Growth
our customer base grew strongly in 2010
with 681,000 customers added during
the year, bringing our total customer base
to 7.576 million customers. Importantly
we continued to attract postpaid customers
which, excluding wholesale customers,
grew in double digits at 11.5% year-
on-year. Customers on postpaid plans at
31 December 2010 were 59.4% of the
customer base, up from 56.8% last year.
During the year, handset customers grew
from 6.22 million to 6.72 million customers,
with the number of customers using data on
their handsets tripling to 2.1 million, largely
driven by the strong take up of smartphones.
Mobile broadband customers also increased
27% from 2009. over 3 million customers
were using 3G services at the end of the
year and, with growing usage, 40.3% of
ARpu now comes from non-voice services,
up from 36.7% at 31 December 2009.
Vha Ceo’s review
5
VHA CEO’s Review
continued
our value leadership
was recognised in
the prestigious Money
magazine’s 2011 Best of
the Best awards, where
two products were chosen
as offering great value.
Value Leadership and Focus
on Integration
With innovation a strong part of our
heritage, throughout the year a number of
product, pricing, sales and service initiatives
were brought to market.
our value leadership was recognised in
the prestigious Money magazine’s 2011
Best of the Best awards, where two
products were chosen as offering great
value. Vodafone’s month-to-month Mobile
Broadband $29/4GB plan was awarded
Best Broadband plan and Vodafone’s $79
Cap was awarded Cheapest Mobile plan –
High usage (postpaid).
In 2010, we completed a number of
important initiatives to begin realising the
benefits of the merger. We consolidated
our contact centre operations to two major
centres in Hobart and Mumbai and made
substantial progress in the consolidation
of our retail footprint and advancement
on a multi-million dollar refit of our retail
stores. All company-owned retail outlets that
were 3 stores are now multibranded, with
Vodafone products sold across all stores.
Service Centres now provide service and
support for devices from all three VHA
brands (Vodafone, 3 and Crazy John’s).
From a network perspective, we also made
significant progress in the appointment of
other key highlights throughout the year
new Core network, Managed Services
included introducing free on-net calling
and transmission suppliers, and a major
between 3 and Vodafone customers;
new contract with Huawei technologies
launching Vodafone Infinite, our new set
of postpaid mobile phone plans; and
(Australia) pty ltd as our radio access
network (RAn) supplier. our head and
continuing our successful sponsorships with
state offices are also now consolidated.
team Vodafone and the Australian test
Cricket team.
6
Vha Ceo’s review
People and Culture
In 2010 we continued on our journey
Investing in the Network
we have taken to restore current network
improved experience. We have also
the network remained a high priority in
2010, and over 50% of 2010 capital
expenditure was invested in a number
of initiatives. In the second half of 2010
performance and increase customer service
capabilities following issues affecting some
of our customers towards the end of 2010
recently extended our 24 month device
warranty to all devices including the Apple®
iphone®.
is beginning to take effect.
we commenced a number of initiatives,
Customer Service
including the rollout of a new 3G 850 MHz
network, consolidating and upgrading
the core voice and data network and
an ongoing programme to upgrade
transmission services including
the migration to Ip-enabled transmission.
Customer Service was a major operational
of building a new and dynamic culture.
focus in 2010. A number of new measures
While it is still early days and there is more
to improve the ease, quality and resolution
of our customer service were introduced
to do to create an even better place where
staff can achieve their aspirations, VHA
following the successful consolidation
was ranked number 12 in Australia’s 2010
to two major call centres in Hobart and
Dream employers Survey and was the only
In october 2010, we announced the
Mumbai. Initiatives such as a call back
communications company to appear in
conclusion of the radio access network
service for customers to ‘save’ their place in
the top 20.
sharing joint venture agreement with telstra
the queue without needing to hold on the
Corporation limited (known as the 3GIS
line, extended call centre operation hours
network). Since the date of the agreement,
to 24/7, an express mobile phone repair
we have commenced incorporating our
and replacement service and a new mobile
share of the 3GIS network assets to further
strengthen the Vodafone network.
and online self-service application were
all launched in 2010. our accelerated
the network is critical to ensuring we
continue to grow strongly and support our
customers, particularly as data volumes
continue to increase significantly. the action
network plan and addition of 300 customer
service staff means customers are seeing
improvements and we are confident that
we will continue to deliver a significantly
We are proud of the energetic, talented
and dedicated people who work here.
they remain the cornerstone of our operation
and ongoing success.
Vha Ceo’s review
7
VHA CEO’s Review
continued
2011 and Beyond
network, including sites that are already
process is a key focus. We will be actively
In the year ahead, we will continue to
grow revenue and profitability through
strengthening network and customer
experience while continuing to focus on
integration. In the face of sustained market
pressure on ARpu, we will continue to
innovate in the prepaid and postpaid
markets, managing costs to ensure the
benefits of the merger are maintained for
customers through affordable handsets,
devices and plans.
After experiencing network and service
difficulties towards the end of 2010, we
have accelerated plans for the network
build and upgrades to the current network,
and plan to spend over $450 million in
2011 on capital expenditure to further
improve network performance. these major
investments include completion of the new
850MHz 3G network with 1,500 sites
to provide more in-building coverage and
additional capacity where data demand
from smartphones and mobile broadband
is high and growing. We will also add
1,400 new sites into the existing Vodafone
8
Vha Ceo’s review
available to VHA following the agreement
engaged in the review of terminating
to conclude the 3GIS network joint venture.
access rates by the Australian Competition
We will continue to upgrade transmission
& Consumer Commission during 2011
with the rollout of dark fibre, microwave
and have also been participating in the
radio upgrades and migration to Ip-enabled
Australian Communications & Media
transmission services. We are replacing
Authority’s ‘Reconnecting the Customer’
all 2G and 3G equipment at all network
initiative. We look forward to this enquiry
sites as part of a plan to improve mobile
producing constructive outcomes for
coverage and download speeds. this also
customer service.
provides a very straightforward and flexible
upgrade path to long term evolution (lte)
network technology.
In summary, VHA will improve network
performance and customer experience and
continue integration activities, gaining further
A number of significant government policy
benefits of scale as we continue to grow
issues will be resolved or progressed in
profitability in 2011.
2011. the progress on establishing the
nBn is encouraging and we are looking
forward to confirmation of access to
transmission services from the nBn to
our network base stations. the nBn also
presents an opportunity, under the right
conditions, for VHA to provide fixed line
services and we intend to participate in
upcoming trials with the nBn. Renewal of
existing spectrum licenses is a significant
unknown cost and completing the renewal
Nigel Dews
Chief executive officer
Vodafone Hutchison Australia
Vodafone Hutchison Australia
Executive Team
Nigel Dews
Chief executive
officer
Greg Bourke
Director of Human
Resources
John Casey
Director of
Marketing
Cormac
Hodgkinson
Director of
Customer Service
and experience
Grant Stevenson
Director of
Integration &
Strategy and
Deputy CFo
Dave Boorman
Chief Financial
officer
Tanya Bowes
Director of
Communications
and Corporate
Affairs
Noel Hamill
Director of Sales
and Distribution
Louise Sexton
Group General
Counsel and
Company
Secretary
Michael Young
Chief technology
officer
Vha executive team
9
Community Investment
at VHA
In 2010 the Vodafone Foundation Australia contributed
to 19 projects with various partners across Australia.
the Vodafone Foundation Australia is a
now in its seventh year, the World of
volunteering at the Vodafone Ashes Series
charitable trust that supports our community
Difference program had another successful
across the country to support the McGrath
investment program in Australia. the
year in 2010. the program is unique in
Foundation. VHA and the Foundation
Foundation and VHA are committed
terms of community investment, and in 2010
donated over $150,000 to the McGrath
to supporting people and charitable
gave five Australians the opportunity to work
Foundation for various initiatives and more
organisations to help them reach their
for their nominated charity, fully funded and
than 150 employees gave up their time and
full potential making social investments
and forming partnerships with partner
charities and creating unique and exciting
opportunities for our staff to connect with
and make a difference to the charities that
they are passionate about.
supported for a year.
the CuretheBullies campaign was launched
helped raise an additional $75,000 by
volunteering at the cricket events.
in conjunction with the Foundation partner
In addition to supporting major partners and
SchoolAid and was designed to educate
events, the Foundation also matches funds
and empower children to recognise and
raised by VHA employees for charities and
take a stand against Cyberbullying,
provides all staff with the opportunity to
In 2010 over $1million was given in
which affects 1 in 4 Australian children.
volunteer for a day – called passion Days.
grants by the Foundation, contributing
CuretheBullies has been developed by kids,
In 2010, 500 passion Days were taken
to 19 projects with various partners
for kids and is a fun, interactive awareness-
by staff across VHA and $375,000 was
across Australia. throughout the year, the
raising campaign that focuses on a new
donated by the Foundation to charities that
Foundation supported a range of charities
approach to the issue – by targeting the
our staff are passionate about.
and not-for-profit organisations including
‘bystander’ (kids who may witness bullying
Australian Red Cross, McGrath Foundation,
behaviour, or even act as an accomplice).
Red Dust, oxfam, SchoolAid, Youth off the
Streets, Mission Australia, Barnardos, Variety
and Conservation Volunteers Australia.
there was also plenty of action throughout
the summer of cricket with VHA employees
10
Community investment at Vha
Sustainability and
Corporate Responsibility
at VHA
In 2010 we collected over
46TONNES
of handsets, batteries and accessories
at MobileMuster collection points.
An increase of 39%.
Our Planet
Our Communities
Our Wellbeing
Our Products
In 2010 we launched our new sustainability
across all areas of our business, including
strategy, an approach that supports the way
handsets and network equipment, in addition
we do business, make decisions and drive
to new ways of becoming more energy-
business initiatives that not only focus on
efficient to reduce our carbon footprint.
today but on the future.
As integration continues we are finding
this strategy was shaped by understanding
new ways of building our business
the key social and environmental issues that
sustainably, such as recycling or reusing
our customers care about. Being able to
telecommunications equipment, moving
make a positive impact on the communities
head office operations to a six Star Green
we work with, our customers and the
Star Rating building and participating in
environment that surrounds us, is something
expanded handset recycling schemes,
that we have a great opportunity to do
collecting over 46 tonnes of handsets,
through our daily operations. the actions we
batteries and accessories in 2010 at
are taking centre around the key areas of
MobileMuster collection points, an
our external environment, our products, our
increase of 39% from 2009.
communities and our wellbeing.
As an example, we are focused on doing
more for customers with a better use of
resources contributing to a more sustainable
future. this means an increase in recycling
Sustainability and Corporate responsibility at Vha
11
Board of Directors
Fok Kin-ning,
Canning
Chairman
Chow Woo Mo
Fong, Susan
Director
Lai Kai Ming,
Dominic
Director
Frank John Sixt
Director
Barry Roberts-
Thomson
Deputy Chairman
Justin Herbert
Gardener
Director
John Michael
Scanlon
Director
Ronald Joseph
Spithill
Director
12
hutchison board of Directors
Fok Kin-ning, Canning
(Chairman) BA, DFM, CA (Aus)
Fok Kin-ning, Canning, aged 59, has been
an executive director since 1984 and group
managing director since 1993 of Hutchison
Whampoa limited (HWl), director since
1992 and chairman since 2002 of Hutchison
Harbour Ring limited (HHR), non-executive
chairman of Hutchison telecommunications
Hong Kong Holdings limited (HtHKH)
since 2009, executive director since 1985
and chairman since 2005 of power Assets
Holdings limited (formerly known as Hongkong
electric Holdings limited) (power Assets),
co-chairman of Husky energy Inc. (Husky)
since 2000, executive director and deputy
chairman of Cheung Kong Infrastructure
Holdings limited (CKIH) since 1997, and non-
executive director of Cheung Kong (Holdings)
limited (CKH) since 1985. He was previously
the chairman of partner Communications
Company ltd. (partner) from 1998 to 2009
and the non-executive chairman of Hutchison
telecommunications International limited (HtIl)
(which ceased to be a public listed company
in May 2010) from 2004 to 2010. He holds
a Bachelor of Arts degree and a Diploma
in Financial Management, and is a member
of the Institute of Chartered Accountants in
Australia. Mr Fok was appointed as a Director
on 8 February 1999.
Barry Roberts-Thomson
(Deputy Chairman)
Barry Roberts-thomson, aged 61, was the
Managing Director of Hutchison from its
inception in 1989 until September 2001.
In his capacity as Deputy Chairman,
Mr Roberts-thomson represents Hutchison in
government relations and strategic projects.
Mr Roberts-thomson was appointed as a
Director on 14 February 1989.
She was previously a director of partner from
1998 to 2009 and a non-executive director
of HtIl (which ceased to be a public listed
company in May 2010) from 2008 to 2010.
She is a solicitor and holds a Bachelor’s
degree in Business Administration.
Mrs Chow was appointed as a Director on
15 February 2006 and as an Alternate
Director to Mr Fok, Mr lai and Mr Sixt on
8 May 2006, 26 February 2007 and
4 May 2007 respectively.
Justin Herbert Gardener
(Director) Bec, FCA
Justin Herbert Gardener, aged 74, has been
a director of a number of private and publicly
listed companies including Austar united
Communications limited (appointed in 1999
and retired in 2008). From 1961, and until
his retirement in 1998, Mr Gardener held
a variety of positions with Arthur Andersen,
becoming a partner in 1972 and for the last
ten years in a management and supervisory
role for Asia pacific. Mr Gardener was
appointed as a Director on 2 July 1999.
Lai Kai Ming, Dominic
(Director) BSc, MBA
lai Kai Ming, Dominic, aged 57, has been
an executive director of HWl since 2000,
director since 1994 and deputy chairman
since 2001 of HHR, and non-executive
director of HtHKH since 2009. He has
over 27 years of management experience
in different industries. He holds a Bachelor
of Science (Hons) degree and a Master’s
degree in Business Administration. Mr lai was
appointed as a Director on 19 May 2004
and as an Alternate Director to Mrs Chow and
Mr Sixt on 8 May 2006.
John Michael Scanlon
(Director)
Chow Woo Mo Fong, Susan
(Director) BSc
Chow Woo Mo Fong, Susan, aged 57, has
been an executive director since 1993 and
deputy group managing director since 1998 of
HWl, executive director of CKIH since 1997,
HHR since 2001, non-executive director of
power Assets since 1996 (re-designated as
executive director since 2006), toM Group
limited (toM) since 1999 and HtHKH
since 2009.
John Michael Scanlon, aged 68, is a special
venture partner to Clarity partners llp, a private
equity firm. From 1965 through to 1988 his
career was with At&t, primarily Bell labs,
rising to group vice president of At&t. Mr
Scanlon then went on to become president
and general manager of Motorola’s Cellular
networks and Space Sector, founding Ceo
of Asia Global Crossing, Ceo of Global
Crossing and chairman and Ceo of primeCo
Cellular. Mr Scanlon was appointed as a
Director on 11 July 2005.
Frank John Sixt
(Director) MA, lll
Frank John Sixt, aged 59, has been an
executive director since 1991 and group
finance director since 1998 of HWl,
non-executive chairman of toM since 1999,
executive director of CKIH since 1996, power
Assets since 1998, non-executive director
of CKH since 1991, HtHKH since 2009,
and director of Husky since 2000. He was
previously a director of partner from 1998 to
2009 and a non-executive director of HtIl
(which ceased to be a public listed company
in May 2010) from 2004 to 2010. He
holds a Bachelor’s degree in Civil law and a
Master’s degree in Arts, and is a member of
the Bar and of the law Society of the provinces
of Quebec and ontario, Canada. Mr Sixt was
appointed as a Director on 12 January 1998
and as an Alternate Director to Mrs Chow and
Mr lai on 25 February 2008.
Ronald Joseph Spithill
(Director) BSctech
Ronald Joseph Spithill, aged 69, is a director
of telecom Corporation of new Zealand
limited (appointed in 2006) and serves on
a number of nGo Boards and the new
Zealand Independent Industry oversight
Group. He was previously president of Alcatel
Asia pacific responsible for operations in
16 countries, executive Vice president and
Chief Marketing officer of the paris-Based
Alcatel group and Vice-Chairman of Alcatel
Shanghai Bell. He has been Ceo and
Chairman of Alcatel Australia. He is past
president of the telecommunications Industry
Association of Australia and served with
the AeeMA Board, the Australian Business
Council, the Malaysian Government Industry
Advisory panel, the nSW Government
It Advisory Board, and the Australian
Government “Goldsworthy” Committee.
Mr Spithill is a Fellow of the Australian
Academy of technological Sciences and
engineering and a Distinguished Fellow of the
telecommunications Society of Australia.
hutchison board of Directors
13
Corporate Governance
Hutchison and its Directors are committed to high standards of corporate governance. Set out below is a description of the Company’s main
corporate governance practices which have been in place for the full year unless otherwise stated.
Board of Directors and its Committees
The Board has responsibility for approving the strategy and monitoring the implementation of the strategy and the performance of HTAL and
its subsidiaries (the group of companies is referred to as Hutchison in this Corporate Governance report), protecting the rights and interests
of shareholders and is responsible for overall corporate governance. The Board has adopted a list of matters reserved to the Board which is
available on the Company’s website. Some aspects of the day-to-day management of Hutchison are undertaken with the assistance of the Chief
Executive Officer and senior management team of VHA, which is 50% owned by HTAL.
The Board’s responsibilities include:
•
Reviewing and approving the strategic direction of Hutchison and establishing goals, both short term and long term, to ensure these strategic
objectives are met and ensuring appropriate resources are available to meet these objectives;
• Overseeing Hutchison, including its control and accountability systems;
•
Ensuring the business risks facing Hutchison are identified and reviewing, ratifying and monitoring systems of risk management and internal
compliance and control, codes of conduct and legal compliance;
• Monitoring the performance of management against these goals and objectives and initiating corrective action when required;
•
•
•
Ensuring that there are adequate internal controls and ethical standards of behaviour adopted and met within Hutchison;
Reviewing and approving annual financial plans and monitoring corporate performance against both short term and long term financial plans;
Ensuring that the business risks facing Hutchison are identified and that appropriate monitoring and reporting controls are in place to
manage these risks;
• Appointing the chief executive, evaluating performance and determining the remuneration of senior executives and ensuring that appropriate
policies and procedures are in place for recruitment, training, remuneration and succession planning; and
• Delegating to the chief executive the authority to manage and supervise the business of Hutchison including the making of all decisions
regarding Hutchison’s operations that are not specifically reserved to the Board.
The nature of these responsibilities has changed substantially since VHA ceased to be a subsidiary of the Company in June 2009 and there are
no longer any executives employed by the Company.
Composition of the Board
The Board comprises eight Directors whose appointment reflects the shareholdings of the Company and the need to ensure that the Company
is run in the best interest of all shareholders. All the Directors, including the Chairman, Mr Fok, are non-executives. The Board has adopted the
definition of independence contained in the Australian Securities Exchange (ASX) best practice recommendations. In light of this definition, the
Board considers that independent Directors are not substantial shareholders or officers of substantial shareholders, have not been employed
as an executive of Hutchison or its majority shareholder, nor are they associated with any significant supplier, customer or professional adviser
of Hutchison. Further, an independent Director does not have any significant contractual relationship with Hutchison nor is there any business
relationship which could materially interfere with a Director’s ability to act in the best interest of the Company.
Mr Gardener and Mr Scanlon, being the only Directors who are not officers of a significant shareholder or have not been employed as an
executive of Hutchison, are considered by the Board to be independent Directors. In light of the majority ownership by HWL, the Board has
resolved that, at this stage, it is not in the best interests of the Company that a majority of Directors or the Chairman be independent.
Subject to the Corporations Act 2001 requirements in relation to the retirement of Directors, the current Directors have not been appointed for a
specified term. Details of the Directors’ experience is set out on page 13.
In connection with their duties and responsibilities, Directors and Board Committees have the right to seek independent professional advice at the
Company’s expense. Prior written notification to the Chairman is required. No formal procedure for performance evaluation of the Board and its
members has been implemented as the Board considers that regular ongoing informal assessment is more appropriate. Accordingly consideration
of the performance of the Board forms part of the regular Board process when the Board conducts deliberations without representatives of
management present at each Board meeting.
Committees
The Board has two committees to assist in the implementation of its corporate governance practices and fiduciary and financial reporting and
audit responsibilities. These are an Audit Committee and a Governance, Nomination and Compensation Committee.
Each of these committees has its own charter setting out its role and responsibilities, composition, structure, membership requirements and the
manner in which the committee is to operate. Details of these charters are available on the Company’s website.
14
Corporate Governance
Audit Committee
The responsibility of the Audit Committee is to assist the Board in fulfilling its audit duties through review and supervision of Hutchison’s
financial reporting process and internal control system. All members of the committee are non-executive Directors and the composition of the
committee meets the requirements of the ASX Listing Rules. The Audit Committee has appropriate financial expertise and knowledge of the
telecommunications industry. Details of the committee members’ qualifications, expertise, experience and attendance at Audit Committee meetings
are set out on page 13 and page 20.
The Audit Committee considers the annual and interim financial statements of the Company and its subsidiaries and any other major financial
statements prior to approval by the Board, and reviews standards of internal control and financial reporting within Hutchison. The Audit
Committee is also responsible for overview of the relationship between Hutchison and its external auditors, including periodic review of
performance and the terms of appointment of the auditors. This committee considers any matters relating to the financial affairs of Hutchison
and its subsidiaries and any other matter referred to it by the Board.
The main responsibilities delegated to the committee are to:
• Consider and recommend to the Board the appointment and remuneration of the Company’s external auditors and to determine with
the external auditors the nature and scope of the audit or review and approve audit or review plans;
• Assess the performance and independence of the external auditors, taking into account factors which may impair the auditor’s judgement
in audit matters related to the Company;
• Review the interim and annual accounts of the Company before their submission to the Board;
• Ensure Hutchison’s practices and procedures with respect to related party transactions are adequate for compliance with the relevant legal
and securities exchange requirements;
• Review the risk management practices and oversee the implementation and effectiveness of the risk management system;
• Review with management and the external auditors the presentation and impact of significant risks and uncertainties associated with the
business of Hutchison and their effects on the financial statements of Hutchison; and
• Ensure corporate compliance with applicable legislation.
The range of matters requiring consideration by the Audit Committee including the internal controls and risk management practices and systems
has changed since VHA ceased to be a subsidiary of the Company and the Company no longer controls any operating entities.
External auditors
The performance of the external auditors is reviewed annually and applications for tender of external audit services will be requested as deemed
appropriate. Deloitte Touche Tohmatsu were appointed as the external auditors in May 2010. It is Deloitte Touche Tohmatsu policy to rotate
audit engagement partners on listed companies every five years, and in accordance with that policy the current audit engagement partner was
appointed in May 2010.
An analysis of fees paid to the external auditors, including a break-down of fees for non-audit services, is provided in note 18 to the financial
statements. The Company’s policy in relation to awarding non-audit work to the external auditors requires that all proposed non-audit service
assignments in excess of $100,000 will be approved by the Audit Committee and will only be awarded to the external auditors after completion
of a competitive tendering process which demonstrates that the external auditors are the preferred service provider on the basis of an objective
assessment of price, capabilities and commitment. It is the policy of the external auditors to provide an annual declaration of their independence
to the Audit Committee.
The external auditors are available for questioning at the Annual General Meeting.
Governance, Nomination and Compensation Committee
The committee comprises non-executive Directors and is chaired by the Chairman of the Board. In light of the majority ownership by HWL, the
Board has resolved that, at this stage, it is not in the best interests of the Company that a majority of members of this committee be independent.
Details of the committee members’ qualifications, expertise, experience and attendance at compensation committee meetings are set out on
page 13 and page 20.
Corporate Governance
15
Corporate Governance
continued
Compensation responsibilities
This committee is responsible for the review of remuneration and other benefits, and Hutchison’s policies in relation to recruitment and retention
of staff, details of which are set out in the Directors’ Report on pages 21 to 24. This committee also reviews and makes recommendations to the
Board on remuneration policies and other terms of employment applicable to the chief executive, senior executives and the Directors themselves. The
committee will, where relevant, obtain independent advice from external consultants on the appropriateness of the remuneration policies of Hutchison.
Executive remuneration, including that of Executive Directors, has been reviewed annually by the committee having regard to personal and
corporate performance, contribution to long term growth and relevant comparative information. Details of the compensation philosophy and
practice of the Company are set out in the Directors’ Report.
Governance and nomination responsibilities:
Related to Board Performance and Evaluation
• To periodically assess and provide recommendations to the Chairman of the Board on the effectiveness of the Board of Directors as a
whole, the committees of the Board, the contribution of individual Directors, and assessment of Directors;
• To periodically review the Company’s investor relations and public relations activities to ensure that procedures are in place for the effective
monitoring of the shareholder base, receipt of shareholder feedback and response to shareholder concerns;
• To oversee the maintenance of an induction and education programme for new Directors;
• To ensure appropriate structures and procedures are in place so that the Board can function independently of management;
• To review the mandates of the Board of Directors’ committees and recommend appropriate changes to the Board;
• To receive and consider any concerns of individual Directors relating to governance matters; and
• To review all related party transactions to ensure they reflect market practice and are in the best interests of Hutchison.
The nature of these responsibilities has changed substantially since VHA ceased to be a subsidiary of the Company and there are no longer any
executives employed by the Company.
Related to the Board of Directors
• To recommend to the Board criteria regarding personal qualifications for Board membership, such as background, experience, technical
skills, affiliations and personal characteristics.
Related to Committees of the Board of Directors
• To review from time to time and recommend to the Board the types, terms of reference and composition of Board committees, and the
nominees as chair of the Board committees; and
• To review from time to time and make recommendations to the Board, with respect to the length of service of members on committees,
meeting procedures, quorum and notice requirements, records and minutes, resignations and vacancies on committees.
Diversity
The Company recognises the corporate benefit of diversity as that term is defined in the ASX best practice recommendations (Diversity)
and has recently put in place a Diversity Policy. The Company’s practices are documented in a policy, details of which are available on
the Company’s website.
The Company is committed to encouraging and promoting a mix of skills and diversity in the membership of its Board which achieves the
Company’s corporate goals and which is evidenced in gender diversity through having one female Director and two female joint Company
Secretaries; and cultural diversity through having Directors and Company Secretaries residing in Hong Kong, Australia and North America.
Measurable objectives have been set by the Board for this purpose, namely that in assessing candidates the Governance, Nomination and
Compensation Committee will have regard to the Diversity and skills of each candidate and the Diversity of the membership of the Board, and the
Board will give due consideration to ensuring that the Diversity of the Board increases. Since the implementation of the policy and the measurable
objectives no Board positions have become vacant.
Business risk
The Board acknowledges its responsibility for risk oversight and ensuring that significant business risks are appropriately managed, whilst
acknowledging that such risks may not be wholly eliminated. Details of the Company’s risk management policy and internal compliance and
control system are available on the Company’s website. The Audit Committee has been delegated responsibility as the primary body for risk
oversight and for ensuring that appropriate risk management policies, systems and resources are in place. As all former operational activities
of the Company are now undertaken in VHA, the associated risks are now in that entity. The Audit Committee receives and considers reports
prepared by the risk management function of VHA, which provides independent reports to the VHA Audit Committee. The risk management
function ensures that adequate mechanisms are in place to identify, assess and manage strategic, financial, operational and regulatory risks and
that VHA corporate performance is reviewed across a broad range of issues. As the Company no longer has executives performing the function
of chief executive officer or chief financial officer, the Board has not received a declaration provided in accordance with section 295A of the
Corporations Act. However, a declaration of this nature has been provided in respect of the VHA financial statements.
16
Corporate Governance
Ethical standards
The need to ensure that a strong ethical culture within Hutchison has lead to greater emphasis on the development of a strong culture designed to
ensure that all Directors, managers and employees act with the utmost integrity and objectivity in their dealings with all people that they come in
contact with during their Hutchison working life. The corporate code of conduct, based upon the existing corporate values, has been updated to
assist in maintaining this culture. This code applies to all Directors and employees and compliance with the values underlying the Company’s culture
forms part of the performance appraisal of senior employees and sales managers. Details of this code are available on the Company’s website.
Directors’ and senior executives’ dealings in HTAL shares
The Company has adopted an updated share trading policy to reflect amendments to the ASX Listing Rules. The Company has the following
policy in place regarding trading in its shares (which currently only applies to Directors and Company Secretaries as the Company does not
employ any senior executives):
•
the Chairman discusses any proposed trade in HTAL shares with an independent Director prior to any trade;
• Directors discuss any proposed trade in HTAL shares with the Chairman prior to any trade; and
• Senior executives discuss any proposed trade in HTAL shares with the Company Secretary or the chief executive officer prior to any trade.
Unless there are unusual circumstances, trades in HTAL shares by Directors and senior executives are limited to the period of one month after
the release of the Company’s half year and annual results to the ASX and from the lodgment of the Company’s annual report with the ASX up
to one month after the Annual General Meeting of HTAL.
Directors and senior executives are prohibited from trading in HTAL shares if the Director or officer is in possession of price sensitive information
or would be trading for a short term gain. All directors and managers within Hutchison have been advised of their obligations in regard to price
sensitive information. Directors and senior executives are also aware of their obligations to ensure that they do not communicate price sensitive
information to any other person who is likely to buy or sell HTAL shares or communicate that information to another party.
The Company’s existing practices are documented in a code, details of which are available on the Company’s website.
Continuous disclosure and shareholder communication
The Board strongly believes that the Company’s shareholders should be fully informed of all material matters that affect Hutchison in accordance
with its continuous disclosure obligations. Financial reports and other significant information are available on the Company’s website for access
by its shareholders and the broader community. Procedures are in place to review whether any price sensitive information has been inadvertently
disclosed in any forum, and if so, this information is immediately released to the market. The Company Secretary, resident in Australia, has been
appointed as the person responsible for communications with the ASX.
The Company seeks to enhance its communication with shareholders through the introduction of new types of communication through cost
effective electronic means, and the provision of significant information in addition to the reports required by legislation.
The Company’s existing practices on information disclosure are documented in a policy, details of which are available on the Company’s website.
Related party transactions
Hutchison draws great strength from its relationship with HWL and other companies in the HWL Group in relation to its financial support,
management expertise, joint procurement programmes and shared research and development costs. The Board is aware of the need to represent
all shareholders and to avoid conflicts of interest. Where there is a conflict of interest or the potential appearance of a conflict, affected Directors
do not participate in the decision making process or vote on such matters. All commercial agreements with related parties are negotiated on
arms’ length terms. Further information about the Company’s related party transactions is set out in note 21 to the financial statements.
Corporate Governance
17
Directors’ Report
The Directors are pleased to present their report on the consolidated entity consisting of HTAL and the entities it controlled at the end of or during
the year ended 31 December 2010.
Principal activities
During the year, Hutchison’s principal activities included the ownership of a 50% interest in VHA which provides mobile telecommunications
services in Australia.
Dividends
No dividend was declared or paid during the year.
Review of operations
Comments on the operations of Hutchison, results of those operations, the Company’s business strategies and its prospects for future years are
contained in pages 2 to 8 of this report. Details of the financial position of the Company are contained in page 29 of this report.
Significant changes in the state of affairs and matters subsequent to the end of the financial year
No other matter or circumstance has arisen since 31 December 2010 that has significantly affected, or may significantly affect:
• Hutchison’s operations in future financial years;
•
the results of those operations in future financial years; or
• Hutchison’s state of affairs in future financial years.
Likely developments and expected results of operations
Other than as set out in the Review of operations above, further information on business strategies and the future prospects of the Company have
not been included in this report because the Directors believe that it would be likely to result in unreasonable prejudice to Hutchison.
Environmental regulation
Hutchison’s operations and business activities are subject to environmental regulations under both Commonwealth and State legislation and the
requirements of the Telecommunications Act 1997. Hutchison has adopted an environmental policy which includes clearly defined accountability
and responsibility for compliance with legislation and for achieving specific environmental management objectives. Hutchison’s risk review and
audit program is designed to ensure that Hutchison meets its obligations under current legislation.
VHA’s operations and business activities are subject to environmental regulations under both Commonwealth and State legislation and the
requirements of the Telecommunications Act 1997, particularly with regard to:
•
the impact of the construction, maintenance and operation of transmission facilities;
•
site contamination; and
• waste management.
Policies are in place to clearly define accountability and responsibility for compliance with legislation and for achieving specific environmental
management objectives.
The Directors are not aware of any material breaches of environmental regulations by Hutchison or by VHA.
18
Directors’ Report
Directors
The following persons were Directors of HTAL during the whole of the year ended 31 December 2010 and up to the date of this report:
FOK Kin-ning, Canning
Barry ROBERTS-THOMSON
CHOW WOO Mo Fong, Susan
Justin Herbert GARDENER
LAI Kai Ming, Dominic
John Michael SCANLON
Frank John SIXT
Mr Roderick James SNODGRASS resigned as a Director with effect from 16 November 2010.
Mr Ronald Joseph SPITHILL was appointed as a Director with effect from 16 November 2010 and continues in office at the date of this report.
Director
Other Responsibilities
Fok Kin-ning, Canning
Non-executive Chairman
Chairman of Governance, Nomination and Compensation Committee
Barry Roberts-Thomson
Deputy Chairman
Chow Woo Mo Fong, Susan
Member of Governance, Nomination and Compensation Committee
Justin Herbert Gardener
Chairman of Audit Committee
Member of Governance, Nomination and Compensation Committee
Lai Kai Ming, Dominic
—
John Michael Scanlon
Member of Audit Committee
Frank John Sixt
Member of Audit Committee
Ronald Joseph Spithill
—
* Direct holding of 100,000 shares.
** Direct holding of 4,540 shares.
Particulars of Directors’
Interests in ordinary
shares of HTAL
5,100,000*
83,918,337**
—
1,630,358
—
—
1,000,000
—
Note: Fok Kin-ning, Canning, holds a relevant interest in (i) 6,010,875 ordinary shares of HWL, a related body corporate of HTAL;
(ii) 5,000,000 ordinary shares of HHR, a related body corporate of HTAL; (iii) a nominal amount of USD1,216,000 in the 6.50% Notes
due 2013 issued by Hutchison Whampoa International (03/13) Limited, a related body corporate of HTAL; (iv) 1,202,380 ordinary
shares of HTHKH, a related body corporate of HTAL; (v) a nominal amount of USD4,000,000 in the 5.75% Notes due 2019 issued by
Hutchison Whampoa International (09/19) Limited, a related body corporate of HTAL; and (vi) a nominal amount of USD5,000,000
in the Subordinated Guaranteed Perpetual Capital Securities issued by Hutchison Whampoa International (10) Limited, a related body
corporate of HTAL.
Chow Woo Mo Fong, Susan holds a relevant interest in (i) 150,000 ordinary shares of HWL; and (ii) 250,000 ordinary shares
of HTHKH.
Lai Kai Ming, Dominic holds a relevant interest in 50,000 ordinary shares of HWL.
Frank John Sixt holds a relevant interest in (i) 200,000 ordinary shares of HWL; (ii) one ordinary share of Colonial Nominees Limited, a
related body corporate of HTAL, on behalf of Hutchison International Limited; (iii) 17,000 American Depositary Shares (each representing
15 ordinary shares) of HTHKH; and (iv) a nominal amount of USD1,000,000 in the Subordinated Guaranteed Perpetual Capital
Securities issued by Hutchison Whampoa International (10) Limited.
Directors’ Report
19
Directors’ Report
continued
Meetings of Directors
The number of meetings of HTAL’s Board of Directors and each of the Board committees held during the year ended 31 December 2010 and the
number of meetings attended by each Director were:
Board
Meetings
held during
the period
as director
Board
Meetings
attended
Audit
Committee
Meetings
held during
the period as
member of
Committee
Audit
Committee
Meetings
attended
Governance,
Nomination
and
Compensation
Committee
Meetings
held during
the period as
member of the
Committee
Governance,
Nomination
and
Compensation
Committee
Meetings
attended
Fok Kin-ning, Canning
Barry Roberts-Thomson
Chow Woo Mo Fong,
Susan
Lai Kai Ming, Dominic
Justin Herbert Gardener
John Michael Scanlon
Frank John Sixt
Roderick James Snodgrass^
Ronald Joseph Spithill^^
12
12
12
12
12
12
12
10
1
12
12
12
12
12
12
12
8
1
^
Resigned as a Director on 16 November 2010.
^^ Appointed as a Director on 16 November 2010.
N/A
N/A
N/A
N/A
5
5
5
N/A
N/A
N/A
N/A
N/A
N/A
5
5
5
N/A
N/A
1
N/A
1
N/A
1
N/A
N/A
N/A
N/A
1
N/A
1
N/A
1
N/A
N/A
N/A
N/A
Retirement, election and continuation in office of Directors
Mr Barry Roberts-Thomson is a Director retiring by rotation in accordance with the Constitution who, being eligible, offers himself for re-election.
Mr Lai Kai Ming, Dominic is a Director retiring by rotation in accordance with the Constitution who, being eligible, offers himself for re-election.
Mr Ronald Joseph Spithill having been appointed since the last Annual General Meeting, in accordance with the Company’s Constitution, retires
as a Director at the Annual General Meeting and offers himself for re-election.
Company secretaries
Edith SHIH BSE, MA, MA, EdM, Solicitor, FCIS, FCS(PE)
Ms Shih has over 13 years of experience as company secretary in listed companies and has been a Company Secretary of the Company since
1999. She has been the head group general counsel of HWL since 1993 and its company secretary since 1997. She is a qualified solicitor in
England and Wales, Hong Kong and Victoria, Australia; and is also a Fellow of both The Institute of Chartered Secretaries and Administrators
and The Hong Kong Institute of Chartered Secretaries.
Louise SEXTON BA, LLM, MBA (Exec)
Ms Sexton has over 17 years’ experience as company secretary in listed companies and has been a Company Secretary of the Company since
1999. Ms Sexton has practised as a solicitor since 1983 with experience in government, private practice and in-house corporate practice, and
is Group General Counsel and Company Secretary of VHA.
20
Directors’ Report
Remuneration report
Following the merger of H3GA and Vodafone Australia in June 2009, the Company’s employees, including all executives, working in the VHA
business ceased to be employees of the Company and became employees of VHA during 2009. VHA is not a subsidiary of the Company and
accordingly this report does not include any information relating to the employees or employment practices of VHA. As at 31 December 2010,
the Company had 62 employees who are providing transition services to VHA. The Company no longer has any employees who are ‘key
management personnel’.
This report applies to employees of the Company only, and prior year comparisons include those who were key management personnel
during the period to 9 June 2009. The compensation philosophy and policies referred to remain in place notwithstanding their currently
limited application.
Compensation philosophy and practice
The Governance, Nomination and Compensation Committee has been responsible for making recommendations to the Board on compensation
policies and packages for all staff, including Board members. The Company’s compensation policy has been designed to ensure that
remuneration strategies are competitive, innovative, support the business objectives and reflect company performance. The company performance
is measured according to the achievement of key financial and non-financial measures as approved by the Board, and key management
personnel’s remuneration packages would be directly linked to these measures. Hutchison has been committed to ensuring it has compensation
arrangements which would reflect individual performance, overall contribution to the company performance and developments in the external
market. Written service agreements setting out remuneration and other terms of employment would be required for key management personnel.
Principles used to determine the nature and amount of remuneration
The Company’s compensation policy was designed to ensure that remuneration strategies are competitive, innovative and support the business
objectives while reflecting individual performance, overall contribution to the business and developments in the external market. Remuneration
packages will generally involve a balance between fixed and performance based components, the latter being assessed against objectives
which include both company and job specific financial and non-financial measures. These measures at the financial level directly relate to the key
management’s contribution to meeting or exceeding the company’s statement of comprehensive income and statement of financial position targets.
At the non-financial level the measures reflected the contribution to achieving a range of key performance indicators as well as building a high
performance company culture. These performance conditions were chosen to reflect an appropriate balance between achieving financial targets
and building a business and organisation to be sustainable for the long term.
Directors’ fees
The remuneration of the non-executive and independent Directors, J Gardener and J Scanlon, was comprised of a fixed amount only and was not
performance based. The non-executive and non-independent Directors, C Fok, S Chow, D Lai, B Roberts-Thomson, R Snodgrass, R Spithill and
F Sixt, did not receive any remuneration for their services as Directors.
Retirement allowances for Directors
No retirement allowances are payable to non-executive Directors.
Company Secretaries fees
The Joint Company Secretaries, E Shih and L Sexton, did not receive any remuneration for their services as Company Secretaries.
Key management personnel
There were no key management personnel having authority and responsibility for planning, directing and controlling the activities of the Company
for the period from 1 January 2010 to 31 December 2010.
Directors’ Report
21
Directors’ Report
continued
Details of remuneration
Details of the remuneration of each Director of HTAL and each of the key management personnel of the Company, including their personally-
related entities, are set out in the following tables.
Directors of HTAL
2010
Short-term benefits
Post –
employment
benefits
Share based
payments
Cash salary
and fees
$
Cash bonus
$
Non-
monetary
benefits
$
Superannuation
$
Options
$
Total
$
—
—
—
50,000
—
50,000
—
—
—
100,000
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
4,500
—
4,500
—
—
—
9,000
—
—
—
—
—
—
—
—
—
—
—
—
—
54,500
—
54,500
—
—
—
109,000
Name
C Fok
B Roberts-Thomson
S Chow
J Gardener
D Lai
J Scanlon
F Sixt
R Snodgrass*
R Spithill**
Total
* Mr Snodgrass resigned as a Director on 16 November 2010.
** Mr Spithill was appointed as a Director on 16 November 2010.
Short-term benefits
Post –
employment
benefits
Share based
payments
Cash salary
and fees
$
Cash bonus
$
Non-monetary
benefits
$
Superannuation
$
Options
$
2009
Name
C Fok
—
B Roberts-Thomson^
533,988
S Chow
J Gardener
D Lai
K Russell*
J Scanlon
F Sixt
R Snodgrass
Total
—
50,000
—
—
50,000
—
—
633,988
—
—
—
—
—
—
—
—
—
—
—
—
3,369
10,488
—
—
—
—
—
—
—
—
4,500
—
—
4,500
—
—
3,369
19,488
—
—
—
—
—
—
—
—
—
—
Total
$
—
547,845
—
54,500
—
—
54,500
—
—
656,845
^ Mr Roberts–Thomson ceased to receive remuneration from HTAL on 31 August 2009.
* Mr Russell resigned as a Director on 9 June 2009.
22
Directors’ Report
Key management personnel and other executives of the Company
2010 – Nil
2009*
Short-term benefits
Cash salary
and fees
$
Cash bonus
$
Name
N Dews^
341,250
350,000
M Young^
315,000
191,750
T Finlayson^
181,250
182,344
G Bourke^
N Hamill^
164,167
175,000
50,000
50,000
Non-
monetary
benefits
$
33,355
31,272
2,105
2,105
2,105
Post -
Employment
benefits
Long-term
benefits
Share-based
payments
Superannuation
$
Long service
leave
$
Options
$
Total
$
6,872
6,872
6,872
6,872
6,872
10,554
68,056
810,087
1,796
7,454
3,149
475
25,384
572,074
20,307
400,332
15,231
241,524
20,307
254,759
Total
1,176,667
824,094
70,942
34,360
23,428
149,285
2,278,776
* All key management personnel ceased to be employed by the Company on 9 June 2009.
^ Denotes one of the 5 highest paid executives of the Company, as required to be disclosed under the Corporations Act 2001.
Share-based compensation
Options were granted to executives under the HTAL Employee Option Plan which was approved by the Board on 4 June 2007. Options were
granted under the plan for no consideration. Options granted under the plan carry no dividend or voting rights. When exercisable, each option
is convertible into one ordinary share.
The exercise price of options is the higher of the following:
(a)
the closing price of HTAL shares on the Australian Securities Exchange on the day on which the options are granted; and
(b)
the average closing price of HTAL shares for the five trading days immediately preceding the day on which the options are granted.
No ordinary shares were issued on the exercise of options during the year to any of the Directors or former key management personnel.
No Directors were issued options during the year or hold options over the ordinary shares of the Company. No options are vested and
unexercisable at the end of the year. The Board has resolved to allow the options held by any employees who have taken up employment with
VHA to remain on their existing terms and conditions.
Share holdings
The number of shares in the Company held during the financial year by each Director, including their personally-related entities, are set out below.
Directors of HTAL
Ordinary shares
Name
C Fok
B Roberts-Thomson
S Chow
J Gardener
D Lai
J Scanlon
F Sixt
R Snodgrass
R Spithill
* Direct holding of 100,000 shares.
** Direct holding of 4,540 shares.
Balance
at the start
of the year
Received during
the year on the
exercise of options
5,100,000
83,918,337
—
1,030,358
—
—
1,000,000
—
—
—
—
—
—
—
—
—
—
—
Changes
during
the year
—
—
—
Balance
at the end
of the year
5,100,000*
83,918,337**
—
600,000
1,630,358
—
—
—
—
—
—
—
1,000,000
—
—
Directors’ Report
23
Directors’ Report
continued
Shares under option
Unissued ordinary shares of HTAL under option issued pursuant to the HTAL Employee Option Plan at the date of this report are as follows:
Grant Date
Expiry date
14 June 2007
13 June 2012
14 November 2007
13 June 2012
4 June 2008
3 June 2013
Issue price
of shares
Value at
grant date
$0.145
$0.200
$0.139
$0.14
$0.20
$0.14
Number
22,850,000
300,000
300,000
Options will expire five years after issue. The options issued in 2007 are exercisable, subject to meeting performance hurdles, on the
following dates:
•
1/3rd on or after 1 July 2008
1/3rd on or after 1 January 2009
1/3rd on or after 1 January 2010
•
•
The options issued in 2008 are exercisable, subject to meeting performance hurdles, on or after 1 January 2010.
No option holder has any right under the options to participate in any other share issue of HTAL or of any other entity.
Shares issued on the exercise of options
No ordinary shares of HTAL were issued during the year ended 31 December 2010 or up to the date of this report on the exercise of options
granted under the HTAL Employee Option Plan.
Loans to Directors and key management personnel
There were no loans made to the Directors or to the key management personnel of the Company, including their personally related entities during
the years ended 31 December 2010 and 31 December 2009.
Other transactions with Directors and key management personnel
There were no other transactions with Directors for the year ended 31 December 2010 or with Directors and the former key management
personnel for the year ended 31 December 2009.
Non-audit services
HTAL may decide to employ the auditor, Deloitte Touche Tohmatsu, on assignments additional to their statutory audit duties where the auditor’s
expertise and experience with the Company are important.
The Board of Directors, in accordance with the advice received from the Audit Committee is satisfied that the provision of the non-audit services
is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the
provision of non-audit services by the auditor, did not compromise the auditor independence requirements of the Corporations Act 2001 for the
following reasons:
•
all non-audit services have been reviewed by the Audit Committee to ensure they do not impact the integrity and objectivity of the
auditor; and
•
none of the services undermine the general principles relating to auditor independence as set out in Professional Statement F1, including
reviewing or auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate
for the Company or jointly sharing economic risk and rewards.
Details of the amounts paid to Deloitte Touche Tohmatsu for audit and non-audit services provided during the year are set out in note 18,
Remuneration of auditors, on pages 48 to 49 of this report.
A copy of the auditors’ independence declaration as required under section 307C of the Corporations Act 2001 is set out on page 26.
Directors’ and officers’ liability insurance
During the financial year, HWL paid a premium to insure the Directors and officers of Hutchison against loss or liability arising out of a claim for a
wrongful act, including any costs, charges and expenses that may be incurred in defending any actions, suits, proceedings or claims.
24
Directors’ Report
Proceedings on behalf of HTAL
No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of HTAL,
or to intervene in any proceedings to which HTAL is a party, for the purpose of taking responsibility on behalf of HTAL for all or part of
those proceedings.
No proceedings have been brought or intervened in on behalf of HTAL with leave of the Court under section 237 of the Corporations Act 2001.
Rounding of amounts to nearest thousand dollars
Hutchison is a company of a kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission, relating to
the “rounding off” of amounts in the Directors’ report. Where noted, amounts in the Directors’ report and financial report have been rounded off
to the nearest thousand dollars in accordance with that Class Order, or in certain cases to the nearest dollar or cent.
Auditor
Deloitte Touche Tohmatsu continues in office in accordance with section 327 of the Corporations Act 2001.
This report is made in accordance with a resolution of the Directors.
Susan Chow
Director
24 February 2011
Dominic Lai
Director
24 February 2011
Directors’ Report
25
Auditor’s Independence Declaration
The Board of Directors
Hutchison Telecommunications (Australia) Limited
40 Mount St
North Sydney, NSW 2060
24 February 2011
Dear Board Members
Hutchison Telecommunications (Australia) Limited
In accordance with section 307C of the Corporations Act 2001, I am pleased to provide the following declaration of independence to the
directors of Hutchison Telecommunications (Australia) Limited and the entities it controlled during the period (“HTAL”).
As lead audit partner for the audit of the financial statements of HTAL for the financial year ended 31 December 2010, I declare that to the best
of my knowledge and belief, there have been no contraventions of:
(i)
the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and
(ii) any applicable code of professional conduct in relation to the audit.
Yours sincerely
DELOITTE TOUCHE TOHMATSU
Sandeep Chadha
Partner
Chartered Accountants
26
Auditor’s Independence Declaration
Financial Report
for the year ended 31 December 2010
Contents
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Changes in Equity
Consolidated Statement of Cash Flows
Notes to Financial Statements
Note 1. Summary of significant accounting policies
Note 2. Revenue
Note 3. Gain on disposal arising from merger
Note 4. Other income
Note 5. Expenses
Note 6.
Income tax expense
Note 7. Current assets – Cash and cash equivalents
Note 8. Current assets – Trade and other receivables
Note 9. Current assets – Other
Note 10. Non-current assets – Receivables
Note 11. Non-current assets – Investment accounted for using the equity method
Note 12. Non-current assets – Controlled and jointly controlled entities
Note 13. Current liabilities – Payables
Note 14. Current liabilities – Other financial liabilities
Note 15. Contributed equity
Note 16. Reserves and accumulated losses
Note 17. Director and key management personnel disclosures
Note 18. Remuneration of auditors
Note 19. Contingencies
Note 20. Commitments
Note 21. Related party transactions
Note 22. Deed of Cross Guarantee
Note 23. Operating segment
Note 24. Reconciliation of profit after income tax to net cash inflows/(outflows) from operating activities
Note 25. Earnings per share
Note 26. Share-based payments
Note 27. Critical accounting estimates and judgements
Note 28. Events occurring after the Reporting date
Note 29. Financial risk management
Note 30. Parent entity disclosures
Directors’ Declaration
Independent Auditor’s Report
Shareholder Information
28
29
30
31
32
32
38
39
39
39
40
41
41
41
42
43
44
45
45
46
47
48
48
49
49
49
51
52
53
53
54
55
55
56
58
60
61
63
Financial Report
27
Consolidated Statement of Comprehensive Income
for the year ended 31 December 2010
Revenue
Gain on disposal arising from merger
Other income
Cost of interconnection and variable content costs
Other direct costs of provision of telecommunication services and goods
Cost of handsets sold
Employee benefits expense
Advertising and promotion expenses
Other operating expenses
Capitalisation of customer acquisition and retention costs
Depreciation and amortisation expense
Finance costs
Share of net profits/(losses) of joint ventures accounted for using the equity method
Profit before income tax
Income tax credit
Profit for the year
Other comprehensive income
Changes in the fair value of cash flow hedges (share of joint venture), net of tax
Other comprehensive income for the year, net of tax
Total comprehensive income for the year attributable to
members of Hutchison Telecommunications (Australia) Limited
Notes
2
3
4
5
11
6
16
16
2010
$’000
22,343
—
—
—
—
—
(480)
(121)
(872)
—
—
2009*
$’000
799,410
587,285
1,866
(216,863)
(150,071)
(185,510)
(57,252)
(22,870)
(56,261)
20,055
(110,317)
(111)
(393)
43,103
(141,355)
63,862
467,724
9,580
—
73,442
467,724
4,207
4,207
(990)
(990)
77,649
466,734
Cents
Cents
Earnings per share for profit attributable to
the ordinary equity holders of the Company:
Basic earnings per share
Diluted earnings per share
25
25
0.54
0.54
6.27
5.85
The above consolidated statement of comprehensive income should be read in conjunction with the accompanying notes.
*
The results to 31 December 2009 include the consolidated results of VHA (previously known as H3GA) for 5 months until merger date and 7 months
equity accounting results for VHA post merger.
28
Financial Report
Consolidated Statement of Financial Position
as at 31 December 2010
ASSETS
Current Assets
Cash and cash equivalents
Trade and other receivables
Other
Total Current Assets
Non-Current Assets
Receivables
Investment accounted for using the equity method
Deferred tax assets
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Payables
Other financial liabilities
Total Current Liabilities
Total Liabilities
Net Assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total Equity
Notes
2010
$’000
2009
$’000
7
8
9
5,317
3,693
163
2,858
64,233
163
9,173
67,254
10
11
6
74,870
50,332
1,600,961
1,553,651
9,580
–
1,685,411
1,603,983
1,694,584
1,671,237
13
14
23,677
8,805
217,838
286,954
241,515
295,759
241,515
295,759
1,453,069
1,375,478
15
16
16
4,204,488
4,204,488
74,990
70,841
(2,826,409)
(2,899,851)
1,453,069
1,375,478
The above consolidated statement of financial position should be read in conjunction with the accompanying notes.
Financial Report
29
Consolidated Statement of Changes in Equity
for the year ended 31 December 2010
ATTRIBUTABLE TO MEMBERS Of
HUTCHISON TELECOMMUNICATIONS (AUSTRALIA) LIMITED
Reserves
Contributed
Capital
equity Redemption
Cash flow
hedges
Share
options
Retained
profits/
(losses)
Total
equity
Notes
$’000
$’000
$’000
$’000
$’000
$’000
Balance at 1 January 2009
4,204,488
54,887
990
15,683
(3,367,575)
908,473
Profit for the year
Changes in the fair value of
cash flow hedges, net of tax
Total comprehensive income/
(loss) for the year
16
Transactions with members in their capacity as members:
Employee share options –
value of employee services
Subtotal
16
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2009
and 1 January 2010
4,204,488
54,887
Profit for the year
Share of joint venture’s changes
in the fair value of cash flow
hedges, net of tax
Total comprehensive
income for the year
16
Transactions with members in their capacity as members:
Employee share options –
value of employee services
Subtotal
16
–
–
–
–
–
–
–
–
–
–
–
(990)
(990)
–
–
–
–
4,207
4,207
–
–
–
271
271
467,724
467,724
–
(990)
467,724
466,734
–
–
271
271
15,954
(2,899,851) 1,375,478
–
–
–
73,442
73,442
–
4,207
73,442
77,649
–
–
(58)
(58)
–
–
(58)
(58)
Balance at 31 December 2010
4,204,488
54,887
4,207
15,896
(2,826,409) 1,453,069
The above consolidated statement of changes in equity should be read in conjunction with the accompanying notes.
30
Financial Report
Consolidated Statement of Cash Flows
for the year ended 31 December 2010
Cash flows from Operating Activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Interest received
Rental income
Finance costs paid
Notes
2010
$’000
2009*
$’000
–
894,146
(496)
(1,383,481)
(496)
(489,335)
861
15
(126)
56,031
66
(393)
Net cash inflows/(outflows) from operating activities
24
254
(433,631)
Cash flows from Investing Activities
Payments for property, plant and equipment
Proceeds from sale of other non-current assets
Proceeds from sale of intangible assets
Loans to jointly controlled entities
Repayment of loans from jointly controlled entities
Payments for intangible assets
Net cash inflows from investing activities
Cash flows from financing Activities
Proceeds from borrowings – subsidiary
Proceeds from borrowings – related parties
Repayment of borrowings – related parties
Repayment of finance lease
Net cash outflows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at 1 January
Cash disposed of with H3GA merger
Cash and cash equivalents at 31 December 2010
–
–
–
–
(74,525)
105
86,000
(69,186)
71,321
1,113,667
–
(19,666)
71,321
1,036,395
–
–
124,513
55,000
14
(69,116)
(768,046)
–
(1,327)
(69,116)
(589,860)
2,459
2,858
12,904
134,685
–
(144,731)
5,317
2,858
The above consolidated statement of cash flows should be read in conjunction with the accompanying notes.
*
The cash flows to 31 December 2009 represent 5 months consolidated results of VHA (previously known as H3GA) until merger date and 7 months
HTAL parent only cash flows from merger date.
Financial Report
31
Notes to Financial Statements
Note 1. Summary of significant accounting policies
Hutchison Telecommunications (Australia) Limited is a company limited by shares incorporated in Australia whose shares are publicly traded on the
Australian Securities Exchange. The nature of the operations and principal activities of the Company and its subsidiaries (the Group or Consolidated Entity
or HTAL) are described in the Directors’ Report.
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been consistently applied
to all the years presented, unless otherwise stated.
(a) Basis of preparation
This general purpose financial report has been prepared in accordance with the Corporations Act 2001, Accounting Standards and Interpretations,
and comply with other requirements of the law.
Statement of compliance
Accounting Standards include Australian equivalents to International Financial Reporting Standards (AIFRS). Compliance with AIFRS ensures that the financial
statements and notes of the Consolidated Entity comply with International Financial Reporting Standards (IFRS).
As a consequence of the financial reporting relief provided by ASIC Class Orders 10/654 and 10/655 the consolidated financial statements are
presented without parent entity financial statements. Disclosures in relation to the parent entity required under paragraph 259(3)(a) of the Corporations
Act 2001 have been included in note 30.
Going concern disclosures
As at 31 December 2010, the Consolidated Entity has a deficiency of net current assets of $232 million (2009: $229 million). Included in the
Consolidated Entity’s current liabilities is an amount of $218 million (2009: $287 million) which relates to an interest free financing facility provided from
the ultimate parent entity, Hutchison Whampoa Limited (HWL), which is repayable on demand. HWL has confirmed its current intention to provide sufficient
financial support to enable the Consolidated Entity to meet its financial obligations as and when they fall due. This undertaking is provided for a minimum
period of twelve months from 24 February 2011. Consequently, the directors have prepared the financial statements on a going concern basis.
Historical cost convention
These financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and liabilities
(including derivative instruments) which are stated at fair value, as explained in the significant accounting policies set out below.
Critical accounting estimates
The preparation of financial statements in conformity with AIFRS requires the use of certain critical accounting estimates. It also requires the Group to
exercise its judgement in the process of applying the Consolidated Entity’s accounting policies. The areas involving a higher degree of judgement or
complexity, or areas where assumptions and estimates are significant to the financial statements, are disclosed in note 27.
(b) Principles of consolidation
The consolidated financial statements include the financial statements of Hutchison Telecommunications (Australia) Limited and its subsidiaries made up to
31 December 2010.
Subsidiaries are all those entities (including special purpose entities) over which the Consolidated Entity has the power to govern the financial and operating
policies so as to obtain benefits from their activities, generally accompanying a shareholding of more than one half of the voting rights. The existence and effect
of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Consolidated Entity controls another entity.
Subsidiaries are fully consolidated from the date on which control is transferred to the Consolidated Entity. They are de-consolidated from the date that
control ceases.
The purchase method of accounting is used to account for the acquisition of subsidiaries by the Consolidated Entity (refer to note 1(f)).
The effects of all transactions between entities in the Consolidated Entity are eliminated. If a member of the Consolidated Entity uses accounting policies
other than those adopted in the consolidated financial statements for like transactions and events in similar circumstances, appropriate adjustments are made
to its financial statements in preparing the consolidated financial statements.
Investments in controlled entities in the Company are accounted for at cost. Investments in joint ventures are accounted for as set out in note 1(g).
(c) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Consolidated Entity’s subsidiaries are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Australian dollars, which is
Hutchison Telecommunications (Australia) Limited’s functional and presentation currency.
32
Notes to the Financial Statements
Note 1. Summary of significant accounting policies (continued)
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign
exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and
liabilities denominated in foreign currencies are recognised in the profit or loss, except when deferred in equity as qualifying cash flow hedges.
(d) Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable. Amounts disclosed as revenue are net of returns, trade allowances and
duties and taxes paid. Revenue is recognised for the major business activities as follows:
(i) Telecommunication services
Revenue from the provision of mobile telecommunication services with respect to voice, video, internet access, messaging and media services, including
data services and information provision, is recognised when the service is rendered and, depending on the nature of the services, is recognised either at
gross amount billed to the customer or the amount receivable as commission for facilitating the services. Revenue from the sales of prepaid mobile calling
cards is recognised upon customer’s usage of the card or upon the expiry of the service period.
(ii) Sale of handsets
Revenue from sale of handsets is recognised at the date of despatch of goods, pursuant to the signing of the customer’s contract and when all the
associated risks and rewards have passed to the customer.
(iii) Interest income
Interest income is recognised on a time proportion basis using the effective interest method.
(e) Income tax
The income tax expense for the period is the tax payable on the current period’s taxable income based on the income tax rate adjusted by changes in
deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the
financial statements, and to unused tax losses.
Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities
are settled. The relevant tax rate is applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset
or liability. No deferred tax asset or liability is recognised in relation to these temporary differences if they arose in a transaction, other than a business
combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax is determined using tax rates
(and laws) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred tax asset is realised
or the deferred tax liability is settled.
Deferred tax assets are recognised for deductible temporary differences and unused tax losses only if it is probable that future taxable amounts will be
available to utilise those temporary differences and losses.
Deferred tax liabilities and assets are not recognised for temporary differences between the carrying amount and tax bases of investments in subsidiaries
where the parent entity is able to control the timing of the reversal of the temporary differences and it is probable that the differences will not reverse in the
foreseeable future.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax
balances relate to the same taxation authority. Current tax assets and liabilities are offset where the entity has a legally enforceable right to offset and
intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity.
Hutchison Telecommunications (Australia) Limited and its wholly owned Australian subsidiaries have not implemented the tax consolidation legislation.
(f) Business combinations
Acquisitions of subsidiaries and businesses are accounted for using the acquisition method. The consideration for each acquisition is measured at the
aggregate of the fair values (at the date of exchange) of assets given, liabilities incurred or assumed, and equity instruments issued by the Group in
exchange for control of the acquiree. Acquisition-related costs are recognised in profit or loss as incurred.
If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Consolidated Entity
reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period,
which is limited to one year from date of acquisition, or additional assets or liabilities are recognised, to reflect new information obtained about facts and
circumstances that existed as of the acquisition date that, if known, would have affected the amounts recognised as of that date.
Refer to note 1(n) for the accounting policy on goodwill arising from a business combination.
Notes to the Financial Statements
33
Notes to the Financial Statements
continued
Note 1. Summary of significant accounting policies (continued)
(g) Joint ventures
A joint venture is a contractual arrangement whereby the venturers undertake an economic activity which is subject to joint control and over which none of
the participating parties has unilateral control.
Jointly controlled entity
(i)
A jointly controlled entity is a joint venture which involves the establishment of a separate entity. The Consolidated Entity’s interest in the joint venture entity is
accounted for in the consolidated financial statements using the equity method of accounting. Under this method the share of the profits or losses of the entity
is recognised in the profit or loss, and the share of the movements in reserves is recognised in reserves in the statement of financial position.
Profits or losses on transactions establishing the joint venture entity and transactions with the joint venture are eliminated to the extent of the Consolidated
Entity’s ownership interest until such time as they are realised by the joint venture entity on consumption or sale, unless they relate to an unrealised loss that
provides evidence of the impairment of an asset transferred.
(ii) Jointly controlled assets
The proportionate interests in the assets, liabilities, income and expenses of a jointly controlled asset have been incorporated in the financial statements
under the appropriate headings.
(h) Impairment of assets
Goodwill is not subject to amortisation and is tested for impairment annually, or more frequently, if events or changes in circumstances indicate that it might
be impaired, and is carried at cost less accumulated impairment losses.
Other assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of
an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are
separately identifiable cash inflows which are largely independent of the cash inflows from other assets or groups of assets (cash generating units).
(i) Cash and cash equivalents
For cash flow statement presentation purposes, cash and cash equivalents include cash on hand, deposits held at call with financial institutions, other short-
term, highly liquid investments with original maturities of three months or less that are readily convertible to known amounts of cash and which are subject
to an insignificant risk of changes in value, and bank overdrafts. Bank overdrafts, if any, are shown within bank borrowings in current liabilities on the
statement of financial position.
(j) Trade receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost, less provision for doubtful debts. Trade receivables are
generally due for settlement within 30 days.
Collectibility of trade receivables is reviewed on an ongoing basis. Debts which are known to be uncollectible are written off. A provision for doubtful
receivables is established when there is objective evidence that the Consolidated Entity will not be able to collect all amounts due according to the original
terms of receivables. The amount of the provision is the difference between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate. The amount of the provision is recognised in the profit or loss.
The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the profit or loss within
‘other expenses’. When a trade receivable is uncollectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of
amounts previously written off are credited against other expenses in the profit or loss.
(k) Derivative financial instruments and hedging activities
Derivative financial instruments are utilised by the Group in the management of its foreign currency and interest rate exposures. The Group’s policy is not to
utilise derivative financial instruments for trading or speculative purposes.
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured to fair value at each
reporting date. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the
nature of the item being hedged. The Consolidated Entity designates certain derivatives as: (1) hedges of the fair value of recognised assets or liabilities or
a firm commitment (fair value hedge); or (2) hedges of highly probable forecast transactions (cash flow hedges).
The Consolidated Entity documents at the inception of the hedging transaction the relationship between hedging instruments and hedged items, as well
as its risk management objective and strategy for undertaking various hedge transactions. The Consolidated Entity also documents its assessment, both
at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions have been and will continue to be highly
effective in offsetting changes in fair values or cash flows of hedged items.
(i) Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the profit or loss, together with any changes in
the fair value of the hedged asset or liability that are attributable to the hedged risk.
34
Notes to the Financial Statements
Note 1. Summary of significant accounting policies (continued)
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in equity in the hedging
reserve. The gain or loss relating to the ineffective portion is recognised immediately in the profit or loss within other income or other expense.
Amounts accumulated in equity are recycled in the profit or loss in the periods when the hedged item will affect profit or loss (for instance when the forecast
sale that is hedged takes place). However, when the forecast transaction that is hedged results in the recognition of a non-financial asset or a non-financial
liability, the gains and losses previously deferred in equity are transferred from equity and included in the measurement of the initial cost or carrying amount
of the asset or liability.
When a hedging instrument expires or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or
loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit or loss. When a
forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the profit or loss.
(l) Fair value estimation
The fair value of financial assets and financial liabilities must be estimated for recognition and measurement or for disclosure purposes.
The fair value of forward exchange contracts is determined using forward exchange market rates at the statement of financial position date.
The nominal value less estimated credit adjustments of trade receivables and payables are assumed to approximate their fair values. The fair value of
financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to
the Consolidated Entity for similar financial instruments.
(m) Leases
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Lease income from
operating leases is recognised in income on a straight-line basis over the lease term.
(n) Goodwill and intangible assets
Goodwill arising in a business combination is recognised as an asset at the date that control is acquired (the acquisition date). Goodwill is measured as the
excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer’s previously
held equity interest in the acquiree (if any) over the net of the acquisition date amounts of the identifiable assets acquired and the liabilities assumed. If,
after reassessment, the Group’s interest in the fair value of the acquiree’s identifiable net assets exceeds the sum of the consideration transferred, the amount
of any non-controlling interests in the acquiree and the fair value of the acquirer’s previously held equity interest in the acquiree (if any), the excess is
recognised immediately in profit or loss as a bargain purchase gain.
Goodwill on acquisitions of subsidiaries is included in intangible assets. Goodwill on acquisitions of associates/jointly controlled entity is included
in investments in associates. Goodwill is not amortised. Instead, goodwill is tested for impairment annually, or more frequently if events or changes in
circumstances indicate that it might be impaired, and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity
include the carrying amount of goodwill relating to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing.
The expected useful lives of the intangible assets, other than goodwill, are as follows:
Spectrum licences and capitalised development costs
Customer acquisition and retention costs
Transmission rights
12 to 15 years
2 to 3 years
13 years
(o) Payables
These amounts represent liabilities for goods and services provided to the Consolidated Entity prior to the end of the financial period and which are unpaid.
The amounts are unsecured and are usually paid or payable within 30 days of recognition.
(p) Interest bearing liabilities
Fixed rate loans are initially recognised at fair value, net of transaction costs incurred. Floating rate loans are initially recognised at cost, net of transaction
costs incurred. Fixed and floating rate loans are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs)
and the redemption amount is recognised in the profit or loss over the period of the liability using the effective interest method.
(q) Borrowing costs
Borrowing costs incurred for the construction of any qualifying asset are capitalised during the period of time that is required to complete and prepare the
asset for its intended use or sale. Other borrowing costs are expensed. Borrowing costs include:
–
interest on bank overdrafts and short-term and long-term borrowings;
–
–
–
amortisation of discounts or premiums relating to borrowings;
amortisation of ancillary costs incurred in connection with the arrangement of borrowings; and
certain exchange differences arising from foreign currency borrowings.
Notes to the Financial Statements
35
Notes to the Financial Statements
continued
Note 1. Summary of significant accounting policies (continued)
(r) Employee benefits
(i) Wages and salaries, and annual leave
Liabilities for wages and salaries, including non-monetary benefits, and annual leave expected to be settled within 12 months of the reporting date are
recognised in other creditors in respect of employees’ services up to the reporting date and are measured at the amounts expected to be paid when the
liabilities are settled. Liabilities for non-accumulating sick leave are recognised when the leave is taken and measured at the rates paid or payable.
(ii) Long service leave
The liability for long service leave expected to be settled within 12 months of the reporting date is recognised in the provision for employee benefits
and is measured in accordance with (i) above. The liability for long service leave expected to be settled more than 12 months from the reporting date
is recognised in the provision for employee benefits and measured as the present value of expected future payments to be made in respect of services
provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and
periods of service. Expected future payments are discounted using market yields at the reporting date on national government bonds with terms to maturity
and currency that match, as closely as possible, the estimated future cash outflows.
(iii) Bonus plan
A liability for employee benefits in the form of a bonus plan is recognised in other creditors when there is no realistic alternative but to settle the liability and
at least one of the following conditions is met:
–
there are formal terms in the plan for determining the amount of the benefit;
–
–
the amounts to be paid are determined before the time of completion of the financial report; or
past practice gives clear evidence of the amount of the obligation.
Liabilities for bonus plans are expected to be settled within 12 months and are measured at the amounts expected to be paid when they are settled.
(iv) Share-based payments
Share-based compensation benefits are provided to employees via the Hutchison Telecommunications (Australia) Limited Employee Option Plan.
Information relating to the Option Plan is set out in note 26.
Share options granted after 7 November 2002 and vested after 1 January 2005.
The fair value of options granted under the Hutchison Telecommunications (Australia) Limited Executive Option Plan is recognised as an employee benefit
expense with a corresponding increase in equity. The fair value is measured at grant date and recognised over the period during which the employees
become unconditionally entitled to the options.
The fair value at the grant date is independently determined using a Black-Scholes option pricing model that takes into account the exercise price, the term
of the option, the vesting and performance criteria, the impact of dilution, the non-tradeable nature of the option, the share price at the grant date and
expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the option.
The fair value of the options granted excludes the impact of any non-market vesting conditions (for example, profitability and sales growth targets).
Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each statement of
financial position date, the entity revises its estimate of the number of options that are expected to become exercisable. The employee benefit expense
recognised each period takes into account the most recent estimate.
Upon the exercise of options, the balance of the share-based payments reserve relating to those options is transferred to share capital.
The market value of shares issued to employees for no cash consideration under the employee share scheme is recognised as an employee benefits
expense with a corresponding increase in equity when the employees become entitled to the shares.
(v) Retirement benefits
Retirement benefits are delivered under the Retail Employees Superannuation Trust, although employees have an option to choose other funds. This fund is a
defined contribution fund and is based on employer and employee contributions made to the fund.
Contributions are recognised as an expense as they become payable.
(s) Contributed equity
Ordinary shares and convertible preference shares are classified as equity. Refer to note 15 for further information.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
36
Notes to the Financial Statements
Note 1. Summary of significant accounting policies (continued)
(t) Earnings per share
(i) Basic earnings per share
Basic earnings per share is calculated by dividing:
–
the profit attributable to ordinary equity holders of the Consolidated Entity;
–
by the weighted average number of ordinary shares outstanding during the financial year.
(ii) Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account:
–
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares; and
–
the weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all dilutive potential
ordinary shares.
(u) Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of associated GST, unless the GST incurred is not recoverable from the taxation authority.
In this case it is recognised as part of the cost of the acquisition of the asset or as part of the expense.
Receivables and payables are stated inclusive of the amount of GST receivable or payable. The net amount of GST recoverable from, or payable to, the
taxation authority is included with other receivables or payables in the statement of financial position.
Cash flows are presented on a gross basis. The GST components of cash flows arising from investing or financing activities which are recoverable from, or
payable to the taxation authority, are presented as operating cash flows.
(v) Operating segments
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur expenses, whose operating
results are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its
performance and for which discrete financial information is available.
Operating segments have been identified based on the information provided to the chief operating decision maker. Operating segments that meet the
quantitative criteria as prescribed by AASB 8 are reported separately. Refer to note 23 for details of the Consolidated Entity’s operating segment, being
investment in telecommunication services.
(w) Rounding of amounts to nearest thousand dollars
The Consolidated Entity is of a kind referred to in Class Order 98/100 issued by the Australian Securities and Investments Commission, relating to the
“rounding off” of amounts in the Directors’ report and financial report. Amounts in the financial report have been rounded off in accordance with that
Class Order to the nearest thousand dollars, or in certain cases, the nearest dollar or cent.
(x) New accounting standards and interpretations
The Consolidated Entity has adopted all of the new and revised Australian Accounting Standards and Interpretations applicable to its operations which
became mandatory.
The adoption of these standards has impacted the recognition, measurement and disclosure of certain transactions. The following is an explanation of the
impact the adoption of these standards and interpretations has had on the financial statements.
AASB 3 Business combinations
Costs incurred to effect a business combination are expensed in the period in which they were incurred. Previously such costs were capitalised as part of
the cost of the business combination.
The revised AASB 3 changes the recognition and subsequent accounting requirements for contingent consideration. Previously, contingent consideration
was recognised at the acquisition date only if payment of the contingent consideration was probable and it could be measured reliably; any subsequent
adjustments to the contingent consideration were always made against the cost of the acquisition. Under the revised Standard, contingent consideration
is measured at fair value at the acquisition date; subsequent adjustments to the consideration are recognised against the cost of the acquisition only to the
extent that they arise from new information obtained within the measurement period (a maximum of 12 months from the acquisition date) about the fair value
at the date of acquisition. All other subsequent adjustments to contingent consideration classified as an asset or a liability are recognised in profit or loss.
The revised AASB 3 prohibits entities from recognising contingencies associated with a business combination, unless they meet the definition of a liability.
The revised AASB 3 requires that where a business combination is achieved in stages, any previously held equity interest is to be remeasured to fair value
and the resulting gain or loss, being the difference between fair value and historical costs, is to be recognised in the statement of comprehensive income.
Notes to the Financial Statements
37
Notes to the Financial Statements
continued
Note 1. Summary of significant accounting policies (continued)
Australian Accounting Standards that have recently been amended but are not yet effective and have not been early adopted by the Consolidated Entity
are outlined in the table below:
Reference
Affected Standard(s)
AASB 9: Financial Instruments, AASB 2009-11
Amendments to Australian Accounting Standards
Application date
of standard*
Application date for
Consolidated Entity
1 January 2013
1 January 2013
AASB 9
AASB 124
AASB 2009-5
AASB 2009-10
AASB 2009-11
Related Party Disclosures (revised December 2009),
AASB 2009-12 Amendments to Australian Accounting Standards
1 January 2011
1 January 2011
Further amendments to Australian Accounting Standards
arising from the Annual Improvements Process
Amendments to Australian Accounting Standards –
Classification of Right Issues
Amendments to Australian Accounting Standards
arising from AASB 9
1 January 2010
1 January 2011
1 February 2010
1 January 2011
1 January 2013
1 January 2013
AASB 2009-12
Amendments to Australian Accounting Standards
1 January 2011
1 January 2011
AASB 2009-14
Amendments to Australian Interpretation –
Prepayments of a Minimum Funding Requirement
1 January 2011
1 January 2011
AASB 2010-4
Further amendments to Australian Accounting Standards
arising from the Annual Improvements Project
1 January 2011
1 January 2011
AASB 2010-5
Amendments to Australian Accounting Standards
1 January 2011
1 January 2011
AASB 2010-6
AASB 2010-7
Amendments to Australian Accounting Standards –
Disclosures on Transfers of Financial Assets
Amendments to Australian Accounting Standards
arising from AASB 9
1 July 2011
1 January 2012
1 January 2013
1 January 2013
Intepretation 19
IFRIC 19: Extinguishing Financial Liabilities with Equity Instruments
1 July 2010
1 January 2011
* Application date of the standard is for the reporting periods beginning on or after the date shown in the above table.
The adoption of other standards and amendments listed above in future periods is not expected to result in substantial changes to the Group’s
accounting policies.
Note 2. Revenue
from continuing operations
Services
Sale of handsets
Other revenue
Interest
Rental income
38
Notes to the Financial Statements
2010
$’000
2009
$’000
–
–
–
711,896
28,520
740,416
22,343
58,929
–
65
22,343
58,994
22,343
799,410
Note 3. Gain on disposal arising from merger
Gain on disposal arising from merger
2010
$’000
2009
$’000
–
587,285
On 10 June 2009, the Company announced that the merger of its operating subsidiary, Hutchison 3G Australia Pty Ltd (H3GA), and Vodafone Australia
Limited (VAL) was completed. As a result of the merger H3GA acquired 100% of VAL and issued shares to subsidiaries of Vodafone Group Plc resulting in
the Vodafone entities holding 50% of the H3GA shares. H3GA has been renamed Vodafone Hutchison Australia Pty Limited (VHA). The Group’s interest in
VHA is accounted for in the consolidated financial statements using the equity method.
The gain on disposal arising from the merger for the consolidated entity of $587,285,000 represents the disposal of 50% of the group’s interest in H3GA
following the merger of H3GA with VAL.
As a result of the completion of the transaction, HTAL has ceased to consolidate the results and net assets of H3GA and equity accounts for its interest in the
Jointly Controlled Entity, VHA.
The consolidated statement of comprehensive income presented for the year ended 31 December 2009 therefore represents 5 months of the former ‘3’
business (H3GA) and 7 months of an equity accounted result of VHA.
The consolidated statement of comprehensive income presented for the year ended 31 December 2010 represents the equity accounted result for VHA.
The consolidated statement of financial position presented as at 31 December 2010 includes the HTAL group’s equity investment in VHA together with
current and non-current loans from the group to VHA.
Note 4. Other income
Net foreign exchange gains
Net gain on sale of property
Note 5. Expenses
Profit before income tax includes the following specific expenses:
Finance costs
Interest and finance charges paid/payable
Depreciation
Fixtures, fittings and office equipment
Computer equipment
Computer equipment under finance lease
Network equipment
Network equipment – jointly controlled asset
Assets under construction
Total depreciation
Amortisation
Spectrum licence
Capitalised development costs
Customer acquisition and retention costs
Customer acquisition costs written off
Transmission capacity
Total amortisation
Total amortisation and depreciation
Rental expense relating to operating leases
Lease payments (included in “Other operating expenses”)
Provision for (write back of)/impairment loss of
Current assets – Trade receivables (included in “Other operating expenses”)
Non-current assets – Receivables (included in “Other operating expenses”)
2010
$’000
–
–
–
2009
$’000
1,790
76
1,866
2010
$’000
2009
$’000
111
393
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,609
14,888
482
9,328
8,149
25,045
59,501
29,032
248
16,594
3,512
1,430
50,816
110,317
14,964
13,843
(3,503)
10,340
Notes to the Financial Statements
39
Notes to the Financial Statements
continued
Note 6. Income tax expense
(a) Income tax credit
Deferred tax
Income tax credit
(b) Numerical reconciliation of income tax credit to prima facie tax payable
Profit from operations before income tax credit
Tax at the Australian tax rate of 30% (2009: 30%)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Entertainment and other non-deductible expenses
Stamp duty on shares – merger
Profit/(loss) on disposal of H3GA shares
Share of net (profit)/loss of jointly controlled entity
Deferred tax on timing differences previously not recognised
Deferred tax/unrecognised tax losses
Previously unrecognised tax losses now recouped to reduce current tax expense
Income tax credit
(c) Unrecognised tax losses
Unused tax losses for which no deferred tax assets have been recognised
Potential tax benefit @ 30%
All unused tax losses were incurred by Australian entities.
2010
$’000
2009
$’000
(9,580)
(9,580)
–
–
63,862
467,724
19,159
140,317
–
–
–
(12,931)
(11,389)
1,293
3,668
(159,610)
42,406
–
–
(28,074)
(5,161)
(4,419)
(9,580)
–
–
–
217,830
232,561
65,349
69,768
This benefit for tax losses will only be obtained if the specific entity carrying forward the tax losses derives future assessable income of a nature and of an
amount sufficient to enable the benefit from the deductions for the losses to be realised, and the Company complies with the conditions for deductibility
imposed by tax legislation.
(d) Recognised deferred tax assets and liabilities
(i) Deferred tax asset
There are temporary differences attributable to:
Provisions
Business related costs
Utilisation of tax losses
Net deferred tax asset
(ii) Deferred tax liability
There are temporary differences attributable to:
Interest in jointly controlled entity
Utilisation of tax losses
Set-off of deferred tax asset pursuant to set-off provisions
Net deferred tax liability
40
Notes to the Financial Statements
2,199
7,381
9,580
–
9,580
–
–
–
–
–
1,841
7,262
9,103
(9,103)
–
43,254
43,254
(52,357)
9,103
–
Note 7. Current assets – Cash and cash equivalents
Cash at bank and in hand
Note 8. Current assets – Trade and other receivables
Receivable from jointly controlled entities (note 21)
Receivable from related entity (note 21)
2010
$’000
5,317
5,317
2010
$’000
1,394
2,299
2009
$’000
2,858
2,858
2009
$’000
61,934
2,299
3,693
64,233
Receivable from related and jointly controlled entities
Further information relating to receivable from related entity and jointly controlled entities is set out in note 21.
(a) Aging of impaired trade receivables and trade receivables which are past due but not impaired
There were no current trade receivables past due but not impaired as at 31 December 2010 and 31 December 2009.
(b) Movements in the provision for impairment of current trade receivables were as follows:
At 1 January
Allowance for impairment recognised during the year
Receivables disposed of/written off during the year as uncollectible
2010
$’000
–
–
–
–
2009
$’000
25,817
13,843
(39,660)
–
There was no allowance for impairment recognised in the statement of comprehensive income for the year ended 31 December 2010. In 2009, the
creation and release of the allowance for impaired receivables has been included in ‘other operating expenses’ in the statement of comprehensive income.
Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
(c) Credit risk
The Consolidated Entity has no significant concentrations of credit risk.
(d) Foreign exchange and interest rate risk
Refer to note 10 for an analysis of the Consolidated Entity’s non-current receivables denominated in various currencies.
Refer to note 29 for an analysis of the Consolidated Entity’s exposure to foreign exchange risk in relation to trade and other receivables.
A summarised analysis of the sensitivity of trade and other receivables to foreign exchange and interest rate risk can be found in note 29.
(e) Fair value and credit risk
Due to the short-term nature of these receivables, their carrying values are recognised initially at fair value and subsequently measured at amortised cost.
This approximates to the fair value.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Consolidated Entity does
not generally hold any collateral as security. Refer to note 29 for more information on the risk management policy of the Consolidated Entity.
Note 9. Current assets – Other
Other
2010
$’000
163
163
2009
$’000
163
163
Notes to the Financial Statements
41
Notes to the Financial Statements
continued
Note 10. Non-current assets – Receivables
Receivable from jointly controlled entities (note 21)
2010
$’000
2009
$’000
74,870
50,332
74,870
50,332
Receivable from jointly controlled entities
Weighted average interest on the receivable from jointly controlled entities is charged at a rate of 8% p.a. (2009: 8% p.a.).
Further information relating to the receivable from jointly controlled entities is set out in note 21.
(a) Movements in the allowance for impairment of non-current trade receivables
As at 31 December 2010 non-current trade receivables of the Consolidated Entity with a nominal value of $nil (2009: $nil) were impaired. The amount of
the allowance was $nil (2009: $nil).
At 1 January
Receivables disposed of/written off during the year
2010
$’000
–
–
–
2009
$’000
3,503
(3,503)
–
The creation and release of the allowance for impaired receivables has been included in ‘other operating expenses’ in the statement of comprehensive
income. Amounts charged to the allowance account are generally written off when there is no expectation of recovering additional cash.
(b) Fair values
The carrying values of non-current receivables at amortised cost approximated to fair value.
(c) Foreign currency and interest rate risk
The carrying amounts of the Consolidated Entity’s current and non-current receivables are denominated in the following currencies:
Australian dollars
Current receivables (note 8)
Non-current receivables
2010
$’000
2009
$’000
78,563
114,565
78,563
114,565
3,693
74,870
64,233
50,332
78,563
114,565
For an analysis of the sensitivity of trade and other receivables to foreign exchange and interest rate risk refer to note 29.
(d) Credit risk
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivables mentioned above. The Consolidated Entity does
not hold any collateral as security. Refer to note 29 for more information on the risk management policy of the Consolidated Entity.
42
Notes to the Financial Statements
Note 11. Non-current assets – Investment accounted for using the equity method
Interest in a jointly controlled entity
2010
$’000
2009
$’000
1,600,961
1,553,651
Jointly controlled entities
(a) Vodafone Hutchison Australia Pty Limited
On 9 June 2009 a subsidiary, H3GA, merged with VAL and H3GA was renamed VHA. The Company’s interests in VHA is accounted for in the
consolidated financial statements using the equity method.
Information relating to the jointly controlled entity is set out below.
Share of the jointly controlled entity’s assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Share of the jointly controlled entity’s revenue, expenses and results
Revenues
Expenses
Profit/(Loss) for the period
Reconciliation of interest in a jointly controlled entity
Investment brought forward
Profit/(Loss) for the period
Share of changes in fair value of cash flow heges, net of tax
Goodwill
Gain on disposal of spectrum licence from HTAL to VHA, net of amortisation
Interest in a jointly controlled entity at 31 December
Share of the jointly controlled entity’s commitments
Lease commitments
Capital commitments
Contingent liabilities relating to the jointly controlled entity
2010
$’000
2009
$’000
557,543
554,437
3,108,599
3,180,941
3,666,142
3,735,378
607,978
1,557,664
1,659,751
765,013
2,267,729
2,322,677
1,398,413
1,412,701
2,410,901
1,302,373
(2,367,798)
(1,446,553)
43,103
(144,180)
1,553,651
1,556,881
43,103
(144,180)
4,207
–
1,600,961
1,412,701
–
–
165,321
(24,371)
1,600,961
1,553,651
456,377
246,661
478,327
123,770
703,038
602,097
22,468
–
Notes to the Financial Statements
43
Notes to the Financial Statements
continued
Note 11. Non-current assets – Investment accounted for using the equity method (continued)
Shares in jointly controlled entity
Under the joint venture agreement each party has contributed $1 to the share capital of the entity.
(b) 3GIS Partnership (“3GIS”)
In December 2004 a controlled entity, VHA (formerly known as H3GA), established a 50% interest in a joint venture with Telstra OnAir Holdings Pty Limited
named 3GIS. 3GIS’s principal activity is the operation and construction of 3G radio access network infrastructure. The interest in 3GIS was accounted for
in the consolidated financial statements using the equity method until 9 June 2009. Following the merger between H3GA and VAL, from 10 June 2009 the
3GIS partnership is accounted for using the equity method in VHA’s consolidated financial statements.
Information relating to the jointly controlled entity is set-out below.
Share of the jointly controlled entity’s revenue, expenses and results
Revenues
Expenses
Profit for the year
2010
$’000
2009
$’000
–
–
–
34,868
(32,043)
2,825
(c) Total share of the jointly controlled entities’ revenue, expenses and results
43,103
(141,355)
Note 12. Non-current assets – Controlled and jointly controlled entities
The consolidated financial statements incorporate the assets, liabilities and results of the following controlled and jointly controlled entities in accordance
with the accounting policy described in note 1(b) and 1(g):
Notes
Country of
Incorporation
Class of
Shares
2010
%
2009
%
EQUITY HOLDING*
Name of Entity
Controlled entities
Bell Organisation Pty Limited
Bell Paging Pty Limited
Bell Communications Pty Limited
Lindian Pty Limited
Erlington Pty Limited
Hutchison Telephone Pty Limited
HTAL Facilities Pty Limited
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
Ordinary
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Hutchison 3G Australia Holdings Pty Limited
(a)
Jointly controlled entity
Vodafone Hutchison Australia Pty Limited
(formerly Hutchison 3G Australia Pty Limited)
(b)
Australia
Ordinary
50
50
*
The proportion of ownership interest is equal to the proportion of voting power held.
(a) This entity has been granted relief from the necessity to prepare financial reports in accordance with Class Order (98/1418) issued by the Australian
Securities and Investments Commission.
(b) This entity is accounted for in the consolidated financial statements using equity accounting.
44
Notes to the Financial Statements
Note 13. Current liabilities – Payables
Trade creditors
Other creditors
Payables to jointly controlled entities (note 21)
2010
$’000
518
7,184
15,975
2009
$’000
105
8,700
–
23,677
8,805
Payables to jointly controlled entity
Further information relating to payables to jointly controlled entity is set out in note 21.
(a) Foreign currency and interest rate risk
The carrying amounts of the Consolidated Entity’s trade and other payables are predominantly denominated in Australian Dollars:
Australian Dollars
2010
$’000
23,677
23,677
2009
$’000
8,805
8,805
Refer to note 29 for an analysis of the Consolidated Entity’s exposure to foreign currency risk in relation to trade payables.
A summarised analysis of the sensitivity of trade payables to foreign exchange and interest rate risk can be found in note 29.
Note 14. Current liabilities – Other financial liabilities
Loan from a related entity (note 21)
Loan from a related entity
Further information relating to the loan from a related entity is set out in note 21.
The loan from a related entity is an interest free financing facility and is repayable on demand.
Financing arrangements
Unrestricted access was available at the statement of financial position date to the following lines of credit:
Other financial liabilities
Total facilities – related entity
Used at the statement of financial position date
Unused at the statement of financial position date
2010
$’000
2009
$’000
217,838
286,954
2010
$’000
2009
$’000
1,600,000
1,100,000
(217,838)
(286,954)
1,382,162
813,046
Notes to the Financial Statements
45
Notes to the Financial Statements
continued
Note 15. Contributed equity
(a) Share capital
Ordinary shares (fully paid)
13,572,508,577 13,572,508,577
4,204,488
4,204,488
2010
Shares
2009
Shares
2010
$’000
2009
$’000
Share capital
Ordinary shares entitle the holder to participate in dividends and proceeds on winding up of the Company in proportion to the number of and amounts
paid on the shares held.
On a show of hands every holder of ordinary shares present at a meeting in person or by proxy, is entitled to one vote, and upon a poll each share is
entitled to one vote.
(b) Movement in ordinary shares:
Detail
Date
01 January 2009
Opening balance
Number of shares
$’000
754,028,255
1,045,194
24 June 2009
Conversion of CPS into ordinary shares
12,818,480,322
3,159,294
31 December 2009
Closing balance
01 January 2010
Opening balance
31 December 2010
Closing balance
13,572,508,577
4,204,488
13,572,508,577
4,204,488
13,572,508,577
4,204,488
On 24 June 2009, the Convertible Preference Share (CPS) were converted into Ordinary Shares. On 10 June 2009, HTAL announced the completion of a
merger between its subsidiary H3GA and Vodafone Australia Limited, pursuant to an arrangement between the Company and Vodafone Group Plc. Under
the arrangement H3GAH entered into a joint venture with subsidiaries of Vodafone to own H3GA on a 50/50 basis. The joint venture was implemented
on 9 June 2009 and resulted in the occurence of a change of control event.
(c) Movement in convertible preference shares:
Date
Detail
Number of shares
Issue price
$’000
01 January 2009
Opening balance
15,080,565,089
24 June 2009
Conversion of CPS into ordinary shares
(15,080,565,089)
0.21
0.21
3,159,294
(3,159,294)
31 December 2009
Closing balance
–
–
(d) Options
Information relating to the HTAL Employee Option plan, including details of options issued, exercised and lapsed during the financial year and options
outstanding at the end of the financial year are set out in note 26.
(e) Capital risk management
The Consolidated Entity’s objectives when managing capital is to safeguard its ability to continue as a going concern so that it can maintain an optimal
capital structure to reduce the cost of capital.
In order to maintain or adjust the capital structure the Consolidated Entity may adjust the amount of dividends paid to shareholders, return capital to
shareholders, issue new shares or sell assets to reduce debt.
Consistent with others in the industry the Consolidated Entity monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided
by total capital. Net debt is calculated as total borrowings (including ‘borrowings’ and ‘trade and other payables’ as shown in the statement of financial
position) less cash and cash equivalents. Total capital is calculated as ‘equity’ as shown in the statement of financial position (including minority interest) plus
net debt.
The gearing ratios at 31 December 2010 and 31 December 2009 were as follows:
Total payables, borrowings and other financial liabilities
Less: cash and cash equivalents (note 7)
Net debt
Total equity
Total capital
Gearing ratio
46
Notes to the Financial Statements
2010
$’000
2009
$’000
241,515
295,759
(5,317)
(2,858)
236,198
292,901
1,453,069
1,375,478
1,689,267
1,668,379
14%
18%
Note 16. Reserves and accumulated losses
(a) Reserves
Capital reserve
Share of hedging reserve – cash flow hedges
Share-based payments reserve
Movements:
Capital reserve
There has been no movement in the capital reserve during the year.
Share of hedging reserve – cash flow hedges
Balance at 1 January
Hedging movements
Balance at 31 December
Share-based payments reserve
Balance at 1 January
Option (lapsed)/expense
Balance at 31 December
(b) Accumulated losses
Accumulated losses at 1 January
Profit attributable to the members of Hutchison Telecommunications (Australia) Limited
Accumulated losses at 31 December
(c) Nature and purpose of reserves
Capital reserve
The capital reserve relates to the surplus arising on initial consolidation of 19.9% stake in H3GAH.
2010
$’000
2009
$’000
54,887
4,207
15,896
54,887
–
15,954
74,990
70,841
–
4,207
4,207
990
(990)
–
15,954
15,683
(58)
271
15,896
15,954
(2,899,851)
(3,367,575)
73,442
467,724
(2,826,409)
(2,899,851)
Hedging reserve – cash flow hedges
The hedging reserve is used to record gains and losses on a hedging instrument in a jointly controlled entity cash flow hedge that are recognised directly in
equity, as described in note 1(g)(i).
Amounts are recognised in the statement of comprehensive income when the associated hedged transaction affects profit or loss.
Share-based payments reserve
(i)
The share-based payments reserve is used to recognise the grant date fair value of options issued to employees but not exercised.
(ii) The fair value of the 850 MHz spectrum licence assigned from TCNZ. The fair value was determined by reference to the fair value of the option
granted to TCNZ.
Notes to the Financial Statements
47
Notes to the Financial Statements
continued
Note 17. Director and key management personnel disclosures
(a) Director and key management personnel compensation
Short term employee benefits
Post employment benefits
Long term benefits
Share based payments
2010
$
2009
$
109,000
1,855,432
–
–
–
27,490
20,279
134,055
109,000
2,037,256
The key management personnel have been transferred to VHA.
(b) Loans to key management personnel
There were no loans made to Directors of the Company, including their personally related entities, during the years ended 31 December 2010 and
31 December 2009.
(c) Other transactions with key management personnel
There were no other transactions with the Directors of the Company for the years ended 31 December 2010 and 31 December 2009.
Note 18. Remuneration of auditors
During the year fees paid to the auditor of the Consolidated Entity, its related
practices and non-related audit firms for the following services:
(a) Deloitte Touche Tohmatsu – 2010
Assurance services
Audit services
–
Audit and review of financial reports and other audit work under the Corporations Act 2001
Total remuneration for assurance services
Taxation services
Tax compliance services, including review of company tax returns
Total remuneration for taxation services
(b) PricewaterhouseCoopers – 2009
Assurance services
Audit services
–
Audit and review of financial reports and other audit work under the Corporations Act 2001
– Other assurance services
IT audit
Accounting services
Other assurance services
Audit of regulatory returns
Due diligence services
Total remuneration for assurance services
Taxation services
Tax compliance services, including review of company tax returns
Tax advice on merger
Total remuneration for taxation services
Total auditors remuneration
48
Notes to the Financial Statements
2010
$
2009
$
78,275
78,275
35,620
35,620
–
–
–
–
–
–
–
–
–
–
–
–
–
343,066
110,000
85,000
10,500
424,499
973,065
56,190
634,595
690,785
113,895
1,663,850
Note 18. Remuneration of auditors (continued)
It is the Consolidated Entity’s policy to employ the auditors on assignments additional to their statutory audit duties where the auditor’s expertise and
experience with the Consolidated Entity are important. These assignments are principally tax advice and due diligence reporting on acquisitions. It is the
Consolidated Entity’s policy to seek competitive tenders for all major consulting projects. The auditor of the Consolidated Entity is Deloitte Touche Tohmatsu
for 2010 (2009: PricewaterhouseCoopers).
Note 19. Contingencies
Details and estimates of maximum amounts of contingent liabilities as at 31 December 2010 are as follows:
Guarantees
Unsecured guarantees in respect of leases of controlled entities
No material losses are anticipated in respect of any of the above contingent liabilities.
The Directors are not aware of any other material contingent liabilities existing at the reporting date.
Note 20. Commitments
Lease Commitments
Commitments in relation to leases contracted for at the reporting date but not recognised as liabilities, payable:
Operating leases
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Representing:
Non-cancellable operating leases
2010
$’000
2009
$’000
8,156
8,156
7,858
7,858
2010
$’000
2009
$’000
128
231
65
424
136
220
–
356
424
356
The Consolidated Entity leases various sites, offices, retail shops and warehouses under non-cancellable operating leases expiring within one to eighteen
years. The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
Note 21. Related party transactions
(a) Parent entities
The holding company and parent entity is Hutchison Telecommunications (Amsterdam) B.V. which at 31 December 2010 owns approximately 88%
of the issued Ordinary Shares of Hutchison Telecommunications (Australia) Limited. (2009 : the holding company and parent entity was Hutchison
Communications (Australia) Pty Limited which owned approximately 88%). On 23 December 2010, Hutchison Telecommunications (Amsterdam) B.V.
completed the acquisition of interests in Hutchison Telecommunications (Australia) Limited from Hutchison Communications (Australia) Pty Limited.
The ultimate parent entity is Hutchison Whampoa Limited (incorporated in Hong Kong).
(b) Directors
The names of persons who were Directors of the Company at any time during the financial year are as follows: FOK Kin-ning, Canning; Barry ROBERTS-
THOMSON; CHOW WOO Mo Fong, Susan; Justin Herbert GARDENER; LAI Kai Ming, Dominic; John Michael SCANLON; Frank John SIXT; Roderick
James SNODGRASS and Ronald Joseph SPITHILL. Roderick James SNODGRASS resigned as a Director on 16 November 2010. Ronald Joseph SPITHILL
was appointed as a Director on 16 November 2010 and continues in office at the date of this report.
(c) Key management personnel compensation
Disclosures relating to key management personnel compensation are set out in note 17.
Notes to the Financial Statements
49
Notes to the Financial Statements
continued
Note 21. Related party transactions (continued)
(d) Transactions with related parties
During the year, the following transactions occurred with related parties:
Sales of goods and services
Sale of telecommunications related goods and services to joint venture
Purchases of goods
Purchase of goods and services from commonly controlled entities
Purchase of telecommunications related goods and services from joint venture
Receivables
Advance to:
Jointly controlled entity
Payables
Advanced from:
Jointly controlled entity
Repayments to:
Related entity
Loans to related parties
Loans advanced to:
Jointly controlled entity
Loans repayments from:
Jointly controlled entity
Loans from related parties
Loans advanced from:
Related entity
Loans repayments to:
Related entity
Loans repayments from:
Related entity
Interest revenue
Jointly controlled entity
Interest expense
Ultimate parent entity
Advances to jointly controlled entity
2010
$’000
2009
$’000
–
–
–
1,937
13,412
78,362
10,781
15,975
–
–
–
591,468
–
1,320,000
71,321
–
–
55,000
69,116
768,046
–
1,250,000
21,481
56,347
126
–
358
50,332
Advances to the jointly controlled entity represent funds advanced under the terms of the agreement with the jointly controlled entity. The funds advanced
under the agreement are interest free.
(e) Outstanding balances
The following balances are outstanding at the reporting date in relation to transactions with related parties:
Current receivables
Jointly controlled entity (note 8)
Related entity (note 8)
Non current receivables
Jointly controlled entity (note 10)
Payables
Jointly controlled entity (note 13)
Current liabilities – Other financial liabilities
Related entity (note 14)
2010
$’000
2009
$’000
1,394
2,299
61,934
2,299
74,870
50,332
15,975
–
217,838
286,954
No provisions for doubtful debts have been raised in relation to any outstanding balances, and no expense has been recognised in respect of bad or
doubtful debts due from related parties.
50
Notes to the Financial Statements
Note 21. Related party transactions (continued)
(f) Terms and conditions
All transactions were made on normal commercial terms and conditions and at market rates, except interest on some loans between the parties that are
interest free.
Note 22. Deed of Cross Guarantee
During the year ended 31 December 2007, Hutchison Telecommunications (Australia) Limited, H3GAH and H3GA entered into a Deed of Cross
Guarantee under which each company guarantees the debts of the others. By entering into the Deed, the wholly-owned entities have been relieved from
the requirement to prepare a financial report and directors’ report under Class Order 98/1418 (as amended) issued by the Australian Securities and
Investments Commission.
On 10 June 2009, the Company announced that the merger of its subsidiary H3GA with VAL had completed. H3GA has been renamed VHA. As a result
the parties to the Deed of Cross Guarantee are now HTAL and H3GAH.
(a) Closed Group consolidated statement of comprehensive income and a summary of movements in the Closed Group
consolidated retained earnings
HTAL, H3GAH and H3GA represented a ‘Closed Group’ for the purposes of the Class Order for the period from 1 January to 9 June 2009. After
10 June 2009, H3GAH and HTAL represent the ‘Closed Group’ for the purposes of the Class Order. As there are no other parties to the Deed of
Cross Guarantee that are controlled by HTAL, H3GAH also represents the ‘Extended Closed Group’.
Set out below is the Closed Group consolidated statement of comprehensive income and a summary of movements in the Closed Group consolidated
accumulated losses for the year ended 31 December 2010.
Statement of Comprehensive Income
Revenue
Gain on disposal arising from merger
Other income
Cost of interconnection and variable content costs
Other direct costs of provision of telecommunication services and goods
Cost of handsets sold
Employee benefits expense
Advertising and promotion expenses
Other operating expenses
Capitalisation of customer acquisition and retention costs
Depreciation and amortisation expense
Finance costs
Profit before income tax
Income tax expense
Profit for the year
Summary of movements in consolidated retained losses
Accumulated losses at the beginning of the financial year
Profit for the year
Accumulated losses at the end of the financial year
2010
$’000
2009
$’000
22,343
–
–
–
–
–
(480)
(121)
(872)
–
–
799,410
780,230
1,866
(216,863)
(150,071)
(185,510)
(57,252)
(22,870)
(56,261)
20,055
(110,317)
(111)
(393)
20,759
802,024
9,580
–
30,339
802,024
(2,896,621)
(3,698,645)
30,339
802,024
(2,866,282)
(2,896,621)
Notes to the Financial Statements
51
Notes to the Financial Statements
continued
Note 22. Deed of Cross Guarantee (continued)
(b) Statement of Financial Position
Set out below is a statement of financial position as at 31 December 2010 of the Closed Group consisting of H3GAH and HTAL.
Current Assets
Cash and cash equivalents
Trade and other receivables
Other
Total Current Assets
Non-Current Assets
Receivables
Other financial assets
Other
Total Non-Current Assets
Total Assets
Current Liabilities
Payables
Other financial liabilities
Total Current Liabilities
Total Liabilities
Net Assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total Equity
2010
$’000
2009
$’000
5,317
3,693
163
2,858
64,233
163
9,173
67,254
74,870
50,332
1,556,881
1,556,881
9,580
–
1,641,331
1,607,213
1,650,504
1,674,467
23,677
8,805
217,838
286,954
241,515
295,759
241,515
295,759
1,408,989
1,378,708
4,204,488
4,204,488
70,783
70,841
(2,866,282)
(2,896,621)
1,408,989
1,378,708
Note 23. Operating segment
The Consolidated Entity has identified its operating segment based on the internal reports that are reviewed and used by the executive management team
(the chief operating decision makers) in assessing performance and in determining the allocation of resources.
The Consolidated Entity operated within the telecommunications industry until 9 June 2009. On 10 June 2009, the Company announced that the merger
of its subsidiary H3GA with VAL had completed. H3GA has been renamed VHA. As a result, the Consolidated Entity now invests in an operator within the
telecommunications industry. In 2010 the Consolidated Entity continued to invest in an operator within the telecommunications industry.
The chief operating decision maker of the Consolidated Entity receives information to manage its operations and investment based on one operating
segment, an investor in an operator of telecommunication services. As such, the Consolidated Entity believes it is appropriate that there is one operating
segment, investment in telecommunication services.
Key financial information used by the chief operating decision maker of the Consolidated Entity when evaluating the investment in telecommunication
services operating segment includes:
HTAL’s share of VHA
Operating Revenue
Operating Margin
EBITDA
52
Notes to the Financial Statements
2010
$m
2,411
1,691
476
2009
$m
2,040
1,386
175
Note 24. Reconciliation of profit after income tax to net cash inflows/(outflows) from operating activities
Profit after income tax
Income tax benefit recognised in profit or loss
Depreciation
Amortisation
Amortisation – subscriber acquisition and retention costs
Customer acquisition costs written off
Non-cash employee benefits expense – share-based payments
Net gain on sale of property, plant and equipment
Gain on disposal arising from merger
Share of net (profits)/losses of joint venture partnership accounted for using equity method
Change in operating assets and liabilities
Decrease in provision for doubtful debts
(Increase)/Decrease in receivables
Increase in inventories
Decrease in other assets
Decrease in payables
Increase in other current liabilities
Decrease in employee entitlements
Net cash inflows/(outflows) from operating activities
Note 25. Earnings per share
(a) Basic earnings per share
Profit attributable to the ordinary equity holders of the Consolidated Entity
(b) Diluted earnings per share
Profit attributable to the ordinary equity holders of the Consolidated Entity
(c) Earnings used in calculating earnings per share
Notes
2010
$’000
2009
$’000
73,442
467,724
5
5
5
5
16
3
11
(9,580)
–
–
–
–
(58)
–
–
–
59,501
30,710
16,594
3,512
271
(76)
(587,285)
(43,103)
141,355
–
(24,538)
–
(6,265)
37,427
(686)
5,194
11,227
(1,103)
(603,241)
–
–
1,016
(5,415)
254
(433,631)
2010
Cents
2009
Cents
0.54
6.27
0.54
5.85
CONSOLIDATED
2010
$’000
2009
$’000
Basic earnings per share
Profit attributable to the ordinary equity holders of the Consolidated Entity used in calculating
basic earnings per share
73,442
467,724
Diluted earnings per share
Profit attributable to the ordinary equity holders of the Consolidated Entity used in calculating
diluted earnings per share
73,442
467,724
(d) Weighted average number of shares used as the denominator
CONSOLIDATED
Weighted average number of ordinary shares used as the denominator
in calculating basic earnings per share
Weighted average number of ordinary shares and potential ordinary
shares used as the denominator in calculating diluted earnings per share
2010
Number
2009
Number
13,572,508,577
7,461,780,971
13,572,508,577
7,988,567,834
There were 23,450,000 (2009: 24,975,000) options outstanding at 31 December 2010 that are anti-dilutive and accordingly have no impact on the
earnings per share calculation for the year ended 31 December 2010.
Notes to the Financial Statements
53
Notes to the Financial Statements
continued
Note 26. Share-based payments
Option Plans
The HTAL Employee Option Plan was established by the Board on 4 June 2007. All permanent full-time, permanent part-time and casual employees who
have been selected by the Board to receive an invitation or who have been approved for participation in the plan are eligible to participate in the plan.
When exercisable, each option is convertible into one Ordinary Share. The exercise price of options is the higher of the following:
the closing price of HTAL shares on the Australian Securities Exchange on the day on which the options are granted; and
(a)
(b)
the average closing price of HTAL shares for the five trading days immediately preceding the day on which the options are granted.
Set out below are summaries of options granted under each plan.
2010
Grant date
14-Jun-07
14-Nov-07
21-May-08
4-Jun-08
Total
2009
Grant date
14-Jun-07
14-Nov-07
21-May-08
4-Jun-08
Total
Expiry
date
Exercise
price
Balance at
the start of
the year
Issued
during
the year
Exercised
during
the year
forfeited Balance at Exercisable
at the end
the end of
the year of the year
during
the year
13-Jun-12
$0.145 24,375,000
13-Nov-12
20-May-13
3-Jun-13
$0.200
$0.165
$0.139
300,000
–
300,000
24,975,000
–
–
–
–
–
–
–
–
–
–
–
–
1,525,000 22,850,000 22,850,000
–
–
–
300,000
300,000
–
–
300,000
300,000
1,525,000 23,450,000 23,450,000
$0.145
$0.146
$0.146
Weighted average exercise price
$0.146
Expiry
date
Exercise
price
Balance at
the start of
the year
Issued
during
the year
Exercised
during
the year
forfeited Balance at Exercisable
at the end
the end of
the year of the year
during
the year
13-Jun-12
$0.145 27,400,000
13-Nov-12
20-May-13
3-Jun-13
$0.200
$0.165
$0.139
300,000
200,000
300,000
28,200,000
–
–
–
–
–
–
–
–
–
–
–
–
3,025,000 24,375,000 16,341,644
–
300,000
200,000
–
–
300,000
–
–
–
3,225,000 24,975,000 16,341,644
$0.146
$0.146
$0.145
Weighted average exercise price
$0.146
The number of options that were forfeited during the year were 1,525,000 (2009: 3,225,000). The weighted average remaining contractual life of share
options outstanding at the end of the period was 1.5 years (2009: 2.5 years).
Fair value of options granted
The assessed fair value at grant date of options expensed during the year ended 31 December 2010 was 4 cents (2009: 4 cents).
Refer to note 1(r)(iv) for how the fair value of options were determined. The additional model inputs for options expensed during the year ended
31 December 2010 and 31 December 2009 not already outlined above include:
(a) weighted average share price at grant date: 14.9 cents;
(b) weighted average of expected price volatility of the company’s shares: 34%;
(c) expected dividend yield: 0%; and
(d) weighted average risk-free interest rate: 6.4%.
The expected price volatility is based on the historical 12 month period prior to grant date.
54
Notes to the Financial Statements
Note 26. Share-based payments (continued)
Employee Share Purchase Plan
The employee share purchase plan allows for HTAL’s shares to be purchased on-market for employees. All Australian resident permanent employees and casual
employees who have been employed by the Company for more than one year are eligible to participate in the plan. Employees may elect not to participate
in the plan.
Under the plan, up to $1,000 of HTAL shares are purchased for each participating employee with the Company contributing up to $250 of the cost of the
purchase, and brokerage and stamp duty costs.
Shares purchased under the plan may not be sold until the earlier of 3 years after purchase or cessation of employment with the Company.
Expenses arising under share-based payment transactions
Total expenses arising from share-based payment transactions recognised during the period as part of employment costs were as follows:
Options issued under HTAL Employee Option Plan
2010
$’000
2009
$’000
(58)
271
Note 27. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events
that are believed to be reasonable under the circumstances. Actual results may differ from these estimates and judgements under different assumptions
and conditions.
(a) Critical accounting estimates and assumptions
Impairment of investments in controlled and jointly controlled entities
In accordance with the Consolidated Entity’s accounting policy stated in note 1(g), investments in controlled and jointly controlled entities have been tested
for impairment. The recoverable amount of the Company’s investment in controlled entities (note 12), and the recoverable amount of the Consolidated
Entity’s investment in jointly controlled entities (note 11) have been determined on the value in use methodology. The fair value underlying the calculations
has been based on the approved business plan for VHA. These calculations require the use of estimates and assumptions.
A discounted cash flow calculation has been undertaken on the approved business plan. A terminal value has been calculated on the cash flows. The cash
flows have then been discounted using a suitable discount rate consistent with recent external assessments of the Consolidated Entity’s weighted average
capital cost. The resulting net present value (NPV) has been compared to the net book value of the Consolidated Entity’s non-current assets and working
capital balances.
The Directors believe that the resulting NPV is appropriate to support the carrying values of both the parent entity’s investment (as disclosed in note 30) and
the Consolidated Entity’s investments in jointly controlled entities as at 31 December 2010.
(b) Critical judgements in applying the Consolidated Entity’s accounting policies
There are no judgements made in applying the Consolidated Entity’s accounting policies that have a significant effect on the amounts recognised in the
financial report.
Note 28. Events occurring after the Reporting date
There has been no other matter or circumstance that has arisen subsequent to the reporting date that has significantly affected, or may significantly affect:
(i)
the operations of Hutchison Telecommunications (Australia) Limited in future financial years, or
(ii)
the results of those operations in future financial years, or
(iii)
the state of affairs of Hutchison Telecommunications (Australia) Limited in future financial years.
Notes to the Financial Statements
55
Notes to the Financial Statements
continued
Note 29. Financial risk management
The Consolidated Entity’s activities expose it to a variety of financial risks: market risk (including currency risk and interest rate risk), credit risk and liquidity
risk. The Consolidated Entity’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimise potential
adverse effects on the financial performance of the Consolidated Entity. The Consolidated Entity cautiously uses derivatives, principally forward foreign
exchange contracts as appropriate for risk management purposes only, for hedging transactions and for managing the Group’s assets and liabilities. It is the
Consolidated Entity’s policy not to enter into derivative transactions for speculative purposes. It is also the Group’s policy not to invest liquidity in financial
products, including hedge funds or similar vehicles, with significant underlying leverage or derivative exposure.
Risk management is carried out by a central treasury department under policies approved by the Board of Directors. Treasury operates as a centralised
service for managing financial risks, including interest rate and foreign exchange risks. Treasury identifies, evaluates and hedges financial risks in close
co-operation with the Consolidated Entity’s operating units. The Board provides written principles for overall risk management, as well as policies covering
specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and
investment of excess liquidity.
(a) Market risk
For the presentation of market risks (including interest rate risk, exchange rate risk and market price risk), AASB 7 “Financial instruments: disclosures” requires
disclosure of a sensitivity analysis for each type of market risk that show the effects of a hypothetical change in the relevant market risk variable to which the
Group is exposed at the reporting date on profit or loss and total equity.
The effect that is disclosed in the following sections assumes that: (a) a hypothetical change of the relevant risk variable had occurred at the reporting date
and had been applied to the relevant risk variable in existence on that date; and (b) the sensitivity analysis for each type of market risk does not reflect inter-
dependencies between risk variables, e.g. the interest rate sensitivity analysis does not take into account of the impact of changes in interest rates would
have on the relative strengthening and weakening of the currency with other currencies.
The preparation and presentation of the sensitivity analysis on market risk is solely for compliance with AASB 7 disclosure requirements in respect of financial
instruments. The sensitivity analysis measures changes in the fair value and/or cash flows of the Group’s financial instruments from hypothetical instantaneous
changes in one risk variable (e.g. functional currency rate or interest rate), the amount so generated from the sensitivity analysis are what-if forward-looking
estimates. The sensitivity analyses are for illustration purposes only and it should be noted that in practice market rates rarely change in isolation. Actual
results in the future may differ materially from the sensitivity analyses due to developments in the global markets which may cause fluctuations in market rates
(e.g. exchange or interest rate) to vary and therefore it is important to note that the hypothetical amounts so generated do not represent a projection of likely
future events and profits or losses.
(i) Foreign exchange risk
The major activities of the operations are denominated in Australian dollars. The foreign exchange risk is minimal.
Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities that are denominated in a currency that is not the
entity’s functional currency. The risk is monitored using sensitivity analysis and cash flow forecasting.
Management has set up a policy requiring operating units to manage their foreign exchange risk against their functional currency. Operating units review
individual requirements with the central treasury department to hedge their foreign exchange risk exposure arising from future commercial transactions and
recognised assets and liabilities using forward contracts transacted with financial institutions.
For reporting purposes, the entity designates contracts as fair value hedges or cash flow hedges, as appropriate. External foreign exchange contracts are
designated as hedges of foreign exchange risk on specific assets, liabilities or future transactions on a gross basis.
At 31 December 2010, had the Australian Dollar weakened/strengthened by 10% against all other currencies with all other variables held constant,
post-tax loss for the year would have been $nil lower/$nil higher (2009: $nil lower/$nil higher). Equity would have been $nil lower/$nil higher
(2009: $nil lower/$nil higher).
(ii) Interest rate risk
The Consolidated Entity’s main interest rate risk arises from cash balances. All long-term borrowings have been fully repaid during the year.
56
Notes to the Financial Statements
Note 29. Financial risk management (continued)
(iii) Summarised sensitivity analysis
The following table summarises the sensitivity of the Consolidated Entity’s financial assets and financial liabilities to interest rate risk, foreign exchange risk
and other price risk.
Interest rate risk
foreign exchange risk
-1%
+1%
-10%
+10%
Carrying
amount
$’000
Post-tax
loss
$’000
Other
equity
$’000
Post-tax
loss
$’000
Other
equity
$’000
Post-tax
loss
$’000
Other
equity
$’000
Post-tax
loss
$’000
Other
equity
$’000
31/12/2010
financial assets
Cash and cash equivalents
5,317
Trade receivables
financial liabilities
Trade payables
Borrowings
–
(518)
–
Other financial liabilities
(217,838)
(53)
–
–
–
–
Total increase/(decrease)
(213,039)
(53)
–
–
–
–
–
–
53
–
–
–
–
53
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Interest rate risk
foreign exchange risk
-1%
+1%
-10%
+10%
Carrying
amount
$’000
Post-tax
loss
$’000
Other
equity
$’000
Post-tax
loss
$’000
Other
equity
$’000
Post-tax
loss
$’000
Other
equity
$’000
Post-tax
loss
$’000
Other
equity
$’000
31/12/2009
financial assets
Cash and cash equivalents
2,858
Trade receivables
financial liabilities
Trade payables
Borrowings
–
(105)
–
Other financial liabilities
(286,954)
(29)
–
–
–
–
Total increase/(decrease)
(284,201)
(29)
–
–
–
–
–
–
29
–
–
–
–
29
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(b) Credit risk
Credit risk is managed on an entity basis. Credit risk arises from cash and cash equivalents, deposits with banks and financial institutions, as well as credit
exposures to related parties. For banks and financial institutions, only independently rated parties with a minimum rating of ‘A’ are accepted.
Credit risk further arises in relation to financial guarantees given to certain parties (see note 19 for details). Such guarantees are only provided in
exceptional circumstances and are subject to board approval.
Notes to the Financial Statements
57
Notes to the Financial Statements
continued
Note 29. Financial risk management (continued)
(c) Liquidity risk
Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability of funding through an adequate amount of
committed credit facilities and the support from related parties.
The Consolidated Entity manages liquidity risk by continuously monitoring forecast and actual cash flows and matching the maturity profiles of financial
assets and liabilities. Due to the dynamic nature of the underlying businesses, Treasury aims at maintaining flexibility in funding by keeping committed credit
lines available with a variety of counterparties. Surplus funds are generally only invested in instruments that are tradeable in highly liquid markets.
The table below analyses the Consolidated Entity’s financial liabilities relevant maturity groupings based on the remaining period at the reporting date to
the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows. Balances due within 12 months equal their
carrying balances, as the impact of discounting is not significant.
Effective
interest rate
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over
5 years
Total
$’000
$’000
$’000
$’000
$’000
–
–
23,677
217,838
241,515
–
–
–
–
–
–
–
–
–
23,677
217,838
241,515
Effective
interest rate
Less than
1 year
Between
1 and
2 years
Between
2 and
5 years
Over
5 years
Total
$’000
$’000
$’000
$’000
$’000
–
–
8,805
286,954
295,759
–
–
–
–
–
–
–
–
–
8,805
286,954
295,759
At 31/12/2010
Payables
Other financial liabilities
Total ($’000)
At 31/12/2009
Payables
Other financial liabilities
Total ($’000)
Note 30. Parent entity disclosures
Financial position
2010
$’000
2009
$’000
8,173
67,251
3,749,099
3,714,988
3,757,272
3,782,239
240,512
295,759
–
–
240,512
295,759
3,516,760
3,486,480
4,204,488
4,204,488
15,895
15,954
(703,623)
(733,962)
3,516,760
3,486,480
ASSETS
Current Assets
Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities
Non-Current Liabilities
Total Liabilities
Net Assets
EQUITY
Contributed equity
Reserves
Accumulated losses
Total Equity
58
Notes to the Financial Statements
Note 30. Parent entity disclosures (continued)
Financial performance
Profit for the year
Total comprehensive income for the year
Contingencies
Guarantees
Unsecured guarantees in respect of leases of controlled entities
Commitments
Operating leases
Not later than 1 year
Later than 1 year but not later than 5 years
Later than 5 years
Representing:
Non-cancellable operating leases
2010
$’000
30,339
30,339
2009
$’000
134,438
134,438
2010
$’000
2009
$’000
8,156
8,156
7,858
7,858
2010
$’000
2009
$’000
128
231
65
424
136
220
–
356
424
356
The Directors of the parent entity are not aware of any other material contingent liabilities existing at the reporting date.
As at 31 December 2010, the Parent Entity has a deficiency of net current assets of $232 million (2009: $229 million). Included in the Parent Entity’s
current liabilities is an amount of $218 million (2009: $287 million) which relates to an interest free financing facility provided from the ultimate parent
entity, Hutchison Whampoa Limited (HWL), which is repayable on demand. HWL has confirmed its current intention to provide sufficient financial support to
enable the Parent Entity to meet its financial obligations as and when they fall due. This undertaking is provided for a minimum period of twelve months from
24 February 2011. Consequently, the Directors have prepared the financial statements on a going concern basis.
Notes to the Financial Statements
59
Directors’ Declaration
In the Directors’ opinion:
(a)
the financial statements and notes set out on pages 28 to 59 are in accordance with the Corporations Act 2001, including:
(i)
complying with Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements;
and
(ii) giving a true and fair view of the Consolidated Entity’s financial position as at 31 December 2010 and of its performance for the
financial year ended on that date; and
(b)
there are reasonable grounds to believe that Hutchison Telecommunications (Australia) Limited will be able to pay its debts as and when they
become due and payable.
(c) at the date of this declaration, there are reasonable grounds to believe that the members of the Extended Closed Group identified in
note 22 will be able to meet any obligations or liabilities to which they are, or may become, subject by virtue of the Deed of Cross
Guarantee described in note 22.
The Directors have been given the declarations by the Chief Executive Officer and Chief Financial Officer of Vodafone Hutchison Australia Pty
Limited required by section 295A of the Corporations Act 2001.
This declaration is made in accordance with a resolution of the Directors.
Susan Chow
Director
24 February 2011
Dominic Lai
Director
24 February 2011
60
Directors’ Declaration
Independent Auditor’s Report
to the members of Hutchison Telecommunications (Australia) Limited
We have audited the accompanying consolidated financial report of Hutchison Telecommunications (Australia) Limited (“HTAL” and “the
company”), which comprises the consolidated statement of comprehensive income, the consolidated statement of financial position as at
31 December 2010, the consolidated statement of cash flows and the consolidated statement of changes in equity for the year ended on that
date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the
consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year as set out
on pages 28 to 60.
Directors’ responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true and fair view in accordance with
Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable
the preparation of the financial report that is free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian
Auditing Standards. Those standards require that we comply with relevant ethical requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial report, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control, relevant to the entity’s preparation of the financial report that
gives a true and fair view, in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Auditor’s independence declaration
In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001.
Auditor’s opinion
In our opinion:
(a)
the consolidated financial report of Hutchison Telecommunications (Australia) Limited is in accordance with the Corporations Act 2001,
including:
(i) giving a true and fair view of the company’s and consolidated entity’s financial position as at 31 December 2010 and of their
performance for the year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b)
the consolidated financial statements also comply with International Financial Reporting Standards as disclosed in Note 1.
Independent Auditor’s Report
61
Independent Auditor’s Report
continued
Report on the Remuneration Report
We have audited the Remuneration Report included in pages 21 to 24 of the directors’ report for the year ended 31 December 2010. The
directors of the company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of
the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance
with Australian Auditing Standards.
Auditor’s opinion
In our opinion, the Remuneration Report of Hutchison Telecommunications (Australia) Limited for the year ended 31 December 2010, complies
with section 300A of the Corporations Act 2001.
DELOITTE TOUCHE TOHMATSU
Sandeep Chadha
Partner
Chartered Accountants
Sydney, 24 February 2011
62
Independent Auditor’s Report
Shareholder Information
The shareholder information set out below was applicable as at
24 February 2011.
Substantial shareholders
Substantial shareholders in the Company are:
Shareholding
Percentage
12,009,393,175
88.48%
Hutchison Whampoa Limited
and its subsidiaries#
Vodafone Group Plc
and subsidiaries*
Telecom 3G (Australia) Limited
and Telecom Corporation of
New Zealand Limited
Twenty largest shareholders
There were 4098 holders of less than a marketable parcel of ordinary
shares. The names of the 20 largest holders of quoted ordinary shares
as at 24 February 2011 are as follows:
% Issued
Shareholder
Shareholding
Capital Rank
Hutchison Telecommunications
(Amsterdam) B.V.
11,925,479,378
87.87
Telecom 3G (Australia) Limited
1,357,250,858
10.00
12,009,393,175
88.48%
Leanrose Pty Limited
83,913,797
0.62
1,357,250,858
10.00%
Citicorp Nominees Pty Limited
11,966,586
0.09
JP Morgan Nominees Australia
17,475,590
0.13
Notes:
# Substantial shareholding includes relevant interest arising from an
equitable mortgage of shares from Leanrose Pty Limited.
*
Substantial shareholding arises solely as a result of the relevant
interests which Vodafone Group Plc and its subsidiaries have in
shares in the Company in which Hutchison Whampoa Limited and its
subsidiaries have a relevant interest. Vodafone Group Plc’s relevant
interests arise under a Shareholders Agreement between Vodafone
Group Plc, Hutchison Whampoa Limited and other parties in relation
to Vodafone Hutchison Australia Pty Limited. The acquisitions of such
relevant interests were approved by shareholders on 2 April 2009.
None of Vodafone Group Plc or any of its subsidiaries holds any
shares in the Company.
Distribution of equity securities
HSBC Custody Nominees
8,591,416
0.06
Arjee Pty Ltd
4,068,851
0.03
George Thomson
2,765,587
0.02
Yet Kwong Chiang
& Ho Yuk Lin Chiang
2,700,138
0.02
Yim Fong Leung
2,025,000
0.01
KKH Investments Pty Limited
1,850,000
0.01
Kenneth Kin Kau Heung
& Rene Conrad Heung
1,830,000
0.01
Hung Fong Chong
1,779,000
0.01
Bin Liu
1,700,000
0.01
Range
1 – 1000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 – OVER
TOTAL
Ordinary
Shares
1,542
2,927
1,094
1,549
270
7,382
Options
John Franciszek Chodorowski
1,652,456
0.01
0
0
0
7
36
43
Justin Herbert Gardener
& Anne Louise Gardener
Kurt Ruegg
& Ursula Ruegg
1,630,358
0.01
16
1,500,000
0.01
Jason Boua Hong Lo
1,400,000
0.01
Yee Man Tang
Xiaoyu Wang
1,250,000
0.01
1,197,031
0.01
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
17
18
19
20
Unquoted Equity Securities
Options issued under the Employee Option Plan
Number of Options on issue
23,450,000
Number of holders
43
Voting rights
The voting rights attaching to each class of equity securities are:
(a) Ordinary shares
On a show of hands, every member present, in person or by proxy,
attorney or representative, has one vote.
On a poll every member has one vote for each share.
(b) Options
No voting rights.
Shareholder Information
63
Corporate Directory
Directors
Fok Kin-ning, Canning
Barry Roberts-Thomson
Chow Woo Mo Fong, Susan
Justin Herbert Gardener
Lai Kai Ming, Dominic
John Michael Scanlon
Frank John Sixt
Ronald Joseph Spithill
Company Secretaries
Edith Shih
Louise Sexton
Investor Relations
Tel: 133 121
Fax: (02) 8904 0438
Email: investors@hutchison.com.au
www.hutchison.com.au
Registered Office
Level 7, 40 Mount Street
North Sydney NSW 2060
Tel: 133 121
Fax: (02) 8904 0457
www.hutchison.com.au
Share Registry
Link Market Services
Level 12, 680 George Street
Sydney NSW 2000
Tel: (02) 8280 7111
www.linkmarketservices.com.au
Auditor
Deloitte Touche Tohmatsu
Grosvenor Place
225 George Street
Sydney NSW 2000
Securities Exchange Listing
Hutchison shares are listed on the Australian Securities Exchange
Limited ASX Code: HTA
Notice of Annual General Meeting
The Annual General Meeting of Hutchison will be held at:
40 Mount Street
North Sydney NSW 2060
Date: Wednesday 4 May 2011
Time: 10.00 am
In this report, Hutchison Telecommunications (Australia) Limited is referred to as Hutchison, HTAL and the Company
64
Corporate Directory
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