Transactions other than those mentioned previously are as follows: - The Company has issued a Letter of Comfort to a bank to support credits obtained by a subsidiary in the amount of Baht 75 million. - The Company has entered into agreements with other related companies to hire them for the construction and installation of equipment for the operations of mobile phone network and to receive satellite transponder services. As at June 30, 1998, the Company was committed to pay for the construction, installation and transponder services in the total amount of Baht 247.87 million. - The Company has entered into agreements with its parent company to receive consulting and management services for periods ranging from 11 months to 12 months with options to renew. The Company is committed to pay service fees in respect of the said agreements amounting to approximately Baht 11.16 million per month. - The Company and its subsidiary have entered into lease and related service agreements with other related companies covering their office spaces and cars for periods ranging from 7 months to 17 years with options to renew. The Company and its subsidiary are committed to pay for rental and related services in respect of the said agreements as follows: Million Baht Per Month Advanced Info Service Public Company Limited 17.49 Advanced Info Service Public Company Limited and subsidiary 19.88 NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Method of Revenue and Cost of Revenue Recognition - The Company and its subsidiary recognize income from mobile phone and pager services when said services are rendered to customers. All service costs incurred during the period are treated as period cost. - The subsidiary recognizes sale and cost of sale when merchandise is delivered to customer. - Revenue from equipment rental is recognized over the period of and at the rate prescribed in each agreement. Accounts and Notes Receivable The Company and its subsidiary provide allowance for doubtful accounts which is equivalent to the estimated collection losses. The estimated losses are based on collection experience and the management estimates. Inventories Inventories are valued at the lower of cost or net realizable value. Cost of inventories is determined on the moving average method. In considering the realizable value, due allowance is made for all obsolete and slow-moving items. Investments Method of recording of Investments in subsidiary in the Company's separate financial statements: Investments in the subsidiary company is recorded by using the equity method of accounting. The excess of the cost of investment in the subsidiary company over its book value at the date near the acquisition is included in investments, and is amortized by the straight-line method over a period of 15 years. The proportionate share in net income of the subsidiary company for the three-month and six-month periods ended June 30, 1998 and 1997, after eliminating all significant gains or losses deriving from intercompany transactions incurred by the Company and its subsidiary, and less amortization of the excess of the cost of investment in the subsidiary company over its book value at the date near the acquisition, are shown as net result of investment in the subsidiary company in the statements of income. The recording of investment in the subsidiary company by using the equity method has been made for the purpose of reflecting the status of and return on investment in the said company. The Company, therefore, does not take into consideration the net result of investment in the subsidiary company for the three-month and six- month periods ended June 30, 1998 and 1997 in the income tax computation for such periods. Method of recording of investments in share capital of companies, which are not subsidiaries, in the Company's separate financial statements: Investment in share capital of companies, which are not subsidiaries and do not represent marketable securities, are recorded by using the cost method and less adjustments relating to the decline in values of investments, determined from their financial status. Property and Equipment Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed by the straight-line method based on the estimated useful lives of assets of 1 - 20 years. In considering the recoverability of equipment, due allowance is made to certain equipment items. Depreciation and amortization for the three-month and six-month periods ended June 30, are summarized as follows: Million Baht Three Months Six Months Ended June 30 Ended June 30 1998 1997 1998 1997 Recorded in the consolidated statements of income 120.22 61.37 229.06 108.85 Recorded in the Company's separate statements of income 104.14 52.78 196.90 91.39 The Company has entered into a number of financial lease agreements to obtain vehicles for its business operations. For the financial reporting purpose, vehicle under each financial lease and its related obligation are recorded at the discounted minimum lease amount, using the discount rate as prescribed in each lease agreement, or the fair market value at the date of each agreement, whichever is lower. Depreciation of vehicles under financial leases is computed by the straight-line method based on the estimated useful lives of vehicles of 5 years. Depreciation of vehicles under financial leases for the three-month and six-month periods ended June 30, are as follows: Million Baht Three Months Six Months Ended June 30 Ended June 30 1998 1997 1998 1997 Recorded in the consolidated statements of income 0.24 0.24 0.48 0.49 Recorded in the Company's separate statements of income 0.24 0.24 0.48 0.49 The aforesaid depreciation are included in the total depreciation and amortization for the three-month and six-month periods ended June 30, 1998 and 1997 as discussed previously. Goodwill Goodwill in the consolidated financial statements represents the excess of the cost of investment in shares of a subsidiary company over its book value at the date near the acquisition. Goodwill is amortized by the straight-line method over a period of 15 years. Amortization of goodwill for the three-month periods ended June 30, 1998 and 1997 are equally recorded at Baht 9.15 million while amortization of goodwill for the six-month periods ended June 30, 1998 and 1997 are equally recorded at Baht 18.30 million. Costs of Mobile Phone and Pager Networks Under Concession Agreements Costs of mobile phone and pager networks under concession agreements represent costs of certain equipment and other assets which have been transferred and/or have to be transferred to the Telephone Organization of Thailand. Costs of certain equipment and other assets which have been transferred and/or ready to be transferred to the Telephone Organization of Thailand are amortized over the remaining period of each concession agreement until September 30, 2015 for Advanced Info Service Public Company Limited, and until June 11, 2005 for Shinawatra Paging Company Limited. Amortization of costs of mobile phone and pager networks under concession agreements for the three-month and six-month periods ended June 30, are summarized as follows: Million Baht Three Months Six Months Ended June 30 Ended June 30 1998 1997 1998 1997 Recorded in the consolidated statements of income 387.96 243.93 737.31 467.74 Recorded in the Company's separate statements of income 358.59 217.83 679.00 416.95 Deferred Charges Deferred charges represent expenditure relating to the increase of share capital, commitment fees of long-term loans, costs of long-term leases for spaces for base stations, expenditure relating to the increase of power of electricity at base station, cost of additional supplementary equipment for the operation of pager network other than those specified in the concession agreement, and have been transferred to the Telephone Organization of Thailand, and cost of computer software. The following amortization methods are used: - Expenditure relating to the increase of share capital is amortized over a period of five years. - Commitment fees of long-term loans are amortized over the period of each loan agreement. - Costs of long-term leases for spaces for base stations are amortized over the period of each lease agreement. - Expenditure relating to the increase of power of electricity at base stations are amortized over the remaining period of concession agreement. - Costs of additional supplementary equipment for the pager network other than those specified in the concession agreement and have been transferred to the Telephone Organization of Thailand are amortized over periods of five years. - Cost of computer software are amortized over a period of ten years. Amortization of deferred charges for the three-month and six-month periods ended June 30, are summarized as follows: Million Baht Three Months Six Months Ended June 30 Ended June 30 1998 1997 1998 1997 Recorded in the consolidated statements of income 23.77 7.66 44.15 15.13 Recorded in the Company's separate statements of income 23.76 7.66 44.13 15.13 Foreign Currency Transactions Foreign currency transactions are recorded in Baht at the rates of exchange ruling on the transaction dates. Outstanding assets and liabilities in foreign currencies at the balance sheet date are translated into Baht at the exchange rates ruling on that date. Translation gain or loss is included as revenue or expense in the statements of income. The Company's forward exchange contracts are intended to hedge the risks of changes in foreign currency exchange rates. Forward exchange contract receivables and payables are recorded in Baht at the spot rate on the date of contract inception, and the balances on the balance sheet date are translated into Baht at the prevailing spot rate. Premiums or discounts under forward exchange contracts for hedging losses on assets and liabilities in foreign currencies are amortized to the profit and loss accounts over the period of the forward exchange contract. Earnings (Loss) Per Share Earnings (loss) per share is computed by using the following methods: - Earnings (loss) per share in the consolidated financial statements for the three-month and six-month periods ended June 30, 1998 and 1997 are computed by dividing consolidated net income (loss) for each period, after considering minority interests in subsidiary, by the number of common shares outstanding at the end of each period. - Earnings (loss) per share in the Company's separate financial statements for the three-month and six-month periods ended June 30, 1998 and 1997 are computed by dividing net income (loss) for each period by the number of common shares outstanding at the end of each period. NOTE 5 - SEGMENT INFORMATION The business operations of the Company and its subsidiary, as reflected in the consolidated financial statements, are classified into four major segments; the operations of a 900-MHz CELLULAR TELEPHONE SYSTEM network; the operations of a DIGITAL DISPLAY PAGING SYSTEM network; pagers rental; and the trading of pagers. Financial information by business segment for the three-month and six- month periods ended June 30, are shown as follows: Million Baht Three Months Six Months Ended June 30 Ended June 30 1998 1997 1998 1997 Revenues from Services and Rental Mobile phone service 3,427.29 3,224.19 7,209.00 6,250.68 Pager service 353.00 366.25 709.90 737.75 Pager rental 2.49 - 5.11 - Adjustments of intercompany transactions (0.69) (0.71) (1.37) (1.32) Total 3,782.09 3,589.73 7,922.64 6,987.11 Million Baht Three Months Six Months Ended June 30 Ended June 30 1998 1997 1998 1997 Revenues from Sales Sales of pagers 56.42 83.02 116.16 83.02 Total Revenues from Services, Rental and Sales Mobile phone service 3,427.29 3,224.19 7,209.00 6,250.68 Pager service 353.00 366.25 709.90 737.75 Pager rental 2.49 - 5.11 - Sales of pagers 56.42 83.02 116.16 83.02 Adjustments of intercompany transactions (0.69) (0.71) (1.37) (1.32) Total 3,838.51 3,672.75 8,038.80 7,070.13 Operating Profit (Loss) Mobile phone service 884.87 1,332.89 2,089.26 2,646.69 Pager service 116.00 96.13 236.50 147.20 Pager rental (5.50) - (10.70) - Sales of pagers (26.20) (6.25) (34.09) (6.25) Adjustments of intercompany transactions - - - - Total Operating Profit (Loss) 969.17 1,422.77 2,280.97 2,787.64 Gain (loss) on exchange (702.92) 7.88 733.65 7.88 Other income 125.67 56.54 296.93 118.82 Interest expense (273.15) (82.89) (599.82) (135.58) Directors' remuneration (1.59) (0.86) (2.60) (2.23) Other expenses (19.99) (13.95) (31.10) (28.19) Net income before considering income tax and minority interests in subsidiary 97.19 1,389.49 2,678.03 2,748.34 Income tax (84.35) (441.59) (897.32) (878.02) Net income before considering minority interests in subsidiary 12.84 947.90 1,780.71 1,870.32 Less Share of net income of subsidiary to minority interests 20.77 19.93 47.51 33.97 Net income (loss) (7.93) 927.97 1,733.20 1,836.35 (More)