Dialog Axiata : Annual Report 2023

Dialog Axiata PLC | Annual Report 2023

Contents

Introduction to the Company	1	Statement of Financial Position		88
Message from the Chairman	2	Statement of Comprehensive Income	89
Group Chief Executive's Review of Operations	8	Consolidated Statement of Changes in Equity	90
Board of Directors	25	Company Statement of Changes in Equity	91
Corporate Management Team	31	Statement of Cash Flows		92
Business & Financial Review	38	Notes to the Financial Statements		93
Corporate Governance Report	56	US Dollar Financial Statements - Statement of	171
Report of the Board Audit Committee	64	Financial Position
Report of the Related Party Transactions	67	US Dollar Financial Statements - Statement of	172
Comprehensive Income
Review Committee
Report of the Board Risk and Compliance	68	Group Value Added Statement		173
Committee		Five Year Summary		174
DIAL Share Information	70	Group Real Estate Portfolio		175
Financial Statements	75	Notice of Annual General Meeting		176
Annual Report of the Board of Directors for	76	Administrative Details for the 27th Annual	178
the year ended 31 December 2023		General Meeting
The Statement of Directors' Responsibility for	81	Form of Proxy		181
Financial Reporting		Corporate Information	Inner Back Cover
Independent Auditor's Report	83

Our Vision

To be the undisputed leader in the provision of multi-sensory connectivity resulting always, in the empowerment and enrichment of Sri Lankan lives and enterprises.

Our Mission

To lead in the provision of technology enabled connectivity touching multiple human senses and faculties, through committed adherence to customer-driven, ethical, responsive and flexible business processes, and through the delivery of quality service and leading edge technology unparalleled by any other, spurred by an empowered set of dedicated individuals who are driven by an irrepressible desire to work as one towards a common goal in the truest sense of team spirit.

Dialog Values

Service from the Heart

Create the Future

Champions of Change

Exceptional Performance

Uncompromising Integrity

Responsible Leadership

One Team

Scan the QR Code to directly access the Dialog Annual Report 2023 online

Scan the QR Code to directly access the Dialog Sustainability Report 2023 online

Introduction to the Company

Dialog Axiata PLC, a subsidiary of Axiata Group Berhad (Axiata), operates Sri Lanka's Leading Quad-Play Connectivity Provider. Dialog is Sri Lanka's largest Foreign Direct Investor (FDI) with investments totalling USD 3.26Bn.

The winner of six Global Mobile Awards, Dialog has had the distinction of being voted by Sri Lankan consumers as the 'Telecommunication Brand of the Year' for a record twelfth year at the SLIM-KANTAR People's Awards 2023. Dialog was awarded 'Sri Lanka's Most Valuable Brand' from 2019-2023 and 'Most Valuable Telecommunications Brand' for the sixteenth consecutive year by Brand Finance, UK.

Dialog is certified for ISO 9001 Quality Management System, ISO 27001:2013 Information Security Management System, and ISO 14001:2015 Environmental Management System. The Company became the first telecommunications service provider in the country to be awarded the ISO 27701 certification for Privacy Information Management Systems. Dialog has received numerous local and international awards, including the National Quality Award and Sri Lanka Business Excellence Award.

The Company was recognised at the ACCA Sustainability Awards and e-Swabhimani Awards for its outstanding digital inclusion and community investment initiatives. Dialog endorses the worldwide Sustainable Development Goals (SDGs) which aim to build a sustainable future for all by 2030.

Dialog has been at the forefront of innovation and digitisation in the mobile industry in Sri Lanka since the late 90's, propelling the nation's mobile telephony infrastructure to a level of advancement on par with the developed world. The Company delivers advanced mobile telephony and high-speed mobile broadband services to a subscriber base of over 17 Mn Sri Lankans. Dialog is rated as the fastest mobile network, with the Company being adjudged the overall winner across multiple dimensions, including Video Experience,

Live Video Experience, Games Experience, Voice App Experience, Download Speed Experience, Upload Speed

Experience, Availability, 4G Availability and Consistent Quality by a leading thirdparty crowdsourced network experience measuring agency. As the market leader in Pay Television and Home Broadband sectors, Dialog provides world-class entertainment services and superior fixed connectivity to millions of households across Sri Lanka. The Company also has a strong international footprint, including roaming partnerships with over 650 operators across over 200 destinations and investments in multiple subsea cables across Asia. The Company forayed into new digital frontiers, spearheading technology firsts in South Asia and Sri Lanka with the commissioning of South Asia's first fully functional and standards-compliant 5G pilot transmission.

Dialog Axiata supplements its market-leading position in the Mobile Telecommunications sector with a robust footprint and market presence in Sri Lanka's Fixed Telecommunications, Digital Pay Television, Digital Services, Financial Services through its subsidiaries, Dialog Broadband Networks (Private) Limited (DBN), Dialog Television (Private) Limited (DTV), Digital Holdings Lanka (Private) Limited, Dialog Finance PLC, H One (Private) Limited, Dialog Network Services (Private) Limited and Dialog Business Services (Private) Limited.

Annual Report 2023

1

Message from the

Chairman

David Nai Pek Lau

Chairman/Non-Independent,Non-Executive Director

"Our commitment to leveraging advanced technology and digital innovation remains unwavering, as these are crucialin adapting to the dynamic needs of our customers and supporting the socio-economicadvancements of our nation."

2	Dialog Axiata PLC

"As the largest telecommunications service provider in

Sri Lanka, our commitment to investment in the nation has been unrelenting."

My dear Shareholders,

The year 2023 has been a transformative period for our nation and for Dialog Axiata. We witnessed the Sri Lankan economy making promising strides towards recovery, transitioning from the depths of the 2022 crisis. These improvements, coupled with a strengthening LKR against the USD, carved the path for recovery, albeit with high vigilance on the prevalent socio-economic sensitivities, including continued pressure on consumer spending due to rising essential costs and new tax impositions.

Despite these hurdles, Dialog Axiata not only navigated through these challenges but also strategically positioned itself to capitalize on emerging opportunities. This backdrop of recovery has played a pivotal role in our journey, marking 2023 as a year where Dialog not only rebounded but also set new benchmarks in resilience and innovation.

PERFORMANCE HIGHLIGHTS

2023 was a turnaround year for Dialog Axiata. From a loss of Rs. 33.4Bn in 2022, we achieved a significant Group Net Profit After Tax (NPAT) of Rs. 20.1Bn in 2023. This remarkable recovery was driven by across- the-boardtop-line growth in all business segments, mainly from Mobile, Fixed Broadband and Enterprise businesses, culminating in a consolidated revenue of Rs. 187.8Bn, marking a 5% growth over 2022.

Our focus on rigorous cost management and operational efficiencies further bolstered our financial health, allowing us to contain the total operating cost increase to 3% Year-on-Year (YoY). Additionally, the appreciation of the LKR against the USD helped reduce expenses denominated in USD. The cost transformation initiatives started in earlier years continued to bear fruit, saving us Rs. 16.6Bn in 2023 alone.

Our EBITDA increased by 19% to Rs. 61.5Bn, driven by our strategic measures such as effective churn management, the delivery of innovative and affordable service packages, excellent network quality, cost management and enhanced customer experience.

INVESTING FOR THE FUTURE

As the largest telecommunications service provider in Sri Lanka, our commitment to investment in the nation has been unrelenting. In 2023, we further solidified our position as the nation's largest Foreign Director Investor (FDI) with investments totalling USD 3.26Bn to date. This was recognised by the Sri Lanka Board of Investment (BOI) in the special award presented by the President to Dialog in April 2024. This investment has not only expanded our infrastructure but also enhanced our capabilities to deliver cutting-edge technology and services across the island.

Annual Report 2023

3

Message from the Chairman

"At Dialog, our commitment to pioneering advancements in technology and creating long- term value for our stakeholders remains at the heart of our mission."

Our journey in 2023 was underpinned by a commitment to operational excellence and strategic foresight. We have remained focused on maintaining our leadership as the largest telecommunications service provider in Sri Lanka, serving over 17 million customers. Our dedication to delivering exceptional service quality and innovative digital solutions has been recognised nationally and internationally, as evidenced by retaining our status as Sri Lanka's 'Most Valuable Brand', as recognised by Brand Finance UK for the fifth consecutive year and being voted the 'Telecommunication Brand of the Year' by Sri Lankans at SLIM-KANTAR People's Awards for a record twelfth consecutive year.

INNOVATIONS AND COMMITMENT TO LONG-TERM VALUE CREATION

At Dialog, our commitment to pioneering advancements in technology and creating long-term value for our stakeholders remains at the heart of our mission. As we embrace the transformative potential of 5G, our efforts in 2023 have set new benchmarks in connectivity, innovation, and customer experience.

During the year under review, we extended the reach of our 5G trial network, which now empower over 200,000 Sri Lankans across diverse regions

to experience the power of 5G. In addition, our customers can enjoy seamless 5G roaming with over 100 operators in more than 50 destinations worldwide, a reflection of our commitment to ensuring continuous connectivity, no matter where they are.

2023 also marked significant advancements with the successful completion of South Asia's first 5G Standalone (5G SA) network trial in Sri Lanka, and the pioneering Voice over New Radio (VoNR) on our standalone 5G network. These breakthroughs are crucial in transitioning towards a fully autonomous 5G ecosystem, offering unprecedented speeds and latency improvements.

Our ongoing enhancements in Digital Services across FinTech, HealthTech, EduTech, and InsurTech reflect our responsive adaptation to increased digital demands. These sectors, vital for socio-economic progress, have seen substantial growth and will continue to benefit from our strategic focus.

Further, this year has seen the strategic reorganisation of Dialog Business Services and Dialog Network Services, aligning our operations more closely with the evolving needs of our customers.

SHAREHOLDERS

Our commitment extends beyond innovation to value creation for our shareholders. Accordingly, we are pleased to propose a dividend of 1.34 Rupees per share, maintaining a payout ratio of 55%.

This balance of reinvestment in our business and reward to our shareholders underpins our strategic vision for sustainable growth and shareholder value enhancement. As we look ahead, our journey is shaped by our unwavering dedication to excellence, innovation, and the belief that through technology, we can transform lives, foster sustainable development, and contribute significantly to a digital future.

ESG - FULFILLING OUR PURPOSE

As we reflect on the year 2023, Dialog has once again demonstrated resilience and commitment towards advancing our core values, particularly in the domain of environmental, social, and governance (ESG) stewardship. Our purpose-driven agenda supports not only our vision of empowering and enriching Sri Lankan lives and enterprises but also our mission to deliver 'The Future. Today'.

4	Dialog Axiata PLC

PROGRESS IN ENVIRONMENTAL STEWARDSHIP

This year, Dialog made significant strides in environmental sustainability, a testament to our commitment to 'Greening the Blue'. We achieved a major milestone by implementing 776 solar sites, adding a capacity of 4,719.095 kW. Our journey included 765 new solar installations and enhancing 11 sites, further reducing our carbon footprint by 8,255.13 tCO2e. These efforts align with our annual target set for zero carbon increase in 2024. As a committed leader in environmental advocacy, we have established a bold target of reaching net zero CO2 emissions by 2050. To pave the way, our initial milestone involves achieving a 45% reduction in carbon emissions by 2030.

COMMUNITY EMPOWERMENT

On the social front, Dialog continues to be a pillar of strength for the community. Our crowdfunding platform, Karuna.lk, now supports over 200 causes, demonstrating our commitment to leveraging digital platforms for societal impact. The Manudam Mehewara initiative continued with a Rs. 324Mn commitment, extending aid to 120,000 families, aligning with our goal to uplift and empower communities.

Our educational initiatives have been particularly impactful, with the Dialog Foundation focusing on connecting 458 schools in the plantation sector to Nenasa TV. Furthermore, the Dialog Merit Scholarship programme awarded scholarships to 158 outstanding students, reinforcing our investment in the future leaders of our nation.

Dialog's dedication to inclusivity saw the relaunch of www.yeheli.lk, providing access to critical advice on health and legal matters, and the introduction of a trilingual DeafTawk app, a pioneering step towards integrating the hearing-impaired community more closely with society.

"Our purpose-driven agenda supports not only our vision of empowering and enriching Sri Lankan lives and enterprises but also our mission to deliver 'The Future. Today'."

UPHOLDING STRONG GOVERNANCE

In governance, Dialog has strengthened its frameworks significantly. Our Anti-Bribery and Anti-Corruption (ABAC) function now features a Chatbot, enhancing accessibility and effectiveness. I am pleased to note that in 2023, we achieved an 83% score in the Effectiveness Testing which evaluates the effectiveness of Dialog's ABAC programme in mitigating corruption risks and fostering an integrity-driven culture.

We also launched the 'Dialog International Anti- Corruption Day 2023' under the theme 'Being True to Uncompromising Integrity', fostering a culture of transparency and ethical conduct across our operations. Our Risk Compass platform aligns with ERM guidelines, ensuring a systematic approach to risk management, which is critical for maintaining the integrity of our operations.

DATA PRIVACY AND CYBERSECURITY

Our commitment to data security and privacy remains unwavering. Dialog was the first telco in Sri Lanka to achieve the ISO 27701:2019 PIMS certification, underscoring our dedication to protecting personal information. We also upgraded our ISO 27001:2013 ISMS certification, reaffirming our status as a leader in cybersecurity, ensuring the protection of critical customer information.

Annual Report 2023

5

Message from the Chairman

"Through collaborative efforts with various stakeholders and our dedication to community development, we aim to reinforce our role in propelling Sri Lanka towards a digitallyinclusive future."

Our commitment to leveraging advanced technology and digital innovation remains unwavering, as these are crucial in adapting to the dynamic needs of our customers and supporting the socio-economic advancements of our nation. Through collaborative efforts with various stakeholders and our dedication to community development, we aim to reinforce our role in propelling Sri Lanka towards a digitally inclusive future. As we embrace these new ventures, our resolve to empower and enrich Sri Lankan lives and enterprises continues to be the cornerstone of our mission.

CULTIVATING EXCELLENCE THROUGH TALENT DEVELOPMENT

In our ongoing journey towards becoming a leading Digital Telco, we've sustained our dedication to cultivating a supportive and inclusive culture.

This year, we've significantly advanced our talent management strategies and HR digitisation, prioritising the development of future leaders and enhancing staff productivity. Our efforts have not only enriched the employee experience but have also reinforced our commitment to listening and responding to our workforce, ensuring we remain the preferred employer in our dynamic industry.

FUTURE OUTLOOK

Looking ahead, Dialog Axiata is poised to face the many challenges of 2024, but see significant opportunities following the landmark consolidation

of Dialog Group and Bharti Airtel Limited in Sri Lanka. This strategic union will reshape the telecom sector's landscape, allowing us to harness our combined strengths. We are set to enhance our offerings in high-speed broadband, superior voice, and innovative value-added services. Through economies of scale and reduced infrastructural redundancies, we expect to achieve notable cost savings and operational efficiencies.

CHANGES TO THE BOARD

Reflecting on the past year, we are deeply saddened by the untimely passing of our esteemed board member, Mr. Azwan Khan Osman Khan, on May 13, 2023. Mr. Azwan Khan joined the Board in July 2020 and had previously served on the Board of Dialog from 2009 to 2012. In addition, his exemplary leadership as Group Chief Operating Officer of Dialog from 2013 to 2016 showcased his passion towards our collective mission. His unwavering dedication and inspiring leadership left an indelible mark on our company, and we will continue to honour his legacy.

On behalf of the Company, I extend my heartfelt thanks to Dato Dr Nik Ramlah Nik Mahmood and Mr. Vivek Sood, who stepped down from the Board in October 2023 and February 2024 respectively, for their unwavering leadership and wise counsel. I also wish to extend my sincere gratitude to Deshamanya Mahesh Amalean, who served in the capacity of an Independent Director since 2014, for his invaluable counsel and his contribution to the Board and Company. Deshamanya Amalean will be stepping down from the Board at the forthcoming Annual General Meeting. Collectively, they have given over 20 years to Dialog, making significant contributions to the Board through their guidance and insights, especially on strategic matters, government relationships and customers' interaction.

6	Dialog Axiata PLC

I also wish to warmly welcome Mr. Thomas Hundt, who was appointed to the Board in February 2024. His vast management expertise and insights will be crucial as we strive for greater excellence. In addition, congratulations to Dr. Hans Wijayasuriya for receiving the GSMA Chairman's Award at the Mobile World Congress in Barcelona, Spain, recognising his remarkable impact on global mobile communications.

APPRECIATION

In retrospect, it is with immense pride that we acknowledge the resilience, passion, and remarkable achievements of our team. Despite the ongoing challenges, their steadfast dedication has not only sustained but propelled our progress, reinforcing our commitment to innovation and excellence. I extend my deepest thanks to the entire Dialog team, under the inspirational leadership of our Group Chief Executive, Mr. Supun Weerasinghe, whose visionary guidance has been a cornerstone of our success. It is a privilege to collaborate with such a formidable group as we continue to navigate obstacles with determination and contribute significantly to both our company's success and the advancement of our nation.

I am equally grateful to our business partners, whose relentless efforts and cooperation have been crucial during this period. We also owe a profound debt of gratitude to our customers, who remain at the heart of our mission, for their ongoing trust and partnership as their preferred digital provider. Our journey towards ambitious digital milestones is buoyed by the enduring support and confidence of our shareholders, for which we are profoundly thankful.

Furthermore, our appreciation extends to the Government of Sri Lanka and its various entities, including the Telecommunications Regulatory Commission of Sri Lanka (TRCSL), the Central Bank of Sri Lanka, the Ministry of Technology, the Board of Investment of Sri Lanka, the Information Communication Technology Agency, and the Ministry of Mass Media and Information, for their consistent support and collaboration.

Lastly, I must express my sincere gratitude to my fellow Board Directors for their advice, steadfast guidance, and robust support, which have been instrumental in our mission to empower and enhance the lives and enterprises across Sri Lanka. Together, we look forward to a future filled with opportunities and continued growth in delivering "The Future. Today".

David Nai Pek Lau

Chairman

30 April 2024

Annual Report 2023

7

Group Chief Executive's

Review of Operations

Supun Weerasinghe

Director / Group Chief Executive

"We continue to play a pivotal role in Sri Lanka's digital transformation journey, significantly contributing to the nation's development and prosperity. Our initiatives have further narrowed the digital divide, fostering a digitally inclusive society that benefits all."

8	Dialog Axiata PLC