001 eng final - telekom

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Contents:

1. Company Profile – History

2. Mission Vision Statement

3. CEO's introduction

4. Board of Directors of MT

5. Management Committee

6. Fixed Line Segment

7. Business Solutions

8. Internet

9. Mobile Segment

10. Marketing

11. Network Infrastructure

12. Information Technologies

13. Human Resources

14. Social Commitment

15. Financial Highlights

16. Audit Report

4 Annual report 2002

AD “Makedonski Telekomunikacii” isa national telecom operator providing pub-lic telecommunication services in the Re-public of Macedonia. As a modern com-pany, which keeps apace of global trends,it offers its customers a comprehensive rangeof telecommunication services: telephonyservices, telegraph and telex services, pub-lic payphone services, leased-line services,mobile telephony services, data transmis-sion services, value-added services, direc-tory services, VSAT and other satellite ser-vices, and other services.

In order to fully satisfy the needs of itscustomers, to understand them, to servethem better and to get closer to them, MT`soperations are organized into the followingseparate Lines-of-business within MT:MTline, MTnet and MTcom, and Mobimak,the last of which, has been operating as aseparate legal entity - daughter company,since 1st June, 2001.

MT has undertaken significant devel-opmental measures in readiness to faceemerging competition in the telecommuni-cations market. Indeed, MT perpetuallystrives to implement new trend technologiesin our quest to achieve ever greater flexibil-ity and adaptability in meeting the needsof our customers and in strengthening ourcustomers’ confidence.

Our company’s major commitmentis to provide services suited to each andevery customer, satisfying all of their com-munication needs and requirements. In thisway, MT is evolving into a company that istruly close to its customers.

Company Profile

History

Prior to 1st January, 1997, MT’s pre-decessor company, under the name of PTTMakedonija, provided telecommunication,postal, savings-banking and other servicesin the Republic of Macedonia..

In accordance with a resolutionpassed by the Government of the Republicof Macedonia in 1996, PTT Makedonijawas divided into two new legal entities: ADMakedonski Telekomunikacii and ADMakedonski Posti. This became effective asof 1st January, 1997 and resulted in theseparation of postal services from those oftelecommunications and telegraphy and inthe division of all relevant assets and li-abilities.

In March, 1998, in order to praparefor privatisation, the Company was regis-tered as a joint stock company in publicownership.

On 15th January, 2001, the Govern-ment of the Republic of Macedonia and aConsortium led by the Hungarian telecom-munication operator, Matáv, signed a con-tract for the acquisition of MT’s shares, bywhich Matáv entered MT’s shareholders’register as the owner of 51% of the shares,thus becoming the dominant owner of theCompany.

The shareholders structure of MT:Stonebridge (Matáv, Cosmotelco, SEEF)owns 51% of the shares, IFC owns 1,875%of the shares, and the Republic ofMacedonia owns 47,125 % of the shares,including the golden share.

1,875%IF C

51%Matav,Cosmotelco,SEEF.

47,125%Republic ofMacedonia

The shareholders structure of MT:

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Vision – Mission Statements

Our Vision

To become the best telecommunications operator in the region and to

expand our activities into other markets.

Our Mission

To satisfy the telecommunication needs of the people, businesses, andinstitutions of Macedonia and, thereby to enhance the quality of life.

To develop MT into a customer - oriented company, measuring oursuccess in terms of the quality of services we provide, the satisfaction level ofour customers, the rate of new customer acquisition, and the overall profit-ability of our company.

To promote and participate in the construction of an information societyin the Republic of Macedonia, and to promote this, as a regional model forthe “networked economy”.


Dear Shareholders, Customers, Partners and Employees,

2002 was a highly significant year for our Company’s operations: a year in which alldivisions of the Company exerted their maximum efforts towards the fulfilment of our BusinessPlan. Our Lines of Business attained strong market position and the Company’s functional areaswere equipped and trained to ensure optimum levels of support for our activities. In spite ofcomplex market conditions this year, the results we achieved in 2002 entitle us to announce withconfidence that our Company is moving in the right direction. To achieve our long-term businessobjectives, however, much scope for improvement still remains.

Financial results for the year ending 2002 show that total company revenues rose by 13%to MKD 16.9 billion. This increase was due, above all, to the strong growth of the mobile phonebusiness sector. MT Group EBITDA revenues amounted to MKD 9.2 billion, with a margin reach-ing 54.5% as a result of revenue growth.

Evaluation of the performance of MT Group companies for the year 2002 clearly indicatedthe positive financial status of MT and showed that net income was sufficiently high to enablepayment of dividends. Based on the precise calculations of the Company’s management -takinginto account the Company’s future prospects and developmental requirements as well as theinterests of MT’s major shareholders- the Company’s owners unanimously decided to pay divi-dends to the amount of approximately EUR 40 million in three instalments throughout 2003. Thisdecision was incorporated in the relevant Resolutions of both the Board of Directors and theShareholders’ Assembly.

The results we achieved in 2002 were highly satisfactory. This successful financial perfor-mance is reflected in our dividend payments and we trust that our shareholders will share oursatisfaction. The successful performance of our Company is of indisputable benefit to theMacedonian economy as a whole and thus, indirectly, brings advantages to all its citizens aswell.

Regarding the Lines of Business, I am pleased to announce that MTline connected 48,742new subscribers in 2002. The rate of digitalisation reached 96% in Macedonia and 100% inSkopje, while the penetration rate reached 28%. In the field of Internet services, we doubled ourInternet customer base (including MTnet pre-paid customers) and maintained our dominantposition in the Internet market, covering over 50% of the market share. MTcom, meanwhile,established itself as a powerful player in providing integrated business solutions, increasing itsrevenue from business-leased lines by 12% compared to 2001, and upping revenue from datatransmission services by 34%. The last quarter of 2002 also saw the commencement of ourprogramme of new public payphone installations, a programme we expect to be completed in2003.

The implementation of two major projects related to the quality of customer service provi-sion began in 2002: the introduction of a new Billing System and the establishment of MT’s firstCall Centre. Both of these projects reflect our strong commitment to increasing levels of customersatisfaction. 2002 was an excellent preparatory year for these projects, all of which are planned tobe launched in 2003.

Attila SzenderiChief Executive Officer of MT

CEO`s Introduction

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These projects form part of our wider endeavour to reshape our organisational structure inorder to transform MT from a technical company into a consumer-driven, market-oriented com-pany. Faced with the rapid emergence of market competition, the way ahead must lie in keepingpace with change and in devoting our efforts towards making MT a commercially viableorganisation that will continue to thrive in a competitive commercial environment. MakedonskiTelekomunikacii must continue to evolve if it is to gain domestic and international recognition asa successful, efficient and profitable company providing optimum services tailored to the needs ofits customers. Such evolution must apply to all areas of our organisation. This requires ourCompany to undertake restructuring measures both internally and externally.

As part of our efforts to achieve these changes, 2002 witnessed the introduction of our‘Road to Success’ programme: a set of measures which will be fully implemented in 2003. Thisprogramme aims at a reassessment of all current Company activities; analysing and dividingthese according to whether they are deemed non-core business support activities, value-addingactivities, or non-value adding activities. Those activities which are identified as non-value add-ing - either for the Company or for its customers - and for which customers are unwilling to pay,will be terminated. Non - core business support activities are henceforth to be outsourced.

The ‘Road to Success’ programme will serve to determine the key aims and steps which ourCompany must adopt and undertake over the years ahead. The programme will involve theparticipation not only of the Company’s management but also of MT’s employees, the mostvaluable resource we possess in our endeavour to achieve our Company’s goals.

With regard to Human Resources we should first reiterate that our employees remained themoving force behind the Company’s success in 2002. In line with this perception, our Companypresented special awards at the end of the year to those personnel who had demonstrated ex-traordinary achievement. Long-service awards were given, too, rewarding those colleagues whohave worked loyally with the Company for more than 15 years.

In a further drive to maximise overall operational efficiency, the Company undertook amanagement headcount survey this year and introduced an early-retirement programme.

We have achieved a very fruitful, cooperative relationship with the Trade Union of MT, andin 2002 we succeeded in reaching agreement on several issues in dispute. A significant stepforward in Company-Trade Union relations was taken in our signing of the Collective Agreement:a central document related to the rights and responsibilities of Company employees and theiremployer.

2002 saw the Company continue its active participation in Macedonian society and itscontributions to social issues through Company donations and sponsorships in many differentareas of social life. One project worthy of special mention is that of MT’s sponsorship of therestoration of Samuil’s Fortress in Ohrid, a building of great significance to Macedonia’s culturalheritage.

Attila SzendreiChief Executive Officer of MT


MT’s Board of Directors

The bodies of MT comprise the Shareholders’ Assembly and the Board of Directors. Inaccordance with the provisions of the Shareholders’ Agreement and Statute of MT, the Board ofDirectors has performs managerial, leading function, and is composed of 9 non-executive mem-bers and one executive member, the Chief Executive Officer (CEO).

Borce DavitkovskiBorce DavitkovskiBorce DavitkovskiBorce DavitkovskiBorce Davitkovski, PresidentRepresentative of the Republic of Macedonia. He has been a non-executive member andPresident of MT’s Board of Directors since 3rd December, 2002.

Gavrilo DzikovskiGavrilo DzikovskiGavrilo DzikovskiGavrilo DzikovskiGavrilo Dzikovski, member.Representative of the Republic of Macedonia. He has been a non-executive member of MT’sBoard of Directors since 3rd December, 2002.

Asan JakupiAsan JakupiAsan JakupiAsan JakupiAsan Jakupi, member.Representative of the Republic of Macedonia. He has been a non-executive member of MT’sBoard of Directors since 3rd December, 2002.

Simo GruevskiSimo GruevskiSimo GruevskiSimo GruevskiSimo Gruevski, member.Representative of the Republic of Macedonia. He has been a non-executive member of MT’sBoard of Directors since 3rd December, 2002.

Horst HermannHorst HermannHorst HermannHorst HermannHorst Hermann, member.Representative of Stonebridge AD. He has been a non-executive member of MT’s Board ofDirectors since its constitution, in January, 2001.

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Stavros Nikos StavridisStavros Nikos StavridisStavros Nikos StavridisStavros Nikos StavridisStavros Nikos Stavridis, member.Representative of Stonebridge AD. He has been a non-executive member of MT’s Board ofDirectors since its constitution in January, 2001.

Siegfried PleinerSiegfried PleinerSiegfried PleinerSiegfried PleinerSiegfried Pleiner, member.Representative of Stonebridge AD. He has been a non-executive member of MT’s Board ofDirectors since September, 2001.

RRRRRonald Oonald Oonald Oonald Oonald O. Drake. Drake. Drake. Drake. Drake, member.Representative of Stonebridge AD. He was elected non-executive member of MT’s Board ofDirectors in March, 2001.

Bence VBence VBence VBence VBence Varady - Szaboarady - Szaboarady - Szaboarady - Szaboarady - Szabo, member.Representative of Stonebridge AD. He was elected non-executive member of MT’s Board ofDirectors in September 2002.

AAAAAttila Szendreittila Szendreittila Szendreittila Szendreittila Szendrei, executive member.He was appointed Chief Executive Officer of MT and elected executive member of MT’s Boardof Directors in September 2002.

Danilo GligorovskiDanilo GligorovskiDanilo GligorovskiDanilo GligorovskiDanilo Gligorovski was a member and Chairman of the Board of Directors of MT until December 2002.Zamir DikaZamir DikaZamir DikaZamir DikaZamir Dika was a member of the Board of Directors of MT until December 2002.Slobodan DanevskiSlobodan DanevskiSlobodan DanevskiSlobodan DanevskiSlobodan Danevski was a member of the Board of Directors of MT until December 2002.Krale SpancevskiKrale SpancevskiKrale SpancevskiKrale SpancevskiKrale Spancevski was a member and president of the Board of Directors of MT until December 2002.Istvan SzaboIstvan SzaboIstvan SzaboIstvan SzaboIstvan Szabo was a member of the Board of Directors of MT until September 2002.John MunneryJohn MunneryJohn MunneryJohn MunneryJohn Munnery was an executive member of the Board of Directors and CEO of MT until September 2002.

By a Resolution of the Government of the Republic of Macedonia, Taki Fiti was elected a Government representative on 25th

November, 2002. At the Shareholders’ Assembly meeting dated 3rd December, 2002, Taki Fiti was elected President of the Assembly.In 2002, Lambe Arnaudov was Chairman of the Shareholders Assembly of MT.


MT Management Committee 2002

The Management Committee of MT has the authority delegated by the Board of Directors aswell as authority regarding the day-to-day activities of MT’s operation, in order to ensure accu-racy and efficiency in the functioning of the Company. The members of the Management Com-mittee are the Chief Executive Officer, the Chief Functional Officers, and the Business ExecutiveDirectors of MT’s Lines of Business.

Attila Szendrei, Chief Executive OfficerAttila Szendrei, Chief Executive OfficerAttila Szendrei, Chief Executive OfficerAttila Szendrei, Chief Executive OfficerAttila Szendrei, Chief Executive OfficerHe holds a BSc. Degree in Technical and Economic Engineering. After working in Aluterv inHungary, he spent 16 months in Libya. He has held top managerial positions in the large Hun-garian companies, Videoton and Zwack Unicum. He later joined Matáv Group as Chief Execu-tive Officer of Matavkabel TV. He was appointed CEO of MT and was elected an executivemember of MT’s Board of Directors in September 2002.

Bence VBence VBence VBence VBence Varadyaradyaradyaradyarady-----Szabo, Chief FSzabo, Chief FSzabo, Chief FSzabo, Chief FSzabo, Chief Financial Officerinancial Officerinancial Officerinancial Officerinancial OfficerHe gained a BSc. Degree in Economics from Budapest University of Economic Sciences, andspecialised in Economic Law at ELTE, Budapest. In his five years with Matáv Ltd., he worked inthe Treasury Department, in the Investment Portfolio, and as Deputy Director in the StrategyDepartment. He joined MT as CEO of Telemacedonia, and in March 2002 he was appointedChief Financial Officer of MT.

Bela KBela KBela KBela KBela Kozma, Chief Tozma, Chief Tozma, Chief Tozma, Chief Tozma, Chief Technical Officerechnical Officerechnical Officerechnical Officerechnical OfficerHe holds a BSc. Degree in Electronic Engineering and Telecommunication Engineering. He be-gan his career as a network planner and expert in the Budapest Area Directorate, Magyar Posta,in 1981. In 1985 he was promoted as a senior expert in the Telecommunications Branch at theHQ of Magyar Posta. In 1987 he became a group leader in ETAS, Austria TelekommunikationGmbH, Wien. He joined Matáv Ltd. in 1990 as Head of Department in Matáv Ltd Headquarters.In 1993 he was promoted to the position of Director of Operations and Maintenance Directorateand in 1999 he was appointed Deputy CTO of Matáv Ltd., later to become Director of PKITelecommunications Development Institute, directing the network development, network planningand technical product development activities of Matáv Ltd. He joined MT as Chief TechnicalOfficer of MT in March, 2001.

Ildiko MagyarIldiko MagyarIldiko MagyarIldiko MagyarIldiko Magyar, Chief Marketing Officer, Chief Marketing Officer, Chief Marketing Officer, Chief Marketing Officer, Chief Marketing OfficerShe holds a BSc. Degree in Electronic and Economic Engineering as well as being certified as anISO auditor, Technical Controller and Change Management Consultant. She worked as a re-searcher and chief wireless collaborator in Hungarian PTT. She then acted as a representative ofseveral French companies (TRT (Philips, LUCENT), Thomson, Dassault,) in Hungary. Before join-ing MT, Ms. Magyar was the director and chief owner of a wireless installation company(NMT,GSM, Micro). She joined MT in March 2002 in the post of Chief Marketing Officer.

11Detail from Embrodery work on the bride’s veil (Sokay) - region of Debartsa

Darko Madzoski, Chief Human Resources OfficerDarko Madzoski, Chief Human Resources OfficerDarko Madzoski, Chief Human Resources OfficerDarko Madzoski, Chief Human Resources OfficerDarko Madzoski, Chief Human Resources OfficerHe graduated from the Faculty of Law, Skopje University, in 1989. His 12-year professional careerbegan as a project manager in the Swedish company, “Punkten AB”, and he progressed invarious positions within the field of PR and marketing. Over the following six and a half years heheaded two multinational companies operating in Macedonia, British American Tobacco andUnilever, as country manager with wider regional responsibilities. He joined MT in January 2002as Chief Human Resources Officer.

Kiril TKiril TKiril TKiril TKiril Trendafilovrendafilovrendafilovrendafilovrendafilov, Business Executive Director of MT line, Business Executive Director of MT line, Business Executive Director of MT line, Business Executive Director of MT line, Business Executive Director of MT lineHe holds a BSc. Degree in Electrical Engineering & IT, and has led IBM seminars (DB administra-tion, system engineer, CICS ). In 1993 he worked in the IT Department of Zastava HTD-Ohrid.After working in Plima-Ohrid as a Programmer in Applications Development, he returned toZastava AGP-Ohrid as an Assistant to the CEO for IT. In 1999, he returned to Plima as GeneralManager. In 1999, he joined MT as a Regional Centre Director based in Ohrid. In March 2000,he was promoted to the post of Chief Operational Officer of MT and in 2002 he was appointedBusiness Executive Director of MTline, which is the fixed telephony centre of MT.

Ognen FOgnen FOgnen FOgnen FOgnen Firfovirfovirfovirfovirfov, Business Executive Director of MTnet, Business Executive Director of MTnet, Business Executive Director of MTnet, Business Executive Director of MTnet, Business Executive Director of MTnetHe holds a BSc. Degree in Electrical Engineering, and an MSc. Degree in Computer Science. Heworked as an Assistant Programmer in EMO Avtomatika & Elektronika between 1991 and 1994.In 1994, he occupied the same position in PTT Macedonia in the City Phone Department. From1996 until 1998, he worked as System Engineer in PTT Macedonia in the TelecommunicationDepartment. He was promoted to the Directorship of MT’s MTnet Line-of-Business in July 1998.Within the new organisational structure, he now holds the position of Business Executive Directorof MTnet, the Company’s Line of Business which covers Internet Business.

TTTTToni Roni Roni Roni Roni Rusomarovski, Business Executive Director of MTusomarovski, Business Executive Director of MTusomarovski, Business Executive Director of MTusomarovski, Business Executive Director of MTusomarovski, Business Executive Director of MTcomcomcomcomcomHe holds a BSc. Degree in Telecommunications. During his career with MT he has written anumber of scholarly papers and led seminars at international conferences. Before joining MT heworked on the system design and programming of micro-controllers. He has been with MT formore than 8 years now. He worked as Director of the Sales Department and -prior to this- heldvarious different engineering positions related to network planning. He has been Business Execu-tive Director of MTcom, MT’s centre for business customers, since its establishment in April 2001.


Fixed Line Segment – MTline

MTline is a separate line-of-businesswithin MT encompassing residential cus-tomer-related business and SME fixed tele-phony customer-related business. One ofthe core segments of the organization,MTline carries forward the company’s strat-egy of increasing our customer orientationwith an emphasis on the Sales and Cus-tomer Care segment, supported by the In-ternational Carrier Relations, Controllingand Technical Support, as well as the Pub-lic Payphones.

In 2002 the introduction of our newSales and Customer Care concept was iden-tified as fundamental to the improvementof the quality of our services and customerrelations. In 2002, therefore, a project forthe implementation of new Call Centre ser-vices was completed, signalling a new di-rection in the manner in which we serveour customers, together with the introduc-tion of the initial phase of people training.A Data Transparency and Network Provi-sion Project was also completed. In thesphere of sales activities, 2002 witnessedthe adoption by MTline of the concept ofDirect Sales Agents and the introduction ofvalue-adding services provision through MTshops. The aim of these measures is that ofproviding customers with comprehensiveservice at one-stop customer care and salespoints employing standardized proceduresin uniformly designed shops throughout theentire territory of the Republic of Macedoniaas part of our overall drive towards achiev-ing better and more direct communicationwith our customers. With respect to the pro-vision of customer complaint procedures,14 first-instance committees were formedacross Macedonia in 2002 . In the sameyear, the 988 operator service establisheditself as an example to most of the Depart-ments in MT which can withstand compari-son of its operational standards to those ofother European operators.

In the Republic of Macedonia, MT isthe sole provider of basic telephony services

in national, long-distance and internationaltraffic, including ISDN services, additionalservices, and public payphone provision.MTline consistently attends to the needs ofits customers, providing up-to-date servicesof the highest available quality. In 2002MTline connected 48,742 new subscribers.

MTline undertook substantial prepa-ratory activities in 2002 with a view to maxi-mizing our adaptability to technologicalchanges and to further enhancing our ca-pacity to meet customers’ needs as com-prehensively as possible. In this direction,MTline has proved itself innovative in cre-ating and packaging new services in linewith customers’demands as part of ourfulfilment of the Company’s Business Plan..An additional target for MTline in 2002 wasthat of providing additional services, ofvalue-adding services, of increasing ISDNsales, and of “leave the message” services.At the end of 2002, we launched acampaignfor package-sales of a new at-tractive ISDN 2 offer and thereby increasedthe number of ISDN subscribers.

International telephone traffic fromMacedonia towards the rest of the world isorganised via direct links with 22 countriesto more then 30 destinations. In total, MThas 2,605 international circuits. MT’s in-ternational terrestrial links are based on SDHtransmission technology. These new directcircuits are with Skopje-Brussels 30NO1.At the beginning of the year we expandedexisting capacity with DCME; expandedcapacity Italy, Skopje via Milan 30NO4;Hungary, Skopje via Budapest 30 NO3;Serbia and Montenegro, Stip via Belgrade30 NO3, 30 NO4. Reduced capacity withSkopje via Vienna 30NO1; Skopje via Sofia30NO3; Greece-Skopje via Athens (GreeceTelecom, 240 circuits with DCME 1:8);Skopje via Rome 30MO2; Skopje viaLjubljana 30NO2; a satellite link via Swit-zerland.

Twenty percent (20%) of the interna-tional telephony traffic is provided via sat-‘97 ‘98 ‘99 ‘00 ‘01 ‘02

40.529

31.392 31.805

36.334

31.191

48.742

Net New Subscribers

13

ellite links, while the remainder travels viaoptical fibers. With each neighboring coun-try, the Republic of Macedonia has achieveda large capacity of international trunks, pro-viding links with telecommunication net-works in Europe and with the rest of theworld.

The Public Payphones Centre, withinMTline, is the first and sole operator of pub-lic payphones employing smart cards in theterritory of the Republic of Macedonia.

In 2002, 1,890 functioning publicpayphones had been installed throughoutthe entire territory of Republic of Macedonia.The public payphones are the product ofNortel and the supervision computer is aproduct of the Tandem company. In orderto upgrade our provision of this service toour customers, 2002 saw the initial phaseof the replacement of existing publicpayphones by a new Marconi system ofpayphones across the network. This projectis set to continue into the future. .

In 2002, MTline plans to undertakeactivities for the creation of more new pack-ages aimed at further increasing the num-ber of our subscribers. Focussing on cus-tomer care provision at the points of salesmentioned above, we are confident that wewill achieve yet greater flexibility in meetingthe needs of our customers.

Detail from Embrodery work on the bride’s veil (Sokay) - region of Struga


Business Solutions – MTcom

As a business unit of MT, establishedto provide integrated communication so-lutions, MTcom is dedicated to serving themarket of key business customers inMacedonia. This entails providing flexibleand dynamic offer of customized servicesto our clients, together with offering verticalmarkets solutions.

One of the business market sector,which has been attracted to MTcom’s solu-tions for developing corporate WANs basedon new digital technologies is that of thepublic sector, within which MTcom imple-mented IP and ISDN solutions for corpo-rate networks and also concluded two im-portant long-term contracts. MTcom oper-ated successfully within the financial sectorof the market providing IP VPN and digitalleased lines solutions for corporate net-works. As a result, revenue from leased linesand data transmission services increasedin 2002.

Revenue from business leased-lineservices in 2002 reached 102,273,000MKD, representing an increase of 12% over2001. If the revenue from the interconnec-tion leased lines with MobiMak is added tothe previous amount, the total revenue fromleased - line services amounts to 411,246,000MKD.

Thanks to the implementation of IPVPN solutions, the revenue from datatransmission services increased by 34% in2002.

In 2002, MTcom performed prepara-tory work on the launching of a campaignfor the encouragement of migration fromanalog leased lines to digital leased lines.Favourable conditions were offered to cus-tomers as incentives for migration and thefirst migrations took place in 2002. Themigration from analog to digital leased lineswill continue throughout 2003, further rais-ing the quality of this service.

As part of MTcom’s flexible range ofservices, we designed and implemented so-lutions during the 2002 election period for

the temporary needs of relevant governmentinstitutions (MTcom provided IP-based store-and-forward video signal transmission forthe Broadcasting Council of RM and acustomised virtual IP-based RAS solution forthe National Election Committee).

In November 2002, MTcom em-barked upon a campaign offering PBX sys-tems with PSTN and ISDN BRI telephonelines, Internet access and maintenance.Varying customer needs were taken intoaccount and this underpinned our decisionto market our campaign under the banner,“Business solutions tailored for you”. Thisapproach proved highly successful. Dur-ing the first month of the introduction of theoffer, sales of PBX systems rose by as muchas 106%, while the increase for the secondmonth was 83%. Each PBX system was soldalong with a contract for two-year mainte-nance.

Plans for 2003 include expanding ourrange of integrated solutions and the imple-mentation of new services that will help fur-ther satisfy our business customers’ needs.

Revenue from data transmissionservices in MKD:

25 mill.

20 mill.

15 mill.

10 mill.

5 mill.

0‘01 ‘02

15

As a business unit of MT, establishedto provide integrated communication so-lutions, MTcom is dedicated to serving themarket of key business customers inMacedonia. That means providing flexibleand dynamic offer of customized servicesand offering vertical markets solutions.

Detail from Embrodery work on a collar & the chest of a woman’s shirt - region of Bitola, Gorni Sela


Internet - MTnet

General InformationMTnet was founded as part of

Makedonski Telekomunikacii in 1995. Thecurrent organisation structure is as follow-ing:

* Sales and Marketing Department* WEB Content and SW Develop-

ment Department* Technical Department* Controlling Department As both the largest and the highest

quality Internet provider in the Republic ofMacedonia, MTnet covers 56% of the mar-ket.

Services

Dial-up servicesMTnet offers a range of different pack-

ages and services to its dial-up customersincluding post-paid and pre-paid offers forboth residential and business customers.

o Post-paidFour different dial-up post-paid

packages, as an Internet solution for ev-eryone:

* Click – limited access* Surfer – for frequent surfers,and business users* Business 1 – 5 e-mail addresses

and web hosting up to 5 MB.* Business 2 - 10 e-mail addresses

and web hosting up to 10 MB.o Pre-paid* 5 hours E-card* 10 hours E-card* PC + Internet (consists of PC and

10 hours Internet access per month over a24 month period).

WEB servicesMTnet WEB services are divided into

the following categories according to thedifferent types of services on offer: buildingWEB pages and portals, hosting serviceson MTnet’s WEB servers, preparation andupdate of WEB sites and portals, WEB pro-

Market share

Other44%

MT Net56%

motions and advertising on the most vis-ited portal in Macedonia (www.mt.net.mk),and it’s affiliated WEB sites. MTnet also of-fers content oriented WEB services includ-ing an e-mail directory, telephone directory,advertising on MTnet, news, search MK, CityInformation, Business, and a Gift Shop.

o New web offer* Easy web1 – design tool for de-

sign of WEB pages up to 5 MB* Easy web2 - design tool for de-

sign of WEB pages up to 10 MBo Web hostingo Promotion and advertisement

through MTnet`s web page

Internet Direct AccessDuring 2002, as part of the business

plan, MTnet implemented two access plansfor Internet Direct Access, suited to busi-ness customers seeking permanent, rapidInternet access.

Marketing campaignsSeveral highly successful marketing

campaigns were launched by MTnet in2002:

* PC+Internet* Pre-paid eCard* New post-paid dial-up number* Relaunch PC+Internet* Joint Mobimak +MTNet Cam-

paign: e-cards in package* Post-paid PWG

SalesThe sales network of MTnet enables

direct sales of MTnet products and servicesthrough MT shops, MTnet corners, 17MobiMak shops and in MTnet cafesthroughout the whole of the Republic ofMacedonia. Indirect sales of e-cards to thewider market are also available.

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CustomersOther activities* Presence at the INFOCOM Fair* Two leased line action plans for

increasing the business customer base.* New Internet Café in Struga* New post-paid dial-up access

number* Co-branding and introducing of

e-snack as a product in the secondMcDonald’s restaurant in Skopje(Pedagoska) - fast Internet, fast service.

* New sales points* Participation at the 5 th CEI Sum-

mit - Economic Forum, as part of MT group* Acknowledgement of MTnet as an

authorised member of the Cisco PoweredNetwork.

SponsorshipsMTnet endeavours to raise awareness

of the importance of the Internet and of thesocial benefits the Internet affords to usersin the Republic of Macedonia. MTnet alsoprovides contributions and support to dif-ferent areas of social life through its spon-sorship activities:

* MTnet Junior Open –junior tennistournament

* McDonalds’ lottery* MobiMak price winning game* “Peace is …” - competition for

best poem and prose

Technical activities* Upgrading of routers and switchers* Dial-up post-paid access ports -

1080 and 120* Upgrading ports for direct access

Dial-up post-paid Dial-up pre-paid WEB IDA

1997 1.258 0 9 16

1998 2.679 0 2 1 3 0

1999 5.315 0 5 0 4 2

2000 9.854 0 178 51

2001 21.587 0 370 88

2002 34.098 18.938 569 124

1.258

2.679

5.315

9.854

21.587

34.098

18.938

50

21

9

178

370569

16

3042

51

12488

1997 1998 1999 2000 2001 2002

Dial-up post-paidDial-up pre-paidWEBIDA

Detail from Embrodery work on the sleeve of a woman’s shirt - region of Bitola, Gorni Sela


Mobile - MobiMak

2002 was the first full year forMobiMak - the Number One GSM opera-tor in Macedonia - following its separationfrom Makedonski Telekomunikacii. In thisyear, MobiMak concentrated primarly oncontinuing the job it began in 2001: that oftransforming MobiMak into a successfulstate-of-the art, customer and market ori-ented company that set out to achieve thehighest possible standards trough excellentquality services, close attention to its cus-tomers, its employees and the whole societyof Macedonia as well as trough financialresults that satisfy the expectations of itsshareholders.

The Company for Cellular Commu-nications MobiMak AD, through its multi-national management team and with thesupport of the main shareholders Matáv-Westel, Cosmotelco-InterAmerican and theMacedonian Government, has reached itsbest ever achievements in all the above-mentioned areas.

Our Philosophy: Quality, Reliabilityand Stability for the Customers

MobiMak is committed to providingquality in all areas of its business, fromthe network upwards through customer re-lations and all the way to financial and hu-man resources management. Serious ef-forts were made to develop our GSM net-work and to increase the quality of its op-eration, to introduce new services, tariffs andbenefits for our customers, to extend the dis-tribution network for the greater convenienceof our existing and future clients, to improvethe activity of the customer services, to up-grade the business supporting functions inInformation Technology and Finance & Ac-counting, to further reward our employeesfor their diligent work and to pay yet greaterattention to the special needs of the society.

We are committed to perpetual im-provement and to the application of bestpractices to our business. This philosophyhas helped us to increase the customer sat-

isfaction dramatically, and this is reflectedin consecutive quarterly results of the cus-tomer satisfaction measurement system,TRIM.

In recognition of these efforts,MobiMak received two special ackno-wledgements in 2002 for its results in theareas elaborated in detail in the report be-low. After thorough and indepth prepara-tion, MobiMak successfully passed the Fi-nal Audit of its quality assurance system on19th December and was presented with theISO 9001-2000 Certification by the Lloyds’Register Company. On the same day, onthe occasion of the European Market Re-search Forum 2002 in Brussels, MobiMakwas awarded the EuroMarket 2002 for “out-standing business performances and mana-gerial achievements while adapting inter-national standards in the field of telecommu-nications”. These acknowledgementsclearly demonstrate that MobiMak is mov-ing in the right direction and is adding valueto the Macedonian economy.

Network and infrastructureIn 2002, MobiMak proceeded with

the network development work begun in2001. In close cooperation with our strate-gic vendor, Ericsson, we built 81 base sta-tions and 27 repeaters. In this way MobiMakreached its original targets for 2002: 98%of the population and 90% territorial cov-erage. Simultaneously, the company car-ried out the installation of the StandaloneHLR and the implementation of the newPrePaid Strong system that facilitates newservices (replacing the old PrePaid Light).As in the previous year, MobiMak againincreased the switching capacity of the net-work in line with the dynamic growth trendof the customer base. Parallel to this exten-sive growth in capacity, we exercised sys-tem optimisation of our MSCs and BSCs inorder to better utilize the capacity. Thesedevelopment projects resulted in improvedquality parameters: network congestion of

0

500 1000 1500 2000

'96

'97

'98

'99

'00

'01

'02

BTSs

Sites

TRUs

Number

Year

16

16

102

37

35

197

50

48

253

108

87

560

177

126

950

290

198

1510

371

252

1996

Network & Infrastructure

19

less then 3%, total dropout of less then 3%,handover dropout of less then 2%, celldowntime at less then 1%. In cooperationwith Makedonski Telekomunikacii, we in-troduced the Fix GSM solution for fasteraccess and better service for fixed line cus-tomers.

These development projects are char-acteristic not only of MobiMak’s networkbut also of the company’s IT infrastructure.The IT Department provided full, functionalset-up and support for the new services,tariffs, discounts, as well as improving ITsecurity. They successfully completed imple-mentation of the new Mediation and Provi-sioning System, the Fraud ManagementSystem, the Call Centre and the MobiNetIntranet System, tightly integrating all sys-tem elements into one coherent structure.The IT Department also carried out an up-grade of the Voice Mail and Short Messag-ing System with new services and features,commenced an upgrade of the Billing Sys-tem and set up a Data Warehouse. In co-operation with Makedonski Telekomunikacii,a New Data Centre was established, pro-viding much better data storage, back-up,security and enhanced system resilience.

MarketingIn 2002, the key concepts driving our

marketing activity were those of: quality, ben-efits, comfort, state-of-the-art services andloyalty. We continuously sought to providemore and more services to our customersat better prices and conditions. The rewardfor this commitment and for our continu-ous endeavour to improve was seen inunprecedented rise in the number of newservices introduced in any one single year:Tandem Subscription, iSMS services, FlirtSMS service, GSM Pro (professional GSM-radio service), GSM adapter to handle callsfrom PABX to mobile phones, PrepaidRoaming, My Company (Closed UserGroup Service), USSD Balance Checkingfor prepaid customers, WAP service (in col-

laboration with our partners MTnet andOnNet) and web2sms service (also in co-operation with MTnet).

We are very proud that one of ouradvertising campaigns was the prize - win-ner at the Festival of Advertising in Maribor,while another (about the extremely suc-cessful SMS winning game named 15thGate) was selected by the BBC as rankingamongst the based available.

To increase the satisfaction of our cus-tomers we surprised them with several tariffinnovations: we cut international tariffs, re-duced the per-minute fees for prepaid cus-tomers by up to 15%, introduced lower tar-iffs for post-paid customers in mobile-to-mobile relation and provided them with theMyCircle (Friends and Family) discounts.Finally – at the end of the year – we ex-tended the validity of the prepaid vouchersand rewarded higher recharges with bo-nuses.

The exemplary Club 360 loyalty pro-gram continued in 2002 to reward keycustomers for their commitment and loyaltyto MobiMak. The Club 360 Magazine be-came one of the highest quality and mostpopular magazines in Macedonia. In themiddle of the year, a new benefit was addedto those already existing: Partner Programwhich provides valuable discounts on a hugenumber of products and in the network ofthe partners.

Customer Relations: Sales and Cus-tomer Service

Our vision of extending the distribu-tion network for the convenience and satis-faction of our existing and future customersresulted in a simultaneously extensive andintensive development of MobiMak. Withinthe framework of this concept, by the endof the year, MobiMak had opened 4 morenew shops, bringing the total number ofMobiMak - branded shops to 18, all fol-lowing our unified layout design, in whichcustomers are served in a high quality en-

400000

350000

300000

250000

200000

150000

100000

50000

0

101179

221336

365346

2000 2001 2002

Cust

om

ers

Year

Number of Customers


vironment.Parallel to the development of the di-

rect sales network, MobiMak continued thedynamic development of the indirect net-work as well, with the collaboration of masterdealers, the indirect network totalled 80dealer shops by the end of 2002 (repre-senting a 100% increase in one year) and690 points for the sale of the pre-paid vouch-ers (representing a 176% increase in thespace of one year).

Through our sales and distributionnetwork, the company sold a total of160,000 new subscriptions. With this out-standing sales result the number of RPCincreased by 63% by the end of 2002 from221,336 to more than 365,000 (which rep-resents more than 18% market penetration).MobiMak continued to pay close attentionto key - account customers through the ap-plication of a discount system and the offerof new tailored services. By the end of theyear, 92% of potential key - account cus-tomers had signed a long term key-accountsubscription contract with MobiMak. Salesof pre-paid vouchers increased from a valueof 84 million MKD in December 2001 to202 million MKD in December 2002. Thenumber of SMS messages sent doubled overthe year, from a monthly average of 4.4million pieces to 9.7 million pieces.

The company further developed itsCustomer Service activity. In the call - incustomer service, we combined high tech-nology with human values: a brand new,modern, IVR- based Call Centre with newemployees, new procedures, quality con-trol (through automated procedures and callrecording) and training for representatives.Service levels rapidly increased as a conse-quence and the ratio of answered calls in-creased in one year from 70% to more then95% by the end of 2002. Other areas ofCustomer Service also achieved spectacu-lar results. By the end of 2002, the collec-tion group had reached a highly signifi-cant milestone: the monthly collection ra-

tio was increased from the last year’s (al-ready very good) 94% to more than 97%.The Fraud Group successfully monitored andfiltered fraud cases, thereby protecting ourbusiness interests and reinforcing customerconfidence. The Proactive Group intensi-fied and modulated its activities by drawingour customers’ attention to the services, dis-counts and benefits that best suit their needs.

FinanceThe Finance Department successfully

completed implementation and integrationof the SAP system, developing the control-ling, procurement and accounting system.The International Roaming team was alsovery productive: by the end of 2002, roam-ing cooperation was established with 147operators in 61 countries. For the conve-nience of our customers, the Finance De-partment (in cooperation with other depart-ments) made possible the payment ofmonthly invoices in all MobiMak salesshowrooms as well as in all subsidiaries ofStopanska Banka.

Human ResourcesIn 2002 MobiMak focused its efforts

on making the successful MobiMak teameven tighter, more cooperative and moreteam - oriented, as well as on rewardingthe team for high performance.

For the purpose of continuing andexpanding the education and training ac-tivity we had begun in 2001, the HR De-partment organised several training coursesin 2002 (project management training,communication training, sales training andteam-building exercises). Informal meetings,a Family Picnic and other social events wereorganised, all aimed at the broadeningMobiMak’s team spirit to the families of ouremployees.

We are proud of our team, in whichall separate departments are linked togetherto form a unique, functioning company. Thecombination of competitive remuneration

21

packages, with a series of company ben-efits (Tandem for family members, sports fa-cilities, health care), together with our long-term loyalty scheme ensure that MobiMakhas been able to keep a very high employeeretention rate.

Another important result from 2002was the conclusion of the Collective Agree-ment between AD MobiMak and the Inde-pendent Union of MobiMak.

Public Relations and Corporate Citi-zenship

As Macedonia’s national operator,MobiMak recognises and embraces itsmoral and social obligation of playing anactive and positive role in society. MobiMakcontinued to invest in the country in 2002in the fields of culture, sport and in variousother sectors of society. The forestation ofpolluted cities (Veles and Bitola), the clean-ing of City Park in Skopje, Skopje Film Fes-tival, Skopje Jazz Festival, the concerts offamous Macedonian music stars, Skopjeand the Ohrid Summer Festivals are justsome of the examples of MobiMak’s socialactivities, crowned by the organisation of aNewYear’s Eve celebration in Skopje andthroughout the country.

Faithful to its brand and public im-age philosophy, MobiMak continued tosupport the archeological excavation atVardarski Rid, along with the provision ofaid to the reconstruction of two monaster-ies that constitute part of the Macedoniannational heritage: St. Jovan Bigorski andSt.Joakim Osogovski.

Through our support for the coun-try-wide music contest, “ M2 - MacedonianMusic - Search for Stars”, MobiMak (to-gether with its partners) created a uniqueopportunity for talented people to breakthrough and achieve success.

MobiMak opened a new chapter incharity activities in Macedonia with the es-tablishment of the Foundation, MobiMakfor Macedonia. The Foundation very suc-

cessfully announced public tenders andimplemented projects for organisations de-voted to the provision of care to people withspecial needs and for childrens’ issues-re-lated organsations. The launch of a spe-cial relationship with the Association of BlindPeople was also very well received, provid-ing support for this Association in the build-ing of a computer laboratory for blind peopleas well as introducing a special MobiMaktariff package with extra discounts suited tothe specific needs of blind users.

Detail from Embrodery work on a collar & the chest of a woman’s shirt - region of Bitola, Gorni Sela

Statements of income

for the year ended 31 December 2002 and six months ended 31 December 2001

NotesIn thousands of denars

Year ended31 December

2002

Six months to 31 December

2001

Operating revenus 10

Operating costs 11

Operating profit

Net financial expenses 12

Profit from ordinary activitiesbefore taxation

7,389,569

(4,137,569)

3,252,286

3,240,991

(1,890,148)

1,350,843

Income taxes 13,14

(89,721)

Net-profit

3,161,565 1,288,932

(389,019)

(61,911)

(94,187)

2,773,546 1,194,745


Marketing

The overall conduct of CMA activi-ties in 2002 was intently focused onfulfilment of the company business plan,and, at the same time, on the execution ofits own activities, serving to support the evo-lution of our organisation into a customerand market-oriented company, thoroughlyprepared for future competition. In spite ofthe business challenges we faced this year,our overall results reflect the momentum weare beginning to attain.

Our commitment to devote all our hu-man and technology resources to the fur-ther development of the company’s opera-tions was realised through the mutual in-volvement of the Company’s integral seg-ments (quoted below) which comprise con-stituents of the Central Marketing Area:

* Product management* Market research* Marketing communication and

PR* Sales and customer care coordi-

nation* Donation and sponsorship* PR

Products and PromotionsThis functional segment is principally

based on a “business case” type of ap-proach which is applicable to each newly-developed product as well as to the modifi-cation of the existing products in MT’s port-folio.

Through intensive team work, ourpeople devised new and creative ways offormulating, harmonising and sustaining theCompany’s bonds with our customers.Consequently, a number of products wereintroduced with tailored modifications sup-ported by relevant research in the form of avariety of financial and technical analysesand innovative communication programs,all of which share the central aim of deep-ening existing relations with targeted cus-tomers (an acceleration of pace we see ascrucial to our future success) and, as al-

ways, with a mind to the generation of ad-ditional growth opportunities for particularproducts.

Even with the growth of our customer-oriented business, our product range wasbroadened in order to guarantee long-termgrowth. The following is only a brief over-view of some of the products we introducedin 2002:

* Migration of analogue leased-linecustomers

* Common data centre proposal* New Internet Leased-Line pack-

age* Fix GSM solution* Mail2SMS product proposal* PC + Internet package* Bundled PBX solution* New CPE portfolio* Video streamingEach new product was launched by

a promotional campaign in support of thesales force of MTline, MTcom and MTnet intheir fulfillment of the projected sales fig-ures and in support of the qualitative, cam-paign-based promotion of these services.Effectiveness, cost-efficiency, and a coordi-nated approach to our customers throughthe Lines-of-Business sales and customercare force were the outcome of the conceptimplemented in 2002.

Indicated below are those MT cam-paigns successfully launched in 2002 andconducted as a means of exploiting allprofitable local opportunities for the prod-ucts through product experience and cre-ative marketing activities based on customerfeedback and our customer service system.

MTline* “Parallel Line” I and II* “My Line”* “Phone in every home” (3 x 15

Euros)* “Line within reach” (12 x 199

denars)

* “New ISDN2 special offer”

23

MTcom“Business Telephony System offer”

(PBX bundles)MTnet* “PC + Internet” (New Year cam-

paign)* “eCard” (Pre-paid Internet)* “Good news from MTnet”* “Spend the Summer with PC +

Internet”* “Life is easier with accessories”

(Tie-in campaign with MobiMak)* “Connect, Surf and Win” (a post-

paid prize winning game)* “Internet Business package +

Easy Web”* “Internet Direct Access” office

package

Fair PresentationMT’s presence at the Infokom 2002

information technology and telecommuni-cations fair was of great significance for theCompany, first and foremost because weeffectively managed to demonstrate that thetransformation process from a technicalcompany into a customer and marketingdriven one was beginning its full implemen-tation. All this is evident in the successfullyapplied approach to our products as wellas in the general initiative to serve the cus-tomers by employing creativity, availabilityand consistency, all of which were fullfiledby means of the superbly organised pro-motional stand, the specially allocatedspace, and the entertainment concept seg-

mentation of each of the Lines-of-Business,namely, MTline, MTnet, and MTcom.

Competitive Prices of Telecommuni-cation Services

The general pricing policy of tele-communication services, which is an ex-clusive right of Makedonski Telecomu-nikacii, is determined by the price capmechanism and the long-term rebalancingapproach.

At the end of the exclusivity period,as a result of rebalancing steps performed,this long-term pricing strategy will result in:

* a cost - oriented tariff structure,* a reduction in the imbalance be-

tween international and national telephonyprices

* cost efficiency and improvementof the operation

* a level of prices reflecting the pur-chasing power of the population andaffordability of the services

The rebalancing step taken in 2002led to an average price drop of interna-tional calls by 9%, and an increase in long-distance and local calls.

Taking into consideration the pulse-based billing system, free pulses for resi-dential customers are included in themonthly fee in order to protect the low-endand low-income customers mostly affectedby the rebalancing. This approach is usedas a temporary substitution for the specialpackages that are going to be tailored forthese customers with the implementation ofthe new billing system.


BSS and Call Centre ProjectThe BSS system was introduced in the

year 2001. An international tender wasorganised and a supplier company waschosen. The Billing system, as part of theBSS, is of crucial importance to the Com-pany in accomplishing its strategic goals.Firstly, it will increase the overall efficiencyof the company in collecting revenue andin reducing the possibility of fraud, and,secondly, it is seen as a means of commu-nication with the customers which will re-sult in greater trust, loyalty, and ever morefriendly relations.

The introduction of the new Billingsystem for all MT customers will provide theCompany with a powerful tool for compre-hensive analyses and the necessary, inbuiltflexibility to offer different product packages,tariff models, and discount opportunities.This will bring about an overall growth ofthe company based on customer satisfac-tion.

The Call Centre Project entered its ini-tial phase in 2001. The Centre is projectedas a modern system better suited to meetthe requirements of existing and potentialcustomers with greater flexibility. Customerswill be given the opportunity of reachingthe Company by telephone as well as ofobtaining information about MT servicesfrom the operators or the automatic answer-ing machines .

All these projects have already given–and continue to represent- a considerablecontribution to the enlargement of the rangeand quality of services provided by MT forthe benfit of our customers. Creating newproducts and packages and improving ex-isting ones in accordance with customers’needs is the main task which the MarketingArea aims to complete in order to bring MTservices closer to the customers to the mu-tual satisfaction of both parties.

Sales and Customer Care Coordina-tion Function

The transformation of MT’s image intothat of an open, customer-oriented andmarket-driven company is seen as a highpriority, middle-term objective. This is a pro-cess requiring many steps to be undertaken.

In order to achieve this transforma-tion, the main activities of the newly estab-lished function within Central Marketing in2002 were oriented towards tracing the pathof development of corporate sales and cus-tomer care strategy, harmonising the salesactivities of the LoBs, the development of aCode of Practice, customer satisfactionmeasurement - implementation and mea-surement procedures, handling of extra cus-tomer cases and the management of mar-keting research. Initial steps were taken withthe aim of developing sales channels andmodern sales strategies, the improvementof customer care and customer loyalty, theestablishment of a corporate image and theprovision of quality service and customersatisfaction.

At the end of 2002, the Printed Direc-tory Pilot project was successfully executed forthe region of Strumica, including the munici-palities of Gevgelija, Novo Selo, Valandovo,Vasilevo, Bogdanci, Murtino, Kuklis, StarDojran, and Miravci, covering a total of50,000 customers. The plan for next year is topublish printed directories for the other regionsof the country, the target being the publica-tion of a printed directory covering the wholeterritory of the Republic of Macedonia by theend of the year.

Commitment to the Transparency andAccuracy of Information delivered to theInternal and the External Public

As a dominant national telecommu-nication operator in Macedonia, and oneof the most modern telecom companies inthe region, as well as a provider of themost sophisticated products and services inthe communications field, MT aims to gen-

25

erate a superior external and internal PRapproach in order to achieve adequate rep-resentation of the Company. The PR seg-ment is perceived as one of the essentialelements that will establish the company’sbrand image.

The main messages that the PR ac-tivities intend to convey to the external andinternal public are as follows:

* MT is a well-organised companyproviding the best telecommunication ser-vices to the customers

* MT is a customer-oriented com-pany

* MT is part of Macedonian societyas a good legal entity

* MT improves its business results,with the contribution of its strategic part-ners

* MT employees are the movingforce of the company.

Within the PR activities in 2002, sev-eral major projects were implemented as partof the company’s efforts to be transparent,

open and truly close to the external andinternal public. These projects are as fol-lows:

* Participation in MT campaigns forthe introduction of new services and pack-ages.

* Organisation of press confer-ences (a press conference during the tradefair for telecommunications, computers andIT – INFOKOM 2002).

* Preparation of MT’s annual re-port for the year 2001 and preparation ofa corporate brochure - MT 2002.

* PR events (internal celebration of17th May, WTD, opening of a new busi-ness centre building, opening of an MTshop, coverage of MT’s participation atthe 5 th CEI Summit Economic Forum)

* Preparation, publication of theinternal newspaper

* Preparation of the new corporateweb page (www.mt.com.mk), launched atthe end of 2002.

Detail from Embrodery work on the lower part of a woman’s shirt - Skopska Blatiya nearby Skopje


Network Infrastructure

2002 was one of the most success-

ful years in the technical sphere. The num-ber of channels connected surpassed44,000. Several analogue (mainly party)lines were replaced all over the country. Thelast analog switch was switched off in Skopjein September. Replacement began in thecountryside as well and the program will befinished in 2003. Several new services andtechnologies were launched and imple-mented in 2002.

More than 79,000 channels withswitching capacity were installed in Alcateland EWSD switches, and more than 33,000channels were reconfigured across the com-plete switching network. As a result of thishigh level of reconfiguration, nearly 80%utilisation rate was reached in the switch-ing network (without ISDN).

More than 2,500 channels were re-activated in the crisis regions and were ableto recommence normal operations.

New software (V15) was installed inseveral switches to prepare for the introduc-tion of new services and to provide betteroperations and maintenance.

More than 200 km of optical cableswere installed throughout the country:

* to connect new locations,* to improve the reliability of the

backbone network.More than 30 new network elements

were installed in the SDH backbone net-work, and some 50 network elements wererelocated to the regional rings. These werepart of the SDH network extension projectlaunched in 2001.

The new network:* Provides transmission capacity to

telephony development,* Provides transmission capacity to

mobile telephony development,* Provides transmission capacity to

business communications development.The new management system supports

us in providing higher quality service to the

leased-line business segment.The mobile network leased-line out-

age was significantly better than the valuequoted in the SLA (Service Level Agreement).

A new TDM network was put into ser-vice with more than 25 network elements.Some 150 leased lines are already operat-ing in the network.

The IP-VPN and IP-VPDN serviceswere launched with SLA.

Power supply is important for all tech-nologies. Three major projects related tothis sphere were underway in 2002.

A new power supply system was in-stalled in the TC Centre. This is state-of-the-art technology and raises the capacityof the telecommunications systems in theTC Centre.

DEAs (Diesel Electric Aggregates)were installed in several towns and villagesto provide the required level of quality toour customers.

Several Makedonska Posta andMakedonski Telekomunikacii buildings wereseparated with regard to electricity) in ac-cordance with the Agreement between thetwo companies.

In 2002, 93,000 new pairs were in-stalled throughout the country, mainly in theurban areas. Several party lines were re-placed in Ohrid, Prilep, Bitola, and othertowns. This replacement activity resulted inbetter quality service and higher revenue.The new projects provided the capacity forthe connection of more than 44,000 chan-nels.

MobiMak and Makedonski Teleko-munikacii provided Fix GSM solution,mainly for rural areas. Around 1,000 setswere installed in 2002. Fix GSM solutionwill continue to remain a technology for therural areas in 2003.

The concession contract defined thequality targets for AD MakedonskiTelekomunikaci. The technical area concen-trated on the quality targets and on quali-tative improvement as well as on the in-

27

vestment program. The figures improvedmonth by month.

The following quality indicators,amongst other factors, were measured andcontrolled in the course of the year:

* Service failures,* Call completion,* Erroneous billing,* Leased-line provisioning.The targets for the most significant in-

dicators wereachieved.The technical area operates as a func-

tional organisational unit. The above-men-tioned results refer to the telecommunica-tions network extension, upgrading and re-construction. Several new technologies wereintroduced in the operation and mainte-nance activities in order to raise levels ofefficiency and quality.

These investments were:* TeMIP implementation, to improve

the switch maintenance* NMS upgrade of SDH, to improve

the transmission maintenance* New management system for the

power supply* Upgrade of the technical inven-

tory systemThe systems were implemented and

the processes were defined and described.The new technologies, along with the de-tailed descriptions of processes and pro-cedures, help us to continuously improveour efficiency and quality.

Detail from Embrodery work on the bride’s veil (Sokay) - region of Debartsa

Plan SDH backbone network in the Republic of Macedonia

YUGOSLAVIA BULG

ARIA

GREECE

ALBA

NIA

SKOPJE

STM 16

STM 16

STM 16

7km18 f.o.

38 km18 f.o.

57 km18 f.o.

26 km12 f.o.

9, 4 km18 f.o.

40, 8 km18 f.o.

33, 5 km18 f.o.

21 km12 f.o.

44, 5 km18 f.o.

52 km18 f.o.

17 km18 f.o.

13 km12 f.o.

30 km24 f.o.

11, 4 km18 f.o.

48, 2 km18 f.o.

47, 8 km24 f.o.

27 km24 f.o.

31 km18/12/8 f.o.

50 km18 f.o.

55 km24 f.o.

15 km18 f.o.

61, 1 km18 f.o.

44, 2 km18 f.o.

34, 7 km18 f.o.

43 km18 f.o.

34, 9 km18 f.o.

44 km18 f.o.

32 km24/18 f.o.

33 km18 f.o.

68 km18 f.o.

57 km18 f.o.

7, 5 km12 f.o.

16, 5 km18 f.o.

11 km8 f.o.

RR 34 Mb/s

RR 155 Mb/s

15 km

8 km

TETOVO

GOSTIVAR

DEBAR

KICEVO

M.BROD KAVADARCI

VELES

BITOLA

PRILEP

OHRID

RESEN

STRUGA GEVGELIJA

VALANDOVO

STRUMICA

RADOVIS

NEGOTINO

DELCEV OKOCANI

STIP

SV.NIKOLE

PROBISTIP

KRATOVO

KR.PALANKA

KUMANOVO

LEGENDINTERNATIONAL ANDTRANSIT EXCHANGE

MAIN EXCHANGE

OPTICAL CABLE(1157,2 KM)

RADIO SYSTEM

NEW CABLE

CROS`S BORDERLINKS

SDH NETWORK

Level1

Level2

Level 1Level 1 Level 1 Level 1 Level 1 Level 1 Level 1 Level 1

Level 2 Level 2

Level 2

Level 2

Level 2Level 2

Level 2Level 2Level 2

Level 2 Level 2

Leve

l1Le

vel1

Leve

l1

Leve

l2Le

vel2

Level 0Node

Skopje-Centar

STM-1

E1 E1

E1 E1 E1 E1 E1 E1 E1 E1

E1E1

E1

E1E1E1

E1

E1E1

E1E1

E1 E1

E1

E1 E1

AERODROMPETROVEC

MILADININOVCI

AVTO KOMANDA

KRATOVO

KUMANOVO

KOCANI

DELCEVOVINICA

BEROVO

VELESSTRUMICA

KAVADARC I

VALANDOVONEGOTINO

STIPGOSTIVAR

M.BROD

D. HISARKRUSEVO

DEBARRESEN

OHRID BITOLAPRILEP

KARPOS

GORCEPETROV


IT

Within the Strategic Plan for the year2002, IT either completed or commencedexecution of the following projects:

Implementation of the following SAPR/3 modules:

* IM/PS module* SD module* MM-WM sub-module* 2002-2003 SIU2002 is developed by IT SIU ( Small

Inventory in Use), SAP customised mod-ule fully integrated into the existing SAPmodules. In 2003, SIU is implemented.

Inhouse developed applications

1. IIS for MTcom2. Decoding of Fix GSM3. Intranet Portal4. IDTKS-Phase 15. CC&NP-Phase 16. Report builder for analysis of

LoBs’ sales7. Sales in MTline and MTnet shops

Activities performed as part of theimplementation of the enterprise storageconsolidation project were as follows: thedefining of the initial storage solution in linewith MT’s requirements, the preparation ofa technical architecture overview, the plan-ning of the enterprise storage network lay-out, and the assignment of the project team.

To realise the company’s vision, ITalso needed to re-engineer itself. This projectcalled for the creation of a new data cen-tre, the intorduction of new applications andthe establishment of a reliable and efficientIT support infrastructure. In this process, wedrew upon the experience and expertise ofour partners, Matáv and Deutsche Telecom.The outcome of this technology transfer wasthe successful completion of the Data Cen-tre and Storage Consolidation Project. Thecommon concept underlying these projectswas that of meeting business needs in thebest and most effective manner while pro-

viding innovative technologies and state-of-the-art equipment.

The object of the Enterprise StorageSystem Consolidation Project forMakedonski Telekomunikacii was that ofproviding our company with an optimisedstorage consolidation solution, which ishighly reliable and efficient in terms of to-tal-cost-of-ownership (TCO) and return-on-investment (ROI). The project was based onthe high level of integration of the enter-prise storage system by EMC, the commu-nication equipment from CNT, the tape back-up hardware by StorageTek and the backupsoftware by Hewlett-Packard. The solutionprovides consolidation of the storage re-quirements, effective tape backup as wellas timely replication of the data to anotherlocation for the purposes of disaster recov-ery using the software tools by EMC.

In IT, we are proud of our recentlydeveloped and installed applications:

* X25/FR Billing and Collection re-developed from the legacy X25/FR billingwith additional functionality customised billcollection system, developed on the Win-dows 2000 platform using Visual C++ 6.0,Crystal Report and Oracle Database 8i.

* EWSD/E10 Automatic MediationSystem. Redesigned application from in-teractive GUI based on COM /ATL win-dows services, developed on the Windows2000 platform using Visual C++ 6.0,Crystal Report and Oracle Database 8i.

* Premium Rate Services Billing andCustomer Care application developed onDelphi 6.0 and MSQL 2000, as a clientserver application.

* Data warehouse for MTnet basedon CDRs developed on MSSQL 2000server, covering all the internet traffic in thecountry.

* Fraud Management based on pro-cessing CDRs from the digital exchangesMSSQL 2000 and DELPHI 6.0.

* Tool for decoding and processing

29

information from the international ex-changes Skopje and Stip, DELPHI 6.0 andMS SQL 2000.

* Suing of customers for unpaidbills, ORACLE Developer and Oracle 8i.

* PCM maintenance and supportapplication.

* IT Help Desk Support applicationbased on ASP/VB 6.0 and MSSQL 2000.

* MTline shops with stock controlbased on Oracle Developer and Oracle8i RDBMS.

Our Billing group is proud of the fol-lowing projects:

* Payments from Diners Club: theapplication for collection of data from Din-ers Club and making the necessary inputfile for billing application are developedon the Windows 2000 platform using Vi-

sual Basic, Crystal Report and Access Da-tabase. Obligations of invoices from theMiracle Database are dealt with by theSQL.

* Data Warehouse for Debt Man-agement – an application that providesan overview of the debiting and paymentsfor the subscribers categorisied accordingto type of subscriber, type of phone line andby RC; developed in SQL Server 2000 us-ing with Microsoft Analysis Management(OLAP).

Some of the activities of the SAP groupinclude:

* Implementation of the SAP – FI(GL, AR, AP, AA), CO and MM modules.

* Programming of the several inter-faces from SAP modules to other applica-tions.



Human Resources

Total number of employees in MT in 2002:

2002 was a year of building the skel-eton of the new HR organisational structureand of founding a new perception of thefunction and role of HR within the Com-pany.

The establishment of a totally newdepartment within the HR functional area- Remuneration & Performance Depart-ment and the adjustment of the Personnel& Training Department, the Labour & Pay-roll Administration Office, and the recentHR service centre as per the Company’sorganisational structure and needs, wereof supreme importance for the HR func-tion in the Company. With the R&P as abrand new department, we started the pro-cess of budgeting and tracking personnelexpenditures. We established a performanceappraisal system for the managers as a logi-cal outcome of the introduction of mana-gerial contracts and yearly bonus targetsfor the management team. Within the frame-

work of the Personnel & Training Depart-ment new procedures for recruitment andselections were implemented, both internallyand externally, following international prac-tices, excluding nepotism and political in-fluences. Also within the Department con-tinuous dialogue with the Trade Union wasmaintained. Training courses and businesstrips were regulated and tracked, and Train-ing Plan was prepared for the year to come,2003, based on the training and develop-ment needs of the employees within the limitsof the available budget. The Labour andPayroll Administration Office followed thenew organisational structure implementedin March 2002, and worked on the improve-ment of all employee - related issues of im-portance to the Company .

Based on the international benchma-rking survey, headcount management wasintroduced for the first time in the Company,and programs such as the early retirement

AreasStatus

31.12.2002Status on

31.12.2001

Percentage of MTCOMPANY

total

CEOCMO

CFOCTOHRMT LINEMT NETMT COMNOT ASSIGNED

MT COMPANY TOTAL:

MOBIMAK

MT GROUP TOTAL:

3437339

3776

10232783

14602968674973

3,120,96

23,9744,700,89

21,002,272,970,09

100,00

%%%%%%%%%

%3266378

3644

31

The chart does not include trainingfor top management called Finance forNon - finance Managers, which 12 man-agers attended and which started in 2002and will continue in 2003. 500 employeestook part in the initial stage of training forall MT employees - end- users of Windows2000 and Exchange 2000 - and the sec-ond stage of training will continue in 2003.

program contributed to an overall increasein the operational efficiency of the Com-pany.

By the end of the year, those col-leagues with extraordinary achievementswere granted special awards. Long - ser-vice awards were presented to those col-leagues who had worked for more than 15years in the Company, and since theseawards had not been given for the previ-ous three years, they were now awarded toolder colleagues in recognition for theirdedication and loyalty to MT.

In order to reach the stage at whichwe will be able to measure employee satis-faction levels, taking into account theCompany’s interests and developmentplans, the change management program“Road to Success”, along with other planssuch as the Talent Management Programand the Corporate Cultural Change Pro-gram was initiated and projected forcompletion in 2003.

Training of employeesIn the survey of the types of training

courses organised in 2002, it can be seenthat the employees that most often at-tended an appropriate training were fromMTline, for the purpose of gaining theo-retical and practical skills for sales andcustomer care, while the training coursesin IT and the technical area were focusedon the new Billing System as well as oninstallation and maintenance of new andadvanced technology, as it is shown in thechart.

Detail from Embrodery work on the bride’s veil (Sokay) - region of Debartsa

Number of trainings for MT employees in 2002

Organizational Unit Number of Employees

CEO -IT

CEO

CMO

MTline

MTcom

MTnet

GRAND TOTAL

Total

Total

Total

Total

Total

Total

40

61

2

25 6

7

9

37 5


A Good Corporate Citizen

As an integral part of the social andeconomic fabric of the community in whichwe operate, Makedonski Telekomunikaciipursues development that responds to themiddle-term and long-term needs and ex-pectations of the societyas a whole. MTcontinues to achieve significant success inits business and wishes to share this suc-cess with its customers and business part-ners.

The Company is known for the spon-sorship activities which it performs on aregular basis. In this way MT seeks to assistin developing values in areas such as cul-ture, sport, cultural heritage, education andcharity.

MT is proud of its largest single spon-sorship in the cultural sphere – the dona-tion of one million Euro towards the resto-ration of Samuil’s Fortress in Ohrid, aunique symbol of Macedonia’s cultural andhistoric heritage. By supporting a project ofsuch immense cultural significance as this,MT embraces the opportunity of contribut-ing to Macedonia and its citizens.

The tradition of one of the biggestinternational festivals, Ohrid Summer Fes-tival, continued this year as well and was

again supported by MT. The event mergedclassical music and theatre at the monu-mental sites of Ohrid, with participants at-tending from all over the world.

MT’s partnership with theMacedonian Philharmonic Orchestra con-tinues to be a highly successful one. Com-munications and music represent different,yet related worlds of possibilities and bothare means of expression that enhance ourlives regardless of the specific musical di-rection. In this respect, MT also participatedin the world famous Skopje Jazz Festival,keeping pace with all that happens in oursociety.

The Ohrid Swimming Marathon, themost important international sporting eventin the country, gave MT an opportunity,together with the contestants and sport fans,to take pleasure in the excitement and en-tertainment offered by sport..

MT acknowledges its role as a cor-porate citizen and recognises that spon-sorship is beneficial to the wider commu-nity with which MT is building good rela-tions and with which it endeavours to be-come … truly close…

33Detail from Embrodery work on the bride’s veil (Sokay) - region of Debartsa

MT is proud of its largest single spon-sorship in the cultural sphere – the dona-tion of one million Euro towards the resto-ration of Samuil’s Fortress in Ohrid, aunique symbol of Macedonia’s cultural andhistoric heritage. By supporting a project ofsuch immense cultural significance as this,MT embraces the opportunity of contribut-ing to Macedonia and its citizens.


Financial Highlights

* Total revenues grew by 13% to MKD 16.9 bn., primarily due to the strong growth of themobile business.

* MT Group EBITDA amounted to MKD 9.2 bn. and the EBITDA margin amounted to54.5% due to growth in revenue.

Operating revenues* The fixed-line segment revenue grew by 8%. A decline in the international traffic revenue

was compensated by an increase in domestic telecommunication revenue, leased line and datarevenue, based on an expanded subscriber base and a tariff increase.

* Mobile segment revenues increased by 37%, reaching MKD 5.6 bn., mainly driven by theexpanded subscriber base attracted by new tariff package offers.

Operating expenses* Employee - related expenses increased by 27% to MKD 1.9 bn. as a result of wage

increases (effective as of December, 2001). At the end of 2002, the total group headcountamounted to 3,644 representing a 3.1% decrease compared to 3,776 at the end of 2001.

* Depreciation and amortisation amounted to MKD 2.0 bn, compared to MKD 1.9 bn in2001 due to continuous capital investments in switches, IT and other investments.

* Payments to other network operators amounted to MKD 1.3 bn. Payments to foreignservice - providers reflect reduced international traffic and favourable average settlement rates.

* Other operating expenses totalled MKD 4.5 bn., compared to MKD 3.6 bn. in 2001, anincrease of 25%. Major expenses increased, including those for materials, maintenance, energy,services, marketing, consultancy expenses and impairment losses for trade receivables.

17.5

17

16.5

16

15.5

15

14.5

14

2001 2002

15

16.9

Operating revenue

10

9.5

9

8.5

8

7.52001 2002

8.4

9.7

Operating expenses

Domestic fixed line telecommunication service

International traffic revenues

Mobile telecommunication service

Leased line and data transmission

Other revenues

Total 15,0 16,9

2001 2002

6,7

3,5

4,1

0,2

0,5

8,0

2,0

5,6

0,5

0,8

In billions of denars

Personal costs

Depreciation and amortisation

Payments to other network operators

Other operating costs

Total 8,4 9,7

2001 2002In billions of denars

1,5

1,9

1,3

3,6

1,9

2,0

1,3

4,5

35

Income tax* The income tax on the annual profit comprises both current and the deferred tax. The

current income tax of 15% was calculated according to Macedonian Law. The deferred tax wascalculated to account for temporary differences between the carrying amounts of assets andliabilities for financial reporting purposes and the amounts used for taxation purposes.

* The effective tax rate was 13% in 2002 and 11% in 2001.

Balance sheet* The total assets on 31 December, 2002 amounting to MKD 28.9 bn., representing an

increase over 2001 of 16%.* The 15% increase in fixed assets was generally due to the completion and activation of a

large number of investment projects related to tangible and intangible assets.* Current assets increased by 23% as a result of the increased debtor accounts and cash

position.

Capital* Total capital on 31 December, 2002, amounted to MKD 26.0 bn compared to 2001,

amounting to MKD 19.8 bn, as a result of higher net-income for the year.

Liabilities* The Group long-term borrowings were repaid, coming to a zero balance at the end of

2002. On the other hand, the trade and other payables increased as a result of the extendedpayment terms negotiated with the suppliers.

Cash flows* The cash flow generated from operating activities in 2002 amounted to MKD 8.5 bn,

increasing by 47% compared to 2001, thereby reflecting the increased operations and improvedinventory management system in 2002. Part of this cash was used for the early repayment of debtsto EBRD and IFC reaching zero balance at the year - end. The net cash employed in investmentactivities in 2002 amounted to MKD 4.7 bn, increasing by 11% compared to 2001. This wasprimarly a result of new capital expenditures in tangible and intangible assets.


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