Notes to the Financial Statements

Sri Lanka Telecom PLC (the “Company”) is a company domiciled in Sri Lanka. The address of the Company’s registered office is Lotus Road, Colombo 1. The Separate Financial Statements relates to Sri Lanka Telecom PLC. The Consolidated Financial Statements of the Company as at and for the year ended December 2025 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”). The Financial Statements of all Companies within the Group are prepared for a common financial year which ends on 31 December 2025.

The Group is primarily involved in providing a broad portfolio of telecommunication services across Sri Lanka. In addition, the range of services provided by the Group include, inter-alia, internet services, data services, domestic and international leased circuits, broadband, satellite uplink, maritime transmission, IPTV service, directory publishing. The Company is a quoted public Company which is listed on the Colombo Stock Exchange.

(a) Statement of Compliance

The Financial Statements of the Group and the Company which comprises the statement of financial position, statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows have been prepared in accordance with Sri Lanka Accounting Standards (SLFRS & LKAS) as laid down by The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and the requirements of the Companies Act No. 07 of 2007.

(b) The Financial Statements were authorised for issue by the Board of Directors in accordance with the resolution of the Directors on 14 May 2026.

(c) Basis of Measurement

The Financial Statements have been prepared on the historical cost basis applied consistently except for the following Change to items:

The liability for defined benefit obligation recognised is actuarially valued and recognised at the present value of the defined benefit obligation. Equity instruments designated at fair value through OCI.

(d) Functional and Presentation Currency

These Financial Statements are presented in Sri Lankan Rupees, which is the Company’s functional currency and the Group’s presentation currency. The functional currency of Xyntac Singapore (Pvt) Ltd is different to the Company’s functional currency. The functional currency of Xyntac Singapore (Pvt) Ltd is US Dollars. All financial information presented in rupees has been rounded to the nearest million, unless otherwise indicated.

(e) Use of Estimates and Judgements

The preparation of Financial Statements in conformity with Sri Lanka Accounting Standards requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Financial Statements is included in the following notes:

• Note 14 – Property, plant and equipment
• Note 15 – Investment Properties
• Note 16 – Right-of-use assets and lease liabilities
• Note 17 – Intangible assets and Goodwill
• Note 23 – Trade and other receivable
• Note 26 – Deferred tax liabilities and assets
• Note 27 – Deferred income
• Note 27 (a) – Contract cost assets
• Note 27 (b) – Contract liabilities
• Note 30 – Employee benefits

(f) Current Versus Non-Current Classification

The Group presents assets and liabilities in the Statement of Financial Position based on current/non-current classification.

An asset is current when it is:

• Expected to be released or intended to be sold or consumed in the normal operating cycle
• Held primarily for the purpose of trading
• Expected to be realised within 12 months after the reporting period

Or

• Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least 12 months after the reporting period
• All other assets are classified as non-current.

A liability is current when:

• It is expected to be settled in the normal cycle
• It is held primarily for the purpose of trading
• It is due to be settled within twelve months after the reporting period
• There is no unconditional right to defer the settlement of the liability for at least 12 months after the reporting period
• The terms of the liability that could, at the option of the counterparty, result in its settlement by the issue of equity instruments do not affect its classification
• The Group classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.

(g) Going Concern

The Directors have made an assessment of the Group’s ability to continue as a going concern and is satisfied it has the resources to continue in business for the foreseeable future. The Directors have considered the impact of the present macro-economic conditions in making the going concern assessment.

In determining the above, significant management judgement, estimates and assumptions and all other relevant factors have been considered as of the reporting date and specific considerations have been disclosed under the notes, as relevant.

Accordingly, these financial statements have been prepared on going concern basis.

The accounting policies set out below have been applied consistently to all periods presented in financial statements, and have been applied consistently by the Group entities, except amendments to existing accounting standards which are effective from 1 January 2025 as described in Note 3 (w).

(a) Basis of Consolidation

(i) Business Combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain or bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in Statement of Profit or Loss.

Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in Statement of Profit or Loss.

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount recognised for non-controlling interests and any previous interest held over the net identifiable assets acquired and liabilities assumed). If the fair value of the net assets acquired is in excess of the aggregate consideration transferred, the Group re-assesses whether it has correctly identified all of the assets acquired and all of the liabilities assumed and reviews the procedures used to measure the amounts to be recognised at the acquisition date. If the reassessment still results in an excess of the fair value of net assets acquired over the aggregate consideration transferred, then the recognised in Statement of Profit or Loss.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the Group’s cash-generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquire are assigned to those units.

Where goodwill has been allocated to a cash-generating unit (CGU) and part of the operation within that unit is disposed of, the goodwill associated with the disposed operation is included in the carrying amount of the operation when determining the gain or loss on disposal. Goodwill disposed in these circumstances is measured based on the relative values of the disposed operation and the portion of the cash-generating unit retained.

(ii) Subsidiaries

Subsidiaries are entities that are controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control over the subsidiary.

(ii - a) Critical Judgements in applying the Entity’s Accounting Policies

The directors have concluded that the Group controls all subsidiaries as it has majority control and voting rights over its subsidiaries as depicted in Note (ii-b).

(ii - b) Interest in Subsidiaries

Set out below are the Group’s principal subsidiaries as at 31 December 2025

Proportion of Equity Interest held by Non-Controlling Interests:

(iii) Equity – Accounted Investees (Investment in Associates and Joint Ventures)

An associate is an entity over which the Group has significant influence. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

A joint venture is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the joint venture. Joint control is the contractually agreed sharing of control of an arrangement, which exists only when decisions about the relevant activities require unanimous consent of the parties sharing control.

The considerations made in determining significant influence or joint control is similar to those necessary to determine control over subsidiaries. The Group’s investments in its associates and joint venture are accounted for using the equity method.

Under the equity method, the investment in an associate or a joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share of net assets of the associate or joint venture since the acquisition date. Goodwill relating to the associate or joint venture is included in the carrying amount of the investment and is not tested for impairment separately.

The Statement of profit or loss reflects the Group’s share of the results of operations of the associate or joint venture. Any change in other comprehensive Income of those investees is presented as part of the Group’s other comprehensive Income. In addition, when there has been a change recognised directly in the equity of the associate or joint venture, the Group recognises its share of any changes, when applicable, in the statement of changes in equity. Unrealised gains and losses resulting from transactions between the Group and the associate or joint venture are eliminated to the extent of the interest in the associate or joint venture.

The aggregate of the Group’s share of profit or loss of an associate and a joint venture is shown on the face of the Statement of profit or loss outside operating profit and represents profit or loss after tax and non-controlling interests in the subsidiaries of the associate or joint venture.

The financial statements of the associate or joint venture are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its associate or joint venture. At each reporting date, the Group determines whether there is objective evidence that the investment in the associate or joint venture is impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the associate or joint venture and its carrying value, and then recognises the loss as “share of profit or loss of equity accounted investees” in the statement of profit or loss.

Upon loss of significant influence over the associate or joint control over the joint venture, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount of the associate or joint venture upon loss of significant influence or joint control and the fair value of the retained investment and proceeds from disposal is recognised in the statement of profit or loss.

(iv) Non-Controlling Interest (NCI)

NCI are measured at their proportionate share of acquiree’s identifiable net assets at the date of acquisition. Changes in the Group interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

(v) Loss of Control

When the Group loses control over a subsidiary, it derecognises the asset and liabilities of the subsidiary and any related NCI (if applicable) and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest in the former subsidiary is measured at fair value when control is lost.

(vi) Transaction Eliminated on Consolidation

Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated.

(b) Foreign Currency

(i) Foreign Currency Transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Foreign currency differences are generally recognised in statement of profit or loss and other comprehensive income.
Non-monetary items that are measured based on historical cost in a foreign currency are not translated.

(C) Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and financial liability or equity instrument of another entity.

(i) Financial Assets

(i-i) Initial Recognition and Measurement

Financial assets are classified, at initial recognition, as subsequently measured at amortised cost, Fair Value Through Other Comprehensive Income (FVTOCI) and Fair Value Through Profit or Loss (FVTPL).

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient, the Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Group has applied the practical expedient are measured at the transaction price as disclosed in Note (I) - Revenue from contracts with customers.

In order for a financial asset to be classified and measured at amortised cost or fair value through OCI, it needs to give rise to cash flows that are “solely payments of principal and interest (SPPI)” on the principal amount outstanding. This assessment is referred to as the SPPI test and is performed at an instrument level. Financial assets with cash flows that are not SPPI are classified and measured at fair value through profit or loss, irrespective of the business model.

The Group’s business model for managing financial assets refers to how it manages its financial assets in order to generate cash flows. The business model determines whether cash flows will result from collecting contractual cash flows, selling the financial assets, or both. Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model. Purchases or sales of financial assets that require delivery of assets within a time frame established by regulation or convention in the market place (regular way trades) are recognised on the trade date, i.e., the date that the Group commits to purchase or sell the asset.

(i-ii) Subsequent Measurement

For purposes of subsequent measurement, financial assets are classified in four categories;

• Financial assets at amortised cost (debt instruments)
• Financial assets at fair value through OCI with recycling of cumulative gains and losses (debt instruments)
• Financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)
• Financial assets at fair value through profit or loss

Financial Assets at Amortised Cost (Debt Instruments)

The Group measures financial assets at amortised cost if both following conditions are met:

• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows, and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortised cost are subsequently measured using the effective interest rate (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

The Group’s financial assets at amortised cost include trade and other receivables, amounts due from related parties and cash and cash equivalents.

Financial Assets at Fair Value Through OCI (Debt Instruments)

The Group measures debt instruments at fair value through OCI if both of following conditions are met:

• The financial asset is held within a business model with the objective of both holding to collect contractual cash flows and selling, and
• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

For debt instruments at fair value through OCI, interest income, foreign exchange revaluation and impairment losses or reversals are recognised in the statement of profit or loss and computed in the same manner as for financial assets measured at amortised cost. The remaining fair value changes are recognised in OCI. Upon derecognition, the cumulative fair value change recognised in OCI is recycled to profit or loss.

Financial Assets Designated at Fair Value Through OCI (Equity Instruments)

Upon initial recognition, the Group can elect to classify irrevocably its equity investments as equity instruments designated at fair value through OCI when they meet the definition of equity under LKAS 32 Financial Instruments: Presentation and are not held for trading. The classification is determined on an instrument-by-instrument basis.

Gains and losses on these financial assets are never recycled to profit or loss. Dividends are recognised as other income in the statement of profit or loss when the right of payment has been established, except when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity instruments designated at fair value through OCI are not subject to impairment assessment. This category includes listed and non listed equity instruments that the Group elected to classify irrevocably.

Financial assets at fair value through profit or loss include financial assets held for trading, financial assets designated upon initial recognition at fair value through profit or loss, or financial assets mandatorily required to be measured at fair value. Financial assets are classified as held for trading if they are acquired for the purpose of selling or repurchasing in the near term. Derivatives, including separated embedded derivatives, are also classified as held for trading unless they are designated as effective hedging instruments. Financial assets with cash flows that are not solely payments of principal and interest are classified and measured at fair value through profit or loss, irrespective of the business model. Notwithstanding the criteria for debt instruments to be classified at amortised cost or at fair value through OCI, as described above, debt instruments may be designated at fair value through profit or loss on initial recognition if doing so eliminates, or significantly reduces, an accounting mismatch.

Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

This category includes derivative instruments and listed equity investments which the Group had not irrevocably elected to classify at fair value through OCI. Dividends on listed equity investments are also recognised as other income in the statement of profit or loss when the right of payment has been established.

A derivative embedded in a hybrid contract, with a financial liability or non-financial host, is separated from the host and accounted for as a separate derivative if: the economic characteristics and risks are not closely related to the host; a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and the hybrid contract is not measured at fair value through profit or loss. Embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss. Reassessment only occurs if there is either a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required or a reclassification of a financial asset out of the fair value through profit or loss category.

(i-iii) Fair Value Measurement

SLFRS 13 defines fair value as the price that would be received to sell and asset or paid to transfer a liability in an orderly transactions between market participants at the measurement date.

A fair value measurement requires an entity to determine all the following;

• The particular asset or liability that is the subject of the measurement.
• For a non-financial asset, the valuation premise that is appropriate for the measurement (consistently with its highest and best use).
• The principal (or most advantageous) market for the asset or liability.
• The valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the asset or liability and the level of the fair value hierarchy within which the inputs are categorised.
• Fair value is a market-based measurement, not an entity-specific measurement. For some assets and liabilities, observable market transactions or market.

When transaction price provides the best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction price and any difference between this price and the value initially obtained from a valuation model is subsequently recognised in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out.

Determination of Fair Values

The determination of fair value for financial assets and liabilities for which there is no observable market price requires the use of valuation techniques. For financial instruments that trade infrequently and have little price transparency, fair value is less objective and requires varying degrees of judgment depending on liquidity, concentration, uncertainty of market factors, pricing assumption and other risks affecting the specific instrument.

Level 1 – fair value measurements using quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – fair value measurements using inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices);and

Level 3 – fair value measurements using inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs).

(i-iv) Amortised Cost

The amortised cost of a financial asset or liability is the amount at which the financial asset or liability is measured at initial recognition, minus principal repayments, plus or minus the cumulative amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.

(i-v) Impairment

Non-derivative Financial Assets

Financial assets not classified at fair value through profit or loss, are assessed at each reporting date to determine whether there is objective evidence of impairment.

Objective evidence that financial assets are impaired includes;

• default or delinquency by a debtor;
• restructuring of an amount due to the Group on terms that the Group would not consider otherwise;
• indications that a debtor or issuer will enter bankruptcy;
• adverse changes in the payment status of borrowers or issuers;
• the disappearance of an active market for a security; or
• Observable data indicating that there is a measurable decrease in the expected cash flows from a group of financial assets.

In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment.

The Group uses a provision matrix to calculate Expected Credit Loses (ECL) for trade receivables. The provision rates are based on days past due for groupings of various customer segments that have similar loss patterns (i.e., product type, customer type). For trade receivables, the Group applies a simplified approach in calculating ECLs. The Group recognises a loss allowance based on lifetime ECLs at each reporting date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific to the debtors and the macro economic environment.

The provision matrix is initially based on the Group’s historical observed default rates. The Group calibrate the matrix to adjust the historical credit loss experience with forward-looking information. For instance, if forecast economic conditions (i.e., gross domestic product) are expected to deteriorate over the next year which can lead to an increased number of defaults in the telecommunication sector, the historical default rates are adjusted. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. Financial assets are considered credit-impaired when one or more events have occurred that have a detrimental impact on the estimated future cash flows of the financial asset. In determining credit impairment, the Group applies its internal credit risk assessment frameworks, consistent with SLFRS 9 requirements.

The assessment of the correlation between historical observed default rates, forecast macro economic conditions and ECLs is a significant estimate. The amount of ECLs is sensitive to changes in circumstances and of forecast economic conditions. The Group’s historical credit loss experience and forecast of macro economic conditions may also not be representative of customer’s actual default in the future.

The expected credit loss rate of the Group for corporate debtors is 0.93%-17% in 2025 (2024 – 0.43%-28%) whereas retail debtors is 1.37%-24% in 2025 (2024 – 0.79%-58%). Expected credit loss of the Group for Corporate customers recognised during the year is LKR 404 Mn. in 2025 (2024 – LKR 379 Mn.) and LKR 1,442 Mn. in 2025 (2024 – LKR 1,318 Mn.) for retail debtors. The expected credit loss rate of the Company for corporate debtors is 0.93% in 2025 (2024 – 0.43%) whereas retail debtors is 1.37% in 2025 (2024 – 0.79%). Expected credit loss of the Company for Corporate customers recognised during the year is LKR 328 Mn. in 2025 (2024 – LKR 255 Mn.) and LKR 1,386 Mn. in 2025 (2024 – LKR 991 Mn.) for retail debtors.

The Group considers a financial asset in default when contractual payments are 30 days past due. In addition, the Group considers that there has been a significant increase in credit risk when contractual payments are more than 65 – 110 days past due depending on the product type. However, in certain cases, the Group may also consider a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation of recovering the contractual cash flows. Refer Note No. 21 for Trade Receivables – Net. The Group periodically writes off trade receivables, relating to terminated customer accounts where all recovery actions have been exhausted and no further collection is expected. Receivables are generally written off when they are more than one year past due and no longer subject to enforcement or recovery actions after obtaining the aproval from Board of Directors.

Investments in fixed deposits and Staff loans are considered as low risk of default. At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or effort. In making that evaluation, the Group reassesses the internal credit rating of the debt instrument.

Non-financial Assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGUs.

Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount.

Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

(i-vi) Hedge

For designated and qualifying cash flow hedges, the effective portion of the gain or loss on the hedging instrument is initially recognised directly in equity in the “cash flow hedge reserve”. The ineffective portion of the gains or losses on the hedge instrument is recognised immediately in the profit and loss.

When the hedge cash flow affect the Income Statement, the gain or loss on the hedging instrument is recorded in the corresponding income or expense line of the Income Statement. When a hedging instrument expires, or is sold, terminated, exercised or when a hedge no longer meet the criteria for hedge accounting, any cumulative gains/losses existing in other comprehensive income at that time remains in other comprehensive income and is recognised in the income statement. When a forecast transaction is no longer expected to occur the cumulative gains/loss was reported in other comprehensive income is immediately transferred to the Income Statement.

(ii) Financial Liabilities

(ii-i) Initial Recognition and Measurement

Financial Liabilities are classified, at initial recognition, as financial liabilities at fair value through profit or loss, loans and borrowings, payables, or as appropriate. All financial liabilities are recognised initially at fair value and, in the case of loans, borrowings, vendor financing and payables, net of directly attributable transaction costs.

The Group’s financial liabilities include trade and other payables, loans and borrowings including bank overdrafts, vendor financing, lease liabilities, contract liabilities and deferred income.

(ii-ii) Subsequent Measurement

This is the category most relevant to the Group. After initial recognition, interest-bearing loans and borrowings and vendor financing are subsequently measured at amortised cost using the EIR method, after considering any discount or premium on acquisition and fees or costs that are an integral part of the EIR. Gains and losses are recognised in profit or loss when the liabilities are derecognised. EIR amortisation is included as finance costs in the statement of profit or loss.

(ii-iii) Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the statement of profit or loss.

(iii) Offsetting of Financial Instruments

Financial assets and financial liabilities are offset and the net amount is reported in the consolidated statement of financial position if there is a currently enforceable legal right to offset the recognised amounts and there is an intention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.

(d) Property, Plant and Equipment

(i) Recognition and Measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour and any other costs directly attributable to bringing the assets to a working condition for their intended use. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that asset.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

(ii) Subsequent Costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss.

(iii) Depreciation

Depreciation is calculated over the depreciable amount, which is the cost of an asset, or other amount substituted for cost, less its residual value. Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant and equipment. In the year of acquisition depreciation is computed on proportionate basis from the month the asset is put into use and no depreciation will be charged to the month in which the particular asset was disposed. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

Depreciation method, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate
The estimated useful lives for the assets are as follows:
Freehold buildings	5 – 40 years
Motor vehicles	3 – 5 years
Ducts, cables and other outside plant
PABX system	1 – 6 years
Submarine cables	10 – 25 years
Other cables	10 – 20 years
Telephone exchanges and transmission equipment
Towers	40 years
IT systems	5 – 10 years
Other fixed assets	2 – 20 years

(iv) Capital Work-in-Progress

Capital work-in-progress is stated at cost net of accumulated impairment losses, if any. These are expenses of a capital nature directly incurred in the construction of buildings, network equipment, system development and other fixed assets, awaiting capitalisation.

Major spare parts and project related inventory qualify as property, plant and equipment when the entity expects to use them during more than one year period and are used in connection with specific items of property, plant and equipment.

(v) Derecognition

The carrying amount of an item of property, plant & equipment is derecognised on disposal. Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised net within “other income” in the statement of profit or loss and other comprehensive Income.

When replacement costs are recognised in the carrying amount of an item of property, plant and equipment, the remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous cost of inspections is derecognised.

(vi) Borrowing Cost

Borrowing cost directly attributable to the acquisition, construction or production of a qualifying asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.

(e) Investment Properties

(i) Initial Recognition and Measurement

Investment property is property held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. The company adopts “cost model” to measure investment property. Investment property is measured at cost on initial recognition.

(ii) Subsequent Measurement

Subsequent to initial recognition, Investment properties are carried at its cost less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use.

(iii) Depreciation

Depreciation is recognised on a straight-line basis over the estimated useful life of the investment property. The estimated useful life of investment property of the Group is as follows.

Freehold buildings

05 – 40 years

(iv) Derecognition

Investment property is derecognised when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the statement of profit or loss in the period of derecognition.

Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the carrying amount of the property at the date of change in use becomes its deemed cost for subsequent accounting. If owneroccupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

(f) Intangible Assets

(i) Goodwill

Goodwill arises on the acquisition of subsidiaries. Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For measurement of goodwill at initial recognition, see note 3 (a) (i).

Goodwill is measured at cost less accumulated impairment losses.

(ii) Other Intangible Assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortisation and accumulated impairment losses.

(iii) Licenses

Separately acquired licenses are shown at historical cost. Expenditures on license fees that is deemed to benefit or relate to more than one financial year is classified as license fee and is being amortised over the License period on a straight line basis.

(iv) Subsequent Expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill is recognised in profit or loss as incurred.

The estimated useful lives for the intangible assets are as follows:

Licences	2 – 10 years
Software	1 – 10 years
Others	5 years

(g) Right of use Assets and Lease Liabilities

Leases

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.

Group as a Lessee

The Group applies a single recognition and measurement approach for all leases, except for short-term leases and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.

Right-of-use Assets

The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use). Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a straight-line basis over the shorter of the lease term and the estimated useful lives of the assets, as follows:

Leased assets	Estimated useful lives
Buildings	2 – 5 years
Towers	2 – 5 years

If ownership of the leased asset transfers to the Group at the end of the lease term or the cost reflects the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset. The right-of-use assets are also subject to impairment as more fully described In Note (U) (ii) – Impairment of Assets.

Lease Liabilities

At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating the lease, if the lease term reflects the Group exercising the option to terminate. Variable lease payments that do not depend on an index or a rate are recognised as expenses (unless they are incurred to produce inventories) in the period in which the event or condition that triggers the payment occur.

In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the lease payments (e.g., changes to future payments resulting from a change in an index or rate used to determine such lease payments) or a change in the assessment of an option to purchase the underlying asset. The Group’s lease liabilities are included in right-of-use assets and lease liabilities in Note 16 to the Financial Statements.

Leases of low-value Assets

The Group applies the lease of low-value assets recognition exemption to leases of some tower rentals that are considered to be low value. Lease payments on leases of low-value assets are recognised as expenses on straight-line basis over the lease term.

Group as a Lessor

Leases in which the Group does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. Rental income arising is accounted for on a straight-line basis over the lease terms and is included in revenue in the statement of profit or loss due to its operating nature. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised over the lease term on the same basis as rental income. Contingent rents are recognised as revenue in the period in which they are earned.

(h) Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost principle. Value of inventories includes expenditure incurred in acquiring, conversion costs and other costs incurred in bringing them to their existing location and condition.

(i) Share Capital

Ordinary Share Capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

(j) Government Grants

Government grants are recognised where there is reasonable assurance that the grant will be received and all attached conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset.

When the Group receives grants of non-monetary assets, the asset and the grant are recorded at nominal amounts and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the benefits of the underlying asset by equal annual installments.

(k) Employee Benefits

(i) Defined Contribution Plans

A defined contribution plan is a post-employment benefit plan under which contributions are made into a separate fund and the entity will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution plan are recognised as an employee benefit expense in profit or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Employees’ Provident Fund

All employees of the Company are members of the Sri Lanka Telecom Provident Fund to which the Company contributes 15% of such employees’ basic salary and allowances. All employees of subsidiaries of the Group are members of Employees’ Provident Fund (EPF), to which the respective subsidiaries contribute 12% of such employees’ basic salary and allowances.

Employees’ Trust Fund

The Company and other subsidiaries contribute 3% of the salary of each employee to the Employees’ Trust Fund.

(ii) Defined Benefit Plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The defined benefit is calculated by an independent actuary using Projected Unit Credit method as recommended by LKAS 19 “Employee Benefits” The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using the yield on Government Bonds at the reporting date and have maturity dates approximating to the terms of the Company’s obligations.

The Group recognises actuarial gains and losses that arise in calculating the Group’s obligation in respect of a plan in other comprehensive income.

The present value of the defined benefit obligation depends on a number of factors that are determined on an actuarial basis using a number of assumptions. Key assumptions used in determining the defined retirement benefit obligations are given in Note 26. Any changes in these assumptions will impact the carrying amount of defined benefit obligations.

Provision has been made for retirement gratuities from the first year of service for all employees, in conformity with LKAS 19 “Employee Benefits”. However, under the Payment of Gratuity Act No.12 of 1983, the liability to an employee arises only on completion of five years of continued service.

(iii) Termination Benefits

Termination benefits are recognised as an expense when the Group is demonstrably committed, without realistic possibility of withdrawal, to a formal detailed plan to either terminate employment before the normal retirement date, or to provide termination benefits as a result of an offer made to encourage voluntary redundancy. Termination benefits for voluntary redundancies are recognised as an expense if the Group has made an offer of voluntary redundancy, it is probable that the offer will be accepted, and the number of acceptances can be estimated reliably.

(iv) Short-term Benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or leave encashment plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(l) Revenue from Contracts with Customers

The Group is primarily involved in providing a broad portfolio of telecommunication services across Sri Lanka. In addition, the range of services provided by the Group include, inter allia, voice and broadband services, domestic and international leased circuits, domestic and international connectivity services, submarine cable, Enterprise solutions, IPTV service, directory publishing service and educational services.

Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those goods or services. The Group has generally concluded that it is the principal in its revenue arrangements.

(i) Performance Obligations Relevant to Contracts

As a telecommunication service provider, the Group’s performance obligation related to service contracts include the installation services and maintenance services provided and the uninterrupted telecommunication service which will be provided throughout the connection period.

The Group expects that above performance obligations would be satisfied throughout the connection period.

Domestic and International Call Revenue and Rental Income

Fixed Lines

Revenue for call time usage by customers is recognised as revenue as services are performed on accrual basis. Fixed rental is recognised as income on a monthly basis in relation to the period of services rendered.

Mobile Revenue

Mobile revenue comprises amounts charged to customers in respect of monthly access charges, airtime usage, messaging, and the provision of other mobile telecommunications services. Mobile monthly access charges are invoiced and recorded as part of a periodic billing cycle. Air time, either from contract customers as part of the invoiced amount or from prepaid customers through the sale of prepaid cards, is recorded in the period in which the customer uses the service.

Revenue from other Network Operators and International Settlements

The revenue received from other network operators, local and international, for the use of the Group’s telecommunication network are recognised, net of taxes, based on usage taking the traffic minutes/per second rates stipulated in the relevant agreements and regulations and based on the terms of the lease agreements for fixed rentals.

Revenue arising from the interconnection of voice and data traffic between other telecommunications operators is recognised at the time of transit across the Group’s network and presented on gross basis. The relevant revenue accrued is recognised under income in the Income Statement and interconnection expenses recognised under operating costs in profit or loss.

Revenue from Broadband

Revenue from Data services and IPTV services is recognised on usage and the fixed rental on a monthly basis when it is earned net of taxes, rebates and discounts.

Revenue from other ICT Services

The revenue from other services are recognised on an accrual basis based on fixed rental contracts entered between the Group and subscribers.

Recognition of Deferred Income

IRU revenue relating to leasing of DS cable system are recognised on a straight line basis over the period of the contracts. Amounts received in advance for any services are recorded as deferred revenue. In the event that a customer terminates an IRU prior to the expiry of the contract and releases the Company from the obligation to provide future services, the remaining unamortised deferred revenue is recognised in the period the contract is terminated.

Sale of mobile recharge cards and reloads for prepaid subscribers are initially recognised as deferred revenue until such time as the subscribers use the services or credit period expires.

(ii) New connection fees

The Group provides installation services relevant to the new connections of fixed and mobile telecommunication services including both voice and non-voice categories. These installation services are bundled together with providing of Customer Premises Equipment (CPE) to customers in fixed line voice and some non-voice services. When the performance obligations relevant to such installation services are performed, CPEs provided to customers are considered as assets of the Group as long as the contracts with customers are valid. Accordingly, the Group allocates a bundled price for the equipment and installation services for such facilities.

(iii) Recognition of Contract Liabilities

The Group concluded that revenue from new connections in fixed and mobile telecommunication services is to be recognised over time because the customer simultaneously receives and consumes the benefits provided by the Group. The fact that another entity would not need to reperform the installation of the service that the Group has provided to date demonstrates that the customer simultaneously receives and consumes the benefits of the Group’s performance as it performs. The revenue from new connections in fixed telecommunication services is recognised based on the expected customer retention period of technology streams.

The Group identifies the revenue for installation services in Mobile telecommunication services as a contract liability and recognises the revenue on a systematic basis that is consistent with the entity’s transfer of the related goods or services to the customer since satisfaction for the installation services will be consumed by the customer over the contract period.

(iv) Obligations for Returns, Refunds and other Similar Obligations

The Group maintains a formal Customer Refund Policy to ensure that all eligible customer refunds are administered in a transparent, fair, and consistent manner. The policy establishes a structured framework for validating refund eligibility, authorising refund transactions, and ensuring timely settlement, while maintaining strong financial discipline and accountability. This policy forms an integral part of the Group’s internal control environment and reinforces its commitment to customer trust, regulatory compliance, and sound financial governance.

(v) Estimating Stand-alone Selling Prices of Promised Goods or Services and Discounts

The Group allocates the transaction price in bundled telecommunication arrangements, including devices, voice, data and broadband services, to each performance obligation based on their relative stand-alone selling prices. Where stand-alone selling prices are not directly observable, these are estimated using appropriate valuation techniques, taking into account observable market prices, expected costs plus an appropriate margin, and the specific discount structure of the contractual arrangement.

(vi) Customer Loyalty Programme – Loyalty Points

Mobitel (Pvt) Limited operates a customer loyalty programme (“Loyalty Points”), where points are treated as a separate performance obligation and a portion of the transaction price is allocated and recognised as a contract liability. Revenue is recognised upon redemption or expiry of points.

(vi) (a) Estimating stand-alone selling price – loyalty programme

The stand-alone selling price of loyalty points is estimated using expected redemption patterns, including the likelihood of customer usage, based on historical data and trends.

These estimates are reviewed quarterly, with any changes accounted for prospectively and reflected in revenue. In determining the standalone selling price assumptions are made in relation to assessing redemption rates and timing.

(vii) Costs Incurred in Securing Customer Contracts

The Group identifies the sales commission paid to sales team for each new connection contract and other such related costs in contract acquisition as costs incurred in securing customer contracts.

(viii) Recognition of Contract Cost Assets

Contract acquisition costs (including Dealer Commission) are recognised as a Contract cost assets and subsequently recognised as an expense over the life of a contract on a systematic basis consistent with the pattern of the transfer of services to which the asset relates (consistent with the customer retention period for Dealer Commission).

(m) Expenditure

The expenses are recognised on an accrual basis. All expenses incurred in the ordinary course of business and in maintaining property, plant and equipment in a state of efficiency is charged against income in arriving at the profit for the year.

(n) Lease Payments

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed. Determining whether an arrangement contains a lease.

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfillment of the arrangement is dependent on the use of that specific asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset.

(o) Finance Income and Expenses

The Group’s finance income and finance cost include:

• Interest income from repurchase agreements
• Interest income from fixed deposits
• Staff loan interest income
• Interest expense from borrowings
• Interest expense arising from Leases
• Foreign exchange gains or losses

Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date on which the Group’s right to receive payment is established.

(p) Income Tax

Current income tax assets are measured at amount to be recovered from or paid to the taxation authorities

(i) Current Taxation

Income tax expense comprises current and deferred tax. Income tax expense is recognised or profit or loss except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity or other comprehensive income.

Provisions for taxation is based on the profit for the year adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act No. 24 of 2017 and the amendments thereto.

(ii) Deferred Taxation

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences;

• The initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss and differences relating to investments in nor taxable profit or loss and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.
• Deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets liabilities will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the temporary difference can be utilised. Deferred tax is not recognised for the undistributed profits of subsidiaries as the Parent Company has control over the dividend policy of its subsidiaries and distribution of those profits. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

Deferred tax relating to items recognised outside profit or loss, is recognised either in other comprehensive income or directly in Statement of Changes in Equity in line with the underlying transaction.

(iii) Social Security Contribution Levy (SSCL)

According to the Social Security Contribution Levy Act No. 25 of 2022, Sri Lanka Telecom PLC is liable for Social Security Contribution Levy at 2.5% on the liable turnover arising from providing of a service with effect from 1 October 2022.

(iv) Sales Tax

Revenue, expenses and assets are recognised net of the amount of sales tax, except: where sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part of expense item as applicable.

(v) Uncertainty Over Income Tax

The Group determines whether to consider each uncertain tax treatment separately or together with one or more other uncertain tax treatments and uses the approach that better predicts the resolution of the uncertainty.

The Group applies significant judgment in identifying uncertainties over income tax treatments and it assessed whether the interpretation had an impact on its consolidated Financial Statements. If the Group concludes that it is probable that the taxation authority will accept the tax treatment used or planned to be used in its tax fillings, the entity determines its tax position on that basis. This is consistent with the requirement that current tax is measured at the amount expected to be paid or recovered from the taxation authorities, and that deferred tax is measured using the rates and tax laws expected to apply when the related asset is realised or liability is settled.

If the Group concludes that acceptance of the uncertain tax treatment by the taxation authorities is not probable, it would apply one of the following two methods for reflecting the effect of uncertainty in its estimate of the amount it expects to pay or recover from the tax authorities

• the most likely amount – the single most likely amount in a range of possible outcomes; or
• the expected value – the sum of the probability-weighted amounts in a range of possible outcomes.

The Group uses the method that is expects to better predict the resolution of the uncertainty.

(q) Earnings per share

The Group presents basic Earnings Per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the company by the weighted average number of ordinary shares outstanding during the period.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted-average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares.

(r) Insurance reserve

SLT has Property All Risk Insurance for targeted assets of the SLT at island wide locations. In order to cover the exposure of remaining assets and possible further exposure LKR 300 Mn. has been retained in the insurance reserve. There are no further contributions to the insurance fund due to the reason of annual renewal of Property All Risk policy of SLT.

(s) Dividend Distribution

Dividend distribution to the Company’s shareholders is recognised as a liability in the Group’s financial statements in the period in which the dividends are approved by the Company’s shareholders.

Provision for final dividends is recognised at the time the dividend recommended and declared by the Board of Directors, is approved by the shareholders.

(t) Comparatives

Except when a standard permits or requires otherwise, comparative information is disclosed in respect of the previous period. Where the presentation or classification of items in the Financial Statements are amended, comparative amounts are reclassified unless it is impracticable.

(u) Statement of Cash Flows

The Statement of Cash Flows has been prepared using the “indirect method” of preparing cash flows in accordance with the Sri Lanka Accounting Standard (LKAS 07) – “Statement of Cash Flows”. Cash and Cash equivalents comprise short-term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of change in value. The cash and cash equivalent include cash in hand, balances with banks, placements with banks, money at call and short notice.

(v) Critical Accounting Estimates, Assumptions and Judgements

In the preparation of these Financial Statements, a number of estimates and assumptions have been made relating to the performance and the financial position of the Group. Results may differ significantly from those estimates under different assumptions and conditions. The Directors consider that the following discussion addresses the Company’s most critical accounting policies, which are those that are most important to the presentation of its financial performance and position. These particular policies require subjective and complex judgements, often as a result of the need to make estimates about the effect of matters that are uncertain.

(i) Depreciation of Property, Plant and Equipment

The Company assigns useful lives and residual values to property, plant and equipment based on periodic studies of actual asset lives and the intended use for those assets. Changes in circumstances such as technological advances, prospective economic utilisation and physical condition of the assets concerned could result in the actual useful lives or residual values differing from initial estimates.

Where the Company determines that the useful life of property, plant and equipment should be shortened or residual value reduced, it depreciates the net carrying amount in excess of the residual value over the revised remaining useful life, thereby increasing depreciation expense. Any change in an asset’s life or residual value is reflected in the Company’s financial statements when the change in estimate is determined.

(ii) Impairment of Property, Plant and Equipment and Intangible Assets

The Company assesses the impairment of property, plant and equipment and intangible assets whenever events or changes in circumstances indicate that the carrying value may not be recoverable or otherwise as required by accounting standards. Factors that are considered important and which could trigger an impairment review include the following;

• obsolescence or physical damage;
• significant changes in technology and regulatory environments;
• significant underperformance relative to expected historical or projected future operating results;
• significant changes in the use of its assets or the strategy for its overall business;

The identification of impairment indicators, the estimation of future cash flows and the determination of the recoverable amount for assets or cash generating units require significant judgement.

(iii) Revenue Recognition

Judgement is required in assessing the application of the principles of revenue recognition in respect of revenues. This includes presentation of revenue as principal or as agent in respect of income received from transmission of content provided by third parties.

(iv) Valuation of Receivables

The provision for impairment losses for trade and other receivables reflects the Company’s estimates of losses arising from the failure or inability of customers to make required payments. The provision is based on the ageing of customer accounts, customer credit-worthiness and the Company’s historical write-off experience etc. Changes to the provision may be required if the financial condition of its customers improves or deteriorates. An improvement in financial condition may result in lower actual write-offs.

(v) Inventories

The Company assesses the inventory provision whenever events or changes in circumstances indicate that the carrying value may not be recoverable or otherwise as required by accounting standards. Factors that are considered important and which could trigger an impairment review include the following;

• obsolescence or physical damage;
• significant changes in technology and regulatory environments;
• significant changes in the use of its assets or the strategy for its overall business;

(vi) Current Tax and Deferred Tax

Judgement was required to determine the total provision for current, deferred and other taxes due to uncertainties that exist with respect to the interpretation of the applicability of tax law at the time of the preparation of these financial statements.

Certain uncertainties exist with respect to the interpretation of tax regulations and the amount and timing of future taxable income. Differences arising between the actual results and the assumptions made, or future changes to such assumptions, could necessitate future adjustments to tax income and expense already recorded. Where the final tax outcome of such matters is different from the amounts that were initially recorded, such differences will impact the income and deferred tax amounts in the period in which the determination is made.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

(vii) Leases-Estimating the Incremental Borrowing Rate

The Group cannot readily determine the interest rate implicit in the lease, therefore, it uses its incremental borrowing rate (IBR) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have to pay”, which requires estimation when no observable rates are available or when they need to be adjusted to reflect the terms and conditions of the lease. The Group estimates the IBR using observable inputs such as market interest rates when available and is required to make certain entity-specific estimates as well.

(viii) Revenue Recognition from Contracts with Customers

Judgement is required in assessing the application of the principles of revenue recognition in respect of revenues. Certain contracts with customers are bundled packages that may include sale of products and telecommunications services that comprise voice, data, and other telecommunications services. The Group accounts for individual products and services separately as separate performance obligations if they are distinct promised goods and services. The Group exercises judgements in determining whether a product is distinct, that is, if such product or service is separately identifiable from other items in the bundled package and if a customer can benefit from it separately. This determination will affect the allocation of consideration specified in the contract and the revenue recognised for each performance obligation.

(w) Amendments to Existing Accounting Standards

The Group applied for the first-time certain standards and amendments, which are effective for annual periods beginning on or after 1 January 2025. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

Lack of Exchangeability: Amendments to LKAS 21

The amendments specify how an entity should assess whether a currency is exchangeable and how it should determine a spot exchange rate when exchangeability is lacking.

The amendments also require disclosure of information that enables users of its financial statements to understand how the currency not being exchangeable into the other currency affects, or is expected to affect, the entity’s financial performance, financial position and cash flows.

The amendments had no impact on the Group’s financial statement.

(x) Standards Issued but not yet effective

SLFRS 18 Presentation and Disclosure in Financial Statements

SLFRS 18, which replaces LKAS 1, introduces significant enhancements to the way financial information is organised and communicated. The standard establishes new categories and subtotals in the statement of profit or loss to improve consistency and comparability across entities. It also requires entities to disclose management-defined performance measures (as specified in the standard), together with clear explanations and reconciliations. In addition, SLFRS 18 introduces strengthened requirements regarding the location, aggregation, and disaggregation of financial information. These changes are designed to ensure that financial statements present information more transparently and in a way that enhances users’ understanding of an entity’s financial performance and position.

SLFRS 18, and consequential amendments to the other accounting standards, are effective for annual reporting periods beginning on or after 1 January 2027. Early application is permitted.

The potential impact of SLFRS 18 on the financial statements and the related notes is currently being identified and evaluated.

SLFRS 19 Subsidiaries without Public Accountability: Disclosures

SLFRS 19 introduces reduced disclosure requirements for subsidiaries that do not have public accountability but continue to apply the full SLFRS recognition and measurement principles.

The purpose of SLFRS 19 is to lessen the financial reporting burden on qualifying subsidiaries by simplifying disclosure requirements, while still ensuring that financial statements remain high-quality, consistent, and comparable for users.

SLFRS 19 applies to Specified Business Enterprises, as defined in the Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995. Subsidiaries that fall within this category and do not have public accountability are eligible to apply SLFRS 19.

The Standard becomes effective for annual reporting periods beginning on or after 1 January 2027. Early application is permitted.

The potential impact of SLFRS 19 is currently being identified and evaluated.

Classification and Measurement of Financial Instruments – Amendments to SLFRS 9 and SLFRS 7

The amendments introduce enhancements to the classification, measurement, derecognition, and disclosure requirements for financial instruments. Their objective is to strengthen transparency, promote greater consistency in financial reporting, and respond to emerging market developments – particularly features such as sustainability-linked terms and nature-dependent electricity contracts.

These amendments are effective for annual reporting periods beginning on or after 1 January 2026. Early application is permitted.

The impact of these amendments is currently being identified and evaluated.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework.

The Group’s risk management processes are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management systems are reviewed regularly to reflect changes in market conditions and the group activities.

The Audit Committee oversees how management monitors compliance with the Group’s risk management processes/guidelines and procedures, and reviews the adequacy of the risk management framework in relation to the risks. The Audit Committee is assisted in its oversight role by internal reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

The Group has exposure to the following risks from its use of financial instruments:

• Credit risk, liquidity risk and market risk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements.

4.1. Credit Risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligation, and arise principally from the Group’s receivables from customers.

Carrying amount of financial assets represents the maximum credit exposure.

4.1.1 Trade Receivables

To mitigate credit risk, the Group continues to operate a comprehensive and well-defined credit risk management framework covering both domestic and international customers, supported by robust policies, systems, and oversight mechanisms. Credit risk is actively monitored and managed through preventive, detective, and corrective controls aimed at safeguarding cash flows and minimising potential losses.

For international interconnect services, a dedicated committee continues to evaluate and recommend the creditworthiness of counterparties, ensuring a structured and disciplined approach to managing cross-border credit exposures. Prepaid arrangements remain a key risk mitigation strategy, significantly reducing exposure to default risk in international operations.

In the domestic market, new customers are subject to screening against an internal blacklist database prior to service activation. The Group applies a strong credit control policy under which customers are segmented based on risk profiles, with credit limits determined in line with average monthly billing values. Customer usage and payment behaviour are continuously monitored against approved limits, which are periodically reviewed and adjusted based on historical billing and settlement patterns.

High-risk voice customers are automatically disconnected upon reaching defined threshold limits, while proactive recovery actions are undertaken for overdue and defaulted accounts. Corporate and high-revenue customers are subject to individual monitoring, enabling early identification of emerging risks and timely intervention.

In line with the SLT’s Debtor Policy, receivables outstanding for more than one year are fully provided for, ensuring a prudent and conservative approach to credit risk recognition and compliance with applicable accounting standards. This policy reinforces discipline in debtor management and limits the impact of long-outstanding balances on the Company’s financial position.

During the year, the Group further strengthened its credit risk controls by introducing a mandatory requirement to obtain 100% advance payment for all one-time and temporary service provisioning to government institutions, subject to limited exceptions approved at senior management level. This measure was implemented in response to historically prolonged settlement cycles and elevated recovery risk associated with such services, and is expected to significantly reduce future bad debt accumulation while improving cash flow predictability.

Overall, the Company’s credit risk management framework continues to evolve, incorporating tighter policies, enhanced monitoring, and targeted preventive measures to maintain an acceptable risk profile while supporting sustainable revenue growth.

As at 31 December, the maximum exposure to credit risk for trade by geographic region was as follows:

	Group				Company
	2025		2024		2025		2024
Sri Lanka	22,057	82%	23,520	85%	17,983	90%	17,213	88%
Middle east	2,892	11%	280	1%	140	1%	113	1%
Asia	1,605	6%	1,595	6%	1,605	8%	1,251	6%
Europe	210	1%	1,051	4%	210	1%	822	4%
Australia	83	0%	156	1%	83	0%	138	1%
Other	37	0%	911	3%	37	0%	109	0%
Total trade receivables	26,884	100%	27,513	100%	20,058	100%	19,646	100%

As at 31 December, the maximum exposure to credit risk for trade receivables by type of counterparty was as follows:

	Group				Company
	2025		2024		2025		2024
Wholesale customers	5,263	20%	6,140	22%	3,975	20%	4,859	25%
Retail customers	12,580	47%	12,667	46%	10,799	53%	9,759	50%
Other	9,041	33%	8,706	32%	5,284	27%	5,028	25%
	26,884	100%	27,513	100%	20,058	100%	19,646	100%

As at 31 December the Group’s most significant customer was Hutchison Telecommunication Lanka (Pvt) Limited which accounted for LKR 1,349 Mn. of trade receivables (2024 – LKR 1,238 Mn.).

For the year ended 31 December 2025, the Company recognised provision for expected credit losses of LKR Nil relating to amounts owed by related parties and other operators. (2024 – Nil).

Provision for receivables outstanding for more than 360 days has not been made if they are not credit-impaired financial assets, in accordance with SLFRS 7 (Intercompany debtors and operators etc).

As at 31 December 2025, the aging of trade receivables that were not impaired was as follows:

	Group		Company
	2025	2024	2025	2024
Past due one year	211	379	190	375
Past due two years and above	2	138	2	51
	213	517	192	426

The Movement in the allowance for impairment in respect of trade receivables during the year is as follows:

	Group impairment	Company impairment
Balance as at 1 January 2024	8,041	5,086
– Impairment loss recognised	1,860	1,463
– Amounts written off	(2,595)	(1,936)
Balance as at December 2024	7,306	4,613
– Impairment loss recognised	2,115	2,115
– Amounts written off	(2,962)	(1,613)
Balance as at 31 December 2025	6,459	5,115

4.1.2 Other Investments

The Group limits its exposure to credit risk by investing only in Government Debt Securities, Repos and in short term deposits with selected bankers with Board approval, which are considered as low risk.

4.1.3 Cash and Balances with Banks

The Group held cash and cash equivalents of LKR 9,935 Mn. as at 31 December 2025 (2024 LKR 8,546 Mn.), which includes investments maturing within next three months periods.

4.1.4 Employee loans

The Group limits its exposure to credit risk by ensuring the loan balance are recovered from the employees monthly salary, or if the employee leaves such amounts are recovered from the employees EPF balance, hence considered as low risk.

4.2 Liquidity Risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

The group ensures its liquidity is maintained by investing in short, medium and long-term financial instruments to support operational and other funding requirements. The group determines its liquidity requirements by the use of both short and long-term cash forecasts. These forecasts are supplemented by a financial headroom analysis which is used to assess funding adequacy for at least a 12-month period and the same is reviewed on an annual basis.

Short and medium-term requirements are regularly reviewed and managed by the Treasury Division.

SLT PLC has provided a corporate guarantee of LKR 200 Mn. (2024 – LKR 200 Mn.) for Mobitel (Pvt) Ltd for Term Loan granted by Mobitel (Pvt) Ltd to Sri Lanka Telecom (Services) Ltd.

SLT PLC has provided a corporate guarantee of USD 2.6 Mn. (2024 – USD 2.6 Mn.) for Bank of Ceylon for LC facility granted by Bank of Ceylon to Sri Lanka Telecom (Services) Ltd.

Group	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
As at 31 December 2025
Bank overdrafts	6,316	6,316	–	–	–
Bank borrowings and others	89,380	14,163	9,298	34,077	31,842
Vendor finance	1,147	1,147	–	–	–
Lease liability	11,589	4,262	1,290	2,524	3,513
Trade and other payables due with in one year (4.2.1)	28,765	28,765	–	–	–
Trade and other payables due after one year (4.2.2)	2,034	123	458	225	1,228
	139,231	54,776	11,046	36,826	36,583
As at 31 December 2024
Bank overdrafts	4,538	4,538	–	–	–
Bank borrowings and others	100,602	16,930	9,271	34,962	39,439
Vendor finance	17,571	7,921	2,336	6,114	1,200
Lease liability	9,193	3,321	920	2,651	2,301
Trade and other payables due with in one year (4.2.3)	28,588	28,588	–	–	–
Trade and other payables due after one year (4.2.4)	3,517	249	1,496	473	1,299
	164,009	61,547	14,023	44,200	44,239

Company	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
As at 31 December 2025
Bank overdrafts	3,099	3,099	–	–	–
Bank borrowings and others	75,112	7,663	6,094	29,513	31,842
Lease liability	577	528	49	–	–
Trade and other payables due with in one year (4.2.5)	23,787	23,787	–	–	–
Trade and other payables due after one year (4.2.6)	1,106	123	458	156	369
	103,681	35,200	6,601	29,669	32,211
As at 31 December 2024
Bank overdrafts	2,833	2,833	–	–	–
Bank borrowings and others	84,751	10,187	6,453	28,672	39,439
Vendor finance	12,598	2,948	2,336	6,114	1,200
Lease liability	337	312	25	–	–
Trade and other payables due with in one year (4.2.7)	24,550	24,550	–	–	–
Trade and other payables due after one year (4.2.8)	2,528	249	1,496	473	310
	127,597	41,079	10,310	35,259	40,949

The Bank borrowing and others, vendor financing and bank overdrafts should be presented including both capital repayments and forecasted interest payments. Further, lease liability should be presented on an undiscounted cashflow basis. Hence, the carrying values of above are not tallying to Borrowing note.

4.2.1 Trade and Other Payables due within One Year – Group

As at 31 December 2025	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
Domestic trade payables	10,369	10,369	–	–	–
Foreign trade payables	4,073	4,073	–	–	–
Capital expenditure payables	1,714	1,714	–	–	–
Social security and other taxes	1,853	1,853	–	–	–
Interest payables	988	988	–	–	–
Other payables	9,768	9,768	–	–	–
	28,765	28,765	–	–	–

4.2.2 Trade and Other Payables due after One Year – Group

As at 31 December 2025	Carrying value	up to 1 year	up to 2 years	up to 5 years	Over 5 years
Subscriber deposits	516	–	–	–	516
Advance on RDA and other contractors	94	–	–	94	–
Unclaimed dividend	244	–	–	–	244
Domestic, foreign and capital expenditure payables	1,180	123	458	131	468
	2,034	123	458	225	1,228

4.2.3 Trade and Other Payables due within One Year – Group

As at 31 December 2024	Carrying value	up to 1 years	up to 2 years	up to 5 years	Over 5 years
Domestic trade payables	7,603	7,603	–	–	–
Foreign trade payables	3,492	3,492	–	–	–
Amount due to related companies	121	121	–	–	–
Capital expenditure payables	4,172	4,172	–	–	–
Social security and other taxes	1,618	1,618	–	–	–
Interest payables	686	686	–	–	–
Other payables	10,896	10,896	–	–	–
	28,588	28,588	–	–	–

4.2.4 Trade and Other Payables more than One Year – Group

As at 31 December 2024	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
Subscriber deposits	8	–	–	–	8
Advance on RDA and others	743	129	199	415	–
Unclaimed dividends	244	–	–	–	244
Domestic, foreign and Capital expenditure payables	2,522	120	1,297	58	1,047
	3,517	249	1,496	473	1,299

4.2.5 Trade and Other Payables due within One Year – Company

As at 31 December 2025	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
Domestic trade payables	12	12	–	–	–
Foreign trade payables	1,031	1,031	–	–	–
Amount due to subsidiaries	10,424	10,424	–	–	–
Amount due to related companies	121	121	–	–	–
Capital expenditure payables	892	892	–	–	–
Social security and other taxes	1,853	1,853	–	–	–
Interest payables	548	548	–	–	–
Other payables	8,906	8,906	–	–	–
	23,787	23,787	–	–	–

4.2.6 Trade and Other Payables due after One Year – Company

As at 31 December 2025	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
Subscriber deposits	8	–	–	–	8
Advance on RDA and other contracts	94	–	–	94	–
Unclaimed dividend	244	–	–	–	244
Capital expenditure payables	760	123	458	62	117
	1,106	123	458	156	369

4.2.7 Trade and Other Payables within One Year – Company

As at 31 December 2024	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
Domestic trade payables	30	30	–	–	–
Foreign trade payables	944	944	–	–	–
Amount due to subsidiaries	9,325	9,325	–	–	–
Amount due to related companies	121	121	–	–	–
Capital expenditure payables	2,839	2,839	–	–	–
Social security and other taxes	1,609	1,609	–	–	–
Interest payable	686	686	–	–	–
Other payables	8,996	8,996	–	–	–
	24,550	24,550	–	–	–

4.2.8 Trade and Other Payables due after One Year – Company

As at 31 December 2024	Carrying value	Up to 1 years	Up to 2 years	Up to 5 years	Over 5 years
Subscriber deposits	8	–	–	–	8
Advance on RDA and other contracts	743	129	199	415	–
Unclaimed dividend	244	–	–	–	244
Capital expenditure payables	1,533	120	1,297	58	58
	2,528	249	1,496	473	310

4.3 Market Risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices which will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

4.3.1 Currency Risk

The Group is exposed to currency risk on services provided and services received.

The Group manages its currency risk by a natural hedging mechanism to a certain extent by matching currency outflows with currency inflows for services settled in foreign currencies. Further SLT uses forward bookings where necessary to mitigate their foreign currency exposure in a prudent manner.

The summary of quantitative data about the Group’s exposure to foreign currency was as follows:

	Group		Company
	2025 LKR Mn.	2024 LKR Mn.	2025 LKR Mn.	2024 LKR Mn.
As at 31 December
Foreign trade receivables	4,838	4,022	2,086	2,462
Fixed deposits and bank balances	10,930	7,252	4,850	3,352
Trade payables	(3,952)	(3,492)	(1,031)	(944)
Vendor financing	(776)	(4,521)	–	–
Net statement of financial position exposure	11,040	3,261	5,905	4,870

The following significant exchange rates have been applied during the year:

	Average rate		Year end spot rate
	2025	2024	2025	2024
USD	301.72	301.04	310.06	292.67

Sensitivity Analysis

A reasonable possible strengthening (weakening) USD by 10% that would have a net impact. This analysis assumes that all other variables, in particular interest rates remain constant.

	Profit or loss		Balance sheet
	Strengthening	Weakening	Strengthening	Weakening
Group
2025 December USD (10%)	438	(438)	438	(438)
2024 December USD (10%)	(124)	124	(124)	124
Company
2025 December USD (10%)	591	(591)	591	(591)
2024 December USD (10%)	487	(487)	487	(487)

4.3.2 Interest Rate Risk

Interest rate risk mainly arises as a result of Group having interest sensitive assets and liabilities, which are directly, impacted by changes in the interest rates. The Group’s borrowings and investments are maintained in a mix of fixed and variable interest rate instruments and periodical maturity gap analysis is carried out to take timely action and to mitigate possible adverse impact due to volatility of the interest rates.

Short-term interest rate management is delegated to the repective company's treasury operations while long-term interest rate management decisions require approval from the board of Directors.

The Group interest rate sensitivity was computed based on a 100 basis point increase or decrease from the rates prevailed during the period. This analysis assumes that all other variables, in particular, foreign currency exchange rates, remain constant. The sensitivity of interest rate movement is shown below;

	Profit or loss
	Increase in interest rate	Decrease in interest rate
Group
2025 December variable rate instruments	(414)	414
2024 December variable rate instruments	(365)	365
Company
2025 December variable rate instruments	(401)	401
2024 December variable rate instruments	(354)	354

4.4 Capital Management

The Board’s policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business. Capital consists of stated capital and reserves The Board of Directors monitors the return on capital as well as the level of dividends to ordinary shareholders.

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital.

In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt.

The debt/equity ratios at 31 December were as follows:

	Group		Company
	2025	2024	2025	2024
Total borrowings	76,435	90,951	53,643	65,932
Total equity	100,929	91,475	75,914	70,242
Total capital	177,364	182,426	129,557	136,174
Debt/equity ratio (%)	75.7	99.42	70.7	93.9

The Group has three reportable segments, as described below, which are the Group’s strategic divisions. The strategic divisions offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic divisions, the board of Directors, reviews internal management reports on at least quarterly basis. The following summary describes the operations in each of the Group’s reportable segments.

• Fixed ICT operations includes supply of fixed telecommunication services.
• Mobile ICT operations includes supply of Mobile telecommunication services.
• Other segment operations includes IPTV Operations Includes providing of IPTV-Internet Protocol Television services , directory publication and support services. None of these segments meet the quantitative thresholds for determining reportable segments in 2025 or 2024.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before tax. As included in the internal management reports that are reviewed by the Board of Directors. Segment profit is used to measure performance as Management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Transfer prices between operating segments are on an arm’s-length basis in a manner similar to transactions with third parties.

Information relevant to the operating segments are presented in a method consistent with the management reporting provided to those charged with governance.

Information about Reportable Segments

The revenue information above is based on the locations of the customers.

The significant categories under which revenue is recognised are as follows:

6. (a) The revenue recognised from providing fixed telephony and mobile communication services by the Group is LKR 112,550 Mn. (2024 – LKR 109,418 Mn.).

The Group recognise revenue at a point in time when the transfer of significant risks and rewards of ownership of devices to customers.

The following items have been included in arriving at operating profit:

7.1 Staff Costs

(a) Other interest mainly include interest cost of leased assets.

(b) Capitalisation rate used for 2025 is 12.00% (2024 – 11.03 %).

(a) Foreign Exchange Gain/(Loss) of the Group Mainly Includes

• Exchange gain of LKR 320 Mn. (2024 – gain of LKR 2,321 Mn.) arising from realised and revaluation of the receivables, fixed deposits and bank balances maintained in USD.
• Exchange gain of LKR 39 Mn. (2024 – loss of LKR 3,020 Mn.) on payment to foreign suppliers and vendor financing.

(b) Foreign Exchange Gain/(Loss) of the Company Mainly Includes

• Exchange gain of LKR 267 Mn. (2024 – Loss of LKR 608 Mn.) arising from realisation and revaluation of receivables, fixed deposits and bank balances maintained in USD.
• Exchange gain of LKR 33 Mn. (2024 – gain of LKR 472 Mn.) on payment to foreign suppliers.

The interest income on bank deposits reflect the prevailing rates on the date of respective investments.

• The weighted average interest rates of the Group on restricted funds in bank deposits was 7.50%-7.75% (2024 – 7.53%-9.41%) and USD was 3.75% to 5.10% (2024 – 5.50%). The weighted average interest rate of the Group on bank deposits in LKR was 7%-17% (2024 – 11.00 %-12.00%).
• The weighted average interest rates of the Company on restricted funds in bank deposits was 7.73% (2024 – 9.41%) and USD was 5.10% (2024 – 5.50%).

Tax Recognised in Statement of Profit or Loss

Tax Recognised in Other Comprehensive Income – Group

Tax Recognised in Other Comprehensive Income – Company

12.1 Reconciliation Between Income Tax Expenses and Accounting Profit/(Loss)

12.2 Tax Losses Carried Forward

• The Group computed the income tax liability for the year of assessment 2025/2026 by applying the income tax rate of 30%. (for the year of assessment 2024/2025 – 30%)
• The Company is subject to corporate income tax at a standard rate of 30% on local taxable income.

In accordance with the First Schedule to the Inland Revenue Act No. 24 of 2017 (Sri Lanka), as amended by the Inland Revenue (Amendment) Act No. 2 of 2025, gains and profits derived from foreign sources, where such income is earned in foreign currency and remitted to Sri Lanka through a licensed commercial bank, are subject to income tax at a concessionary rate of 15%.

Current income tax charge of the Group/Company is made up as follows:

		Group		Company
		2025	2024	2025	2024
Sri Lanka Telecom PLC		–	–	–	–
Mobitel (Private) Limited		18	480	–	–
Sri Lanka Telecom (Services) Limited		323	209	–	–
SLT Human Capital Solutions (Private) Limited		–	–	–	–
SLT Property Management (Private) Limited		–	–	–	–
		341	689	–	–

• Pursuant to agreements dated 15 January 1993 and 26 February 2001 entered into with the Board of Investment of Sri Lanka under Section 17 of the Board of Investment Act No. 4 of 1978, 15 years tax exemption period granted to Mobitel (Private) Limited expired on 30 June 2009 and as per the agreement, Mobitel (Private) Limited opted for the turnover based tax option in which 2% was charged on the turnover for a further period of 15 years commencing from 1 July 2009. The turnover based tax option was expired on 30 June 2024.

The basic earnings per share is calculated by dividing the net profit attributable to equity holders by the weighted average number of ordinary shares in issue during the year.

Diluted EPS is the same as computed above as the Company does not have any instrument that will potentially dilute the share holdings.

14.1 Property, Plant and Equipment – Group

14.2 Property, Plant and Equipment – Company

• On 1 September 1991, the Department of Telecommunications (DoT) transferred its entire telecommunications business and related assets and liabilities to SLT. A valuation of the assets and liabilities transferred to SLT was performed by the Government of Sri Lanka. The net amount of those assets and liabilities represents SLT’s Contributed Capital on incorporation and the value of property, plant and equipment as determined by the Government of Sri Lanka. Valuers were used to determine the opening cost of fixed assets on 01 September 1991 in the first statutory accounts of SLT. Further, SLT was converted into a public limited company, Sri Lanka Telecom Limited (SLTL), on 25 September 1996 and on that date, all business and the related assets and liabilities of SLT were transferred to SLTL as part of the privatisation process.
• The cost of fully depreciated assets still in use in the company as at 31 December 2025 was LKR 179,255 Mn. (2024 - LKR 170,251 Mn.). The cost of fully depreciated assets still in use in the Group as at 31 December 2025 was LKR 212,208 Mn. (2024 - LKR 205,557 Mn.).
• No assets have been mortgaged or pledged as security for borrowings of the Group.
• The number of buildings of the Group as at 31 December 2025 is 1,242 (2024 - LKR 1,242).
• All the motor vehicles have been insured. SLT has obtained Property All Risk Insurance with effect from 31 March 2022 for targeted assets of SLT at island wide locations. An insurance reserve has been created together with a sinking fund investment to meet any potential losses with regard to uninsured property, plant and equipment. At the reporting date, the insurance reserve amounted to LKR 300 Mn. (2024 - LKR 300 Mn.) (Note 31). The insurance claim received for items of property, plant and equipment for the Group is LKR 54 Mn. and the Company is LKR 28 Mn. during the year 2025.
• During the year ended 31 December 2025 Company has recognised a provision of impairment of LKR 121.4 Mn. due to damages caused by Ditwa flood on Telephone exchanges and generators (which are included under other fixed assets). When calculating the impairment provision, recoverable amount of the cyclone-affected assets has been determined by comparing their net book value with the fair value less costs of disposal. Due to the nature and extent of the damage, it was determined that the asset has no recoverable amount.
• The capital work-in-progress related to network equipment of the Group is LKR 15,186 Mn. (2024 - LKR 16,697 Mn.) and the Company is LKR 12,386 Mn. (2024 - LKR 16,541 Mn.)
• The Company capitalised borrowing costs amounting to LKR 549 Mn. during the year (2024 - LKR 1,323 Mn.). Borrowing cost capitalised from a Group perspective amounted to LKR 630 Mn. (2024 - LKR 1,323 Mn.).
• The carrying value of network assets of the Group is LKR 129,470 Mn. (2024 - LKR 124,144 Mn.) and the Company is LKR 94,342 Mn. (2024 - LKR 88,824 Mn.).
• The depreciation charge on network assets of the Group is LKR 19,514 Mn. (2024 - LKR 20,459 Mn.) and the Company is LKR 13,274 Mn. (2024 - LKR 15,040 Mn.).
• Property, plant and equipment include submarine cables. The total cost and accumulated depreciation of all cables under this category as follows;

	Group/Company
	2025	2024
Cost	14,065	14,065
Accumulated depreciation as at 1 January	(7,906)	(7,489)
Depreciation charge for the year	(423)	(417)
Carrying amount	5,736	6,159

During the year, the Company has transferred the aggregate value of LKR 98 Mn. to Investment Properties.

The Company as a Lessor

The Company has entered into operating leases on its building rented as office space to other related and non-related companies.

The Group has adopted the cost model to value the Investment Property as per “LKRS 40-Investment Property” The details of the Investment Property of the group are as follows.

(a) Lands

(b) Buildings

The fair values of investment properties as at 31 December 2025 based on valuation performed by Mr A A M Fathihu, W M Chandrasena and P W Senaratne who are registered members of RICS. The fair value of properties was determined by external independent property valuers having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued.

Fair Value Hierarchy

The fair value measurement for investment properties have been categorised as level II and III of the fair value hierarchy based on the input to the valuation techniques used.

Valuation Technique and Significant Unobservable Inputs

The following table shows the valuation techniques used in measuring the fair value of Investment properties, as well as the significant unobservable inputs.

Terms and Conditions of Leases with Related Parties

The investment Property is leased to related parties under operating leases with rentals payable as per the lease terms following the arms length principles.

The Group has lease contracts for various items of land and Buildings, E1 Links and towers used in it’s operations. Leases of land and Buildings generally have lease terms between 1 to 2 years while Leases of towers generally have lease terms between 2 to 3 years. The Group’s obligations under it’s leases are secured by the lessor’s title to the leases assets. Generally the Group is restricted from assigning and sub leasing the leased assets. Sri Lanka Telecom (Services) Limited lease covenants include that Lessee cannot make any structural alterations to the building without approval of the lessor and all general maintenance should be carried by the lessee.

The Group also has certain leases of towers or tower spaces with low value. The Group applies the ‘‘short-term lease’’ and ‘‘lease of low-value assets’’ recognition exemptions for these leases.

(i) Set out below are the carrying amounts of right-of-use assets recognised and the movements during the year.

(ii) Set out below are the carrying amounts of lease liabilities recognised and the movements during the year.

(iii) Following are the Amounts Recognised in Profit or Loss.

Sensitivity Analysis

17.1 Intangible Assets Goodwill – Group

The cost of fully amortised intangible assets still in use in the Company as at 31 December 2025 was LKR 5,548 Mn. (2024 - LKR 3,078 Mn.). The cost of fully amortised intangible assets still in use in the Group as at 31 December 2025 was LKR 6,577 Mn. (2024 - LKR 3,802 Mn.).

The individual intangible assets that are material to the Group include:

The goodwill in the Group consists of goodwill arising on acquisition of Mobitel (Private) Limited and eChannelling PLC.

Goodwill is allocated to the Group’s Cash-Generating Units (CGUs). A summary of the goodwill allocation is presented below:

The recoverable amount of a CGU of Mobitel (Private) Limited is determined based on value-in-use calculations. These calculations use pre-tax cash flow projections, based on financial budgets approved by management covering a five-year period. Cash flows beyond the five year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed the long-term average growth rate for the business in which the CGU operates.

The key assumptions used for value-in-use calculations of Mobitel (Private) Limited are as follows:

Management determined budgeted gross margin based on past performance and its expectations of market development. The weighted average growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant operating segments.

The recoverable amount of a CGU is determined based on fair value using level 01 observable inputs; market share of eChannelling PLC. The management has observed that the current market price of a share of eChannelling PLC, (LKR 15.80) is more than the net asset value per share as at 31 December 2025.

No impairment charge has been recognised for the year ended 31 December 2025 for the above CGU (2024 - LKR Nil)

The Group’s research and development concentrates on the development of technology-driven innovation. Research and development costs that are not eligible for capitalisation have been expensed in the period incurred (in 2025, this was LKR 17 Mn. (2024: LKR 9 Mn.)), and they are recognised in administrative expenses.

17.2 Intangible Assets – Company

The individual intangiable assets that are material to the Company include:

18.1 Investments in Subsidiaries

According to Sec. 242 of Companies Act No. 07 of 2007, due to Short form amalgamation the investment in shares of SLT Visioncom (Pvt) Ltd. and SLT Digital Services (Pvt) Ltd was cancelled after amalgamation with Sri Lanka Telecom (Services) Ltd. in financial year 2024. There is no impact at the Group level as Sri Lanka Telecom (Services) Ltd is a fully owned subsidiary of Sri Lanka Telecom PLC.

Details of the subsidiary companies in which the Company had control as at 31 December are set out below:

The Directors believe that the fair value of each of the companies listed above do not differ significantly from their book values other than eChannelling PLC.

• The Company owns 1,320,013,240 shares representing 100% of the entire Ordinary Share capital of Mobitel (Private) Limited.
• The Company owns of 30,000,000 shares representing 100% of the entire Ordinary Share capital of Sri Lanka Telecom (Services) Limited.
• This investment in subsidiary company consists of 50,000 shares representing the entire stated capital of SLT Human Capital Solutions (Private) Limited.
• SLT Property management (Private) Limited has been dissolved on 22/04/2025 by the Members' voluntary winding up.
• This investment in subsidiary company consists of 199,955 shares representing the 100% stated capital of Xyntac Singapore Pte. Ltd.
• This investment in subsidiary Company consists of 106,974,618 shares representing the 87.59% holding of the issued share capital of eChannelling PLC. Remaining 12.41% of the issued share capital of eChannelling PLC is belongs to Non-Controlling Interests.

18.2 Investments in Joint Venture

Galle Submarine Cable Depot (Private) Limited (GSCDPL) engages in the business of providing services related to storage of spare submersible plant for the repair and maintenance of submarine telecommunication cable systems under South East Asia Indian Ocean Cable Maintenance Agreement. The address of the GSCDPL’s registered office is Lotus Road, Colombo 1. The Company’s 40% interest in GSCDPL is accounted for using the equity method in the Company’s financial statements.

	Group/Company
	2025	2024
As at 1 January	515	514
Share of profit from joint venture	53	1
As at 31 December	568	515

Summarised financial information of the joint venture, based on its financial statements prepared in accordance with SLFRS accounting standards are set out below:

	Group/Company
	2025	2024
Current assets	393	270
Non-current assets	383	430
Current liabilities	121	100
Non-current liabilities	181	236
Revenue from contracts with customers	426	419
Profit for the year	250	164
Total comprehensive income for the year	250	164

The Group designated the investments shown below as equity securities at FVOCI as these equity securities represent investments that the Group intends to hold for the long term for strategic purposes.

No strategic investments were disposed of during the year 2025, and there were no transfers to any cumulative gain or loss within the equity relating to these investments.

Group has received a scrip dividend of shares amounting to LKR 313/- (2024 – LKR 745/-) for the year ended 31 December 2025.

19.1 Reconciliation of Fair Value Measurement of the Equity Instruments Designated at Fair Value Through OCI:

Current Investments

Group Fixed deposits with a carrying value of LKR 39 Mn. (2024 - LKR 38 Mn.) is in local currency. Group Fixed deposits in foreign currency with a carrying value of LKR 2,790 Mn. (2024 - 830 Mn.). The fixed deposits of the Company with a carrying value of LKR 302Mn. (2024-LKR Nil.) are restricted in bank. All the fixed deposits referred in this note are not matured as at 31 December 2025 and invested for a period of 3-12 months.

The Group's exposure to credit and market risk and fair value information related to other investment are disclosed in Note 4.

The Group provides loans to employees at concessionary rates. The fair value of the employee loans are determined by discounting expected future cash flows using market related rates for similar loans.

The difference between the cost and fair value of employee loans is recognised as prepaid staff cost. The employee loans are classified as loans and receivables and subsequently measured at amortised cost.

• Inventories include telecommunication hardware, consumables and office stationery. Inventory is stated net of provisions for slow-moving and obsolete items.
• During the year the Group/Company has no write-off of inventories (2024 - LKR Nil).

• Advances and prepayments of the Company mainly consist of advances on foreign and local suppliers advances LKR 1,165 Mn. (2024 – LKR 1,524 Mn.), Advances on Frequency, Tower Leases and Operators of LKR 584 Mn. (2024 – LKR 648 Mn.) payments for software maintenance of LKR 359 Mn. (2024 – LKR 433 Mn.). Advances and prepayments of the Group mainly consist of advances on foreign and local suppliers advances LKR 1,324 Mn. (2024 – LKR 1,948 Mn.), payments for software maintenance of LKR 425 Mn. (2024 – LKR 706 Mn.) Prepaid TRC Frequency LKR 1,207 Mn. (2024 – LKR 1,093 Mn.) and free phone offer LKR 206 Mn. (2024 – LKR 205 Mn.).
• Other receivables of the Company consist of refundable deposits of LKR 163 Mn. (2024 – LKR 157 Mn.). Other receivables of the Group mainly consist of refundable deposits of LKR 337 Mn. (2024 – LKR 337 Mn.) and site rentals receivables from other operators LKR 1,457 Mn. (2024 – LKR 1,837 Mn.).

The Fixed deposits of the Group in foreign currency include with a carrying value of LKR 7,651 Mn. (2024 – LKR 5,912). The Fixed deposits of the Company in foreign currency include a carrying value of LKR 1,814 Mn. (2024 – LKR 2,212), the fixed deposits of the Company with a carrying value of LKR Nil (2024 – LKR 323 Mn.) are restricted at bank. The fixed deposits of the Group in LKR include a carrying value of LKR 365 Mn. (2024 – LKR 347 Mn.).

Bank guarantees outstanding as at 31 December 2025 to LKR 287 Mn. have been issued by the Company. Total cash and cash equivalents balances held are available for use by the Company.

24. (a) For Cash Flow Purpose:

• The interest rate exposure of the borrowings of the Group and the Company were as follows:

		Group		Company
		2025	2024	2025	2024
– At fixed rates		12,622	22,575	9,845	9,598
– At floating rates		55,827	48,464	43,250	46,500
		68,449	71,039	53,095	56,098

The currency exposure of the borrowings of the Group and the Company as at the reporting date were as follows:

		Group		Company
		2025	2024	2025	2024
Foreign currency		–	–	–	–
Local currency		68,449	71,039	53,095	56,098

• Effective interest rates of the Group and the Company are as follows:

		Group		Company
		2025 %	2024 %	2025 %	2024 %
Average effective interest rates:
– Bank overdrafts		7.46-13.00	10.01-13.70	7.88	10.01
– Bank borrowings (LKR loans)		7.41-9.28	AWPLR + 0.2% + AWPLR + 1%, 10.15%-11.47%	8.92	11.47
– Debenture		12.75	12.75	12.75	12.75

• Maturity analysis of the Group and the Company is as follows:

		Group		Company
		2025	2024	2025	2024
Maturity of non current borrowings:
– Between 1 and 2 years		6,742	5,919	1,362	1,466
– Between 3 and 5 years		20,574	19,868	19,044	16,461
– Over 5 years		27,044	31,573	27,044	31,573
		54,360	57,360	47,450	49,500

• Movement of the borrowings is given below – Group

		Borrowings	Bank overdraft	Total
As at 1 January 2025		66,882	4,157	71,039
– Additions during the year		44,950	80,516	125,466
– Net repayment during the year		(49,182)	(78,874)	(128,056)
		62,650	5,799	68,449

• Movement of the borrowings is given below – Company

		Borrowings	Bank overdraft	Total
As at 1 January 2025		53,500	2,598	56,098
– Additions during the year		27,750	79,098	106,848
– Net repayment during the year		(31,000)	(78,851)	(109,851)
		50,250	2,845	53,095

• During the year the Company, drew down LKR 3,750 Mn. (2024 – LKR 31,500 Mn.) from the Syndicate term loan and LKR 24,000 Mn. (2024 – LKR 5,000 Mn.) from short term loans.
• The Company’s unutilised short term facilities and long term facilities as at 31 December 2025 were LKR 22,937 Mn. and LKR Nil Mn. respectively (2024 – LKR 21,192 Mn. and LKR – 7,500). The Group’s unutilised short term facilities and long term facilities as at 31 December 2025 LKR 26,437 Mn. and LKR Nil respectively (2024 – LKR 26,588 Mn. and LKR – 10,250).
• The loan covenants include submission of audited Financial Statements to the lenders within a specified period from the financial year end, maintenance of covenant ratios and to maintain adequate accounting records in accordance with Sri Lanka Accounting Standards as specified below.

Loans obtained by the Company

• Sampath bank term Loan – No Financial covenants
• Syndicate Loan – Interest Service Coverage Ratio and Debt Service Coverage Ratio, The covenant is tested yearly, until the maturity.

Loans obtained by Subsidiaries

• HNB term Loan – Gearing ratio to be maintained below 2.00 at all the times.
• Debt Service Cover Ratio to be maintained above 2.00 at all times.
• Not less than The existing share of collections should continue to be routed through HNB PLC and existing collection arrangement should not be deviated from at any point without prior consent of the Bank.
• NTB PLC term Loan – Debt to Equity ratios to be a minimum of 80:20 for the projected network expansion projects.

• Gearing ratio to be maintained 2 times at all time
• NTB PLC solar Loan – Debt to Equity ratios to be a minimum of 80:20 for the Solar project cost.
• Gearing ratio to be maintained 2 times at all time
• 50% of the operating cash flows in terms of Amex/Frimi/customer and dealer collections of the Company to be assigned and routed through the account in the name of Company maintained with Nations Trust Bank PLC with a minimum amount of Rupees 1,500,000,000/- per month.
• All cash collections from the agreed methods to continue during the tenure of the Loan and cash collections from any new methods mutually agreed with Nations Trust Bank PLC should also be routed through the collection account.
• In the event, the cash cover is below LKR 1,000,000,000/- continuously for more than a 03-month period, the Company to remit collections from own funds to Nations Trust Bank PLC within 60 days of being informed.

• Monthly minimum of LKR 50 Mn. to be routed through the Company account maintained with Cargills Bank Ltd.
• Monthly cash buildup of LKR 1,000,000/- to be made to the Company’s saving account and the funds being built up to be held under lien to the Bank. The Bank is authorised to execute the standing instruction to debit the Current Account of Mobitel (Pvt) Ltd on monthly basis and transfer funds to their Savings Account for this amount.
• (e) PABC short term loan – No Financial covenants
• The Group has no indication that it will have difficulty complying with these covenants.
• The Directors believe that the Company and the Group will have sufficient funds available to meet its present loan commitments.
• Lease liabilities of the Company and the Group are effectively secured by the lessor against the rights to the title of the asset.
• Fixed Deposits have been pledged as a collateral for borrowings in Sri Lanka Telecom (Services) Ltd.

Recognised Deferred Tax (Assets) and Liabilities

Deferred tax (assets) and liabilities are calculated on all taxable and deductible temporary differences arising from differences between accounting bases and tax bases of assets and liabilities. Deferred tax is provided under the liability method using a principal tax rate of 30% (for the year 2024 – 30%).

The movement in the deferred tax account is as follows:

The amounts shown in the statement of financial position represents the following:

The taxable and deductible temporary differences mainly arise from property, plant and equipment, deferred income, provision for defined benefit obligations and other provisions.

Deferred tax assets and liabilities of the Group are attributable to the following:

Movement in deferred tax balances during the year-Group

Deferred tax assets and liabilities of the Company are attributable to the following:

Movement in deferred tax balances during the year – Company as indicated below:

The Group incurred a tax loss during the current financial year primarily due to the claim of Enhanced Capital Allowances (ECA).

A deferred tax asset has been recognised on the tax losses carried forward to the extent that it is probable that future taxable profits will be available against which the losses can be utilised.

The recognition of the deferred tax asset of the Group has resulted in a reduction of the current tax expense and a corresponding increase in profit and equity.

Further details on income taxes are disclosed in Note 12.

The Company has tax losses that are available for offsetting against future taxable profits of the Company.

These losses arose during the current year and can only be utilised against future taxable profits of the Company and cannot be offset against taxable profits of other entities within the Group.

The unused tax losses arising during the year primarily due to Enhanced Capital Allowances (ECA) are available for offset against future taxable profits of the Company and will expire within 10 years from the year in which the losses were incurred, in accordance with the provisions of the Inland Revenue Act.

The deferred tax asset recognised in the Group respect of unused tax losses amounts to LKR 4,901 Mn. (2024: LKR 3,962 Mn.).

Sale of mobile recharge cards and reloads for prepaid subscribers are initially recognised as deferred revenue until such time as the subscribers use the services or credit period expires.

IRU revenue relating to leasing of DS cable capacity is recognised on a straight line basis over the period of the contracts. Amounts received in advance for any services are recorded as deferred revenue. In the event that a customer terminates an IRU prior to the expiry of the contract and releases the Company from the obligation to provide future services, the remaining unamortised deferred revenue is recognised in the period the contract is terminated.

The Deferred income movements are provided below:

27. (a) Contract Cost Assets

The Contract cost assets movements are provided below:

27. (b) Contract Liabilities

A contract liability of the Company is recognised when the new connection income is received or due (whichever is higher) in which Company received the revenue over the retention period of the customer.

Futher, Mobitel (Pvt) Limited operates a customer loyalty programme (“Loyalty Points”), where points are treated as a separate performance obligation and a portion of the transaction price is allocated and recognised as a contract liability. Revenue is recognised upon redemption or expiry of points.

The figure shows the correct liabilities due to unsatisfied performance obligations as at 31 December 2025.