02 Corporate Information 03 Director s Report

Transcription

1

2

3 contents 02 Corporate Information 03 Director s Report Condensed Financial Information 05 Auditors Review Report to the Members 06 Condensed Interim Balance Sheet 08 Condensed Interim Profit and Loss Account 09 Condensed Interim Statement of Comprehensive Income 10 Condensed Interim Cash Flow Statement 12 Condensed Interim Statement of Changes in Equity 13 Selected Notes to and Forming Part of the Condensed Interim Financial Information Condensed Consolidated Financial Information 28 Condensed Consolidated Interim Balance Sheet 30 Condensed Consolidated Interim Profit and Loss Account 31 Condensed Consolidated Interim Statement of Comprehensive Income 32 Condensed Consolidated Interim Cash Flow Statement 34 Condensed Consolidated Interim Statement of Changes in Equity 35 Selected Notes to and Forming Part of the Condensed Consolidated Interim Financial Information 01

4 CORPORATE INFORMATION Management Team Naeem Zamindar Chief Executive Officer Sajjeed Aslam Chief Financial Officer Sajid Farooq Hashmi Company Secretary & Head of Legal Syed Jibran Ali Chief Commercial Officer Faisal Sattar Chief Technology Officer Asad Rezzvi Chief Transformation Officer Zafar Iqbal Ch. GM HR, Admin & Infrastructure Zeeshan Hasan GM Customer Care Ali Khan GM Enterprise & Carrier Sales Adnan Kareem Head of Product Development Brig (R) Mazhar Qayyum Butt GM Corporate Affairs Saleem Akhtar Head of Project Management Office Naila Bhatti GM Media Auditors A.F. Ferguson & Co. Chartered Accountants PIA Building, 3rd Floor, 49 - Blue Area, P.O. Box 3021, Islamabad. Registered Office 4th Floor, New Auriga Complex, Main Boulevard, Gulberg II Lahore. Share Registrar THK Associates (Pvt.) Limited Ground Floor, State Life Building No.3, Dr. Zia-ud-Din Ahmed Road, Karachi. Bankers Standard Chartered Bank (Pakistan) Limited Bank Al Habib Limited Habib Bank Limited Bank Alfalah Limited National Bank of Pakistan Limited Pak Libya Holding Company (Pvt.) Limited Summit Bank Limited (Formerly Arif Habib Bank Limited) Askari Bank Limited Soneri Bank Limited Pak Brunei Investment Company Limited The Bank Of Khyber HSBC Bank Middle East Limited Allied Bank Limited United Bank Limited Dubai Islamic Bank Limited 02

5 DIrectors report The Directors of Wateen Telecom Limited are pleased to present the financial statements for the second quarter and six months ended December 31, These financial statements have been reviewed by the statutory auditors. The new Board of Directors appreciate and recognize the significance of sound corporate governance practices are hence, giving high priority to regularize matters to ensure compliance with the legal and regulatory requirements. Wateen reassessed its overall strategy given the current socio-economic situation of Pakistan, evolving consumer needs and the current trends in the telecom sector worldwide. New management and governance structures were introduced during FY 2011 with the major changes in the Board of Directors, establishment of an Executive Management Committee, reconstitution of the Board Audit Committee and appointments of a new Chief Executive Officer, Chief Financial Officer and Company Secretary along with other key positions. These changes were necessary to reinforce compliance with rigorous requirements of corporate governance and enhancing transparency in the overall operations. The company has posted consolidated revenues of Rs 1,478 million for the second quarter ended December 31, 2010 and cumulative revenues of Rs 3,409 million for the six months ended December 31, A 30% decline in the revenue is attributable to the change in market dynamics of long distance international business which remained under severe pressure of grey traffic. Gross profit has been improved to 25% compared to 18% in same period last year. Sponsors has injected Rs 2,063 million directly and Rs 600 million through an associated company to improve the liquidity situation of the company compared to Nil for the same period last year. WATEEN TELECOM LIMITED half yearly report dec 10 03

6 New Management has evaluated the current market dynamics and recommended a focused approach to consolidate the position of the Company and make significant progress in areas with high growth opportunities and discontinue certain operations to ensure best possible return on investments. This has resulted in provisions and write offs of Rs 1,542 million compared to Rs 18 million in the same period last year and brought EBITDA loss to the tune of Rs 1,649 million. We believe these drastic measures were inevitable and overdue to build a profitable business going forward. Demand for data services in Pakistan and neighboring countries from carriers, businesses and consumers with more innovative value added services like mobile banking and cloud computing will be the key drivers for growth in the years to come. Your company is well placed and prepared to claim a fair share in the growth and profitability with the capacity to provide services in the region. The Company recognizes the importance of its human resources which play a critical role for a service organization like Wateen Telecom. Conscious efforts are being made to obtain and retain best available human resources as well as to enhance the productivity of the existing ones so as to create a work force suitable to meet today s challenges. The Board would like to thank our valued customers for their continued support and the regulatory authorities for their guidance and patronage. On behalf of the Board, Naeem Zamindar Chief Executive Officer & Member Board of Directors 04

7 ~ pwc AUDITOR'S REPORT TO THE MEMBERS ON REVIEW OF INTERIM FINANCIAL INFORMATION We have reviewed the accompanying condensed interim balance sheet of Wateen Telecom Limited as at December 31, 2010 and the related condensed interim profit and loss account, condensed interim statement of comprehensive income, condensed interim cash flow statement and condensed interim statement of changes in equity and notes to the interim financial information for the six months period ended (here-in-after referred to as the "interim financial information"). Management is responsible for the preparation and presentation of this interim financial information in accordance with approved accounting standards as applicable in Pakistan. Our responsibility is to express a conclusion on this interim financial information based on our review. The figures of the condensed interim profit and loss account for quarters ended December 31, 2010 and 2009 have not been reviewed, as we are required to review only the cumulative figures for the six months period ended December 31, We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim financial information as of and for the six months period ended December 31, 2010 is not prepared, in all material respects, in accordance with approved accounting standards as applicable in Pakistan. H~ Chartered Accountants Islamabad: January 20, :A. F. FERGUSON & CO., Chartered Accountants, a member firm of the PwC network PIA Building, 3rd FloOr, 49 Blue Area, Fazl-ul-Haq Road, P.O. Box 3021, Islamabad-44000, Pakistan Tel: +92 (51) / ; Fax: +92 (51) ; < Karachi: State Life Building No. 1-C, 1.1. Chundrigar Road, P.O. Box 4716, Karachi-74000, Pakistan; Tel: +92 (21) ; Fax: +92 (21) Lahore: 23-C, Aziz Avenue, Canal Bank, Gulberg V, P.O. Box 39, Lahore-54660, Pakistan; Tel: +92 (42) ; Fax: +92 (42) Kabul: House No. 1916, Street NO.1, Behind Cinema Bariqot, Nahar-e-Darsan, Karte-4, Kabul, Afghanistan; Tel: +93 (779) , +93 (799)

8 CONDENSED INTERIM BALANCE SHEET (UN-AUDITED) AS AT DECEMBER 31, 2010 Note December 31, June 30, SHARE CAPITAL AND RESERVES Authorised capital 1,000,000,000 (June 30, 2010: 1,000,000,000) ordinary shares of Rs 10 each 10,000,000 10,000,000 Issued, subscribed and paid up capital 6,174,746 6,174, ,474,620 (June 30, 2010: 617,474,620) ordinary shares of Rs 10 each General reserve 134, ,681 Accumulated loss (4,900,856) (2,099,760) 1,408,571 4,209,667 NON CURRENT LIABILITIES Long term finance secured 5 Medium term finance from an associated company unsecured 6 Long term finance from a shareholder unsecured 7 2,063,379 Cross currency and interest rate swap fair value ,053 Obligations under finance leases 4,638 5,429 Long term deposits 64, ,455 2,132, ,937 DEFERRED LIABILITIES Employees retirement benefits 43,690 Deferred income tax liability 8 74,593 Deferred USF grant 9 1,046, ,159 1,046, ,442 CURRENT LIABILITIES Current portion of long term finance secured 5 11,858,743 12,411,659 Current portion of medium term finance from an associated company unsecured 6 600,000 Payable to supplier to be settled through long term finance 433,798 Cross currency and interest rate swap liability , ,397 Current portion of obligations under finance leases 2,035 1,556 Finance from supplier unsecured 77,941 77,668 Short term borrowings secured 10 4,092,484 4,604,346 Trade and other payables 11 4,898,324 5,922,431 Interest / markup accrued 661, ,491 22,708,142 24,300,346 CONTINGENCIES AND COMMITMENTS 12 27,295,737 29,710,392 The annexed notes 1-26 are an integral part of this condensed interim financial information. 06

9 Note December 31, June 30, NON-CURRENT ASSETS Property, plant and equipment Operating assets 13 18,712,000 17,045,929 Capital work in progress 14 2,791,644 3,883,565 Intangible assets 197, ,726 21,701,236 21,134,220 LONG TERM INVESTMENT IN SUBSIDIARY COMPANIES ,661 57,061 DEFERRED INCOME TAX ASSET 8 773,395 LONG TERM DEPOSITS AND PREPAYMENTS Long term deposits 273, ,584 Long term prepayments 71,328 79, , ,723 CURRENT ASSETS Trade debts 16 1,274,874 3,097,982 Contract work in progress 18,805 18,782 Stores, spares and loose tools , ,528 Advances, deposits, prepayments and other receivables 18 1,923,479 2,001,340 Income tax refundable 192, ,841 Cash and bank balances ,565 1,996,915 4,338,231 8,201,388 27,295,737 29,710,392 Chief Executive Director 07

10 CONDENSED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Note 3 months to 6 months to December 31, December 31, December 31, December 31, Revenue 20 1,431,663 2,163,409 3,257,190 4,533,435 Cost of sales (excluding depreciation and amortisation) 21 1,208,553 1,708,023 2,439,071 3,757,814 General and administration expenses 567, , , ,756 Advertisement and marketing expenses 44,664 71,605 75, ,196 Selling and distribution expenses 1,478 6,901 8,830 14,093 Provisions and write off 22 1,516,803 1,516,803 18,273 Other charges 28,936 28,936 Other income ,652 (9,492) (176,790) (33,394) 3,467,942 2,180,399 4,718,149 4,682,674 Loss before interest, taxation, depreciation and amortisation (2,036,279) (16,990) (1,460,959) (149,239) Depreciation and amortisation 518, , , ,205 Finance cost , ,266 1,282, ,956 Finance income (78,349) (52,714) (81,759) (60,405) Loss before taxation (3,275,475) (920,854) (3,649,084) (1,830,995) Deferred income tax credit 791, , , ,369 Loss for the period (2,483,826) (630,670) (2,801,096) (1,250,626) Loss per share Rs (4.03) Rs (1.51) Rs (4.54) Rs (3.00) The annexed notes 1-26 are an integral part of this condensed interim financial information. Chief Executive Director 08

11 CONDENSED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, months to 6 months to December 31, December 31, December 31, December 31, Loss for the period (2,483,826) (630,670) (2,801,096) (1,250,626) Other comprehensive income Total comprehensive loss for the period (2,483,826) (630,670) (2,801,096) (1,250,626) The annexed notes 1-26 are an integral part of this condensed interim financial information. Chief Executive Director 09

12 CONDENSED INTERIM CASH FLOW STATEMENT (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, months to December 31, December 31, CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (3,649,084) (1,830,995) Adjustment of non cash items: Depreciation/ Amortisation 987, ,205 (Profit)/loss on sale of operating assets 6,798 (22,953) Finance cost 1,282, ,956 Deferred grant recognised during the period (25,939) Dividend income from subsidiary company (156,060) Provisions and write off (note 22) 1,516,803 18,273 3,611,486 1,737,481 (37,598) (93,514) Changes in working capital: Decrease/ (Increase) in trade debts 1,399,405 (282,265) (Increase) in contract work in progress (23) (3,140) Decrease in stores, spares and loose tools 17, ,188 (Increase)/Decrease in advances, deposits, prepayments and other receivables (140,297) 205,756 Increase in cross currency and interest rate swap liability 160,550 43,813 (Decrease)/ Increase in trade and other payables (1,062,810) 708, , ,465 Taxes (paid)/refunded 46,429 (20,710) Cash flows from operating activities 383, ,241 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,920,356) (2,809,011) Intangible assets additions (4,300) Sale of property, plant and equipment 10, ,024 Long term deposits receivable (paid)/received (35,302) 213 Long term prepayments 7,811 8,814 Advance against purchase of shares (85,000) Dividend income received 156,060 Cash flows from investing activities (1,871,087) (2,636,960) 10

13 6 months to December 31, December 31, CASH FLOW FROM FINANCING ACTIVITIES Long term finance received 579,241 5,691,156 Long term finance repaid (1,132,158) (470,929) Long term finance received from associated company 600,000 Long term finance received from sponsor 2,063,379 Payable to supplier to be settled through long term finance repaid (433,798) (2,872,226) Long term payable to supplier received/(repaid) 273 (210,212) Employees accumulated absences paid (4,987) 4,228 Deferred USF grant received 297,960 Obligations under finance leases repaid (312) (1,683) Long term deposits payable (repaid)/received (45,696) 13,594 Short term borrowings repaid (1,545,415) Finance cost paid (1,252,433) (769,511) Cash flows from financing activities (1,171,906) 1,682,377 (DECREASE) IN CASH AND CASH EQUIVALENTS (2,659,903) (173,341) Cash and cash equivalents at beginning of the period (927,266) (2,324,688) CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,587,169) (2,498,029) CASH AND CASH EQUIVALENTS COMPRISE: Cash and bank balances 370, ,838 Short term running finance (3,957,734) (2,835,867) (3,587,169) (2,498,029) The annexed notes 1-26 are an integral part of this condensed interim financial information. Chief Executive Director 11

14 CONDENSED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Share General Accumulated capital reserve loss Total Balance at July 1, ,087, ,908 1,829,146 4,309,427 Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) Total comprehensive loss for the period (1,250,626) (1,250,626) Balance at December 31, ,174, ,681 (1,250,626) 3,058,801 Balance at January 1, ,174, ,681 (1,250,626) 3,058,801 Issue of 200,000,000 shares for cash on April 20, ,000,000 2,000,000 Shares issue cost (net of tax benefit) (79,247) (79,247) Total comprehensive loss for the period (769,887) (769,887) Balance at June 30, ,174, ,681 (2,099,760) 4,209,667 Balance at July 1, ,174, ,681 (2,099,760) 4,209,667 Total comprehensive loss for the period (2,801,096) (2,801,096) Balance at December 31, ,174, ,681 (4,900,856) 1,408,571 The annexed notes 1-26 are an integral part of this condensed interim financial information. Chief Executive Director 12

15 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, Legal status and operations The Company was incorporated in Pakistan as a Private Limited Company under Companies Ordinance, 1984 on March 4, 2005 for providing Long Distance and International public voice telephone (LDI) services and Wireless Local Loop (WLL) service in Pakistan. The Company commenced its commercial operations from May 1, The legal status of the Company was changed from Private Limited to Public Limited with effect from October 19, The Company is listed on Karachi, Lahore and Islamabad Stock Exchanges. The registered office of the Company is situated at Lahore. The Company is a subsidiary of Warid Telecom International LLC, U.A.E. 2. Statement of compliance This condensed interim financial information of the Company for the six months period ended December 31, 2010 has been prepared in accordance with the requirements of the International Accounting Standard 34 - Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. 3. Accounting policies The accounting policies and methods of computation adopted for the preparation of this condensed interim financial information are the same as those applied in preparation of the financial statements for the year ended June 30, Net current liabilities Net current liabilities as at December 31, 2010 were Rs billion of which Rs billion relate to loan installments due for repayment after December 31, 2011 and Rs billion relates to current portion of long term finance and short term finance. A shareholder of the Company has provided financial support in the form of long term finance amounting to Rs billion to meet the requirements of the Company and this arrangement is expected to continue. Subsequent to the period end, the Company has negotiated with the lenders to restructure long term finance and convert short term finance, except for short term running finance from Bank Alfalah Limited amounting to Rs billion, into long term finance facilities. The tenure of the restructured facilities is eight years w.e.f January 1, 2011 (inclusive of grace period of three years). The principal of restructured facilities will be repayable in 10 semiannual installments commencing July 1, Compliance with financial covenants is required after the grace period except for the Long Term Debt to Equity Ratio of 80:20, which should not be breached during the grace period. The Company is in the phase of finalizing addendum agreements to restructure term finance facilities with lenders. The Company has also negotiated with associated company Taavun (Pvt) Limited to reschedule its medium term finance facility. The associated company has agreed to reschedule its facility. Principal will be repayable in semi-annual equal installments within two years after the expiry of grace period i.e. from January 01, 2011 to December 31, The rate of markup will be 6 months KIBOR, subject to the approval of the Board of Directors of Taavun (Pvt) Limited, the Company will finalize addendum agreement to restructure the term finance facility with lender. 13

16 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Note December 31, June 30, Long term finance - secured Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department (ECGD) 5.2 2,199,048 2,450,304 Standard Chartered Bank (SCB) ,500 54,000 Dubai Islamic Bank (DIB) , ,000 Motorola Credit Corporation (MCC) 5.5 4,122,227 4,963,819 Standard Chartered Bank (SCB) ,830 Total 12,113,605 12,711,123 Unamortized transaction and other ancillary cost Opening balance 299,464 Additions during the period/year 400,862 Amortisation for the period/year (44,602) (101,398) (254,862) (299,464) 11,858,743 12,411,659 Less: Amount shown as current liability Amount payable within next twelve months (1,845,763) (1,991,174) Amount due after Dec 31, (10,012,980) (10,420,485) (11,858,743) (12,411,659) 5.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till December 31, The tenure of the facility is 5 years commencing from November 4, The principal is repayable in six unequal stepped -up- semi annual installments. The first such installment shall be due on June 30, 2012 and subsequently every six months thereafter until December 31, The rate of mark-up is 6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years. The facility is secured by way of hypothecation over all present and future moveable assets (including all current assets) and present and future current/fixed assets (excluding assets under specific charge of CM Pak, CISCO, Motorola, DIB, World call and USF), a mortgage by deposit of title deeds in respect of immoveable properties of the Company, lien over collection accounts and Debt Service Reserve Account and a corporate guarantee from Warid Telecom International LLC. 5.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till December 31, Amount outstanding at December 31, 2010 was USD million. The loan is repayable in 14 semi annual installments of USD 3,025 thousand each starting from October 14, The rate of mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default payment from the due date for payment upto the date of payment. If the finance charge is not paid 14

17 then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The loan is secured by personal guarantees by three Sponsors of the Company. 5.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from October 1, The rate of interest is six month average KIBOR %.The loan is secured by first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 million. 5.4 The Company has obtained Ijarah finance facility of Rs 530 million from Dubai Islamic Bank (DIB). The principal is repayable in 10 semi annual installments of 53 million each commencing from February 1, The rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is payable on default payment at KIBOR + 4% per annum from the due date for payment upto the date of payment. The loan is secured by specific fixed assets (DWDM equipment, eltek cabinets and batteries). During the period the bank has rescheduled the second installment due on August 01, 2010 to January 31, Remaining repayments are due on their respective dates. 5.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million (June 30, 2010: USD 64 million) has been availed till December 31, Amount outstanding at December 31, 2010 was USD million. The principal amount of outstanding facility is repayable in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final maturity date which is December 31, The rate of mark-up is six month LIBOR + 1.7% per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from the due date for payment upto the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply & services agreements with Motorola. Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) amounting to US$ 23.2 million at December 31, 2010 (June 30,2010: US$ 25.5 million) were hedged through cross currency swap contract with SCB. In consideration, the Company paid the difference between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account. The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 53.5 million at December 31, 2010 (June 30, 2010: US$ 58.5 million) were hedged through interest rate swap contract with SCB. In consideration, the company paid 3.05% on the notional amount. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account. Subsequent to period end MCC has transferred all of its rights, title benefits and interests in the original facility agreement to the Deutsche Bank AG as lender, effective August 19, During the period, the Company has obtained term finance facility from Standard Chartered Bank amounting to Rs 291 million against letter of credit facilities availed till June 30, The principal is repayable in five installments commencing from June 30, The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 15

18 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer. During the period the Company has obtained term finance facility from Standard Chartered Bank amounting to Rs 217 million. The principal is repayable in five installments commencing from June 30, The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer. 5.7 The Company is required to make payments of long term loans on due dates and to maintain certain ratios as specified in loan agreements. The Company paid ECGD loan installment of USD million on December 24, 2010 which was due on October 14, 2010 and SCB loan installment of Rs 13,500 thousand on January 31, 2011 which was due on October 25, Further, certain ratios specified in the loan agreements have not been maintained at December 31, As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the balance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan installments due as per loan agreements after December 31, 2011 amounting to Rs 10,012,980 thousand have been shown as current liability. Subsequent to period end, the Company has negotiated with the lenders to restructure its existing long term finance facilities as explained in note Medium term finance from an associated company - unsecured During the period, the Company has obtained an aggregate medium term finance facility of Rs 600 million from an associated company Taavun (Pvt) Limited. This loan is subordinated to all secured finance facilities availed by the Company. The principal is repayable within 30 days of the expiry of twenty four months from the effective date i.e September 30, The rate of mark-up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. As explained in note 5.7, loan installments due as per loan agreement after December 31, 2011 amounting to Rs 600 million have been shown as current liability. Subsequent to the period end the Company has negotiated with associated Company Taavun (Pvt) Limited to reschedule its finance facility. The associated Company has agreed to restructure its facility as explained in note Long term finance from a shareholder - unsecured During the period, the Company has obtained loan from a shareholder amounting to USD 24 million. This loan is subordinated to all secured finance facilities availed by the Company. This loan is repayable within 30 days of the expiry of a period of five years from the last date the lender has disbursed the loan, which shall be on or about January 29, The rate of mark-up is LIBOR + 1.5%. Alternatively the loan may be converted into equity by way of issuance of the Company s ordinary shares at the option of the lender at any time after the repayment date on the best possible terms but subject to fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be at the higher of par value i-e Rs 10/ ordinary share or 10% below prevailing market value, which value 16

19 shall be calculated after taking into account the average share price of the last 30 calendar days, counted backwards from the repayment date, provided that such conversion is permissible under the applicable laws of Pakistan. December 31, June 30, Note 8. Deferred income tax asset/ (liability) Taxable temporary differences between accounting and tax depreciation (3,745,267) (3,423,807) Unused tax losses 8.1 3,973,860 3,268,671 Unused tax benefit related to share issue cost 39,462 34,138 Deductible temporary differences on account of provisions 505,340 46, ,395 (74,593) 8.1 Unused tax losses for which no deferred tax asset has been recognised amounts to Rs 478,585 thousand representing business losses of Rs 1,367,386 thousand which will expire in tax year The existence of future taxable profits sufficient to absorb these losses is based on a business plan prepared by management of the Company which involves making judgments regarding key assumptions underlying the estimation of future taxable profits estimated in the plan. These assumptions if not met have a significant risk of causing a material adjustment to the carrying amount of the deferred tax asset. In the management s view it is probable that the company will be able to achieve the profits projected in the plan. December 31, June 30, Deferred Universal Service Fund (USF) grant Balance at beginning of the period/year 827, ,428 Amount received/receivable during the period/year 245, ,477 Amount recognised as income during the period/year (25,939) (1,746) Closing balance 1,046, , Short term borrowings - secured Short term borrowings 134,750 1,680,165 Short term running finance 3,957,734 2,924,181 4,092,484 4,604,346 17

20 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, Trade and other payables These include payable to related parties as follows: December 31, June 30, Wateen Solutions (Pvt) Limited 175, ,283 Wateen Satellite Services (Pvt) Limited 146, ,204 Warid Telecom (Pvt) Limited 106,366 86,656 Advances from Warid Telecom (Pvt) Limited 34, ,004 Bank Alfalah Limited 3,950 Warid Telecom Uganda Limited 47,474 Payable to gratuity fund 109, ,041 Payable to provident fund 22,637 11, , , Contingencies and commitments (i) Claims against the Company not acknowledged as debt 260, ,038 (ii) Performance guarantees issued by banks in favour of the Company 1,412,233 1,476,816 (iii) Outstanding commitments for capital expenditure 1,208,145 1,799,824 (iv) Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 49% of the shareholding of Wateen Solutions is held by Mr. Jahangir Ahmed. The Board of Directors of the Company in their meetings held on November 15, 2009 and November 19, 2009 approved the acquisition of 49% shareholding of Wateen Solutions from Mr. Jahangir Ahmed for a total sale consideration of Rs 490,000 thousand. On the basis of the approval of the Board of Directors of the Company, the Company entered into a Share Purchase Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% shareholding of Wateen Solutions. However, in light of the dividend payment of Rs 150,000 thousand by Wateen Solutions to Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the purposes of negotiating a downward revision to the purchase price as agreed in the SPA from Rs 490,000 thousand to Rs 340,000 thousand. This reduction in the purchase price and the resultant change in utilization of the IPO proceeds was approved by the shareholders of the Company in the Extra Ordinary General Meeting dated August 13, Under the terms of the SPA, the Company has paid an advance of Rs 85,000 thousand as partial payment of the purchase price and the balance of Rs 255,000 thousand is payable by the Company to Mr. Jahangir Ahmed. In light of the current business dynamics of Wateen Solutions and the resultant devaluation of its share price, the new management entered into negotiations as a result of which Mr. Jahangir Ahmad has agreed to transfer the shares of Wateen Solutions to the Company without requiring payment of the balance of Rs 255,000 thousand, however the finalization of renegotiated agreement is in process. Same have been approved by shareholders in Extra Ordinary General Meeting dated December 31,

21 Note Six months to Year ended December 31, June 30, Operating assets Opening net book value 17,045,929 14,050,553 Additions owned 2,658,762 4,803,102 leased 9,293 Disposals at net book value (16,798) (191,184) Depreciation charge (975,893) (1,625,835) 18,712,000 17,045, Capital work in progress Leasehold improvements 21,219 23,334 Line and wire 1,240,781 1,319,762 Network equipment ,529,644 2,540,469 2,791,644 3,883, Network equipment is net of provision for impairment of Rs 354 million (June 30, 2010: Nil) Finance cost of Rs 234 million was capitalised during the six months period ended December 31, 2010 (Year ended June 30, 2010: Rs 550 million). Six months to Year ended December 31, 2010 June 30, 2010 %age (Rupees in %age (Rupees in Holding thousand) Holding thousand) 15. Long term investment in subsidiary companies Unquoted Wateen Solutions (Pvt) Limited 413,212 fully paid ordinary shares of Rs 100 each 51 52, ,656 Advance against purchase of shares 85, ,656 52,656 Wateen Satellite Services (Pvt) Limited 500 fully paid ordinary shares of Rs 10 each Netsonline Services (Pvt) Limited 4,000 fully paid ordinary shares of Rs 100 each 100 4, , ,061 57,061 Provision for impairment of investment in Netsonline Services (Pvt) Limited (4,400) - 137,661 57,061 All the companies are incorporated in Pakistan. 19

22 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Note December 31, June 30, Trade debts Trade debts related parties ,956 1,807,657 other parties 1,399,981 1,422,911 1,624,937 3,230,568 Less: Provision for doubtful debts other parties 16.2 (350,063) (132,586) 1,274,874 3,097, Trade debts include due from related parties as follows: Warid Telecom (Pvt) Limited 124, ,957 Warid International LLC, UAE Parent company 85,700 85,400 Bank Alfalah Limited 14,392 12,125 Warid Telecom Congo S.A 1,060,716 Warid Telecom Uganda Limited 85,816 Wateen Telecom UK Limited 105, ,956 1,807,657 These balances are net of trade debts written off during the period related to following associated companies, which have been approved by the shareholders in Extra Ordinary General Meeting held on December 31, December 31, June 30, Warid Telecom (Private) Limited 76,834 Warid Telecom Congo Limited 125,127 Warid Telecom Uganda Limited 4,266 Bank Alfalah Limited 8, ,227 8, Provision for doubtful debts other parties Opening balance 132,586 85,131 Provision during the period 217,477 47,455 Closing balance 350, ,586 Provision during the period includes Rs 197,213 thousand based on age analysis of debts as follows: Balances days past due - 50 % Balances over 360 days past due % 20

23 Note December 31, June 30, Stores, spares and loose tools Cost 830, ,528 Less: Provision for obsolete stores 271, , , Advances, deposits, prepayments and other receivables 18.1 These include receivable from related parties as follows: Wateen Solutions (Pvt) Limited 370, ,943 Wateen Telecom UK Limited , ,720 Wateen Multimedia (Pvt) Limited 149, ,160 Advance for construction of Warid Tower 68,916 65,716 Warid International LLC, UAE Parent company 38,956 35,855 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technology (Pvt) Limited 16,329 Warid Telecom Georgia Limited 15,403 15,403 Netsonline Services (Pvt) Limited 7,728 6,847 Warid Telecom International Bangladesh 5,587 5,587 Bank Alfalah Limited 12,379 Warid Telecom Congo S.A 5, , ,954 Less: Provision for doubtful receivables from related parties , , , This includes investment in 51 % shares of Wateen Telecom UK Limited of par value GBP 5,099 (2010: 51 % shares of par value of GBP 5,099). Subsequent to December 31, 2010 the Company acquired remaining 49 % shares of Wateen Telecom UK Limited of par value GBP 4,901. This company was incorporated in UK in 2008 for wholesale and retail voice business. Approval from State Bank of Pakistan for investment in foreign equity abroad is in process and shares of Wateen Telecom UK Limited will be issued to Wateen Telecom Limited after receipt of such approval. In absence of this specific approval, holding company cannot control the financial and operating policies of Wateen Telecom UK Limited to obtain the benefit in terms of dividend, repatriation of investment, advance or receive any loan or interest thereon. Hence despite the 51% ownership Wateen Telecom UK Limited is not treated as subsidiary of the Company. 21

24 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, Provision for doubtful receivables from related parties December 31, June 30, Wateen Telecom UK Limited 266,708 Advance for construction of Warid Tower 68,916 Warid International LLC, UAE 38,956 Amoon Media Group (Pvt) Limited 27,960 Raseen Technology (Pvt) Limited 16,329 Warid Telecom Georgia Limited 15,403 Netsonline Services (Pvt) Limited 7,728 Warid Telecom International Bangladesh 5, ,587 - Provision for doubtful receivables other than Netsonline Services (Pvt) Limited have been approved by shareholders of the Company in Extraordinary General Meeting held on December 31, Provision for doubtful advances and other receivables from other parties is Rs 15,598 thousand (June 30, 2010: Rs Nil). 19. Cash and bank balances Bank balances amounting to Rs 31 million were under lien with banks (June 30, 2010: Rs 31 million). 20. Revenue 3 months to 6 months to December 31, December 31, December 31, December 31, Long Distance and International (LDI) 675,810 1,085,157 1,237,677 2,495,301 Optic Fiber Cable (OFC) Indefeasible Right of Use (IRU) (232,045) Operation and Maintenance 155, , , ,709 Managed capacity 21,991 23,669 34,734 52,582 Broadband and voice 455, , , ,357 Hybrid Fiber Cable Services (HFC) 8,535 8,081 17,395 14,378 Very Small Aperture Terminal services (VSAT) 218, , , ,073 ADM sites rentals 43,174 74,172 Others 84,941 55, , ,035 1,431,663 2,163,409 3,257,190 4,533,435 22

25 21. Cost of sales 3 months to 6 months to December 31, December 31, December 31, December 31, LDI Interconnect cost 616, ,525 1,069,463 1,531,653 Leased circuit charges 84,230 80, , ,327 Contribution to PTA Funds 49, , , ,848 PTA regulatory and spectrum fee 5,926 9,008 13,138 12,260 Operational cost 247, , , ,966 Bandwidth cost of VSAT services 196, , , ,642 Others 9,241 21,641 64,629 65, Provisions and write off 1,208,553 1,708,023 2,439,071 3,757,814 Trade debts written off related parties 206, ,227 8,451 Provision for doubtful trade debts other parties 217, ,477 9,822 Provision for doubtful advances and other receivables related parties 447, ,587 other parties 15,599 15,599 Provision for impairment of capital work in progress 353, ,515 Provision for impairment of long term investment in subsidiary company 4,400 4,400 Provision for obsolete stores and spares 271, , Other income/ (loss) 1,516,803 1,516,803 18,273 Dividend income from subsidiary company 156,060 USF grant recognised as income (121,608) 25,939 Profit/ (loss) on sale of fixed assets (6,709) (6,798) 22,953 Rental income 3,892 3,892 Other income/ (loss) (335) 5,600 1,589 6, Finance cost (128,652) 9, ,790 33,394 Interest/markup 500, ,886 1,012, ,875 Cross currency and interest rate swap contracts cost 377, , , ,155 Amortization of ancillary cost of long term finance 22,301 44,602 Finance cost of leased assets Bank charges, commission and fees 26,615 43,682 39,638 95,916 Exchange (gain)/ loss (11,900) 328,542 41, , , ,455 1,516,949 1,277,333 Interest/mark up capitalised under property, plant and equipment (117,196) (146,189) (234,392) (292,377) 799, ,266 1,282, ,956 23

26 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, Related party transactions Aggregate transactions with related parties during the period were as follows: Parent Company 3 months to 6 months to December 31, December 31, December 31, December 31, Warid Telecom International LLC, UAE (WTI) Markup charged to WTI 1,549 3,045 Provision for doubtful advances 35,911 35,911 Payments made by the Company on behalf of WTI 56 Shareholder Long term finance received from shareholder 856,579 2,063,379 Markup on long term finance from shareholder 8,693 8,693 Subsidiary Companies Wateen Solutions (Private) Limited (WSPL) Cost and expenses charged by WSPL 30,191 30,630 Markup charged to WSPL 25,951 57,225 Purchase of intangible assets 4,300 4,300 Dividend income 156,060 Payments made by WSPL on behalf of the Company 65, ,952 35,588 Payments made on behalf of WSPL 21,797 21,797 Netsonline Services (Pvt) Limited Provision for doubtful advances 7,728 7,728 Provision for impairment in investment 4,400 4,400 Associated Companies Warid Telecom (Private) Limited (WTL) Sale of services to WTL 500, , ,537 1,097,493 Cost and expenses charged by WTL 86,601 69, , ,775 Trade debts written off 76,834 76,834 Wateen Multimedia (Pvt) Limited (WMM) Cost and expenses charged by WMM 13,674 22,791 Payments made by the Company on behalf of WMM 3,683 4,078 11,945 17,833 Wateen Telecom Limited - UK (Wateen UK) Sale of services 33,635 67,313 Markup charged to Wateen UK 7,480 11,820 Cost and expenses charged by Wateen UK 153, ,766 Provision for doubtful advances 266, ,708 Payments made by the Company on behalf of Wateen UK 173,458 24

27 3 months to 6 months to December 31, December 31, December 31, December 31, Bank Alfalah Limited (BAL) Sale of services to BAL 1,652 35,312 33,818 Markup charged by BAL on short term borrowings 68,399 67, , ,581 Trade debts written off 8,451 8,451 Taavun (Pvt) Limited Long term finance received 50, ,000 Markup on long term finance 23,789 23,789 Warid Congo S.A (Warid Congo) Cost and expenses charged by Warid Congo 3,675 Trade debts written off 125, ,127 Payments made on behalf of Warid Congo 5,384 Warid Telecom Uganda Limited (Warid Uganda) Payments made by the Company on behalf of Warid Uganda 26,537 47,474 39,933 Trade debts written off 4,266 4,266 Warid Telecom Georgia Limited Provision for doubtful advances 15,403 15,403 Warid Telecom International Bangladesh Provision for doubtful advances 5,587 5,587 Raseen Technology (Pvt) Limited (Raseen) Markup charged to Raseen 1,159 Provision for doubtful advances 16,329 16,329 Amoon Media Group (Private) Limited Provision for doubtful advances 27,960 27,960 Advance for construction of Warid Tower Advance paid during the period 3,200 Provision for doubtful advances 68,916 68,916 Gratuity Fund Employer contribution to fund 8,905 17,963 27,686 32,963 Provident Fund Trust Employer contribution to trust 4,649 8,267 14,052 14,865 Surcharge payable to trust on late payments 1,142 1,142 Other related parties Remuneration of chief executive and key management personnel including benefits and perquisites 110,926 97, , ,483 25

28 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, Date of authorisation for issue This condensed interim financial information has been authorised for circulation to the shareholders by the Board Of Directors of the Company on January 20, Chief Executive Director 26

29 CONDENSED CONSOLIDATED FINANCIAL INFORMATION 27

30 CONDENSED CONSOLIDATED INTERIM BALANCE SHEET (UN-AUDITED) AS AT DECEMBER 31, 2010 Note December 31, June 30, SHARE CAPITAL AND RESERVES Authorised capital 1,000,000,000 (June 30, 2010: 1,000,000,000) ordinary shares of Rs 10 each 10,000,000 10,000,000 Issued, subscribed and paid up capital 6,174,746 6,174, ,474,620 (June 30, 2010: 617,474,620) ordinary shares of Rs 10 each General reserve 134, ,681 Accumulated loss (4,799,761) (1,794,123) 1,509,666 4,515,304 Non controlling interest in equity of Subsidiary Company Wateen Solutions (Pvt) Ltd 5, ,999 1,514,673 4,722,303 NON CURRENT LIABILITIES Long term finance secured 5 Medium term finance from an associated company unsecured 6 Long term finance from a shareholder unsecured 7 2,063,379 Cross currency and interest rate swap fair value ,053 Obligations under finance leases 4,638 5,429 Long term deposits 64, ,455 2,132, ,937 DEFERRED LIABILITIES Employees retirement benefits 18,748 60,059 Deferred income tax liability 8 76,807 Deferred USF grant 9 1,046, ,159 1,064, ,025 CURRENT LIABILITIES Current portion of long term finance secured 5 11,858,743 12,411,659 Current portion of medium term finance from an associated company unsecured 6 600,000 Payable to supplier to be settled through long term finance 433,798 Cross currency and interest rate swap liability , ,397 Current portion of obligations under finance leases 2,035 1,556 Finance from supplier unsecured 77,941 77,668 Short term borrowings secured 10 4,092,484 4,604,346 Trade and other payables 11 4,909,744 6,030,371 Interest / markup accrued 661, ,491 22,719,562 24,408,286 CONTINGENCIES AND COMMITMENTS 12 27,432,007 30,349,551 The annexed notes 1-27 are an integral part of this condensed consolidated interim financial information. 28

31 Note December 31, June 30, NON-CURRENT ASSETS Property, plant and equipment Operating assets 13 18,718,039 17,053,114 Capital work in progress 14 2,791,644 3,883,565 Intangible assets 295, ,843 21,805,627 21,247,522 ADVANCE AGAINST PURCHASE OF SHARES 15 85,000 DEFERRED INCOME TAX ASSET 8 772,299 LONG TERM DEPOSITS AND PREPAYMENTS Long term deposits 273, ,474 Long term prepayments 71,328 79, , ,613 CURRENT ASSETS Trade debts 16 1,602,279 4,060,687 Contract work in progress 39,390 47,394 Stores, spares and loose tools , ,619 Advances, deposits, prepayments and other receivables 18 1,634,177 1,558,692 Income tax refundable 202, ,298 Cash and bank balances ,435 2,014,726 4,423,867 8,783,416 27,432,007 30,349,551 Chief Executive Director 29

32 CONDENSED CONSOLIDATED INTERIM PROFIT AND LOSS ACCOUNT (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Note 3 months to 6 months to December 31, December 31, December 31, December 31, Revenue 20 1,478,374 2,417,220 3,409,340 4,915,648 Cost of sales (excluding depreciation and amortisation) 21 1,231,428 1,901,223 2,563,887 4,049,688 General and administration expenses 595, , , ,691 Provisions and write off 22 1,542,537 1,542,537 18,273 Advertisement and marketing expenses 44,664 71,605 75, ,196 Selling and distribution expenses 1,478 6,901 8,830 14,093 Other charges 28,936 28,936 Other income 23 95,135 (10,163) (23,388) (34,695) 3,510,565 2,378,401 5,058,642 5,005,182 Loss before interest, taxation, depreciation and amortisation (2,032,191) 38,819 (1,649,302) (89,534) Depreciation and amortisation 519, , , ,748 Finance cost , ,208 1,284, ,734 Finance income (20,503) (52,460) (23,917) (60,405) Loss before taxation (3,339,642) (865,462) (3,900,450) (1,755,611) Deferred Income tax credit , , , ,268 Loss for the period (2,553,676) (577,827) (3,057,690) (1,180,343) Non controlling interest in (profit)/loss of consolidated subsidiary company 34,506 (17,455) 52,052 (34,956) Loss for the period (2,519,170) (595,282) (3,005,638) (1,215,299) Loss per share Rs (4.08) Rs (1.47) Rs (4.87) Rs (2.91) The annexed notes 1-27 are an integral part of this condensed consolidated interim financial information. Chief Executive Director 30

33 CONDENSED CONSOLIDATED INTERIM STATEMENT OF COMPREHENSIVE INCOME (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, months to 6 months to December 31, December 31, December 31, December 31, Loss for the period (2,519,170) (595,282) (3,005,638) (1,215,299) Other comprehensive income Total comprehensive loss for the period (2,519,170) (595,282) (3,005,638) (1,215,299) The annexed notes 1-27 are an integral part of this condensed consolidated interim financial information. Chief Executive Director 31

34 CONDENSED CONSOLIDATED INTERIM CASH FLOW STATEMENT (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, months to December 31, June 30, CASH FLOW FROM OPERATING ACTIVITIES Loss before taxation (3,900,450) (1,755,611) Adjustment of non cash items: Depreciation and amortisation 990, ,748 Finance cost 1,284, ,734 (Profit)/loss on sale of operating assets 6,798 (23,328) Deferred grant recognised during the period (25,939) Provisions and write off (note 22) 1,542,537 18,273 Provision for employees retirement benefits 4,052 6,655 3,801,858 1,728,082 (98,593) (27,529) Changes in working capital: Decrease/(Increase) in trade debts 2,002,607 (384,933) Decrease/(Increase) in contract work in progress 8,004 (9,527) Decrease in stores, spares and loose tools 19, ,191 (Increase)/Decrease in advances, deposits, prepayments and other receivables (285,259) 561,588 Increase in cross currency and interest rate swap liability 160,550 43,813 (Decrease)/Increase in trade and other payables (1,159,330) 235, , ,285 Employees retirement benefits paid (6,661) Taxes refund/(paid) 37,786 (28,958) Cash flows from operating activities 678, ,798 CASH FLOW FROM INVESTING ACTIVITIES Property, plant and equipment additions (including finance cost) (1,920,356) (2,809,024) Intangible assets additions (4,300) Sale of property, plant and equipment 10, ,656 Long term deposits receivable (paid)/received (34,412) 213 Long term prepayments 7,811 8,815 Advance against purchase of shares (85,000) Cash flows from investing activities (2,026,257) (2,636,340) 32

35 6 months to December 31, June 30, CASH FLOW FROM FINANCING ACTIVITIES Long term finance received 579,241 5,691,156 Long term finance repaid (1,132,158) (470,929) Long term finance received from associated company 600,000 Long term finance received from a shareholder 2,063,379 Payable to supplier to be settled through long term finance repaid (433,798) (2,872,226) Long term payable to supplier 273 (210,212) Deferred USF grant received 297,960 Obligations under finance leases repaid (311) (1,683) Long term deposits payable (repaid)/received (45,696) 13,594 Dividend paid to non controlling shareholders (149,940) Short term borrowings repaid (1,545,415) Finance cost paid (1,254,470) (748,289) Cash flows from financing activities (1,318,895) 1,699,371 (DECREASE) IN CASH AND CASH EQUIVALENTS (2,666,844) (211,171) Cash and cash equivalents at beginning of the period (909,455) (2,261,349) CASH AND CASH EQUIVALENTS AT END OF THE PERIOD (3,576,299) (2,472,520) CASH AND CASH EQUIVALENTS COMPRISE: Cash and bank balances 381, ,347 Short term running finance (3,957,734) (2,835,867) (3,576,299) (2,472,520) The annexed notes 1-27 are an integral part of this condensed consolidated interim financial information. Chief Executive Director 33

36 CONDENSED CONSOLIDATED INTERIM STATEMENT OF CHANGES IN EQUITY (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Non controlling Share General Accumulated interest in equity capital reserve loss Total of subsidiary Total Balance at July 1, ,087, ,908 2,107,630 4,587, ,500 4,767,411 Issue of 208,737,310 bonus shares 2,087,373 (258,227) (1,829,146) Total comprehensive loss for the period (1,215,298) (1,215,298) 34,956 (1,180,342) Balance at December 31, ,174, ,681 (936,814) 3,372, ,456 3,587,069 Balance at January 1, ,174, ,681 (936,814) 3,372, ,456 3,587,069 Issue of 200,000,000 shares for cash 2,000,000 2,000,000 2,000,000 on April 20, 2010 Shares issue cost (net of tax benefit) (79,247) (79,247) (79,247) Total comprehensive loss for the period (778,062) (778,062) (7,457) (785,519) Balance at June 30, ,174, ,681 (1,794,123) 4,515, ,999 4,722,303 Balance at July 1, ,174, ,681 (1,794,123) 4,515, ,999 4,722,303 Dividend paid to non controlling shareholders (149,940) (149,940) Total comprehensive loss for the period (3,005,638) (3,005,638) (52,052) (3,057,690) Balance at December 31, ,174, ,681 (4,799,761) 1,509,666 5,007 1,514,673 The annexed notes 1-27 are an integral part of this condensed consolidated interim financial information. Chief Executive Director 34

37 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, Legal status and operations The condensed consolidated interim financial information includes the financial information of Wateen Telecom Limited and its subsidiary companies Wateen Solutions (Pvt) Limited (51% owned), Wateen Satellite Services (Pvt) Limited (100% owned) and Netsonline Services (Pvt) Limited (100% owned). For the purpose of this financial information, Wateen and consolidated subsidiaries are referred to as the Company. Wateen Telecom Limited was incorporated in Pakistan as a Private Limited Company under Companies Ordinance, 1984 on March 4, 2005 for providing Long Distance and International public voice telephone (LDI) services and Wireless Local Loop (WLL) service in Pakistan. The Company commenced its commercial operations from May 1, The legal status of the Company was changed from Private Limited to Public Limited with effect from October 19, The Company was listed on Karachi, Lahore and Islamabad Stock Exchanges with effect from May 27, The registered office of the Company is situated at Lahore. The Company is a subsidiary of Warid Telecom International LLC, U.A.E. The subsidiary company Wateen Solutions (Pvt) Limited, is incorporated under Companies Ordinance, 1984 as a private Limited company on May 17, The principal activities of the company are to sell and deploy telecom equipment and provide related services. The registered office of the company is situated at Lahore. Wateen acquired 100 % interest in Wateen Solutions (Pvt) Limited on August 2, Wateen sold 49% shares (397,027 fully paid ordinary shares of Rs 100 each) of Wateen Solutions (Pvt) Limited on July 1, The subsidiary company Wateen Satellite Services (Pvt) Limited (WSS),is incorporated as a private limited company under the Companies Ordinance, 1984 and is engaged in providing back haul and satellite data connectivity services in Pakistan. On March 1, 2009, the Company transferred all contracts for providing back haul and satellite data connectivity services to Wateen Telecom Limited. Wateen acquired 100% shares of Wateen Satellite Services (Pvt) Limited on July 1, WSS has transferred all of its assets to parent company on March 31, Further, subsequent to year end the Board of Directors of the parent company in their meeting held on November 22, 2011 has decided to voluntary winding up the Company. Accordingly, the financial statements of the WSS has not been prepared on a going concern basis. The subsidiary company Netsonline Services (Pvt) Limited, is incorporated as a private limited company under the Companies Ordinance, 1984 and is engaged in providing internet and other technology related services in Pakistan. Wateen acquired 100% shares of Netsonline Services (Pvt) Limited on July 1, Further, subsequent to year end the Board of Directors of the parent company in their meeting held on November 22, 2011 has decided to voluntary winding up the Company. Accordingly, the financial statements of the NetsOnline Services (Pvt) Limited has not been prepared on a going concern basis. Subsidiaries are all entities over which the parent has the power to govern the financial and operating policies generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are de-consolidated from the date control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries by the group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a 35

38 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 business combination are measured initially at their fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the parent share of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income statement. All significant intercompany transactions and balances between group entities are eliminated on consolidation. The group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the group. Disposals to non-controlling interests result in gain and losses for the company and are recorded in the income statement if the parent losses control of the subsidiary and in the statement of changes in equity if the change in ownership of subsidiary does not result in loss of control. Purchases from minority interests results in goodwill, being the difference between any consideration paid and the relevant share acquired of the carrying value of the assets of the subsidiary. 2. Statement of compliance The presentation of this condensed consolidated interim financial information of the Company for the six months period ended December 31, 2010 has been prepared in accordance with the requirements of the International Accounting Standard 34 - Interim Financial Reporting and provisions of and directives issued under the Companies Ordinance, In case where requirements differ, the provisions of or directives issued under the Companies Ordinance, 1984 have been followed. 3. Accounting policies The accounting policies and methods of computation adopted for the preparation of this condensed consolidated interim financial information are the same as those applied in preparation of the published financial statements for the year ended June 30, Net current liabilities Net current liabilities as at December 31, 2010 were Rs billion of which Rs billion relate to loan installments due for repayment after December 31, 2011 and Rs billion relates to current portion of long term finance and short term finance. A shareholder of the Company has provided financial support in the form of long term finance amounting to Rs billion to meet the requirements of the Company and this arrangement is expected to continue. Subsequent to the period end, the Company has negotiated with the lenders to restructure long term finance and convert short term finance, except for short term running finance from Bank Alfalah Limited amounting to Rs billion, into long term finance facilities. The tenure of the restructured facilities is eight years w.e.f January 1, 2011 (inclusive of grace period of three years). The principal amount of restructured facilities will be repayable in 10 semiannual installments commencing July 1, Compliance with financial covenants is required after the grace period except for the Long Term Debt to Equity Ratio of 80:20, which should not be breached during the grace period. The Company is in the phase of finalizing addendum agreements to restructure term finance facilities with lenders. The Company has also negotiated with associated company Taavun (Pvt) Limited to reschedule its medium term finance facility. The associated company has agreed to reschedule its facility. Principal will be repayable in semi-annual equal installments within two years after the expiry of grace period (from January 01, 2011 to December 31, 2019). The rate of markup will be 6 months KIBOR, subject to the approval of the Board of Directors of Taavun (Pvt) Limited, the Company will finalize addendum agreement to restructure the term finance facility with lender. 36

39 Note December 31, June 30, Long term finance - secured Syndicate of banks 5.1 4,766,000 4,766,000 Export Credit Guarantee Department (ECGD) 5.2 2,199,048 2,450,304 Standard Chartered Bank (SCB) ,500 54,000 Dubai Islamic Bank (DIB) , ,000 Motorola Credit Corporation (MCC) 5.5 4,122,227 4,963,819 Standard Chartered Bank (SCB) ,830 Total 12,113,605 12,711,123 Unamortized transaction and other ancillary cost Opening balance 299,464 Additions during the period/year 400,862 Amortisation for the period/year (44,602) (101,398) (254,862) (299,464) 11,858,743 12,411,659 Less: Amount shown as current liability Amount payable within next twelve months (1,845,763) (1,991,174) Amount due after Dec 31, (10,012,980) (10,420,485) (11,858,743) (12,411,659) 5.1 The Company has obtained syndicate term finance facility from a syndicate of banks with Standard Chartered Bank Limited (SCB), Habib Bank Limited (HBL), Bank Al-Habib Limited (BAHL) and National Bank of Pakistan (NBP), being lead arrangers to finance the capital requirements of the Company amounting to Rs 5.0 billion, of which Rs 4.8 billion has been availed till December 31, The tenure of the facility is 5 years commencing from November 4, The principal is repayable in six unequal stepped -up- semi annual instalments. The first such instalment shall be due on June 30, 2012 and subsequently every six months thereafter until December 31, The rate of mark-up is 6 months KIBOR+2.75% per annum for 1-2 years and KIBOR + 2.5% per annum for next 3-5 years. The facility is secured by way of hypothecation over all present and future moveable assets (including all current assets) and present and future current/fixed assets (excluding assets under specific charge of CM Pak, CISCO, Motorola, DIB, World call and USF), a mortgage by deposit of title deeds in respect of immoveable properties of the Company, lien over collection accounts and Debt Service Reserve Account and a corporate guarantee from Warid Telecom International LLC. 5.2 The Company has obtained long term finance facility amounting to USD 42 million from Export Credit Guarantee Department (ECGD) UK, of which US$ 35 million has been availed till December 31, Amount outstanding at December 31, 2010 was USD million. The loan is repayable in 14 semi annual installments of USD 3,025 thousand each starting from October 14, The rate of mark-up is LIBOR + 1.5% per annum. Additional mark-up at 2% per annum will be payable on default payment from the due date for payment upto the date of payment. If the finance charge is not paid 37

40 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 then additional interest rate will be payable at 1.5% per annum above CIRR rate applicable to the period during which the finance charge remained unpaid or at 5% per annum whichever is higher. The loan is secured by personal guarantees by three Sponsors of the Company. 5.3 The Company has obtained an aggregate medium term finance facility of USD 3 million from Standard Chartered bank. The principal is repayable in 8 equal semi annual installments commencing from October 1, The rate of interest is six month average KIBOR %.The loan is secured by first pari passu hypothecation charge over the specific assets of the Company amounting to Rs 275 million. 5.4 The Company has obtained Ijarah finance facility of Rs 530 million from Dubai Islamic Bank (DIB). The principal is repayable in 10 semi annual installments of 53 million each commencing from February 1, The rate of mark up is 6 month KIBOR plus 1.5% per annum. Additional interest is payable on default payment at KIBOR + 4% per annum from the due date for payment upto the date of payment. The loan is secured by specific fixed assets (DWDM equipment, eltek cabinets and batteries). During the period the bank has rescheduled the second installment due on August 01, 2010 to January 31, Remaining repayments are due on their respective dates. 5.5 The Company has obtained term finance facility of USD 65 million from MCC of which USD 64 million (June 30, 2010: USD 64 million) has been availed till December 31, Amount outstanding at December 31, 2010 was USD million. The principal amount of outstanding facility is repayable in 12 unequal semi annual installments commencing from June 30, 2009 until and including the final maturity date which is December 31, The rate of mark-up is six month LIBOR + 1.7% per annum. Additional interest is payable on default payment at six month LIBOR + 2% per annum from the due date for payment upto the date of payment. The loan is secured through hypothecation charge over specific assets of the Company supplied under supply & services agreements with Motorola. Repayment of principal and interest payments thereon (except for margin of 1.7% per annum) amounting to US$ 23.2 million at December 31, 2010 (June 30,2010: US$ 25.5 million) were hedged through cross currency swap contract with SCB. In consideration, the Company paid the difference between interest based on LIBOR and KIBOR + 2.2% per annum to the bank. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account. The interest payments (except for margin of 1.7% per annum) upon principal amounting to US$ 53.5 million at December 31, 2010 (June 30, 2010: US$ 58.5 million) were hedged through interest rate swap contract with SCB. In consideration, the company paid 3.05% on the notional amount. The contract was terminated by the Company on January 18, 2011 and the cost of termination has been recognised in profit and loss account. Subsequent to period end MCC has transferred all of its rights, title benefits and interests in the original facility agreement to the Deutsche Bank AG as lender, effective August 19, During the period, the Company has obtained term finance facility from Standard Chartered bank amounting to Rs 291 million against letter of credit facilities availed till June 30, The principal is repayable in five installments commencing from June 30, The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 1,000 38

41 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer. During the period the Company has obtained term finance facility from Standard Chartered bank amounting to Rs 217 million. The principal is repayable in five installments commencing from June 30, The rate of mark-up is six months KIBOR + 2.5%. The facility is secured by way of hypothecation over all of its current and fixed assets (excluding cellular license and CM Pak, CISCO & Motorola financed assets) for a sum of Rs 500 million, which charge shall no later than thirty days from the execution of this agreement be enhanced to a first pari passu charge inter se, SCB and the existing creditors of the customer. 5.7 The Company is required to make payments of long term loans on due dates and to maintain certain ratios as specified in loan agreements. The Company paid ECGD loan installment of USD million on December 24, 2010 which was due on October 14, 2010 and SCB loan installment of Rs 13,500 thousand on January 31, 2011 which was due on October 25, Further, certain ratios specified in the loan agreements have not been maintained at December 31, As a consequence, the lenders shall be entitled to declare all outstanding amount of the loans immediately due and payable. In terms of provisions of International Accounting Standard on Presentation of financial statements (IAS 1), since the Company does not have an unconditional right to defer settlement of liabilities for at least twelve months after the balance sheet date, all liabilities under these loan agreements are required to be classified as current liabilities. Based on above, loan installments due as per loan agreements after December 31, 2011 amounting to Rs 10,012,980 thousand have been shown as current liability. Subsequent to period end, the Company has negotiated with the lenders to restructure its existing long term finance facilities as explained in note Medium term finance from an associated company - unsecured During the period, the Company has obtained an aggregate medium term finance facility of Rs 600 million from an associated company Taavun (Pvt) Limited. This loan is subordinated to all secured finance facilities availed by the Company. The principal is repayable within 30 days of the expiry of twenty four months from the effective date i.e September 30, The rate of mark-up is six month KIBOR + 2.5% with 24 months grace period payable quarterly. As explained in note 5.7, loan installments due as per loan agreement after December 31, 2011 amounting to Rs 600 million have been shown as current liability. Subsequent to the period end the Company has negotiated with associated Company Taavun (Pvt) Limited to reschedule its finance facility. The associated Company has agreed to restructure its facility as explained in note Long term finance from a shareholder - unsecured During the period, the Company has obtained loan from a shareholder amounting to USD 24 million. This loan is subordinated to all secured finance facilities availed by the Company. This loan is repayable within 30 days of the expiry of a period of five years from the last date the lender has disbursed the loan, which shall be on or about January 29, The rate of mark-up is LIBOR + 1.5%. Alternatively the loan may be converted into equity by way of issuance of the Company s ordinary shares at the option of the lender at any time after the repayment date on the best possible terms but subject to fulfillment of all legal requirements at the cost of the Company. The said conversion of loan shall be at the higher of par value i-e Rs 10/ ordinary share or 10% below prevailing market value, which value 39

42 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 shall be calculated after taking into account the average share price of the last 30 calendar days, counted backwards from the repayment date, provided that such conversion is permissible under the applicable laws of Pakistan. Note December 31, June 30, Deferred income tax asset/ (liability) Temporary differences between accounting and tax depreciation (3,745,161) 3,423,722 Unused tax losses 8.1 3,973,860 (3,268,671) Unused tax benefit related to share issue cost 39,462 (34,138) Deductible temporary differences on account of provisions 506,037 (47,102) Deferred cost 36 (72) Trade debts - exchange gain (1,935) 3, ,299 76, Potential tax benefit of Rs 478,585 thousand has not been recognised representing business losses of Rs 1,367,386 thousand which will expire in tax year The existence of future taxable profits sufficient to absorb these losses is based on a business plan prepared by management of the Company which involves making judgments regarding key assumptions underlying the estimation of future taxable profits estimated in the plan. These assumptions if not met have a significant risk of causing a material adjustment to the carrying amount of the deferred tax asset. In the management s view it is probable that the company will be able to achieve the profits projected in the plan. December 31, June 30, Deferred Universal Service Fund (USF) grant Balance at beginning of the period/year 827, ,428 Amount received/receivable during the period/year 245, ,477 Amount recognised as income during the period/year (25,939) (1,746) Closing balance 1,046, , Short term borrowings - secured Short term borrowings 134,750 1,680,165 Short term running finance 3,957,734 2,924,181 4,092,484 4,604,346 40

43 11. Trade and other payables These include payable to related parties as follows: December 31, June 30, Warid Telecom (Pvt) Limited 140,682 86,656 Advances from Warid Telecom (Pvt) Limited 34, ,004 Bank Alfalah Limited 3,950 Warid Telecom Uganda Limited 47,474 Payable to gratuity fund 109, ,041 Payable to provident fund 22,637 11, , , Contingencies and commitments (i) Claims against the Company not acknowledged as debt 260, ,038 (ii) Performance guarantees issued by banks in favour of the Company 1,412,233 1,476,816 (iii) Outstanding commitments for capital expenditure 1,208,145 1,799,824 (iv) Acquisition of 49% shares in subsidiary Wateen Solutions (Pvt) Limited 49% of the shareholding of Wateen Solutions is held by Mr. Jahangir Ahmed. The Board of Directors of the Company in their meetings held on November 15, 2009 and November 19, 2009 approved the acquisition of 49% shareholding of Wateen Solutions from Mr. Jahangir Ahmed for a total sale consideration of Rs 490,000 thousand. On the basis of the approval of the Board of Directors of the Company, the Company entered into a Share Purchase Agreement dated April 1, 2010 (SPA) with Mr. Jahangir Ahmed for the acquisition of the 49% shareholding of Wateen Solutions. However, in light of the dividend payment of Rs 150,000 thousand by Wateen Solutions to Mr. Jahangir Ahmed, the Company entered into negotiations with Mr. Jahangir Ahmed for the purposes of negotiating a downward revision to the purchase price as agreed in the SPA from Rs 490,000 thousand to Rs 340,000 thousand. This reduction in the purchase price and the resultant change in utilization of the IPO proceeds was approved by the shareholders of the Company in the Extra Ordinary General Meeting dated August 13, Under the terms of the SPA, the Company has paid an advance of Rs 85,000 thousand as partial payment of the purchase price and the balance of Rs 255,000 thousand is payable by the Company to Mr. Jahangir Ahmed. In light of the current business dynamics of Wateen Solutions and the resultant devaluation of its share price, the new management entered into negotiations as a result of which Mr. Jahangir Ahmad has agreed to transfer the shares of Wateen Solutions to the Company without requiring payment of the balance of Rs 255,000 thousand, however the finalization of renegotiated agreement is in process. Same have been approved by shareholders in EOGM dated December 31,

44 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Note Six months to Year ended December 31, June 30, Operating assets Opening net book value 17,053,114 14,062,017 Additions owned 2,658,762 4,804,160 leased 9,293 Disposals at net book value (16,798) (191,532) Depreciation charge (977,039) (1,630,824) Closing net book value 18,718,039 17,053, Capital work in progress Leasehold improvements 21,219 23,334 Line and wire 1,240,781 1,319,762 Network equipment ,529,644 2,540,469 2,791,644 3,883, Network equipment is net of provision for impairment of Rs 354 million (June 30, 2010: Nil) Finance cost of Rs 234 million was capitalised during the six months period ended December 31, 2010 (Year ended June 30, 2010: Rs 550 million). December 31, June 30, Note 15. Advance against purchase of shares Advance paid against purchase of shares Wateen Solutions (Pvt) Limited 12 (iv) 85, Trade debts Trade debts related parties ,258 1,807,657 other parties 1,680,630 1,422,911 Less: Provision for doubtful debts other parties 16.2 (406,609) (157,035) 1,602,279 4,060,687 42

45 16.1 Trade debts include due from related parties as follows: December 31, June 30, Warid Telecom (Pvt) Limited 145, ,627 Warid International LLC, UAE - Parent company 85,700 85,400 Bank Alfalah Limited 96,631 22,095 Warid Telecom Congo S.A 1,191,305 Warid Telecom Uganda Limited 201,540 Wateen Telecom UK Limited 105, ,258 2,166,610 These balances are net of trade debts written off during the period related to following associated companies, which have been approved by the shareholders in Extra Ordinary General Meeting held on December 31, December 31, June 30, Warid Telecom (Private) Limited 76,834 Warid Telecom Congo Limited 125,127 Warid Telecom Uganda Limited 4,266 Bank Alfalah Limited 8, ,227 8, Provision for doubtful debts other parties Opening balance 157, ,875 Provision during the period 249,574 47,203 Recovery during the year (1,043) Closing balance 406, ,035 Provision during the period includes Rs 197,213 thousand based on age analysis of debts as follows: Balances days past due - 50 % Balances over 360 days past due % December 31, June 30, Stores, spares and loose tools Cost 836, ,619 Less: Provision for obsolete stores 271, , ,619 43

46 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, 2010 Note December 31, June 30, Advances, deposits, prepayments and other receivables 18.1 These include receivable from related parties as follows: Wateen Telecom UK Limited 293, ,720 Wateen Multimedia (Pvt) Limited 149, ,160 Advance for construction of Warid Tower 68,916 65,716 Warid International LLC, UAE Parent company 38,956 35,855 Amoon Media Group (Pvt) Limited 27,960 27,960 Raseen Technology (Pvt) Limited 16,329 Warid Telecom Georgia Limited 15,403 15,403 Warid Telecom International Bangladesh 5,587 5,587 Bank Alfalah Limited 12,379 Warid Telecom Congo S.A 5, , ,164 Less: Provision for doubtful receivables from related parties , , , Provision for doubtful receivables from related parties Wateen Telecom UK Limited ,708 Advance for construction of Warid Tower 68,916 Warid International LLC, UAE 38,956 Amoon Media Group (Pvt) Limited 27,960 Raseen Technology (Pvt) Limited 16,329 Warid Telecom Georgia Limited 15,403 Warid Telecom International Bangladesh 5, ,859 Provision for doubtful receivables have been approved by shareholders of the Company in Extraordinary General Meeting held on December 31, This includes investment in 51% shares of Wateen Telecom UK Limited of par value GBP 5,099 (June 30, 2010: 51% shares of par value of GBP 5,099). Subsequent to December 31, 2010 the Company acquired remaining 49% shares of Wateen Telecom UK Limited of par value GBP 4,901. This company was incorporated in UK in 2008 for wholesale and retail voice business. Approval from State Bank Of Pakistan as per investment in foreign equity abroad is in process and shares of Wateen Telecom UK Limited will be issued to Wateen Telecom Limited after receipt of such approval. In absence of this specific approval holding company cannot control the financial and operating policies of Wateen Telecom UK Limited to obtain the benefit in term of dividend, repatriation of investment, advance or receive any loan or interest thereon. Hence despite of the 100% ownership Wateen Telecom UK Limited is not treated as subsidiary of the Company. 44

47 18.4 Provision for doubtful advances and other receivables from other parties is Rs 15,598 thousand (June 30, 2010: Rs Nil). 19. Cash and bank balances Bank balances amounting to Rs 34 million were under lien with banks (June 30, 2010: Rs 42.2 million). 3 months to 6 months to December 31, December 31, December 31, December 31, Revenue Long Distance and International (LDI) 675,810 1,085,157 1,237,677 2,495,301 Optic Fiber Cable (OFC) Indefeasible Right of Use (IRU) (232,045) Operation and Maintenance 155, , , ,709 Managed capacity 21,991 23,669 34,734 52,582 Broadband and voice 455, , , ,854 Hybrid Fiber Cable Services (HFC) 8,535 8,081 17,395 14,378 Very Small Aperture Terminal services (VSAT) 218, , , ,073 ADM sites rentals 43,174 74,172 Sale of product and services 33, , , ,576 Margin/commission 13, ,177 3,060 4,637 Others 84,941 55, ,360 36,538 1,478,374 2,417,220 3,409,340 4,915, Cost of sales LDI Interconnect cost 616, ,525 1,069,463 1,531,653 Leased circuit charges 84,230 80, , ,327 Contribution to PTA Funds 49, , , ,848 PTA regulatory and spectrum fee 5,926 9,008 13,138 12,260 Cost associated with IRU of Optic Fiber Cable Operational cost 247, , , ,017 Bandwidth cost of VSAT services 196, , , ,642 Equipment and material consumed 22,875 79,238 82, ,320 Others 9,241 21,641 64,629 81,621 1,231,428 1,901,223 2,563,887 4,049,688 45

48 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, Provisions and write off 3 months to 6 months to December 31, December 31, December 31, December 31, Trade debts written off - related parties 206, ,227 8,451 Provision for doubtful trade debts other parties 249, ,574 9,822 Provision for doubtful advances and other receivables related parties 439, ,859 other parties 15,599 15,599 Provision for impairment of capital work in progress 353, ,515 Provision for impairment of goodwill on acquisition of subsidiary company 5,765 5,765 Provision for obsolete stores and spares 271, , Other income/ (loss) 1,542,537 1,542,537 18,273 Profit/(loss) on sale of fixed assets (6,709) (6,798) 23,326 Rental income 3,892 3,892 USF grant recognised as income (84,816) 25,939 Other income/ (loss) (3,610) 6,271 4,247 7, Finance cost (95,135) 10,163 23,388 34,695 Interest/markup 507, ,886 1,012, ,926 Cross currency and interest rate swap contracts cost 377, , , ,155 Amortization of ancillary cost of long term finance 22,301 44,602 Finance cost of leased assets Bank charges, commission and fees 28,762 44,006 41, ,785 Exchange loss/(gain) (11,937) 323,160 41, , , ,397 1,518,986 1,256,111 Mark up on long term finance capitalised under property, plant and equipment (117,196) (146,189) (234,392) (292,377) 25. Income tax charge/(credit) 808, ,208 1,284, ,734 Current (12,894) 4,310 3,747 8,621 Prior Period 2,601 Deferred (773,071) (291,944) (849,108) (583,889) (785,965) (287,634) (842,760) (575,268) 46

49 3 months to 6 months to December 31, December 31, December 31, December 31, Related party transactions Aggregate transactions with related parties during the period were as follows: Parent Company Warid Telecom International LLC, UAE (WTI) Markup charged to WTI 3,045 6,090 Payments made by the Company on behalf of WTI 56 Provision for doubtful advances 35,911 35,911 Shareholder Long term finance received from shareholder 856,579 2,063,379 Markup on long term finance from shareholder 8,693 8,693 Associated Companies Warid Telecom (Private) Limited (WTL) Sale of services 500, , ,537 1,097,493 Cost and expenses charged by company 86,601 69, , ,775 Trade debts written off 76,834 76,834 Unearned revenue reversed 147, ,315 Wateen Multimedia (Pvt) Limited (WMM) Cost and expenses charged by (WMM) 13,674 22,791 Payments made by the Company on behalf of WMM 3,683 4,078 11,945 17,833 Bank Alfalah Limited (BAL) Sale of services 1,652 35,312 33,818 Markup charged by company on running finance facility 68,399 67, , ,581 Trade debts written off 8,451 Taavun (Pvt) Limited Long term finance received 50, ,000 Markup charged by company on long term finance 23,789 23,789 Wateen Telecom Limited UK (Wateen UK) Sale of services 33,635 67,313 Markup charged to Wateen UK 7,480 11,820 Cost and expenses charged by Wateen UK 153, ,766 Provision for advance against purchase of shares 266, ,708 Payments made by the Company on behalf of Wateen UK 86, ,458 47

50 SELECTED NOTES TO AND FORMING PART OF THE CONDENSED CONSOLIDATED INTERIM FINANCIAL INFORMATION (UN-AUDITED) FOR THE SIX MONTHS PERIOD ENDED DECEMBER 31, months to 6 months to December 31, December 31, December 31, December 31, Warid Congo S.A (Warid Congo) Cost and expenses charged by Warid Congo 3,675 Trade Debts written off 125, ,127 Payments made on behalf of Warid Congo 5,384 Warid Telecom Uganda Limited (Warid Uganda) Payments made by the Company on behalf of Warid Uganda 26,537 47,474 39,933 Trade Debts written off 4,266 4,266 Warid Telecom Georgia Limited Provision for doubtful advances 15,402 15,402 Warid Telecom International Bangladesh Provision for doubtful advances 5,586 5,586 Raseen Technology (Pvt) Limited (Raseen) Markup charged to Raseen 1,159 Provision for doubtful advances 16,329 16,329 Amoon Media Group (Private) Limited Provision for doubtful advances 27,960 27,960 Advance for construction of Warid Tower Advance paid during the period 3,200 Provision for doubtful advances 68,916 68,916 Gratuity Fund Employer contribution to fund 8,905 17,963 27,686 32,963 Provident Fund Trust Employer contribution to trust 4,649 8,267 14,052 14,865 Surcharge charged by trust on late payments 1,142 1,142 Other related parties Remuneration of chief executive and key management personnel including benefits and perquisites 110,926 97, , , Date of authorisation for issue This condensed interim financial information has been authorised for circulation to the shareholders by the Board Of Directors of the Company on January 20, Chief Executive Director 48